SEC Info - Hexion Inc. - ‘10-K’ for 12/31/20

Year Ended December 31, 2018

(In millions)

Net sales

i 2,510

i 1,323

i 1,481

i 3,137

Cost of sales (exclusive of depreciation and amortization shown below)

i 2,043

i 1,117

i 1,211

i 2,559

Selling, general and administrative expense

i 231

i 124

i 128

i 243

Depreciation and amortization

i 191

i 93

i 43

i 98

Gain on dispositions (see Note 18)

i —

( i 44)

Asset impairments (see Note 8)

i 16

i —

i 28

Business realignment costs

i 69

i 22

i 14

i 27

Other operating expense, net

i 24

i 16

i 17

i 37

Operating (loss) income

( i 64)

( i 49)

i 68

i 189

Interest expense, net

i 100

i 55

i 89

i 365

Reorganization items, net (see Note 7)

i —

( i 2,970)

i —

Other non-operating income, net

( i 15)

i —

( i 11)

( i 12)

(Loss) income from continuing operations before income tax and earnings from unconsolidated entities

( i 149)

( i 104)

i 2,960

( i 164)

Income tax expense (benefit) (see Note 17)

i 14

( i 10)

i 201

i 31

(Loss) income from continuing operations before earnings from unconsolidated entities

( i 163)

( i 94)

i 2,759

( i 195)

Earnings from unconsolidated entities, net of taxes

i 2

i 1

i 4

(Loss) income from continuing operations, net of taxes

( i 161)

( i 92)

i 2,760

( i 191)

(Loss) income from discontinued operations, net of taxes

( i 69)

i 4

i 135

i 28

Net (loss) income

( i 230)

( i 88)

i 2,895

( i 163)

Net (income) loss attributable to noncontrolling interest

i —

( i 1)

i 1

Net (loss) income attributable to Hexion Inc.

( i 230)

( i 89)

i 2,894

( i 162)

See Notes to Consolidated Financial Statements

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HEXION INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME

Successor

Predecessor

Year Ended December 31, 2020

Year Ended December 31, 2018

(In millions)

Net (loss) income

( i 230)

( i 88)

i 2,895

( i 163)

Other comprehensive loss, net of tax:

Foreign currency translation adjustments

( i 8)

( i 3)

( i 8)

Unrealized (loss) gain on cash flow hedge

( i 18)

i 2

i —

Loss recognized from pension and postretirement benefits

i —

( i 2)

Other comprehensive loss

( i 26)

( i 1)

( i 8)

( i 10)

Comprehensive (loss) income

( i 256)

( i 89)

i 2,887

( i 173)

Comprehensive (income) loss attributable to noncontrolling interest

i —

( i 1)

i 1

Comprehensive (loss) income attributable to Hexion Inc.

( i 256)

( i 90)

i 2,886

( i 172)

See Notes to Consolidated Financial Statements

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HEXION INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

Successor

Predecessor

(In millions)

Year Ended December 31, 2020

Year Ended December 31, 2018

Cash flows provided by (used in) operating activities

Net (loss) income

( i 230)

( i 88)

i 2,895

( i 163)

Less: (Loss) income from discontinued operations, net of taxes

( i 69)

i 4

i 135

i 28

(Loss) income from continuing operations

( i 161)

( i 92)

i 2,760

( i 191)

Adjustments to reconcile net loss to net cash provided by (used in) operating activities:

Depreciation and amortization

i 191

i 93

i 43

i 98

Non-cash asset impairments

i 16

i —

i 28

Non-cash reorganization items, net

i —

( i 3,156)

i —

Non-cash impact of inventory step-up

i —

i 27

i —

Deferred tax expense (benefit)

i 9

( i 9)

i 140

i 12

Gain on dispositions (see Note 18)

i —

( i 44)

Loss on sale of assets

i 9

i 4

i 3

i 6

Amortization of deferred financing fees

i —

i 49

Unrealized foreign currency (gains) losses

( i 3)

( i 1)

( i 7)

i 2

Non-cash stock based compensation expense

i 17

i 8

i —

Unrealized losses (gains) on pension and postretirement benefit plan liabilities

i 4

i 5

i —

( i 13)

Financing fees included in net loss

i —

i 136

i —

Other non-cash adjustments

( i 1)

( i 2)

( i 1)

( i 3)

Net change in assets and liabilities:

Accounts receivable

( i 3)

i 108

( i 73)

i 9

Inventories

i 35

i 15

( i 20)

( i 30)

Accounts payable

i 44

( i 15)

( i 3)

Income taxes payable

( i 9)

( i 3)

i 15

i 8

Other assets, current and non-current

( i 21)

i 25

i 3

Other liabilities, current and non-current

( i 11)

i 11

i 9

i 6

Net cash provided by (used in) operating activities from continuing operations

i 116

i 174

( i 163)

( i 63)

Net cash provided by (used in) operating activities from discontinued operations

i 15

i 50

( i 10)

i 40

Net cash provided by (used in) operating activities

i 131

i 224

( i 173)

( i 23)

Cash flows used in investing activities

Capital expenditures

( i 108)

( i 47)

( i 41)

( i 81)

Proceeds from dispositions, net

i —

i 49

Proceeds from sale of assets, net

i 3

i —

i 1

Net cash used in investing activities from continuing operations

( i 105)

( i 47)

( i 40)

( i 31)

Net cash used in investing activities from discontinued operations

( i 21)

( i 11)

( i 2)

( i 9)

Net cash used in investing activities

( i 126)

( i 58)

( i 42)

( i 40)

Cash flows (used in) provided by financing activities

Net short-term debt (repayments) borrowings

( i 7)

( i 24)

( i 4)

i 10

Borrowings of long-term debt

i 256

i 118

i 2,313

i 540

Repayments of long-term debt

( i 293)

( i 130)

( i 2,261)

( i 468)

Return of capital to parent (see Note 9)

( i 13)

i —

Proceeds from rights offering

i —

i 300

i —

Financing fees paid

i —

( i 2)

( i 136)

( i 1)

Net cash (used in) provided by financing activities

( i 57)

( i 38)

i 212

i 81

Effect of exchange rates on cash and cash equivalents, including restricted cash

i 2

i 1

i —

( i 5)

(Decrease) increase in cash and cash equivalents, including restricted cash

( i 50)

i 129

( i 3)

i 13

Cash, cash equivalents and restricted cash at beginning of period

i 254

i 125

i 128

i 115

Cash, cash equivalents and restricted cash at end of period

i 204

i 254

i 125

i 128

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Successor

Predecessor

(In millions)

Year Ended December 31, 2020

Year Ended December 31, 2018

Supplemental disclosures of cash flow information

Cash paid for:

Interest, net

i 103

i 22

i 71

i 318

Income taxes, net of cash refunds

i 16

i 10

i 17

Reorganization items, net

i —

i 188

i —

See Notes to Consolidated Financial Statements

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HEXION INC.

CONSOLIDATED STATEMENTS OF EQUITY (DEFICIT)

(In millions)

Common
Stock

Paid-in
Capital

Treasury
Stock

Note
Receivable
From Parent

Accumulated
Other
Comprehensive
Loss

Accumulated
(Deficit) Equity

Total Hexion Inc. (Deficit) Equity

Non-controlling Interest

Total Shareholder’s (Deficit) Equity

Predecessor

Balance at December 31, 2017

i 1

i 526

( i 296)

i —

( i 8)

( i 2,964)

( i 2,741)

( i 1)

( i 2,742)

Net loss

i —

( i 162)

( i 1)

( i 163)

Other comprehensive loss

i —

( i 10)

i —

( i 10)

i —

( i 10)

Impact of change in accounting policy (ASC 606)

i —

i 1

i —

i 1

Balance at December 31, 2018

i 1

i 526

( i 296)

i —

( i 18)

( i 3,125)

( i 2,912)

( i 2)

( i 2,914)

Net income

i —

i 2,894

i 1

i 2,895

Other comprehensive loss

i —

( i 8)

i —

( i 8)

i —

( i 8)

Elimination of Predecessor Equity

( i 1)

( i 526)

i 296

i —

i 231

i —

Elimination of Predecessor accumulated other comprehensive loss

i —

i 26

i —

i 26

i —

i 26

Balance at July 1, 2019

i —

( i 1)

Issuance of Successor Company common stock

i —

i 1,157

i —

i 1,157

i —

i 1,157

Successor

Balance at July 2, 2019

i —

i 1,157

i —

i 1,157

( i 1)

i 1,156

Net loss

i —

( i 89)

i 1

( i 88)

Stock-based compensation

i —

i 8

i —

i 8

i —

i 8

Other comprehensive loss

i —

( i 1)

i —

( i 1)

i —

( i 1)

Balance at December 31, 2019

i —

i 1,165

i —

( i 1)

( i 89)

i 1,075

i —

i 1,075

Net loss

i —

( i 230)

i —

( i 230)

Stock-based compensation

i —

i 17

i —

i 17

i —

i 17

Other comprehensive loss

i —

( i 26)

i —

( i 26)

i —

( i 26)

Return of capital to parent (see Note 9)

i —

( i 13)

i —

( i 13)

i —

( i 13)

Distribution of affiliate loan (see Note 9)

i —

( i 10)

i —

( i 10)

i —

( i 10)

Settlement of affiliate loan (see Note 9)

i —

i 10

i —

i 10

i —

i 10

Balance at December 31, 2020

i —

i 1,169

i —

( i 27)

( i 319)

i 823

i —

i 823

See Notes to Consolidated Financial Statements

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HEXION INC.

Notes to Consolidated Financial Statements

(In millions, except share data)

1. i Background and Basis of Presentation

Based in Columbus, Ohio, Hexion Inc. (“Hexion” or the “Company”), serves global industrial markets through a broad range of thermoset technologies, specialty products and technical support for customers in a diverse range of applications and industries. At December 31, 2020, the Company had i 44 production and manufacturing facilities, with i 21 located in the United States. The Company’s business is organized based on the products offered and the markets served. At December 31, 2020, the Company had i three reportable segments: Adhesives; Coatings and Composites; and Corporate and Other.

Sale of Phenolic Specialty Resins Business

On September 27, 2020, the Company entered into a definitive agreement (the “Purchase Agreement”) for the sale of its Phenolic Specialty Resins ("PSR"), Hexamine and European-based Forest Products Resins businesses (together with PSR, the “Held for Sale Business”) to Black Diamond Capital Management, LLC and Investindustrial (the “Buyers”) for a purchase price of approximately $425. The consideration consists of $335 in cash and certain assumed liabilities with the remainder in future contingent proceeds based on the performance of the Held for Sale Business. For more information, see Note 4 “Discontinued Operations”.

As of December 31, 2020, the Company reclassified the assets and liabilities of the Held for Sale Business as held for sale on the Consolidated Balance Sheets and reported the results of the operations for the year ended December 31, 2020 as “(Loss) income from continuing operations, net of taxes” on the Consolidated Statements of Operations. Amounts for prior periods have similarly been retrospectively reclassified for all periods presented.

Additionally, the Company has included $ i 15, $ i 9, $ i 10 and $ i 24 in both “Net sales” and “Cost of sales” within the Company’s continuing operations for the year ended December 31, 2020, the Successor period July 2, 2019 through December 31, 2019, the Predecessor period January 1, 2019 through July 1, 2019 and year ended December 31, 2018, respectively, which represents sales from the Company’s continuing operations to the Held for Sale Business that were previously eliminated in consolidation. These reclassifications had no impact on “Net (loss) income” in the Consolidated Statements of Operations for any of the periods presented.

Emergence from Chapter 11 and Fresh Start Accounting

As a result of the Company’s reorganization and emergence from Chapter 11 (as defined in Note 5) on the morning of July 1, 2019 (the “Effective Date”), the Company’s direct parent is Hexion Intermediate Holding 2, Inc. (“Hexion Intermediate”), a holding company and wholly owned subsidiary of Hexion Intermediate Holding 1, Inc., a holding company and wholly owned subsidiary of Hexion Holdings Corporation, the ultimate parent of Hexion (“Hexion Holdings” or “Parent”). Prior to its reorganization, the Company’s parent was Hexion LLC, a holding company and wholly owned subsidiary of Hexion Holdings LLC (now known as Hexion TopCo, LLC or “TopCo”), the previous ultimate parent entity of Hexion, which was controlled by investment funds managed by affiliates of Apollo Management Holdings, L.P. (together with Apollo Global Management, Inc. and its subsidiaries, “Apollo”). On the Effective Date, the Company’s existing common stock were cancelled and 100 new shares of common stock were issued at a par value of $ i 0.01 to the Company’s new direct parent Hexion Intermediate in accordance with the Plan (as defined in Note 5). See Note 5 for more information.

The Company filed for Chapter 11 bankruptcy protection on April 1, 2019 (the “Petition Date”) and as the Company previously disclosed, based on its financial condition and its projected operating results, the defaults under its debt agreements, and the risks and uncertainties surrounding its Chapter 11 proceedings (see Note 5), that there was substantial doubt as to the Company’s ability to continue as a going concern as of the issuance of the Company’s 2018 Annual Report on Form 10-K. Since the Company’s emergence from Chapter 11 on July 1, 2019, based on its new capital structure, liquidity position and projected operating results, the Company expects to continue as a going concern for the next twelve months. See Note 5 for more information.

As a result of the application of fresh start accounting and the effects of the implementation of the Plan, the Consolidated Financial Statements after the Effective Date are not comparable with the Consolidated Financial Statements prior to that date. References to “Successor” or “Successor Company” relate to the financial position and results of operations of the Company after the Effective Date. References to “Predecessor” or “Predecessor Company” refer to the financial position and results of operations of the Company on or before the Effective Date. Refer to Note 6 for more information.

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Financial Reporting in Reorganization

Effective on the Petition Date, the Company applied Accounting Standard Codification, No. 852, “Reorganizations,” (“ASC 852”) which is applicable to companies under Chapter 11 bankruptcy protection. It requires the financial statements for periods subsequent to the Chapter 11 filing to distinguish transactions and events that are directly associated with the reorganization from the ongoing operations of the business. Expenses, realized gains and losses, and provisions for losses that are directly associated with reorganization proceedings must be reported separately as “Reorganization items, net” in the Consolidated Statements of Operations. In addition, the balance sheet must distinguish debtor pre-petition liabilities subject to compromise (“LSTC”) from liabilities of non-filing entities, pre-petition liabilities that are not subject to compromise and post-petition liabilities in the accompanying Consolidated Balance Sheet. LSTC are pre-petition obligations that are not fully secured and have at least a possibility of not being repaid at the full claim amount. LSTC related to debt, its related interest payable and certain affiliate payables were settled in accordance with the Plan, as applicable, on or shortly after the Company emerged from Chapter 11 bankruptcy on July 1, 2019. As of July 1, 2019, all remaining liabilities subject to compromise were not impaired and remain on the Company’s Consolidated Balance Sheets.

