Lenders fight Momentive rate precedent

摘要

First-lien lenders to bankrupt chemical producer momentive performance materials are racing to overturn a stunning decision that allowed the company to reset interest rates on more than US$1bn in secured debt. The company successfully used a 2004 US Supreme Court decision from a personal bankruptcy case to reset the rate on its debts using a formula for determining the rate that adds as little as 100bp to the prime risk-free rate. New York bankruptcy Judge Robert Drain ruled that the use of the formula was appropriate in the Chapter 11 bankruptcy context. He approved the company's reorganisation plan last Thursday. The lenders are preparing their appeal already.