Case | HBS Case Collection | June 2010 (Revised November 2013)

Momentive Performance Materials, Inc.

by Victoria Ivashina and David Scharfstein

Abstract

After nearly violating its loan covenants in 2009, Momentive Performance Materials, backed by its financial sponsor Apollo Global Management, took a variety of actions to restructure its debt. The restructuring steps included an open market repurchase of publicly held notes; a notes exchange; a loan-covenant waiver; and, finally, an attempted loan amendment that sought to extend the maturity of the loan used to finance the Momentive buyout. This case allows students to see different debt-restructuring options in one setting. The case protagonist is a fund investment manager at a large hedge fund that holds 3 percent of Momentive's syndicated loan. The decision point in the case is whether the investor should vote to amend the loan. The perspective of the investor allows students to understand tensions underlying the restructuring process. The case serves as a vehicle for discussing contractual and institutional differences between public debt and syndicated loans, and challenges in the restructuring of such debt.

Keywords: Restructuring; Financial Crisis; Borrowing and Debt; Private Equity; Financing and Loans;

Citation:

Ivashina, Victoria, and David Scharfstein. "Momentive Performance Materials, Inc." Harvard Business School Case 210-081, June 2010. (Revised November 2013.)