The Company’s Consolidated Balance Sheets as of December 31, 2020 and 2019 included in this Annual Report on Form 10-K were prepared under the basis of accounting assuming that the Company will continue as a going concern, which contemplated continuity of operations, realization of assets and satisfaction of liabilities and commitments in the normal course of business.

2. i Summary of Significant Accounting Policies

Principles of Consolidation—The Consolidated Financial Statements include the accounts of the Company and its majority-owned subsidiaries in which minority shareholders hold no substantive participating rights. Intercompany accounts and transactions are eliminated in consolidation. The Company’s share of the net earnings of 20% to 50% owned companies, which are accounted for under the equity method of accounting as the Company has the ability to exercise significance influence over operating and financial policies (but not control), are included in “Earnings from unconsolidated entities, net of taxes” in the Consolidated Statements of Operations. Investments in the other companies are carried at cost.

The Company has recorded a noncontrolling interest for the equity interests in consolidated subsidiaries that are not 100% owned.

The Company’s unconsolidated investments accounted for under the equity method of accounting include the following as of December 31, 2020:

•49.99% interest in Momentive UV Coatings (Shanghai) Co., Ltd, a joint venture that manufactures UV-curable coatings and adhesives in China;

•50% ownership interest in Hexion Shchekinoazot Holding B.V., a joint venture that manufactures forest products resins in Russia (see Note 4 for discussion of Russia JV within discontinued operations);

•50% ownership interest in Hexion Australia Pty Ltd, a joint venture which provides urea formaldehyde resins and other products to industrial customers in western Australia.

i Foreign Currency Translations and Transactions—Assets and liabilities of foreign affiliates are translated at the exchange rates in effect at the balance sheet date. Income, expenses and cash flows are translated at average exchange rates during the year. The Company did not recognize a transaction gain or loss for the year ended December 31, 2020. The Company recognized transaction gains (losses) of $ i 5, $( i 8) and $ i 30 for the Successor period July 2, 2019 through December 31, 2019, the Predecessor periods January 1, 2019 through July 1, 2019 and the year ended December 31, 2018, respectively, which are included as a component of “Net (loss) income.” In addition, gains or losses related to the Company’s intercompany loans payable and receivable denominated in a foreign currency other than the subsidiary’s functional currency that are deemed to be permanently invested are remeasured to cumulative translation and recorded in “Accumulated other comprehensive loss” in the Consolidated Balance Sheets. The effect of translation is included in “Accumulated other comprehensive loss.”

i Use of Estimates—The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and also the disclosure of contingent assets and liabilities at the date of the financial statements. In addition, it requires management to make estimates and assumptions that affect the reported amounts of revenues and expenses during the reporting period. The most significant estimates that are included in the financial statements are environmental remediation liabilities, legal liabilities, deferred tax assets and liabilities and related valuation allowances, income tax accruals, pension and postretirement assets and liabilities, reserves for uncollectible accounts receivable, general insurance liabilities, asset impairments, fair values of assets acquired and liabilities assumed in business acquisitions, and valuations associated with fresh start accounting. Actual results could differ from these estimates.

i Cash and Cash Equivalents—The Company considers all highly liquid investments that are purchased with an original maturity of three months or less to be cash equivalents. At December 31, 2020 and 2019, the Company had interest-bearing time deposits and other cash equivalent investments of $ i 20 and $ i 74, respectively. The Company’s restricted cash balances of $ i i 4 / as of both December 31, 2020 and 2019, respectively represent deposits to secure certain bank guarantees issued to third parties to guarantee potential obligations of the Company primarily related to the completion of tax audits. These balances will remain restricted as long as the underlying exposures exist and are included in the Consolidated Balance Sheets as a component of “Cash and cash equivalents.” /

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Allowance for Doubtful Accounts—Under adoption of ASU 2016-13, the Company has updated its credit loss methodology to consider a broader range of reasonable and supportable information to determine its credit loss estimates. The Company utilizes a historical aging method disaggregated by portfolio segment of geographic region, and then the Company makes any necessary adjustments for current conditions and forecasts about future economic conditions for calculating its allowance for doubtful accounts. The Company evaluates each pooled receivables’ geographic region by differing regional industrial and economic conditions, overall end market conditions and groups of customers with similar risk profiles related to timing and uncertainty of future collections. If particular accounts receivable balances no longer display risk characteristics that are similar to other pooled receivables, the Company performs individual assessments of expected credit losses for those specific receivables. Receivables are charged against the allowance for doubtful accounts when it is probable that the receivable will not be collected.

As of December 31, 2020, the Company’s allowance for doubtful accounts provision for expected credit losses reflected the current business conditions, forecasts of future economic conditions and the impacts related to the global business and market disruptions of the coronavirus disease 2019 (“COVID-19”) pandemic, in accordance with ASU 2016-13 (see Note 3 for more information) which did not result in an increase for the year. The Company’s current expectations and assumptions regarding its business, the economy and other future events and conditions are based on currently available financial, economic and competitive data and current business plans as of December 31, 2020. Actual results could vary materially depending on risks and uncertainties that may affect the Company’s operations, markets, services, prices and other factors.

The Company recorded an allowance for doubtful accounts of $ i i 3 / at both December 31, 2020 and 2019, to reduce accounts receivable to their estimated net realizable value. Accounts receivable balances are written-off against the allowance if a final determination of uncollectibility is made. There were no write-offs or recoveries for the year ended December 31, 2020. Prior to adoption of ASU 2016-13, the Company’s policy for the allowance for doubtful accounts was estimated using factors such as customer credit ratings and past collection history.

i Inventories—Inventories are stated at lower of cost or net realizable value using the first-in, first-out method. Costs include direct material, direct labor and applicable manufacturing overheads, which are based on normal production capacity. Abnormal manufacturing costs are recognized as period costs and fixed manufacturing overheads are allocated based on normal production capacity.

Deferred Expenses—Deferred debt financing costs are included in “Long-term debt” in the Consolidated Balance Sheets, with the exception of deferred financing costs related to revolving line of credit arrangements, which are included in “Other long-term assets” in the Consolidated Balance Sheets. These costs are amortized over the life of the related debt or credit facility using the effective interest method. Upon extinguishment of any debt, the related debt issuance costs are written off. Deferred debt financing costs included in “Long-term debt” in the Consolidated Balance Sheets were less than $ i 1 at December 31, 2020.

During the year ended December 31, 2019, in connection with the application of fresh start accounting, any existing debt issuance costs were included in “Reorganization items, net” in the Consolidated Statements of Operations and there were no deferred debt financing costs included in “Long-term debt” in the Consolidated Balance Sheets as of December 31, 2019.

i Property and Equipment—Land, buildings and machinery and equipment are stated at cost less accumulated depreciation. Depreciation is recorded on a straight-line basis over the estimated useful lives of properties (the range of estimated useful lives for buildings and machinery and equipment were i 9 to i 39 years and i 1 to i 20 years, respectively at December 31, 2020 and 2019). Assets under finance leases are amortized over the lesser of their useful life or the lease term. Major renewals and betterments are capitalized. Maintenance, repairs and minor renewals are expensed as incurred. When property and equipment is retired or disposed of, the asset and related depreciation are removed from the accounts and any gain or loss is reflected in operating income. The Company capitalizes interest costs that are incurred during the construction of property and equipment. Property and equipment was recorded at its estimated fair value in connection with the application of fresh start accounting, resulting in the remeasurement of accumulated depreciation to zero as of July 1, 2019 (see Note 6. Depreciation expense was $ i 131, $ i 90, $ i 40 and $ i 86 for the year ended December 31, 2020, the Successor period July 2, 2019 through December 31, 2019, the Predecessor period January 1, 2019 through July 1, 2019 and the year ended December 31, 2018, respectively. Additionally, for the year ended December 31, 2020 and 2018, $ i 2 and $ i 4, respectively, / of accelerated depreciation was recorded as a result of shortening the estimated useful lives of certain long-lived assets related to planned facility rationalizations. There was no accelerated depreciation in the Successor period July 2, 2019 through December 31, 2019 or in the Predecessor period January 1, 2019 through July 1, 2019. Lastly, for the year ended December 31, 2020 and the Successor period July 2, 2019 through December 31, 2019, the Predecessor period January 1, 2019 through July 1, 2019 and the year ended December 31, 2018, “Capitalized expenditures” in the Consolidated Statements of Cash Flows were increased by $ i 2, decreased by $ i 8, increased by $ i 7 and increased by $ i 5, respectively, to reflect the change in invoiced but unpaid capital expenditures at each respective year-end as a non-cash investing activity.

i Leases—The Company adopted ASU 2016-02 using a modified retrospective adoption method at January 1, 2019. Under this method of adoption, there is no impact to the comparative Consolidated Statement of Operations and the Consolidated Balance Sheets. The Company also determined that there was no cumulative-effect adjustment to beginning retained earnings on the Consolidated Balance Sheet. The Company will continue to report periods prior to January 1, 2019 in its financial statements under prior guidance as outlined in Accounting Standards Codification Topic 840, “Leases”. In addition, the Company elected the package of practical expedients permitted under the transition guidance within the new standard, which allowed the Company to carry forward its historical lease classification. The Company also elected the hindsight practical expedient to determine the lease term for existing leases.

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The Company determines if a contract is a lease at the inception of the arrangement. The Company reviews all options to extend, terminate, or purchase its right of use assets at the inception of the lease and accounts for these options when they are reasonably certain of being exercised. Nearly all of the Company’s lease contracts do not provide a readily determinable implicit rate. For these contracts, the Company estimates the incremental borrowing rate to discount the lease payments based on information available at lease commencement. Leases with an initial term of 12 months or less are not recorded on the balance sheet and the Company recognizes lease expense for these leases on a straight-line basis over the lease term. For lease agreements entered into or reassessed after the adoption of Topic 842, the Company combines lease and non-lease components. See Note 13 for more information.

i Capitalized Software—The Company capitalizes certain costs, such as software coding, installation and testing, that are incurred to purchase or create and implement computer software for internal use. Amortization is recorded on the straight-line basis over the estimated useful lives, which range from i 1 to i 5 years. /

Goodwill and Intangibles—The excess of purchase price over net tangible and identifiable intangible assets of businesses acquired is carried as “Goodwill” in the Consolidated Balance Sheets. Separately identifiable intangible assets that are used in the operations of the business (e.g., patents and technology, tradenames, customer lists and contracts) are recorded at cost (fair value at the time of acquisition) and reported as “Other intangible assets, net” in the Consolidated Balance Sheets. Costs to renew or extend the term of identifiable intangible assets are expensed as incurred. The Company does not amortize goodwill. Intangible assets with determinable lives are amortized on a straight-line basis over the legal or economic life of the assets, which range from i 15 to i 25 years (see Note 6 and Note 10).

As a result of the application of fresh start accounting the Company established $ i 178 of Successor goodwill and $ i 1,219 of Successor intangibles upon Emergence. Refer to Note 6 for additional information related to Emergence. The amount of goodwill and intangibles related to continuing operations is $ i 164 and $ i 1,079, respectively. Refer to Note 10 for additional information.

Impairment—The Company reviews property and equipment, leases and all amortizable intangible assets for impairment whenever events or changes in circumstances indicate that the carrying amount of these assets may not be recoverable. Recoverability is based on estimated undiscounted cash flows or other relevant observable measures. The Company tests goodwill for impairment annually, or when events or changes in circumstances indicate impairment may exist, by comparing the estimated fair value of each reporting unit with goodwill to its carrying value to determine if there is an indication that a potential impairment may exist.

Long-Lived Assets and Amortizable Intangible Assets

There were $ i 16 long-lived asset impairments recorded during the year ended December 31, 2020 and there were i i no / long-lived asset impairments for the Successor period July 2, 2019 through December 31, 2019 or the Predecessor period January 1, 2019 through July 1, 2019. During the year ended December 31, 2018, the Company recorded long-lived asset impairments of $ i 28, which are included in “Asset impairments” in the Consolidated Statements of Operations (see Note 8 for more information).

Goodwill

The Company’s reporting units in continuing operations include epoxy, versatics and forest products. The Company’s reporting units are generally one level below the operating segments for which discrete financial information is available and reviewed by segment management. However, components of an operating segment can be aggregated as one reporting unit if the components have similar economic characteristics. The Company’s consolidated goodwill balance from continuing operations was $ i 164 as of December 31, 2020, including $ i 127 related to the forest products reporting unit, $ i 36 related to the versatics reporting unit and $ i 1 related to the epoxy reporting unit.

The Company tests goodwill annually for impairment of value or more frequently when potential impairment triggering events are present. The Company’s annual impairment testing date is October 1. Goodwill is tested for impairment by comparing the estimated fair value of a reporting unit to its carrying value. The Company uses a weighted market and income approach to estimate the fair value of its reporting units. The market approach is a comparable analysis technique commonly used in the investment banking and private equity industries based on the EBITDA (earnings before interest, income taxes, depreciation and amortization) multiple technique, and the income approach is based on a discounted cash flow model. The key assumptions and estimates utilized in the market and income approaches primarily include market multiples, discount rates and future levels of revenue growth and operating margins, and to a lesser extent, estimates and assumptions related to working capital investment, taxes, depreciation and amortization and capital spending projections. If the carrying value of the reporting unit exceeds the estimated fair value, an impairment charge is recorded for the difference.

As of October 1, 2020 and 2019, the estimated fair value of each of the Company’s remaining reporting units was deemed to be in excess of the carrying amount of assets (including goodwill) and liabilities assigned to each reporting unit. The step-up of fixed and intangible asset values during fresh start accounting resulted in an increase of the carrying amounts of net assets for the Company’s reporting units that have goodwill, thereby reducing the amount of headroom between the fair value and carrying value of these reporting units. As a result, future unfavorable changes to business results and/or discounted cash flows for these reporting units are more likely to result in asset impairments.

i General Insurance—The Company is generally insured for losses and liabilities for workers’ compensation, physical damage to property, business interruption and comprehensive general, product and vehicle liability under high-deductible insurance policies. The Company records losses when they are probable and reasonably estimable and amortizes insurance premiums over the life of the respective insurance policies.

