Related Party Transactions

9 Months Ended

Sep. 30, 2020

Transactions with Apollo

As of the Company’s emergence from bankruptcy on July 1, 2019, Apollo is no longer a related party to the Company. Sales to various Apollo affiliates were $1 for the Predecessor period January 1, 2019 through July 1, 2019. There were no purchases during the Predecessor period January 1, 2019 through July 1, 2019.

Management Consulting Agreement

The Company was party to a Management Consulting Agreement with Apollo (the “Management Consulting Agreement”) pursuant to which the Company received certain structuring and advisory services from Apollo and its affiliates. Apollo was entitled to an annual fee equal to the greater of $3 or 2% of the Company’s Adjusted EBITDA. In conjunction with the Company’s Chapter 11 proceedings and the Support Agreement filed on April 1, 2019, Apollo agreed to waive its annual management fee for 2019. In connection with the Company’s emergence from Chapter 11, the Management Consulting Agreement was terminated pursuant to the Confirmation Order, as of the Effective Date.

Transactions with MPM

As of May 15, 2019, Momentive Performance Materials (“MPM”) is no longer under the common control of Apollo and no longer a related party to the Company. There were no products sold to MPM during the Predecessor period January 1, 2019 through July 1, 2019. During the Predecessor period January 1, 2019 through July 1, 2019, the Company earned less than $1 from MPM as compensation for acting as distributor of products and had purchases of $10.

Shared Services Agreement

The Company previously held a shared services agreement with MPM (the “Shared Services Agreement”). Under this agreement, the Company provided to MPM, and MPM provided to the Company, certain services, including, but not limited to, executive and senior management, administrative support, human resources, information technology support, accounting, finance, legal and procurement services. On March 14, 2019, MPM terminated the Shared Services Agreement, which triggered a transition period for the parties to work together to facilitate an orderly transition of services. The transition of services was completed on September 1, 2020. During the Predecessor period January 1, 2019 through July 1, 2019 the Company incurred approximately $15 of net costs for shared services and MPM incurred approximately $14 of net costs for shared services. Included in the net costs incurred during the Predecessor period January 1, 2019 through July 1, 2019 were net billings from Hexion to MPM of $11.

Other Transactions and Arrangements

In March 2020, the Company entered into a $10 short term affiliate loan with its Parent at a 0% interest rate to fund Parent share repurchases. In June 2020, the Company made a $10 non-cash distribution to its Parent treated as a return of capital to settle this affiliate loan. This return of capital reduced “Paid-in capital” in the unaudited Condensed Consolidated Balance Sheet at September 30, 2020.

The Company sells products and provides services to, and purchases products from, its joint ventures which are recorded under the equity method of accounting. Refer to the below table for a summary of the sales and purchases with the Company and its joint ventures which are recorded under the equity method of accounting:


	Successor				Successor				Predecessor
	Three Months Ended September 30, 2020		July 2, 2019 through September 30, 2019		Nine Months Ended September 30, 2020		July 2, 2019 through September 30, 2019		January 1, 2019 through July 1, 2019
Sales to joint ventures (1)(2)	$	1	$	—	$	2	$	—	$	2
Purchases from joint ventures (1)	<1		1		1		1		2

(1) There were no sales to joint ventures or purchases from joint ventures for the Predecessor period July 1, 2019.

(2) Sales to joint ventures is primarily comprised of sales to the Russia JV included in the Held for Sale Business. Sales to the Company’s other joint ventures were less than $1 in all Successor and Predecessor periods presented.


	September 30, 2020		December 31, 2019
Accounts receivable from joint ventures(1)	$	1	$	1
Accounts payable to joint ventures	—		<1

(1) Accounts receivable from joint ventures is mostly comprised of receivables from the Russia JV included in the Held for Sale Business. Accounts receivable from the Company’s other joint ventures was less than $1 for both September 30, 2020 and December 31, 2019.

In addition to the accounts receivable from joint ventures disclosed above, the Company had a loan receivable of $5 and $7 as of September 30, 2020 and December 31, 2019, respectively, from the Russia JV. These loan receivables have been included in “Long-term assets held for sale” within the unaudited Condensed Consolidated Balance Sheets.