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Webcast: The Recent Momentive Ruling: Possible Implications for Secured Creditor Cramdown

Created date

9/22/2014

In a lengthy bench ruling delivered on August 26, 2014, Judge Robert D. Drain of the United States Bankruptcy Court for the Southern District of New York held that Momentive Performance Materials could satisfy the cramdown standard of Section 1129(b) of the Bankruptcy Code as to its oversecured creditors by distributing to them replacement notes paying a below-market interest rate.

If followed, Judge Drain’s cramdown ruling may shift the leverage in future cases in favor of debtors and unsecured creditors, potentially enabling them to satisfy secured creditors with long-term replacement notes at below-market rates, thus obviating the need for some debtors to secure takeout exit financing and potentially providing additional value for unsecured creditors at the expense of secured creditors.

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