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i Legal Claims and Costs—The Company accrues for legal claims and costs in the period in which a claim is made or an event becomes known, if the amounts are probable and reasonably estimable. Each claim is assigned a range of potential liability and the most likely amount is accrued. If there is no amount in the range of potential liability that is most likely, the low end of the range is accrued. The amount accrued includes all costs associated with the claim, including settlements, assessments, judgments and fines. Legal fees are expensed as incurred (see Note 14).

i Environmental Matters—Accruals for environmental matters are recorded when it is probable that a liability has been incurred and the amount of the liability can be reasonably estimated. Environmental accruals are reviewed on a quarterly basis and as events and developments warrant (see Note 14).

i Asset Retirement Obligations—Asset retirement obligations are initially recorded at their estimated net present values in the period in which the obligation occurs, with a corresponding increase to the related long-lived asset. Over time, the liability is accreted to its settlement value and the capitalized cost is depreciated over the useful life of the related asset. When the liability is settled, a gain or loss is recognized for any difference between the settlement amount and the liability that was recorded.

i Revenue Recognition—The Company follows the principles-based five step model to recognize revenue upon the transfer of promised goods or services to customers and in an amount that reflects the consideration for which the entity expects to be entitled in exchange for those goods or services. Revenue, net of estimated allowances and returns, is recognized when the Company has completed its performance obligations under a contract and control of the product is transferred to the customer. Substantially all revenue is recognized at the time shipment is made or upon delivery as risk and title to the product transfer to the customer. Sales, value add, and other taxes that are collected concurrently with revenue-producing activities are excluded from revenue. Contract terms for certain transactions, including sales made on a consignment basis, result in the transfer of control of the finished product to the customer prior to the point at which the Company has the right to invoice for the product. In these cases, timing of revenue recognition will differ from the timing of invoicing to customers and will result in the Company recording a contract asset. The Company adopted ASU 2014-09 as of January 1, 2018 utilizing a modified retrospective approach. A contract asset balance of $ i 5 and $ i 6 is recorded within “Other current assets” at December 31, 2020 and 2019, respectively, in the Consolidated Balance Sheet. Refer to Note 20 for additional discussion of the Company’s net sales by reportable segment disaggregated by geographic region. /

i Shipping and Handling—Freight costs that are billed to customers are included in “Net sales” in the Consolidated Statements of Operations. Shipping costs are incurred to move the Company’s products from production and storage facilities to the customer. Handling costs are incurred from the point the product is removed from inventory until it is provided to the shipper and generally include costs to store, move and prepare the products for shipment. Revenue from shipping and handling services is recognized when control of the product is transferred to the customer. Shipping and handling costs are recorded in “Cost of sales” in the Consolidated Statements of Operations.

i Turnaround Costs—The Company periodically performs procedures at its major production facilities to extend the useful life, increase output and efficiency and ensure the long-term reliability and safety of plant machinery (“turnaround” or “turnaround costs”). As a result of the application of fresh start accounting upon the Company’s emergence from Chapter 11, the Successor Company adopted an accounting policy to capitalize certain turnaround costs and amortize on a straight-line basis over the estimated period until the next turnaround. Costs for routine repairs and maintenance are expensed as incurred. Capitalized turnaround costs were $ i 7 and $ i 2 at December 31, 2020 and 2019 and are included in “Machinery and equipment” in the Consolidated Balance Sheets. /

i Research and Development Costs—Funds are committed to research and development activities for technical improvement of products and processes that are expected to contribute to future earnings. We also provide customer service through our technical staff as part of our research and development program to discover new applications and processes. All costs associated with research and development and technical services are charged to expense as incurred. Research and development and technical service expense was $ i 38, $ i 20, $ i 21 and $ i 43 for the year ended December 31, 2020, the Successor period ended July 2, 2019 through December 31, 2019, the Predecessor period January 1, 2019 through July 1, 2019 and the year ended December 31, 2018, respectively, and is included in “Selling, general and administrative expense” in the Consolidated Statements of Operations. /

i Business Realignment Costs—The Company incurred “Business realignment costs” totaling $ i 69, $ i 22, $ i 14 and $ i 27 for the year ended December 31, 2020, the Successor period July 2, 2019 through December 31, 2019, the Predecessor period January 1, 2019 through July 1, 2019 and the year ended December 31, 2018, respectively. These costs primarily included costs related to in-process cost reduction programs and certain in-process and recently completed facility rationalizations.

Pension and Other Non-Pension Postretirement Benefit Liabilities—Pension and other non-pension postretirement benefit (“OPEB”) assumptions are significant inputs to the actuarial models that measure pension and OPEB benefit obligations and related effects on operations. Two assumptions, discount rate and expected return on assets, are important elements of plan expense and asset/liability measurement. The Company evaluates these critical assumptions at least annually on a plan and country-specific basis. The Company periodically evaluates other assumptions involving demographic factors, such as retirement age, mortality and turnover, and updates them to reflect the Company's experience and expectations for the future. Actual results in any given year will often differ from actuarial assumptions because of economic and other factors.

Accumulated and projected benefit obligations are measured as the present value of future cash payments. The Company discounts these cash payments using a split-rate interest approach. This approach uses multiple interest rates from market-observed forward yield curves which correspond to the estimated timing of the related benefit payments. Lower discount rates increase present values and higher discount rates decrease present values.

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To determine the expected long-term rate of return on pension plan assets, the Company considers current and expected asset allocations, as well as historical and expected returns on various categories of plan assets. In developing future return expectations for the principal benefit plans’ assets, the Company evaluates general market trends as well as key elements of asset class returns such as expected earnings growth, yields and spreads across a number of potential scenarios.

Upon the Company’s annual remeasurement of its pension and OPEB liabilities in the fourth quarter, or on an interim basis as triggering events warrant remeasurement, the Company immediately recognizes gains and losses as a mark-to-market (“MTM”) gain or loss through earnings. As such, the Company’s net periodic pension and OPEB expense consists of i) service cost, interest cost, expected return on plan assets, amortization of prior service cost/credits recognized on a quarterly basis and ii) MTM adjustments recognized annually in the fourth quarter upon remeasurement of pension and OPEB liabilities or when triggering events warrant remeasurement.

The MTM adjustments were a loss of $ i 4, loss of $ i 5 and a gain of $ i 13 for the year ended December 31, 2020, the Successor period July 2, 2019 through December 31, 2019, and the year ended December 31, 2018, respectively, and are recognized in “Other non-operating (income) expense, net” in the Consolidated Statements of Operations. A MTM loss of $ i 44 was recorded upon the Company’s emergence from bankruptcy (see Note 5 for more information) which was included within “Reorganization items, net” on the Consolidated Statement of Operations for the Predecessor period January 1, 2019 through July 1, 2019.

Income Taxes—The Company recognizes deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the financial statement carrying amounts and the tax bases of the assets and liabilities.

Deferred tax balances are adjusted to reflect tax rates, based on current tax laws, which will be in effect in the years in which temporary differences are expected to reverse. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized (see Note 17).

Unrecognized tax benefits are generated when there are differences between tax positions taken in a tax return and amounts recognized in the consolidated financial statements. Tax benefits are recognized in the consolidated financial statements when it is more likely than not that a tax position will be sustained upon examination. Tax benefits are measured as the largest amount of benefit that is greater than 50% likely of being realized upon settlement. The Company classifies interest and penalties as a component of tax expense.

The Company monitors changes in tax laws and reflects the impact of tax law changes in the period of enactment. See Note 17 for additional information on how the Company recorded the impacts of the U.S. tax reform.

i Derivative Financial Instruments and Hedging Activities—Periodically, the Company is a party to forward exchange contracts, foreign exchange rate swaps, interest rate swaps, natural gas futures and electricity forward contracts to reduce its cash flow exposure to changes in interest rates and natural gas and electricity prices. The Company does not hold or issue derivative financial instruments for trading purposes. All derivatives, whether designated as hedging relationships or not, are recorded on our balance sheet at fair value. For fair value and cash flow hedges qualifying for hedge accounting, the Company formally documents at inception the relationship between hedging instruments and hedged items, the risk management objective, strategy and the evaluation of effectiveness for the hedge transaction. If the derivative is designated as a cash flow hedge, changes in the fair value of the derivative are recorded in accumulated other comprehensive income, to the extent effective, and will be recognized in the Consolidated Statement of Operations when settled. The effectiveness of a cash flow hedging relationship is established at the inception of the hedge, and after inception the Company performs effectiveness assessments at least every three months. For a derivative that does not qualify or has not been designated as a hedge, changes in fair value are recognized in earnings.

i Stock-Based Compensation—All stock-based compensation activity relates to shares issued by Hexion Holdings, the ultimate parent of the Company. Stock-based compensation cost is measured at the grant date based on the fair value of the award which is amortized as expense over the requisite service period or derived service period on a graded-vesting basis. The expense is recorded net of forfeitures upon occurrence (see Note 16).

i Transfers of Financial Assets—The Company executes factoring and sales agreements with respect to its trade accounts receivable to support its working capital requirements. The Company accounts for these transactions as either sales-type or financing-type transfers of financial assets based on the terms and conditions of each agreement. For the portion of the sales price that is deferred in a reserve account and subsequently collected, the Company’s policy is to classify the cash in-flows as cash flows from operating activities as the predominant source of the cash flows pertains to the Company’s trade accounts receivable. The remaining portion of the sales price not deferred is recognized as cash flows from operating activities. When the Company retains the servicing rights on the transfers of accounts receivable, it measures these rights at fair value, if material.

i Concentrations of Credit Risk—Financial instruments that potentially subject the Company to concentrations of credit risk are primarily temporary investments and accounts receivable. The Company places its temporary investments with high quality institutions and, by policy, limits the amount of credit exposure to any one institution. Concentrations of credit risk for accounts receivable are limited due to the large number of customers in the Company’s customer base and their dispersion across many different industries and geographies. The Company generally does not require collateral or other security to support customer receivables.

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i Concentrations of Supplier Risk—The Company relies on long-term agreements with key suppliers for most of its raw materials. The loss of a key source of supply or a delay in shipments could have an adverse effect on its business. Should any of the suppliers fail to deliver or should any of the key long-term supply contracts be canceled, the Company would be forced to purchase raw materials at current market prices. The Company’s largest supplier provides approximately i 9% of raw material purchases. In addition, several of the feedstocks at various facilities are transported through a pipeline from one supplier. /

i Subsequent Events—The Company has evaluated events and transactions subsequent to December 31, 2020 through the date of issuance of its Consolidated Financial Statements.

i Reclassifications—Certain amounts in the Consolidated Financial Statements for prior periods have been reclassified to conform with the current presentation. These reclassifications were to record the assets and liabilities of the Held for Sale Business and the results of operations as discontinued operations. See Note 4 for more information.

Standard Guarantees / Indemnifications—In the ordinary course of business, the Company enters into a number of agreements that contain standard guarantees and indemnities where the Company may indemnify another party for, among other things, breaches of representations and warranties. These guarantees or indemnifications are granted under various agreements, including those governing (i) purchases and sales of assets or businesses, (ii) leases of real property, (iii) licenses of intellectual property, (iv) long-term supply agreements, (v) employee benefits services agreements and (vi) agreements with public authorities on subsidies for designated research and development projects. These guarantees or indemnifications are for the benefit of the (i) buyers in sale agreements and sellers in purchase agreements, (ii) landlords or lessors in lease contracts, (iii) licensors or licensees in license agreements, (iv) vendors or customers in long-term supply agreements, (v) service providers in employee benefits services agreements and (vi) governments or agencies subsidizing research or development. In addition, the Company guarantees some of the payables of its subsidiaries to purchase raw materials in the ordinary course of business.

These parties may also be indemnified against any third party claim resulting from the transaction that is contemplated in the underlying agreement. Additionally, in connection with the sale of assets and the divestiture of businesses, the Company may agree to indemnify the buyer for liabilities related to the pre-closing operations of the assets or businesses sold. Indemnities for pre-closing operations generally include tax liabilities, environmental liabilities and employee benefit liabilities that are not assumed by the buyer in the transaction.

Indemnities related to the pre-closing operations of sold assets normally do not represent additional liabilities to the Company, but simply serve to protect the buyer from potential liability associated with the Company’s existing obligations at the time of sale. The Company has accrued for those pre-closing obligations that it considers to be probable and reasonably estimable. The amounts recorded at December 31, 2020 and 2019 are not material.

While some of these guarantees extend only for the duration of the underlying agreement, many survive the expiration of the term of the agreement or extend into perpetuity (unless they are subject to a legal statute of limitations). There are no specific limitations on the maximum potential amount of future payments that the Company could be required to make under its guarantees, nor is the Company able to estimate the maximum potential amount of future payments to be made under these guarantees because the triggering events are not predictable.

Our corporate charter also requires us to indemnify, to the extent allowed by New Jersey state corporate law, our directors and officers as well as directors and officers of our subsidiaries and other agents against certain liabilities and expenses incurred by them in carrying out their obligations.

Warranties—The Company does not make express warranties on its products, other than that they comply with the Company’s specifications; therefore, the Company does not record a warranty liability. Adjustments for product quality claims are not material and are charged against net sales.

Recently Issued Accounting Standards

Newly Adopted Accounting Standards

In June 2016, the FASB issued ASU 2016-13: Financial Instruments - Credit Losses (Topic 820): Measurement of Credit Losses on Financial Instruments, (“ASU 2016-13”). The amendments in this update replace the incurred loss impairment methodology in current U.S. GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. New disclosures are also required with this standard. The standard is effective for annual and interim periods beginning after December 15, 2019. This standard impacts the Company’s accounts receivables and contract assets. The Company adopted ASU 2016-13 at January 1, 2020, using a modified retrospective adoption method. Under this method of adoption, there is no impact to the comparative Consolidated Statement of Operations and the Consolidated Balance Sheets. There was an immaterial impact of adopting ASU 2016-13 on the date of adoption.

In August 2018, the FASB issued ASU 2018-15: Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40): Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract (“ASU 2018-15”). ASU 2018-15 align the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. The standard is effective for annual and interim periods beginning after December 15, 2019. The Company adopted ASU 2016-13 prospectively on January 1, 2020 and the adoption had an immaterial impact on its consolidated financial statements.

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In March 2020, the FASB issued ASU 2020-04: Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting (“ASU 2020-04”). ASU 2020-04 will provide optional expedients and exceptions for a limited period of time to ease the potential burden in accounting for contracts, hedging relationships and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. The amendments in this ASU are effective for all entities as of March 12, 2020 through December 31, 2022. The Company has adopted ASU 2020-04 and the initial adoption of this ASU did not have an impact on our consolidated financial statements.

Recently Issued Accounting Standards

In December 2019, the FASB issued ASU 2019-12: Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes (“ASU 2019-12”). ASU 2019-12 will simplify the accounting for income taxes by removing certain exceptions to the general principles in income tax accounting and improve consistent application of and simplify GAAP for other areas of income tax accounting by clarifying and amending existing guidance. The new guidance is effective for fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. The Company is currently assessing the potential impact ASU 2019-12 will have on its consolidated financial statements.

