Momentive notes trustee eyes stay of confirmation order pending appeal

By Caroline Salls

Pittsburgh, Sept. 3 – Momentive Performance Materials Inc. indenture trustee U.S. Bank NA is seeking a stay of the impending court order confirming the company’s plan of reorganization pending outcome of an appeal, according to a Sept. 2 filing with the U.S. Bankruptcy Court for the Southern District of New York.

As previously reported, the court said last week that it would confirm the plan after modifications are made.

U.S. Bank said it has challenged the plan proponents’ interpretation of the company’s notes indenture since the beginning of Momentive’s Chapter 11 cases and made it clear from the outset that it would appeal any adverse ruling related to a subordination issue.

The indenture trustee said it and the Momentive’s senior subordinated noteholders “will be significantly prejudiced if U.S. Bank is denied its appellate rights.”

U.S. Bank said denial of the stay could cause it to permanently lose its right of appeal because the company plans to claim that any appeal is “equitably moot.”

“The debtors’ plan stripped the senior sub noteholders of their right to receive any distributions from the debtors’ bankruptcy estate,” U.S. Bank said.

“This appeal is the only recourse the senior sub noteholders have to undo this wrong.

“While U.S. Bank believes that its appeal will not be rendered moot, dismissal of the appeal on mootness grounds would leave the noteholders with nothing - no distributions and no legal rights.”

The trustee said it believes that there is a significant likelihood that a reviewing court would conclude on appeal that the company’s second-priority notes are subordinate and junior to $1.5 billion in other claims against the debtors.

Momentive, a silicones and advanced materials company based in Albany, N.Y., filed for bankruptcy on April 13. The Chapter 11 case number is 14-22503.

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