Hexion Inc. announced it has entered into a Restructuring Support Agreement (RSA) with the vast majority of holders of each of the company’s notes issuances, representing consensus across its capital structure, on the terms of a consensual financial de-leveraging plan that will strengthen the company’s financial position and accelerate future growth.
To implement the RSA, the company, including substantially all of its U.S. subsidiaries and one non-operating entity based in Nova Scotia, Canada, has voluntarily filed for reorganization under Chapter 11 of the U.S. Bankruptcy Code in the U.S. Bankruptcy Court for the District of Delaware.
All of Hexion’s global business segments are continuing to operate as normal, and Hexion’s operations outside the U.S. are not included in the Chapter 11 proceedings.
Under the RSA, creditors representing all tranches of the company’s notes have agreed to support, and the company has agreed to pursue, confirmation of the plan. The RSA contemplates that the plan will provide for, among other things: (1) significant de-leveraging of the company’s capital structure by over $2 billion, (2) an infusion of $300 million in equity capital through a fully backstopped rights offering, (3) a committed exit facility of over $1.6 billion, and (4) payment in full of the company’s trade creditors, employees and other general unsecured creditors.Consummation of the plan will be subject to confirmation by the Bankruptcy Court in addition to other conditions to be set forth in the plan.
“We are pleased to have reached an agreement with the vast majority of our creditors across our capital structure on a consensual financial de-leveraging plan that provides Hexion with a path forward to emerge that eliminates a significant portion of the Company’s debt and strengthens our competitive position,” said Craig A. Rogerson, Chairman, President and CEO of Hexion. “We believe that with a stronger balance sheet, Hexion will be better positioned to further invest in our specialty product portfolio and capitalize on positive industry growth trends and our market leading positions.”
Rogerson continued, “We appreciate the support of our creditors, and this agreement reflects their confidence in our business and our team as we continue executing our strategy and providing our customers with the high-quality products and service they expect. We are also committed to operating our business safely and efficiently while maintaining productive relationships with all of our business partners. I would like to thank our outstanding team for their continued dedication to our company. Supported by innovative research and development capabilities, strong strategic partnerships, an enviable global manufacturing footprint, blue-chip customers and a world-class team, this process better positions Hexion for investing in our long-term growth.”
Hexion has received commitments for $700 million in debtor-in-possession (DIP) financing, a portion of which will be used to pay off its asset-based revolving credit facility. Following court approval, this financing, combined with cash generated by the company’s ongoing operations, is expected to be available and sufficient to meet Hexion’s operational and restructuring needs on a global basis.
In conjunction with the filing, the company has filed a number of customary first day motions. These motions should allow the company to continue to operate in the normal course of business without interruption or disruption to its relationships with its customers, suppliers, vendors and employees. The company expects to receive Court approval for these requests. The company intends to pay suppliers to the U.S. operations in full for all goods received and services rendered on or after the filing date. Payments to suppliers supporting operations outside of the U.S. will continue without interruption and in the normal course.