In August 2018, the FASB issued ASU 2018-14: Compensation - Retirement Benefits - Defined Benefit Plans - General (Subtopic 715-20): Disclosure Framework - Changes to the Disclosure Requirements for Defined Benefit Plans (“ASU 2018-14”). ASU 2018-14 modifies the disclosure requirements for employers that sponsor defined benefit pension or other postretirement plans. The standard is effective for fiscal years ending after December 15, 2020. The Company is currently assessing the potential impact of ASU 2018-14 on its financial statements.

3. i COVID-19 Impacts

During this pandemic, the Company has implemented additional guidelines to further protect the health and safety of its employees as the Company continues to operate with its suppliers and customers. The Company has maintained a focus on the safety of its employees while minimizing potential disruptions caused by COVID-19. For example, the Company is following all legislatively-mandated travel directives in the various countries where it operates, and the Company has also put additional travel restrictions in place for its associates designed to reduce the risk from COVID-19. Additionally, the Company is utilizing extended work from home options to protect its office associates, while adjusting its meeting protocols and processes at its manufacturing sites.

The Company’s businesses have been designated by many governments as essential businesses and the Company’s operations have continued through December 31, 2020. While the Company has continued to operate during the pandemic, it did incur adverse financial impacts to its sales and profitability results during the year ended December 31, 2020 from COVID-19, primarily related to reduced volumes associated with the pandemic. The pandemic has impacted global economic conditions and lowered demand in many of the end use markets in which the Company operates such as automotive, aerospace, industrial products, oil and gas, construction and housing. The ultimate impact that COVID-19 will have on the Company’s future financial position, operating results and cash flows involves numerous risks and uncertainties, including new information which may emerge concerning the severity and duration of COVID-19 and actions to contain the virus or treat its impact.

The Coronavirus Aid, Relief, and Economic Security (the “CARES”) Act was enacted on March 27, 2020 in the U.S. The CARES Act includes several significant provisions, such as delaying certain payroll tax payments, mandatory transition tax payments under the Tax Cuts and Jobs Act, and estimated income tax payments. The Company does not currently expect the CARES Act to have a material impact on its financial results, including on its annual estimated effective tax rate but the Company delayed approximately $15 of certain income tax and non-income tax payments during 2020 and deferred an additional $5 of certain tax payments to future years. The Company continues to monitor and assess the CARES Act and similar legislation in the US and other jurisdictions where the Company operates which may impact the Company’s business and financial results.

Subsequent to December 31, 2020, the United States, and the global regions where the Company operates, continue to be affected by COVID-19. The Company is closely monitoring the COVID-19 pandemic on all aspects of its businesses and geographies, including the impact on its facilities, employees, customers, suppliers, vendors, business partners and distribution.

4. i Discontinued Operations

On September 27, 2020, the Company entered into a Purchase Agreement for the sale of PSR, Hexamine and European-based Forest Products Resins businesses (together with PSR, the “Held for Sale Business” or the “Business”) to Black Diamond Capital Management, LLC and Investindustrial (the “Buyers”) for a purchase price of approximately $ i 425. The consideration consists of $ i 335 in cash and certain assumed liabilities with the remainder in future contingent proceeds based on the performance of the Held for Sale Business. The final purchase price is subject to customary post-closing adjustments. The Held for Sale Business was formerly included in the Company’s Adhesives reportable segment.

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The Held for Sale Business produces phenolic specialty resins and engineered thermoset molding compounds used in applications that require extreme heat resistance and strength, such as after-market automotive and original equipment manufacturing (“OEM”) truck brake pads, filtration, aircraft components and foundry resins. The Business is also a significant producer of formaldehyde-based resins in Europe and merchant formaldehyde and formaldehyde derivatives in the Louisville and Acme plants, respectively. Formaldehyde-based resins, also known as forest products resins, are a key adhesive and binding ingredient used in the production of a wide variety of engineered lumber products, including medium density fiberboard (“MDF”), particleboard and oriented strand board (“OSB”). These products are used in a wide range of applications in the construction, remodeling and furniture industries. Merchant formaldehyde and formaldehyde derivatives are intermediate ingredients that are used in a variety of durable and industrial products. The Business generated annual sales of approximately $500 in 2020 and was historically reported within the Adhesives reportable segment. The sale is subject to customary closing conditions, including European Works Council consultation, and is expected to close in the first quarter of 2021.

As of December 31, 2020, the Company reclassified the assets and liabilities of the Held for Sale Business as held for sale on the Consolidated Balance Sheets and reported the results of the operations for the year ended December 31, 2020 as “(Loss) income from discontinued operations, net of tax” on the Consolidated Statements of Operations. Amounts for prior periods have similarly been retrospectively reclassified for all periods presented.

The Held for Sale Business had $ i i 14 / of goodwill at both December 31, 2020 and 2019, and $ i 61 and $ i 63 of other intangible assets at December 31, 2020 and 2019, respectively. Goodwill was allocated based on the relative fair value of the European-based Forest Products Resins businesses, included in the Held for Sale Business, which is part of the Company’s Forest Product Resins reporting unit. Other intangible assets were specifically identified based on customer relationships within the Company’s Forest Products Resins reporting unit that are associated with the Held for Sale Business.

As a result of entering into the Purchase Agreement, the Company recognized a pre-tax charge of $ i 75 within discontinued operations, representing the difference between the fair value of the Held for Sale Business, less costs to sell, and the carrying value of net assets held for sale as of December 31, 2020. Fair value represents the expected net cash proceeds, excluding any future contingent proceeds, from the sale of the Held for Sale Business. The Company has made an accounting policy election to account for the initial and subsequent measurement of the future contingent proceeds, of up to $90, as a gain contingency. Under this model, any future contingent consideration is not recognized until all future conditions are met and the Company has earned the proceeds. The contingent proceeds are based on performance targets of the Held for Sale Business over each of the next three years, as specified in the Purchase Agreement. Thus, for purposes of this impairment analysis the fair value of the future contingent proceeds was not considered in determination of the disposal group impairment. Further, the Company concluded that the impairment of the Held for Sale Business assets did not represent an impairment triggering event for the Company’s continuing operations.

The following table reconciles the carrying amounts of major classes of assets and liabilities of discontinued operations to total assets and liabilities of discontinued operations that are classified as held for sale in the Company’s Consolidated Balance Sheets:


	December 31, 2020		December 31, 2019
Carrying amounts of major classes of assets held for sale:

Accounts receivable	$	i 66	$	i 49
Finished and in-process goods	i 18		i 21
Raw materials and supplies	i 17		i 18
Other current assets	i 12		i 11
Total current assets	i 113		i 99
Investment in unconsolidated entities	i 5		i 3
Deferred tax assets	i 2		i —
Other long-term assets	i 7		i 11
Property, plant and equipment, net	i 310		i 297
Operating lease assets	i 13		i 12
Goodwill	i i 14 /		i 14
Other intangible assets, net	i 61		i 63
Discontinued operations impairment	( i 75)		i —
Total long-term assets	i 337		i 400
Total assets held for sale	$	i 450	$	i 499

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Carrying amounts of major classes of liabilities held for sale:
Accounts payable	$	i 52	$	i 52
Income taxes payable	i 1		i —
Accrued payroll	i 3		i 5
Current portion of operating lease liabilities	i 2		i 2
Other current liabilities	i 9		i 10
Total current liabilities	i 67		i 69
Long-term pension and post employment benefit obligations	i 36		i 29
Deferred income taxes	i 22		i 15
Operating lease liabilities	i 5		i 4
Other long-term liabilities	i 8		i 8
Total long-term liabilities	i 71		i 56
Total liabilities held for sale	$	i 138	$	i 125

In addition to the Held for Sale Business assets and liabilities classified as “held for sale” in the table above, the Company’s Consolidated Balance Sheets as of December 31, 2020 also includes $ i 1 of current assets held for sale, noncurrent assets held for sale of $ i 5, current liabilities associated with assets held for sale of $ i 3 and noncurrent liabilities associated with assets held for sale of $ i 3. These additional assets and liabilities classified as “held for sale” at December 31, 2020 are related to the Company’s other restructuring activities.

The following table shows the financial results of discontinued operations for the periods presented:

Successor

Predecessor

Year Ended December 31, 2020

Year Ended December 31, 2018

Major line items constituting pretax income of discontinued operations:

Net sales (1)

i 493

i 286

i 309

i 692

Cost of sales (exclusive of depreciation and amortization)(1)

i 412

i 245

i 263

i 600

Selling, general and administrative expense

i 42

i 15

i 17

i 34

Depreciation and amortization

i 26

i 17

i 9

i 19

Asset impairments

i 75

i —

Business realignment costs

i 3

i 2

i 1

i 2

Other operating expense (income), net

i —

i 1

( i 1)

Operating (loss) income

( i 65)

i 6

i 20

i 38

Reorganization items, net

i —

( i 135)

i —

Other non-operating expense, net

i 5

i 1

i —

(Loss) income from discontinued operations before income tax, earnings from unconsolidated entities

( i 70)

i 5

i 155

i 38

Income tax expense (benefit)

i 1

i 21

i 9

(Loss) income from discontinued operations, net of tax

( i 71)

i 4

i 134

i 29

Earnings from unconsolidated entities, net of tax

i 2

i —

i 1

( i 1)

Net (loss) income attributable to discontinued operations

( i 69)

i 4

i 135

i 28

(1) The Held for Sale Business has included $ i 4, $ i 5, $ i 2 and $ i i 9 / in both “Net sales” and “Cost of sales” within the discontinued operations for the year ended December 31, 2020, the Successor period July 2, 2019 through December 31, 2019 and the Predecessor periods January 1, 2019 through July 1, 2019 and year ended December 31, 2018, respectively, which represents sales from the Held for Sale Business to the Company’s continuing operations that were previously eliminated in consolidation. These reclassifications had no impact on “Net (loss) income” in the Consolidated Statements of Operations for any of the periods presented.

Equity Method Investments

The Company's 50% ownership interest in the Russia JV, accounted for using the equity method of accounting, is included in the Held for Sale Business. Summarized financial data for the Russia JV are shown in the following tables:


	December 31, 2020		December 31, 2019
Current assets	$	i 7	$	i 9
Non-current assets	i 1		i 1
Current liabilities	i 2		i 11
Non-current liabilities	i 6		i 12

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Successor

Predecessor

Year Ended December 31, 2020

Year Ended December 31, 2018

Net sales

i 32

i 14

i 18

i 43

Gross profit

i 12

i 3

i 4

i 7

Pre-tax income

i 5

i 1

i 2

Net income

i 4

i —

i 2

5. i Emergence from Chapter 11 Bankruptcy

Bankruptcy Petitions and Emergence from Chapter 11

On the Petition Date, the Company, Hexion Holdings LLC, Hexion LLC and certain of the Company’s subsidiaries (collectively, the “Debtors”) filed voluntary petitions (the “Bankruptcy Petitions”) for reorganization under Chapter 11 (“Chapter 11”) of the U.S. Bankruptcy Code (the “Bankruptcy Code”) in the United States Bankruptcy Court for the District of Delaware, (the “Bankruptcy Court”). The Chapter 11 proceedings were jointly administered under the caption In re Hexion TopCo, LLC, No. 19-10684 (the “Chapter 11 Cases”). The Debtors continued to operate their businesses as “debtors-in-possession” under the jurisdiction of the Bankruptcy Court and in accordance with the applicable provisions of the Bankruptcy Code and orders of the Bankruptcy Court.

Debtor-in-Possession Financing

DIP Term Loan Facility

In connection with the filing of the Bankruptcy Petitions, on April 3, 2019, the Company entered into a New York law-governed senior secured term loan agreement (the “DIP Term Loan Facility”), among Hexion LLC (“Holdings”), the Company, Hexion International Holdings B.V. (the “Dutch Borrower”), which was amended on April 17, 2019, the lenders party thereto and JPMorgan Chase Bank, N.A. (“JPMorgan”), as administrative agent and collateral agent (the “Term Loan Agent”). The proceeds of the DIP Term Loan Facility were loaned by the Dutch Borrower to the Company pursuant to an intercompany loan agreement (the “Intercompany Loan Agreement”) and were used in part to repay in full the outstanding obligations under the Company’s existing asset-based revolving credit agreement ABL Facility (the “Predecessor ABL Facility”). As of June 30, 2019, the Company had $ i 350 borrowings outstanding under DIP Term Loan Facility. The Company’s remaining obligations under the DIP Term Loan Facility were repaid in full and the DIP Term Loan Facility was terminated upon consummation of the Plan by the Company on July 1, 2019.

DIP ABL Facility

In connection with the filing of the Bankruptcy Petitions, on April 3, 2019, Holdings, the Company and certain of its subsidiaries (collectively, the “Borrowers”), the lenders party thereto, JPMorgan, as administrative agent, and JPMorgan, as collateral agent (the “DIP ABL Collateral Agent” and together with the DIP Term Loan Facility, the “ DIP Credit Facilities”), entered into an amended and restated senior secured debtor-in-possession asset-based revolving credit agreement, which was further amended on May 10, 2019 (the “DIP ABL Facility”), which amended and restated the Company’s Predecessor ABL Facility among Holdings, the Company, the Borrowers, the lenders party thereto, JPMorgan, as administrative agent, and JPMorgan, as collateral agent. As of June 30, 2019, the Company had no outstanding borrowings under the DIP ABL Facility and the DIP ABL Facility was terminated upon consummation of the Plan by the Company on July 1, 2019.

Restructuring Support Agreement

On April 1, 2019, the Debtors entered into a Restructuring Support Agreement (the “Support Agreement”) with equityholders that beneficially owned more than a majority of the Company’s outstanding equity (the “Consenting Sponsors”) and creditors that held more than a majority of the aggregate outstanding principal amount of each of the Company’s 6.625% Notes and 10.00% Notes, (the “1L Notes”), i 13.750% 1.5 lien notes due 2022 (the “1.5L Notes”), 9.00% second lien notes due 2020 (the “2L Notes”), 9.20% Debentures due 2021 and/or 7.875% Debentures due 2023 issued by Borden, Inc. (the “Unsecured Notes”) (the “Consenting Creditors” and, together with the Consenting Sponsors, the “Consenting Parties”). The Support Agreement incorporated the economic terms regarding a restructuring of the Debtors agreed to by the parties reflected in the Support Agreement. The restructuring transactions were effectuated through the Plan.

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Equity Backstop Agreement and Rights Offering

On April 25, 2019, the Debtors entered into the Equity Backstop Commitment Agreement, as subsequently amended (the “Equity Backstop”), among the Debtors and the equity backstop parties party thereto (the “Equity Backstop Parties”). The Equity Backstop provides that upon the satisfaction of certain terms and conditions, including the confirmation of the Plan, the Company will have the option to require the Equity Backstop Parties to backstop the common stock of the reorganized Company (the “New Common Stock”) that is not otherwise purchased in connection with the $300 rights offerings for New Common Stock of Hexion Holdings (the “Rights Offering”) to be made in connection with the Plan (the “Unsubscribed Shares”) on a several, and not joint and several, basis. In consideration for their commitment to purchase the Unsubscribed Shares, the Equity Backstop Parties will be paid a Premium of 8% of the Rights Offering Amount (the “Equity Backstop Premium”), which premium was earned in full upon entry of the Equity Backstop Approval Order and which is payable either in Cash or in New Common Equity at the option of each Equity Backstop Party. Pursuant to the terms of the Equity Backstop, the Equity Backstop Premium was deemed earned, nonrefundable and non-avoidable upon entry of the approval order by the Court. The Company incurred $ i 24 for the Equity Backstop Premium, which is included in “Reorganization items, net” in the Consolidated Statements of Operations. The Company paid the Equity Backstop Premium on the Effective Date in accordance with the Plan.

Debt Backstop Agreement

On April 25, 2019, the Debtors entered into the Debt Backstop Commitment Agreement, as subsequently amended (the “Debt Backstop”), among the Debtors and the debt backstop parties party thereto (the “Debt Backstop Parties”). The Debt Backstop provides that upon satisfaction of certain terms and conditions, including the confirmation of the Plan, the Debt Backstop Parties will backstop the New Long-Term Debt on a several, and not joint and several, basis of an amount equal to such Debt Backstop Party’s commitment percentage, in exchange for (a) the Debt Backstop Premium of 3.375% of the backstop commitments thereunder payable either in Cash or in New Common Equity at the option of each Debt Backstop Party and (b) for certain Debt Backstop Parties, the Additional Debt Backstop Premium of 1.5% of the backstop commitments thereunder payable in Cash, both of which premiums (described in (a) and (b)) were earned in full upon entry of the Debt Backstop Approval Order. Pursuant to the terms of the Debt Backstop, the Backstop Commitment Premium was deemed earned, nonrefundable and non-avoidable upon entry of the approval order by the Court. The Company incurred $ i 80 for the Backstop Commitment Premium, which is included in “Reorganization items, net” in the Consolidated Statements of Operations. The Company paid the Debt Backstop Premium on the Effective Date in accordance with the Plan.

Pre-Petition Claims

On June 7, 2019, the Debtors filed schedules of assets and liabilities and statements of financial affairs with the Court, which were amended on June 14, 2019. Prior to the Company’s emergence from Chapter 11 bankruptcy on the Effective Date, all pre-petition amounts were classified as “Liabilities subject to compromise” in the Consolidated Balance Sheets as of June 30, 2019 and have either been settled or reinstated pursuant to the terms of the Plan. See Note 4 for more information.

The Debt Instruments provide that as a result of the Bankruptcy Petitions the principal and interest due thereunder shall be immediately due and payable. Any efforts to enforce such payment obligations under the Debt Instruments are automatically stayed as a result of the Bankruptcy Petitions and the creditors’ rights of enforcement in respect of the Debt Instruments are subject to the applicable provisions of the Bankruptcy Code. Upon Emergence on July 1, 2019, these automatic stay provisions are no longer in effect.

Emergence from Chapter 11 Bankruptcy

On July 1, 2019, the Plan became effective and the Debtors emerged from the Chapter 11 proceedings.

On or following the Effective Date, and pursuant to the terms of the Plan, the following occurred:

•The restructuring of the Debtors’ pre-petition funded debt obligations with the proceeds of $ i 1,658 in new long-term debt (“New Long-term Debt”) (see Note 12);

• A $300 Rights Offering for new common equity of Hexion Holdings;

•A percentage of the Rights Offering was issued in the form of warrants (“New Warrants”), these warrants represented 15% of the Rights Offering which are exercisable for shares of Common Stock, issued by Hexion Holdings under the Plan, and referred to as New Warrants under the Plan (together with New Common Stock, “Registrable Securities”);

•Certain of the Debtors entered into the $350 ABL Facility (the “ABL Facility) (see Note 12) ;

•General unsecured claims being paid in full or otherwise continuing unimpaired;

•Holders of claims with respect to the 1L Notes received their pro rata share of (a) cash in the amount of $1.450 billion (less the sum of adequate protection payments paid on account of the 1L Notes during the Chapter 11 cases), (b) 72.5% of new common equity of Hexion Holdings (“New Common Equity”) (subject to the Agreed Dilution), and (c) 72.5% of the rights to purchase additional New Common Equity pursuant to the Rights Offering. The dilution of the New Common Equity (“the Agreed Dilution”) resulted from the Rights Offering and the Management Incentive Plan, as defined in the Plan. 10% of the fully-diluted equity of Hexion Holdings is to be reserved for grant to key members of management and independent, non-employee members of the Board of Directors, (see Note 14 for further details on the Management Incentive Plan);

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•Holders of claims with respect to the 1.5L Notes, 2L Notes, and Unsecured Notes received their pro rata share of (a) 27.5% of the New Common Equity (subject to the Agreed Dilution) and (b) 27.5% of the rights to purchase additional New Common Equity pursuant to the Rights Offering;

•Holders of equity interests (i.e., any class of equity securities) in TopCo received no distributions and all such Equity Interests being cancelled;

•Reorganized Hexion issuing a $ i 2.5 settlement note to the Consenting Sponsors; and

•Appointment of a new board of directors.

Cancellation of Prior Common Stock

In accordance with the Plan, each share of the Predecessor Company’s common stock outstanding prior to the Effective Date, including treasury stock, was canceled. Furthermore, all of the Company’s equity award agreements under prior incentive plans, and the awards granted pursuant thereto, were extinguished, canceled and discharged and have no further force or effect after the Effective Date. On the Effective Date, 100 new shares of common stock were issued at a par value of $ i 0.01 to the Company’s new direct parent Hexion Intermediate in accordance with the Plan.

Issuance of New Common Stock

On the Effective Date, all previously issued and outstanding equity interests in TopCo were cancelled. Upon effectiveness of the Plan, Hexion Holdings issued i 58,410,731 shares of a new class of common stock, par value $ i 0.01 per share (“New Common Stock”), pursuant to the Rights Offering. The shares of New Common Stock were exempt from registration under the Securities Act of 1933, as amended (the “Securities Act”), pursuant to Section 1145 of the Bankruptcy Code, which generally exempts from such registration requirements the issuance of securities under a plan of reorganization.

New Warrant Agreement

In addition, Hexion Holdings entered into a warrant agreement (the “Warrant Agreement”) and upon effectiveness of the Plan, Hexion Holdings issued 10,307,778 New Warrants as a part of the Rights Offering on the Effective Date. The New Warrants represented 15% of the Rights Offering which are exercisable to purchase shares of New Common Stock. These New Warrants may be exercised, at any time on or after the initial exercise date for exercise price per share of the New Common Stock of $ i 0.01. The Warrant Agreement contains customary anti-dilution adjustments in the event of any stock split, reverse stock split, reclassification, stock dividend or other distributions.

The holder or group of holders (the “Attribution Parties”) of New Warrants shall be permitted to exercise these New Warrants, at any time, in part or in whole, in amounts sufficient for the holder and Attribution Parties to maintain in the aggregate no less than the beneficial ownership limitation of 9.9% of the fully diluted shares outstanding. Fully diluted shares outstanding is calculated as (x) the aggregate number of shares of New Common Stock issued and outstanding plus (y) the aggregate number of shares of common stock issuable upon the conversion of any other issued and outstanding securities or rights convertible into, or exchangeable for (in each case, directly or indirectly), common stock (excluding, for the avoidance of doubt, any unexercised warrants or options to purchase common stock).

The New Warrants do not entitle the holder or group of holders of the New Warrants to any voting rights, dividends or other rights as a shareholder of the Company prior to exercise of the held New Warrants. If any shares of common stock are listed on a trading market, Hexion Holdings shall use its reasonable best efforts to cause the New Warrants shares issued upon exercise of these New Warrants to also be listed on such trading market, in accordance with the Warrant Agreement.

Registration Rights Agreement

On the Effective Date, Hexion Holdings entered into a registration rights agreement with certain of its shareholders (the “Registration Rights Agreement”).

Under the Registration Rights Agreement, upon delivery of a written notice by one or more shareholders holding, individually or in the aggregate, at least a majority of the outstanding Registrable Securities and New Warrants, voting together (as if such New Warrants had been exercised), Hexion Holdings is required to file a registration statement and effect an initial public offering and listing of its common stock, so long as the total offering size is at least $ i 100 (a “Qualified IPO”).

Hexion Holdings is also required to file a registration statement at any time following 180 days after the closing of a Qualified IPO upon the delivery of a written notice by one or more shareholders proposing to sell, individually or in the aggregate, at least $50 of Registrable Securities. In addition, under the Registration Rights Agreement, Hexion Holdings is required to file a shelf registration statement as soon as practicable following the closing of a Qualified IPO to register the resale, on a delayed or continuous basis, of all Registrable Securities that have been timely designated for inclusion by the holders (specified in the Registration Rights Agreement). Any individual holder or holders of our outstanding common stock party thereto can demand up to four “shelf takedowns” in any 12-month period which may be conducted in underwritten offerings so long as the total offering size is at least $50. Furthermore, each shareholder party to the Registration Rights Agreement has unlimited piggyback registration rights with respect to underwritten offerings, subject to certain exceptions and limitations.

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The foregoing registration rights are subject to certain cutback provisions and customary suspension/blackout provisions. Hexion Holdings has agreed to pay all registration expenses under the Registration Rights Agreement.

Generally, “Registrable Securities” under the Registration Rights Agreement includes New Common Equity issued under the Plan, except that “Registrable Securities” does not include securities that have been sold under an effective registration statement or Rule 144 under the Securities Act.

6. i Fresh Start Accounting

Upon Emergence, the Company applied fresh start accounting, in accordance with ASC 852, to its financial statements because (i) the holders of existing voting shares of the Predecessor Company prior to its emergence received less than 50% of the voting shares of the Successor Company outstanding following its emergence from bankruptcy and (ii) the reorganization value of the Company’s assets immediately prior to confirmation of the plan of reorganization was less than the post-petition liabilities and allowed claims. Fresh start accounting was applied to the Company’s consolidated financial statements upon Emergence.

Under the principles of fresh start accounting, a new reporting entity was created, and, as a result, the Company allocated the reorganization value of the Company to its individual assets based on their estimated fair values in conformity with ASC 805, “Business Combinations”. Reorganization value represents the fair value of the Successor Company’s assets before considering liabilities. The excess reorganization value over the fair value of identified tangible and intangible assets was reported as goodwill. As a result of the application of fresh start accounting and the effects of the implementation of the Plan of Reorganization, the consolidated financial statements after the Effective Date are not comparable with the consolidated financial statements as of or prior to that date.

Reorganization Value

As set forth in the Plan of Reorganization and the Disclosure Statement filed with the Bankruptcy Court, the enterprise value of the Successor Company was estimated to be between $ i 2,900 and $ i 3,300 as of the Effective Date. Based on the estimates and assumptions discussed below, the Company estimated the enterprise value to be $ i 3,100 for financial reporting purposes, which is the mid-point of the range of enterprise value per the Plan of Reorganization.

The Company estimated the enterprise value of the Successor Company utilizing three valuation methods: a comparable public company analysis, a selected precedent transactions analysis, and a discounted cash flow (“DCF”) method. The comparable public company analysis is based on the enterprise values of selected publicly traded diversified chemical companies with operating and financial characteristics comparable to the Company. Under this methodology, certain financial multiples that measure financial performance and value are calculated for each selected company and then applied to imply an estimated enterprise value of the Company.

The selected precedent transaction analysis is based on the implied enterprise values of companies and assets involved in publicly disclosed merger and acquisition transactions which the targets had operating and financial characteristics comparable to certain respects of the Company. Under this methodology, a multiple is derived using the enterprise value of each such target, calculated as the consideration paid and the net debt assumed in the merger or acquisition transaction relative to a financial metric, in this case, EBITDA (earnings before interest, income taxes, depreciation and amortization) for the Company, for the last twelve month period which financial results have been publicly announced. Utilizing these multiples a reference range was created to imply an estimated enterprise value range.

The DCF analysis is a forward-looking enterprise valuation methodology that estimates fair value by calculating the present value of expected future cash flows to be generated plus a present value of the estimated terminal value. The Company established a five year estimate of future cash flows based on the financial projections and assumptions utilized in the Company’s disclosure statement, which were derived from earnings forecasts and assumptions regarding growth and margin projections. A terminal value was included, and was calculated using the constant growth method based on the projected cash flows of the final year of the forecast period. While the Company considers such estimates and assumptions reasonable, they are inherently subject to significant business, economic and competitive uncertainties, many of which are beyond the Company’s control and, therefore, may not be realized. Changes in these estimates and assumptions may have a significant effect on the determination of the Company’s enterprise value. The assumptions used in the calculations for the DCF analysis included projected revenue, cost and cash flows representing the Company’s best estimates at the time the analysis was prepared. The DCF analysis has various complex considerations and judgments, including the discount rate and all of the other projections, etc. Due to the unobservable inputs to the valuation, the fair value would be considered Level 3 in the fair value hierarchy.

The estimated enterprise value is not necessarily indicative of the actual value and the financial results; changes in the economy or the financial markets could result in a different enterprise value. The calculated enterprise value relies on all three of the methodologies listed above collectively. The actual value of the business is subject to certain uncertainties and contingencies that are difficult to predict and will fluctuate with changes in various factors affecting the financial conditions and prospects of such a business.

The discount rate for each reporting unit was estimated based on an after-tax weighted average cost of capital (“WACC”) reflecting the rate of return that would be expected by a market participant and ranged between approximately 11% and 19%. The WACC also takes into consideration a company-specific risk premium, reflecting the risk associated with the overall uncertainty of the financial projections used to estimate future cash flows.

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The fair value of debt obligations represents $ i 97 of debt payable within one year and $ i 1,733 of long-term debt. The fair value of long-term debt was determined based on a market approach utilizing current market yields and was estimated to be approximately 100% of par value.

The fair value of pension liabilities of $ i 239 was determined based upon assumptions related to discount rates and expected return on assets, as well as certain other assumptions related to various demographic factors.

i The following table reconciles the enterprise value (including both continuing and discontinued operations) to the estimated reorganization value as of the Effective Date:


Enterprise value	$	i 3,100
Plus: Total cash	i 125
Plus: Fair value of non-debt and non-pension liabilities
Current liabilities	i 540
Long-term liabilities	i 527
Total non-debt and non-pension liabilities	i 1,067
Reorganization value of Successor assets	$	i 4,292

The fair value of non-debt and non-pension liabilities represents the total liabilities, less debt payable within one year, long-term debt and pension obligations, of the Successor Company as of the Effective Date.

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Condensed Consolidated Statement of Financial Position

The following balance sheet illustrates the impacts of the implementation of the Plan and the application of fresh start accounting, which results in the opening balance sheet of the Successor Company. The Company has reclassified assets and liabilities of the Held for Sale Business and the results of discontinued operations in the table below.

As of July 1, 2019 (in millions, except share data)

Predecessor Company

Reorganization Adjustments(a)

Fresh Start Adjustments(q)

Successor Company

Assets

Current assets:

Cash and cash equivalents (including restricted cash of $15)

i 96

i 29

(b)

i —

i 125

Accounts receivable (net of allowance for doubtful accounts of $16 and $0, respectively)

i 421

i —

i 6

(r)

i 427

Inventories:

Finished and in-process goods

i 221

i —

i 27

(s)

i 248

Raw materials and supplies

i 89

i —

i 89

Current assets held for sale

i 132

i —

i 2

(aa)

i 134

Other current assets

i 56

i 2

(c)

i —

i 58

Total current assets

i 1,015

i 31

i 35

i 1,081

Investment in unconsolidated entities

i 20

i —

( i 6)

(t)

i 14

Deferred tax assets

i —

i 12

(d)

( i 3)

(u)

i 9

Other long-term assets

i 34

i 4

(e)

( i 1)

(v)

i 37

Property and equipment:

Land

i 69

i —

i 11

(w)

i 80

Buildings

i 228

i —

( i 118)

(w)

i 110

Machinery and equipment

i 1,948

i —

( i 837)

(w)

i 1,111

i 2,245

i —

( i 944)

i 1,301

Less accumulated depreciation

( i 1,559)

i —

i 1,566

(w)

i 7

i 686

i —

i 622

i 1,308

Operating lease assets

i 89

i —

i 33

(x)

i 122

Goodwill

i 83

—

i 81

(y)

i 164

Other intangible assets, net

i 17

i —

i 1,138

(z)

i 1,155

Noncurrent assets held for sale

i 187

i —

i 215

(aa)

i 402

Total assets

i 2,131

i 47

i 2,114

i 4,292

Liabilities and Deficit

Current liabilities:

Accounts payable

i 247

i 49

(a)

i —

i 296

Debt payable within one year

i 438

( i 343)

(f)

i 2

(ab)

i 97

Interest payable

i 7

( i 5)

(g)

i —

i 2

Income taxes payable

i 5

i 11

(h)

i —

i 16

Accrued payroll and incentive compensation

i 32

i —

i 32

Current liabilities associated with assets held for sale

i 69

i —

i 1

(aa)

i 70

Current portion of operating lease liabilities

i 19

i —

i 6

(x)

i 25

Financing fees payable

i 104

( i 104)

(i)

i —

Other current liabilities

i 101

i 5

(j)

i —

i 106

Total current liabilities

i 1,022

( i 387)

i 9

i 644

Long-term liabilities:

Liabilities subject to compromise

i 3,664

( i 3,664)

(k)

i —

Long-term debt

i 90

i 1,622

(l)

i 21

(ab)

i 1,733

Long-term pension and post employment benefit obligations

i 160

i 33

(a)

i 39

(ac)

i 232

Deferred income taxes

i 11

i 1

(m)

i 148

(ad)

i 160

Operating lease liabilities

i 70

i —

i 17

(x)

i 87

Other long-term liabilities

i 149

i 72

(n)

( i 6)

(r)

i 215

Noncurrent liabilities associated with assets held for sale

i 46

i —

i 20

(aa)

i 66

Total liabilities

i 5,212

( i 2,323)

i 248

i 3,137

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As of July 1, 2019 (in millions, except share data)

Predecessor Company

Reorganization Adjustments(a)

Fresh Start Adjustments(q)

Successor Company

Equity (Deficit)

Common stock (Successor)

—

(o)

i —

Paid-in capital (Successor)

—

i 1,156

(o)

i —

i 1,156

Common stock (Predecessor)

i 1

( i 1)

(p)

—

Paid-in capital (Predecessor)

i 526

( i 526)

(p)

i —

—

Treasury stock (Predecessor), at cost—88,049,059 shares at December 31, 2018

( i 296)

i 296

(p)

i —

—

Accumulated other comprehensive loss

( i 26)

i —

i 26

(ae)

—

Accumulated deficit

( i 3,285)

i 1,445

(p)

i 1,840

(ae)

—

Total Hexion Inc. equity (deficit)

( i 3,080)

i 2,370

i 1,866

i 1,156

Noncontrolling interest

( i 1)

i —

( i 1)

Total equity (deficit)

( i 3,081)

i 2,370

(o)

i 1,866

i 1,155

Total liabilities and equity (deficit)

i 2,131

i 47

i 2,114

i 4,292

Reorganization Adjustments

(a) The reorganization adjustments column reflects adjustments related to the consummation of the Plan, including the settlement of liabilities subject to compromise and related payments, other distributions of cash, issuance of new shares of common stock and the cancellation of the common equity of the Predecessor Company, as discussed in Note 5.

The following is a calculation of the total pre-tax gain on the settlement of the liabilities subject to compromise:


Liabilities subject to compromise (“LSTC”) (see (k) below)	$	i 3,664
Repayment of 1st Lien Notes	( i 1,383)
Liabilities reinstated at emergence:
Accounts payable	( i 49)
Pension and other post employment benefit obligations	( i 33)
Other current liabilities	( i 18)
Other long-term liabilities	( i 32)
Total liabilities reinstated at emergence	( i 132)
Fair value of equity issued in exchange for debt:
Fair value of equity	( i 1,156)
Less: Proceeds from Rights Offering	i 300
Total fair value of equity issued in exchange for debt	( i 856)
Gain on settlement of LSTC	$	i 1,293

(b) Reflects the net cash received as of the Effective Date from implementation of the Plan:


Sources:
Proceeds from the Rights Offerings	$	i 300
Proceeds from the Senior Notes	i 450
Proceeds from the Senior Secured Term Loan	i 1,196
Release of utility deposit	i 1
Total sources	i 1,947
Uses:
Repayment of 1st Lien Notes	( i 1,383)
Repayment of DIP Term Loan Facility	( i 350)
Repayment of DIP Term Loan interest	( i 5)
Debt and Equity Backstop premiums	( i 104)
Financing fees	( i 19)
Success fees at emergence	( i 31)
Other professional fees	( i 26)
Total uses	( i 1,918)
Net cash received	$	i 29

(c) Represents $ i 3 of excess professional fees due to the Company offset by $ i 1 for the settlement of certain amounts owed during reorganization.

(d) Reflects the adjustment to release the valuation allowance on deferred tax assets for certain non-U.S. subsidiaries which management believes more likely than not will be realized as a result of reorganization.

(e) Reflects the adjustments to capitalize the ABL Facility financing fees incurred upon Emergence.

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(f) Reflects the adjustments made on the Effective Date to repay $ i 350 in outstanding DIP Term Loans and to incur $ i 7 for the current portion of the new Senior Secured Term Loan (see Note 12).

(g) On the Effective Date, the Company repaid $ i 5 of accrued unpaid interest on the DIP Term Loan Facility.

(h) Reflects the adjustment to record income taxes payable as a result of reorganization.

(i) On the Effective Date, the Company paid $ i 24 of Equity Backstop premiums to the parties participating in the Rights Offering and $ i 80 of Debt Backstop premiums. See Note 5 for more information.

(j) Represents $ i 18 of other current liabilities that were reclassified from “Liabilities subject to compromise” and $ i 13 of other current liabilities incurred as a result of emergence offset by $ i 26 of professional fees paid at emergence.

(k) Liabilities subject to compromise represent unsecured liabilities incurred prior to the Petition Date. As a result of the Bankruptcy Petitions, actions to enforce or otherwise effect payment of pre-petition liabilities were generally stayed. These liabilities represent the amounts which have been allowed on known claims which were resolved through the Chapter 11 process, and have been approved by the Court as a result of the Confirmation Order.

The following table summarizes pre-petition liabilities that are classified as “Liabilities subject to compromise” in the Consolidated Balance Sheets:


	June 30, 2019
Debt	$	i 3,420
Interest payable	i 99
Accounts payable	i 49
Environmental reserve	i 43
Pension and other post employment benefit obligations	i 33
Dividends payable to parent	i 13
Other	i 7
Total	$	i 3,664

(l) Represents the issuance of the new Senior Term Loan due 2026 of $ i 1,208 and the new Senior Secured Notes due 2027 of $ i 450 offset by $ i 12 of debt discounts and $ i 17 of debt issuance costs of which $ i 7 is classified as “Debt due within one year” on the Consolidated Balance Sheets. The term loan and notes were recorded at estimated fair value, which was determined based on a market approach utilizing current yield.

(m) Represents deferred tax activity associated with Emergence.

(n) Reflects the adjustments made to reclassify $ i 32 of other long-term liabilities from “Liabilities subject to compromise” and to record $ i 40 of tax liability as a result of Emergence.

(o) The following table reconciles the enterprise value to the estimated fair value of the Successor equity as of the Emergence Date:


Enterprise value	$	i 3,100
Plus: Total cash	i 125
Less: Fair value of new debt	( i 1,646)
Less: Fair value of remaining debt obligations	( i 184)
Less: Pension obligations	( i 239)
Fair value of equity	i 1,156
Plus: Fair value of noncontrolling interest	i 1
Fair value of Successor paid-in capital	$	i 1,157

At the Effective Date, 100 shares of Common Stock of Hexion Inc. held by new direct parent Hexion Intermediate were issued and outstanding at a par value of $0.01 per share.

(p) Reflects the cumulative impact of the reorganization adjustments discussed above:


	Continuing Operations
Gain on settlement of LSTC	$	1,293
Success and other fees recognized at emergence	(39)
Net gain on reorganization adjustments(1)	i 1,254
Tax impact on reorganization adjustments	( i 40)
Cancellation of Predecessor common stock	1
Cancellation of Predecessor additional paid-in capital	526
Cancellation of Predecessor treasury stock	(296)
Net impact to Accumulated Deficit	i 1,445

(1)The net gain on reorganization adjustments has been included in “Reorganization items, net” in the Consolidated Statements of Operations.

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Fresh Start Adjustments

(q) The Fresh Start Adjustments column reflects adjustments required to record the assets and liabilities of the Company at fair value, including the elimination of the accumulated deficit and accumulated other comprehensive (loss) of the Predecessor Company.

(r) Reflects the adjustments made to Predecessor deferred revenue in situations where it has been determined the Successor Company has no remaining legal performance obligation related to the arrangement that give rise to the deferred revenue for the Predecessor Company.

(s) Reflects the adjustment made to record finished goods inventory at its estimated fair value, which was determined based on the current acquisition cost, including disposal and holding period costs and a reasonable profit margin less costs to sell.

(t) Reflects the adjustments made to record the Predecessor Company’s investments in unconsolidated subsidiaries at fair value utilizing a cost approach method.

(u) Reflects the deferred tax asset impact of the fresh start adjustments, resulting primarily from the book adjustment made to foreign property, plant, and equipment and intangibles that increased the future taxable temporary differences recorded.

(v) Reflects the adjustments required to record the Predecessor Company’s long-term assets at fair value.

(w) Reflects the adjustments made to record property, plant and equipment at its estimated fair value and eliminate Predecessor accumulated depreciation. Depreciable lives were also revised to reflect the remaining estimated useful lives of the related property, plant and equipment, which range from 1 to 39 years. Fair value was determined as follows:

•The market, sales comparison or trended cost approach was utilized to estimate fair value for land and buildings. This approach relies upon recent sales, offerings of similar assets or a specific inflationary adjustment to original purchase price to arrive at a probable selling price.

•The cost approach was utilized to estimate fair value for machinery and equipment. This approach considers the amount required to construct or purchase a new asset of equal utility at current market prices, with adjustments in value for physical deterioration and functional and economic obsolescence. Physical deterioration is an adjustment made in the cost approach to reflect the real operating age of an asset with regard to wear and tear, decay and deterioration that is not prevented by maintenance. Functional obsolescence is an adjustment made to reflect the loss in value or usefulness of an asset caused by inefficiencies or inadequacies of the asset, as compared to a more efficient or less costly replacement asset with newer technology. Economic obsolescence is an adjustment made to reflect the loss in value or usefulness of an asset due to factors external to the asset, such as the economics of the industry, reduced demand, increased competition or similar factors.

Depreciable lives were revised to reflect the remaining estimated useful lives as follows (in years):


Buildings			9 to 39 years
Machinery and equipment			1 to 20 years

(x) Reflects $ i 24 of adjustments made to bring the right-of-use operating leased assets, exclusive of $ i 1 related to the Held of Sale Business, and their associated liabilities to fair value utilizing an average discount rate of approximately 6% and to record favorable leasehold interests of $ i 9, exclusive of $ i 5 related to the Held for Sale Business, which were valued using a rental analysis approach based on (i) fair market rent was determined based on rates for facilities comparable to the Company’s properties, (ii) discount rates ranging from 8.0% to 12.0%, which were based on the after-tax WACC; and (iii) market rental growth rates ranging from 0.0% to 5.0%.

(y) Reflects the adjustments made to record the elimination of the Predecessor goodwill balance of $ i 83, exclusive of $ i 25 related to the Held for Sale Business, and to record the Successor goodwill of $ i 164, exclusive of $ i 14 related to the Held for Sale Business, which represents the reorganization value of assets in excess of amounts allocated to identified tangible and intangible assets.

(z) Reflects the adjustments made to eliminate the Predecessor Company’s other intangible assets of $ i 17, exclusive of $ i 7 related to the Held for Sale Business, and to record $ i 1,155, exclusive of $ i 64 related to the Held for Sale Business, in estimated fair value of Successor other intangible assets. Fair value was comprised of the following:

•Customer related intangible assets of $ i 904, exclusive of $ i 64 related to the Held for Sale Business, were valued using the multi-period excess earnings income approach based on the following significant assumptions;

i.Forecasted net sales and profit margins attributable to the current customer base through the applicable economic useful life;

ii.Attrition rates ranging from 0.5% to 5.0%;

iii.Discount rates ranging from 13.0% to 17.5%, which were based on the after-tax WACC; and

iv.Economic lives of 20 to 25 years.

•Trademarks of $ i 141 were valued using the relief from royalty income approach based on the following significant assumptions:

i.Forecasted net sales attributable to the trademarks through the applicable economic useful life;

ii.Royalty rates ranging from 0.2% to 2.0% of expected net sales determined with regard to comparable market transactions and profitability analysis;

iii.Discount rates ranging from 11.0% to 16.5%, which were based on the after-tax weighted average cost of capital (“WACC”); and

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iv.Economic lives ranging from 15 to 20 years.

•Technology based intangible assets of $ i 110 were valued used the relief from royalty income approach based on the following significant assumptions:

i.Forecasted net sales attributable to the respective technologies through the applicable economic useful life;

ii.Royalty rates ranging from 0.5% to 2.25% of expected net sales determined with regard to expected cash flows of respective technologies and the overall importance of respective technologies to product offering

iii.Discount rates ranging from 11.0% to 16.5%, which were based on the after-tax WACC; and

iv.Economic lives of 15 years.

(aa) Reflects the fresh start accounting adjustments related to the Held for Sale business:


	Discontinued Operations
Finished and in-process goods	$	i 2
Total current assets held for sale	i 2

Investment in unconsolidated companies	i 3
Deferred tax assets	( i 1)
Other long-term assets	i 3
Property and equipment, net	i 158
Operating lease assets (See endnote X)	i 6
Goodwill (See endnote Y)	( i 11)
Other intangible assets (See endnote Z)	i 57
Total noncurrent assets held for sale	i 215

Current portion of operating lease liabilities (See endnote X)	i 1
Current liabilities associated with assets held for sale	i 1

Long-term pension and post employment benefit obligations	i 5
Deferred income taxes	i 15
Noncurrent liabilities associated with assets held for sale	i 20

(ab) Reflects the adjustments made to bring various sale-leaseback financing arrangements to fair value and to revalue debt obligations.

(ac) Reflects the remeasurement of the Predecessor Company’s pension liabilities. The increase in pension liabilities was driven by reductions in discount rates and changes in other actuarial assumptions as of the Effective Date, primarily impacting our unfunded German pension plans.

(ad) Represents the deferred tax liability impact of the fresh start adjustments, resulting primarily from the book adjustment made to foreign property, plant, and equipment and intangibles that increased the future taxable temporary differences recorded.

(ae) Reflects the cumulative impact of the fresh start accounting adjustments discussed above and the elimination of the Predecessor Company’s accumulated other comprehensive income:

Continuing Operations

Discontinued Operations

Total Hexion

Establishment of Successor goodwill

i 164

i 14

i 178

Elimination of Predecessor goodwill

( i 83)

( i 25)

( i 108)

Establishment of Successor other intangible assets

i 1,155

i 64

i 1,219

Elimination of Predecessor other intangible assets

( i 17)

( i 7)

( i 24)

Inventory fair value adjustments

i 27

i 2

i 29

Property, plant and equipment fair value adjustment

i 622

i 158

i 780

Pension liability fair value adjustment

( i 39)

( i 5)

( i 44)

Other assets and liabilities fair value adjustment

( i 8)

i 11

i 3

Elimination of Predecessor Company accumulated other comprehensive income

i 51

( i 77)

( i 26)

Net gain on fresh start adjustments(1)

i 1,872

i 135

i 2,007

Tax impact on fresh start adjustments

( i 151)

( i 16)

( i 167)

Net impact on accumulated deficit

i 1,721

i 119

i 1,840

(1)The net gain on fresh start adjustments has been included in “Reorganization items, net” in the Consolidated Statements of Operations.

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7. i Reorganization Items, Net

Incremental costs incurred directly as a result of the Bankruptcy Petitions, gains on the settlement of liabilities under the Plan and the net impact of fresh start accounting adjustments are classified as “Reorganization items, net” in the Consolidated Statements of Operations. i The following table summarizes reorganization items:


	January 1, 2019 through July 1, 2019
	Continuing Operations		Discontinued Operations
Net gain on reorganization adjustments (see Note 6)	$	( i 1,254)	$	i —
Net gain on fresh start adjustments (see Note 6)	( i 1,872)		( i 135)
Financing fees	i 104		i —
Professional fees	i 39		i —
DIP ABL Facility fees	i 13		i —
Total	$	( i 2,970)	$	( i 135)

8. i Asset Impairments

During the first quarter of 2020, the Company indefinitely idled certain assets within its Adhesives segment. These represented triggering events resulting in impairment evaluations of the fixed assets within both the oilfield and phenolic specialty resins asset groups. As a result, asset impairments totaling $ i 16 were recorded in “Asset impairments” in the Consolidated Statements of Operations during the year ended December 31, 2020. See Note 4 for discussion of the discontinued operations impairment charge recorded in 2020.

During the first quarter of 2018, the Company indefinitely idled an oilfield manufacturing facility within its Adhesives segment, and production was shifted to another facility within the oilfield manufacturing group. This represented a triggering event resulting in an impairment evaluation of the fixed and intangible assets within the U.S. oilfield asset group. As a result, an asset impairment of $ i 20 was recorded in the first quarter of 2018 related to the fixed assets at the idled manufacturing facility. In addition, the remaining U.S. oilfield asset group was evaluated for impairment utilizing a discounted cash flow approach, resulting in an additional impairment of $ i 5 that was recorded during the first quarter of 2018 related to an existing customer relationship intangible asset. Overall, the Company incurred $ i 25 of total impairment related to these assets, which is included in “Asset impairments” in the Consolidated Statements of Operations for the year ended December 31, 2018.

9. i Related Party Transactions

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. The disclosures below are through July 1, 2019 and only reflect the time period when Apollo was a related party. Sales to various Apollo affiliates were $ i 1 and $ i 2 for the Predecessor period January 1, 2019 through July 1, 2019 and for the year ended December 31, 2018. There were no purchases during the Predecessor period January 1, 2019 through July 1, 2019 and for the year ended December 31, 2018.

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 $ i 3 or i 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, MPM was no longer under the common control of Apollo and, accordingly, is no longer a related party to the Company. During the year ended December 31, 2018, the Company sold less than $ i 1 of products to MPM. 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 and the year ended December 31, 2018, the Company earned less than $ i i 1 / from MPM as compensation for acting as distributor of products and had purchases of $ i 10 and $ i 32, respectively.

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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 and the year ended December 31, 2018, the Company incurred approximately $ i 15 and $ i 28, respectively, of net costs for shared services and MPM incurred approximately $ i 14 and $ i 21 of net costs for shared services. Included in the net costs incurred during the Predecessor period January 1, 2019 through July 1, 2019 and the year ended December 31, 2018 were net billings from Hexion to MPM of $ i 11 and $ i 14, respectively.

Other Transactions and Arrangements

In March 2020, the Company entered into a $ i 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 $ i 10 non-cash distribution to its Parent treated as a return of capital to settle this affiliate loan. The Company made an additional $ i 3 return of capital distribution to its Parent to fund additional Parent share repurchases in December 2020. This return of capital reduced “Paid-in capital” in the Consolidated Balance Sheet at December 31, 2020.

The Company sells products and provides services to, and purchases products from, its other joint ventures which are accounted for under the equity method of accounting. i 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

Predecessor

Year Ended December 31, 2020

Year Ended December 31, 2018

Sales to joint ventures(1)(2)

i 2

i 9

Purchases from joint ventures(2)

i 1

i 2

i 6

(1)Sales to joint ventures includes sales to the Russia JV of $ i 1, $ i 1, $ i 1, and $ i 7 for the year ended December 31, 2020, the Successor period July 2, 2019 through December 31, 2019, the Predecessor period January 1, 2019 through July 1, 2019 and the year ended December 31, 2018, which are included in the Held for Sale Business.

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


	December 31, 2020	December 31, 2019
Accounts receivable from joint ventures(1)	$ < i 1	$	i 1
Accounts payable to joint ventures	i —	< i 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 $ i i 1 / for both December 31, 2020 and 2019.

In addition to the accounts receivable from joint ventures disclosed above, the Company had a loan receivable of $ i 4 and $ i 7 as of December 31, 2020 and 2019, respectively, from the Russia JV. This loan receivable has been included in “Long-term assets held for sale” within the Consolidated Balance Sheets.

10. i Goodwill and Intangible Assets

In connection with the Company’s emergence from Chapter 11 and application of fresh start accounting, the excess of reorganization value over the fair value of identified tangible and intangible assets of $ i 178 was recorded as goodwill as of July 1, 2019. i The Company’s gross carrying amount and accumulated impairments of goodwill consist of the following as of December 31, 2020 and 2019:

2020

2019

Gross
Carrying
Amount

Accumulated
Impairments

Accumulated
Foreign
Currency
Translation

Net
Book
Value

Gross
Carrying
Amount

Accumulated
Impairments

Accumulated
Foreign
Currency
Translation

Net
Book
Value

Adhesives(1)

i i 127 /

i —

i 127

i i — /

i 127

Coatings and Composites

i 37

i —

i 37

i i — /

i 37

Total

i 164

i —

i 164

i —

i 164

(1)Excludes $ i i 14 / of goodwill in the Adhesives segment associated with the Held for Sale Business at both December 31, 2020 and 2019 (See Note 4).

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The changes in the net carrying amount of goodwill by segment for the years ended December 31, 2020 and 2019 are as follows:

Adhesives(3)

Coatings and Composites

Total

Predecessor

Goodwill balance at December 31, 2018

i 43

i 41

i 84

Divestitures

i —

Foreign currency translation

( i 1)

i —

( i 1)

Goodwill balance at June 30, 2019

i 42

i 41

i 83

Elimination of Predecessor Goodwill

( i 42)

( i 41)

( i 83)

Goodwill balance at July 1, 2019

i —

Recording of Successor Goodwill(1)

i 127

i 37

i 164

Successor

Goodwill balance at July 2, 2019

i 127

i 37

i 164

Adjustments(2)

i —

Goodwill balance at December 31, 2019

i 127

i 37

i 164

Adjustments(2)

i —

Goodwill balance at December 31, 2020

i 127

i 37

i 164

(1)Recording of the Successor Company goodwill in accordance with the application of fresh start accounting. Refer to Note 6 for more details.

(2)There were no foreign currency adjustments nor impairments related to Successor Company goodwill for the year ended December 31, 2020 and the Successor period July 2, 2019 through December 31, 2019.

(3)Excludes $ i i 14 / at both December 31, 2020 and 2019 and $ i 25 at both June 30, 2019 and December 31, 2018 related in the Held for Sale Business (See Note 4).

The Company’s intangible assets with identifiable useful lives consist of the following as of December 31, 2020 and 2019:

Gross
Carrying
Amount

Accumulated Foreign Exchange

Accumulated
Amortization

Net
Book
Value

Gross
Carrying
Amount

Accumulated Foreign Exchange

Accumulated
Amortization

Net
Book
Value

2020

2019

Customer relationships(1)

i 903

i 5

( i 61)

i 847

i 903

( i 3)

( i 19)

i 881

Trademarks

i 141

i 2

( i 12)

i 131

i 141

i —

( i 3)

i 138

Technology

i 110

i 2

( i 11)

i 101

i 110

i —

( i 4)

i 106

Total

i 1,154

i 9

( i 84)

i 1,079

i 1,154

( i 3)

( i 26)

i 1,125

(1)Excludes net book value of $ i 61 and $ i 63 at December 31, 2020 and 2019, respectively, related to the Held of Sale Business (See Note 4).

On July 1, 2019, as part of the application of fresh start accounting, the Company’s existing intangible assets were eliminated and new intangible assets were established at their estimated fair value as of July 1, 2019. New intangible assets were established for customer relationships, trademarks, and technology. See Note 6 for more information.

Total intangible amortization expense related to continuing operations for the year ended December 31, 2020, the Successor period July 2, 2019 through December 31, 2019, the Predecessor period January 1, 2019 through July 1, 2019 and the year ended December 31, 2018 was $ i 58, $ i 26, $ i 3 and $ i 9, respectively.

Estimated annual intangible amortization expense for 2021 through 2025 is as follows:


2021	$	i 58
2022	i 58
2023	i 58
2024	i 58
2025	i 58

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11. i Fair Value

Fair value is the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Fair value measurement provisions establish a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. This guidance describes three levels of inputs that may be used to measure fair value:

•Level 1: Inputs are quoted prices (unadjusted) for identical assets or liabilities in active markets.

•Level 2: Pricing inputs are other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reported date.

•Level 3: Unobservable inputs that are supported by little or no market activity and are developed based on the best information available in the circumstances. For example, inputs derived through extrapolation or interpolation that cannot be corroborated by observable market data.

Recurring Fair Value Measurements

As of December 31, 2020, the Company had derivative liabilities related to foreign exchange, electricity and natural gas contracts of $ i 1, which were measured using Level 2 inputs, and consist of derivative instruments transacted primarily in over-the-counter markets. There were no transfers between Level 1, Level 2 or Level 3 measurements during the year ended December 31, 2020, the Successor period July 2, 2019 through December 31, 2019, the Predecessor period January 1, 2019 through July 1, 2019 and the year ended December 31, 2018.

The Company calculates the fair value of its Level 2 derivative liabilities using standard pricing models with market-based inputs, adjusted for nonperformance risk. When its financial instruments are in a liability position, the Company evaluates its credit risk as a component of fair value. At December 31, 2020 and 2019, no adjustment was made by the Company to reduce its derivative liabilities for nonperformance risk.

When its financial instruments are in an asset position, the Company is exposed to credit loss in the event of nonperformance by other parties to these contracts and evaluates their credit risk as a component of fair value.

Interest Rate Swap

The Company will from time to time use interest rate swaps to alter interest rate exposures between floating and fixed rates on certain long-term debt. Under interest rate swaps, the Company agrees with other parties to exchange, at specified intervals, the difference between fixed rate and floating rate interest amounts calculated using an agreed-upon notional principal amount. The counter-parties to the interest rate swap agreements are financial institutions with investment grade ratings.

On October 10, 2019, the Company executed an interest rate swap syndication agreement with Credit Suisse International where Hexion receives a variable 3-month LIBOR, and pays fixed interest rate swaps, beginning January 1, 2020 through January 1, 2025 (the “Hedge”) for a total notional amount of $ i 300. The purpose of this arrangement is to hedge the variability caused by quarterly changes in cash flow due to associated changes in LIBOR for $300 of the Company’s variable rate Senior Secured Term Loan denominated in USD ($ i 701 at December 31, 2020.) The Company has evaluated this transaction and designated this derivative instrument as a cash flow hedge for hedge accounting under Accounting Standard Codification, No. 815, “Derivatives and hedging,” (“ASC 815”). For the Hedge, the Company recorded changes in the fair value of the derivative in other comprehensive income (“OCI”) and will subsequently reclassify gains and losses from these changes in fair value from OCI to the Consolidated Statement of Operations in the same period that the hedged transaction affects net (loss) income and in the same Consolidated Statement of Operations category as the hedged item, “Interest expense, net”.

i The following tables summarize the Company’s derivative financial instrument designated as a hedging instrument:

Balance Sheet Location

Notional Amount

Fair Value Liability

Notional Amount

Fair Value Asset

Derivatives designated as hedging instruments

Interest Rate Swap

Other current (liabilities)/assets

i 300

( i 15)

i 300

i 3

Total derivatives designated as hedging instruments

( i 15)

i 3

Amount of (Loss) Gain Recognized in OCI on Derivatives, net of tax

Successor

Predecessor

Derivatives designated as hedging instruments

Year ended December 31, 2020

Interest Rate Swaps

Interest Rate Swap

( i 18)

i 2

i —

Total

( i 18)

i 2

i —

During the year ended December 31, 2020, the Company reclassified a loss of $ i 2 from OCI to “Interest expense, net” on the Consolidated Statement of Operations related to the settlement of a portion of the Hedge.

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Non-derivative Financial Instruments

The following table summarizes the carrying amount and fair value of the Company’s non-derivative financial instruments:

Carrying Amount

Fair Value

Level 1

Level 2

Level 3

Total

Debt

i 1,792

i —

i 1,767

i 55

i 1,822

Debt

i 1,785

i —

i 1,751

i 64

i 1,815

Fair values of debt classified as Level 2 are determined based on other similar financial instruments, or based upon interest rates that are currently available to the Company for the issuance of debt with similar terms and maturities. Level 3 amounts represent capital leases whose fair value is determined through the use of present value and specific contract terms. The carrying amounts of cash and cash equivalents, short term investments, accounts receivable, accounts payable and other accrued liabilities are considered reasonable estimates of their fair values due to the short-term maturity of these financial instruments.

12. i Debt Obligations

i Debt outstanding at December 31, 2020 and 2019 is as follows:

Long-Term

Due Within One Year

Long-Term

Due Within One Year

Senior Secured Credit Facility:

ABL Facility

i —

Senior Secured Term Loan - USD due 2026 (includes $ i 6 and $ i 7 of unamortized debt discount at December 31, 2020 and 2019, respectively)

i 701

i 7

i 708

i 7

Senior Secured Term Loan - EUR due 2026 (includes $ i i 4 / of unamortized debt discount at December 31, 2020 and 2019)

i 515

i —

i 473

i —

Senior Notes:

i i 7.875 / % Senior Notes due 2027

i 450

i —

i 450

i —

Other Borrowings:

Australia Facility due 2021 at i 4.0% and i 3.9% at December 31, 2020 and 2019, respectively

i —

i 30

i 27

i 4

Brazilian bank loans at i 10.2% and i 9.2% at December 31, 2020 and 2019, respectively

i 2

i 22

i 7

i 34

Lease obligations(1)

i 42

i 14

i 50

i 14

Other at i 3.9% and i 5.0% at December 31, 2020 and 2019, respectively

i —

i 9

i —

i 11

Total(2)

i 1,710

i 82

i 1,715

i 70

(1)Lease obligations include finance leases and sale leaseback financing arrangements.

(2)The foreign exchange translation impact of the Company’s foreign currency denominated debt instruments was an increase of $ i 46 and a decrease of $ i 10 as of December 31, 2020 and 2019, respectively.

In consummation of the Plan, on July 1, 2019, the 1L Note holders received their pro rata share of (a) cash in the amount of $1.450 billion (less the sum of adequate protection payments paid on account of the 1L Notes during the Chapter 11 cases), (b) 72.5% of new common equity of Hexion Holdings (“New Common Equity”) (subject to the Agreed Dilution), and (c) 72.5% of the rights to purchase additional New Common Equity pursuant to the Rights Offering.

Additionally, the owners of the 1.5L Notes, 2L Notes, and Unsecured Notes received their pro rata share of (a) 27.5% of the New Common Equity (subject to the Agreed Dilution) and (b) 27.5% of the rights to purchase additional New Common Equity pursuant to the Rights Offering. See Note 5 for more information.

In connection with the filing of the Bankruptcy Petitions, on April 3, 2019, as described in Note 5 the proceeds of the DIP Term Loan Facility were used in part to repay in full the outstanding obligations under the Company’s existing asset-based revolving credit agreement ABL Facility.

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Credit Facilities and Senior Notes

ABL Facility

On July 1, 2019, in connection with the Emergence, the Company, Hexion Canada Inc., a Canadian corporation (the “Canadian ABL Borrower”), Hexion B.V., a company organized under the laws of The Netherlands (the “Dutch ABL Borrower”), Hexion GmbH, a company organized under the laws of Germany (the “German ABL Borrower”), Hexion UK Limited, a corporation organized under the laws of England and Wales ( the “U.K. ABL Borrower” and, together with the Company, the Canadian ABL Borrower, the Dutch ABL Borrower and the German ABL Borrower, the “ABL Borrowers”) entered into a senior secured ABL Facility with the lenders and other parties thereto and JPMorgan Chase Bank, N.A., as administrative agent and collateral agent, in an aggregate principal amount of $ i 350, under which the ABL Borrowers may borrow funds from time to time and up to $ i 150 amount of which is available through a subfacility in the form of letters of credit, in each case subject to a borrowing base, as further described below. In addition, the Company may request one or more incremental facilities in an aggregate amount equal to the greater of (i) $100 and (ii) the excess of the borrowing base over $ i 350.

The ABL Facility will mature and the commitments thereunder will terminate on July 1, 2024 and bears interest based on an adjusted LIBOR rate, EURIBOR or an alternate base rate (depending on the currency of the borrowing), in each case plus an applicable initial margin of 1.50% or, in the case of the alternate base rate, 0.50%, which margin may increase or decrease depending on the average availability under the ABL Facility.

The borrowing base is, at any time of determination, an amount (net of reserves) equal to the sum of:

•in the case of the borrowing base for the Company’s U.S., U.K., Dutch and Canadian subsidiaries, 85% of the amount of eligible receivables (or 90% of the amount of “investment grade” eligible receivables) (including trade receivables), plus

•in the case of the borrowing base for the Company’s U.S., U.K., Dutch and Canadian subsidiaries, the lesser of (i) 70% of the amount of eligible inventory and (ii) 85% of the net orderly liquidation value of eligible inventory, plus

•in the case of the borrowing base for the Company’s U.K., Dutch, Canadian and German subsidiaries, the lesser of (i) the sum of (a) 80% of the amount of eligible machinery and equipment appraised on a net orderly liquidation basis and (b) 75% of the appraised fair market value of eligible real property of the loan parties in Canada, England and Wales, the Netherlands and Germany and (ii) the lesser of (x) 20% of the total commitments and (y) 20% of the borrowing base of the borrowers without giving effect to the additional borrowing base from the eligible machinery and equipment and eligible real property, plus

•in the case of the borrowing base for the Company’s U.S. and Canadian subsidiaries, 100% of unrestricted cash, in each case held in an account subject to the springing control of the agent; provided, that the cash component of the borrowing base shall not constitute more than the lesser of (x) 15.0% of the total commitments and (y) 15.0% of the borrowing base of the borrowers (calculated prior to giving effect to such limitation).

The borrowing base of the U.K., Dutch and German subsidiaries may not exceed the greater of 50% of the total commitments and 50% of the borrowing base of the ABL Borrowers. On the closing date of the ABL Facility, as adjusted for the consummation of the Plan and related transactions, the borrowing base reflecting various required reserves was determined to be approximately $350.

In addition to paying interest on outstanding principal under the ABL Facility, the Company is required to pay a commitment fee to the lenders in respect of the unutilized commitments thereunder at a rate equal to 0.50% or 0.375% per annum depending on the average utilization of the commitments. The Company also pays a customary letter of credit fee, including a fronting fee of 0.125% per annum of the daily average stated amount of each outstanding letter of credit, and customary agency fees.

Outstanding loans under the ABL Facility may be voluntarily repaid at any time without premium or penalty, other than customary “breakage” costs with respect to eurocurrency loans.

The obligations of the Company under the ABL Facility are unconditionally guaranteed by the Company’s direct parent, Hexion Intermediate, and each of the Company’s existing and future wholly-owned material U.S. subsidiaries, which the Company refers to as the “U.S. ABL Guarantors.” In addition, all obligations of the foreign subsidiary borrowers under the ABL Facility are guaranteed by the U.S. ABL Guarantors and certain other direct and indirect wholly-owned foreign subsidiaries, which the Company refers to collectively as the “Foreign ABL Guarantors” and, together with the U.S. ABL Guarantors, the “ABL Guarantors.”

In addition, the ABL Facility requires the Company to maintain a minimum fixed charge coverage ratio at any time when the excess availability is less than the greater of (x) $30 and (y) 10.0% of the lesser of (i) the borrowing base at such time and (ii) the aggregate amount of ABL Facility commitments at such time. In that event, the Company must satisfy a minimum fixed charge coverage ratio of 1.0 to 1.0. The Company was in compliance with all ABL Facility provisions as of December 31, 2020 and 2019.

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New Senior Secured Term Loan Facility

Additionally, in connection with the completion of the Plan, on July 1, 2019, the Company and Hexion International Cooperatief U.A., a company organized under the laws of the Netherlands (the “Dutch Term Loan Borrower” and, together with the Company, the “Term Loan Borrowers”), entered into a senior secured term loan facility with the lenders party thereto and JPMorgan Chase Bank, N.A., as administrative agent and collateral agent (the “Term Loan Facility”), which consists of (i) a USD denominated tranche in an aggregate principal amount of $ i 725 (“Senior Secured Term Loan - USD”) borrowed by the Company and (ii) a EUR denominated tranche in an aggregate principal amount of € i 425 (“Senior Secured Term Loan - EUR”) borrowed by the Dutch Term Loan Borrower (the Senior Secured Term Loans together with the ABL Facility represent the “Credit Facilities”). In addition, the Company may request one or more incremental facilities in an aggregate amount up to the sum of $425 and amounts that may be incurred pursuant to certain leverage and coverage ratios.

The Term Loan Facility will mature on i i July 1, 2026 / and bears interest based on (i) in the case of the USD tranche, at the Company’s option, an adjusted LIBOR rate or an alternate base rate, in each case plus an applicable margin equal to 3.50% or, in the case of the alternate base rate, 2.50% and (ii) in the case of the EUR tranche, EURIBOR plus an applicable margin equal to 4.00%. As of December 31, 2020, the effective interest for the Company’s Term Loan Facility on the USD tranche and EUR tranche was i 3.73% and i 4.00%, respectively, and the effective interest rate as of December 31, 2019 for the Company’s Term Loan Facility on USD tranche and EUR tranche was i 5.82% and i 4.00%, respectively.

The obligations of the Company under the Term Loan Facility are unconditionally guaranteed by Hexion Intermediate and each of the Company’s existing and future wholly owned material U.S. subsidiaries, which subsidiaries the Company refers to collectively as “U.S. Term Guarantors”. In addition, all obligations of the Dutch Term Loan Borrower under the Term Loan Facility are guaranteed by Hexion Intermediate, the Company, the U.S. Term Guarantors and certain other direct and indirect wholly-owned foreign subsidiaries, which foreign subsidiaries the Company collectively refers to as the “Foreign Term Guarantors” (together with the U.S. Term Guarantors, the “Subsidiary Term Guarantors” and, together with Hexion Intermediate, the “Term Guarantors”).

The Credit Facilities contain among other provisions, restrictive covenants regarding indebtedness, payments and distributions, mergers and acquisitions, asset sales, affiliate transactions, capital expenditures and the maintenance of certain financial ratios. Events of default include the failure to pay principal and interest when due, a material breach of representation or warranty, covenant defaults, events of bankruptcy and a change of control. The Credit Facilities also contain certain other customary affirmative covenants and events of default. If the Company fails to perform its obligations under these and other covenants, the Credit Facilities could be terminated and any outstanding borrowings, together with accrued interest, under the Credit Facilities could be declared immediately due and payable. There were no covenant violations or events of default as of December 31, 2020 or 2019.

Indenture and 7.875% Senior Notes due 2027

The Company entered into an indenture, dated as of July 1, 2019 (the “Indenture”), among the Company, the subsidiary guarantors party thereto and Wilmington Trust, National Association, as trustee, and issued $450 aggregate principal amount of i 7.875% Senior Notes due 2027 (the “Senior Notes”) thereunder. The Senior Notes are guaranteed on a senior basis by the Company’s existing domestic subsidiaries that guarantee its obligations under its Credit Facilities (as defined below) (the “Guarantors”) on a full and unconditional basis. The following is a brief description of the material provisions of the Indenture and the Senior Notes.

The Senior Notes will mature on i July 15, 2027. Interest on the Senior Notes will accrue at the rate of i 7.875% per annum and will be payable semiannually in arrears on January 15 and July 15, commencing on January 15, 2020.

Optional Redemption. At any time prior to July 15, 2022, the Company may redeem the Senior Notes, in whole or in part, at a price equal to 100% of the principal amount of the Senior Notes redeemed, plus an applicable “make-whole” premium and accrued and unpaid interest, if any, to the redemption date.

In addition, at any time prior to July 15, 2022, the Company may redeem up to 40% of the aggregate principal amount of the Senior Notes at a redemption price of i 107.875% of the principal amount thereof, plus accrued and unpaid interest, if any, to the redemption date, with the net cash proceeds of certain equity offerings; provided that at least 50% of the aggregate principal amount of the Senior Notes originally issued under the Indenture remains outstanding immediately after the occurrence of such redemption (excluding Notes held by the Company and its subsidiaries); and provided, further, that such redemption occurs within 90 days of the date of the closing of such equity offering.

i On and after July 15, 2022, the Company may redeem all or a part of the Senior Notes at the redemption prices (expressed as percentages of principal amount) set forth below plus accrued and unpaid interest, if any, thereon, to the applicable redemption date, if redeemed during the twelve-month period beginning on July 15 of the years indicated below:


Year	Percentage
2022	i 103.94	%
2023	i 101.97	%
2024 and thereafter	i 100.00	%

Change of Control. If a change of control (as defined in the Indenture) occurs, holders of the Senior Notes will have the right to require the Company to repurchase all or any part of their Senior Notes at a purchase price equal to 101% of the aggregate principal amount of the Senior Notes repurchased, plus accrued and unpaid interest, if any, to the repurchase date.

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Certain Covenants. The Indenture governing the Senior Notes contains, among other provisions, restrictive covenants regarding indebtedness, payments and distributions, mergers and acquisitions, asset sales, affiliate transactions, capital expenditures and the maintenance of certain financial ratios. At such time as (1) the Senior Notes have an investment grade rating from both of Moody’s Investors Service, Inc. and Standard and Poor’s Ratings Services and (2) no default has occurred and is continuing under the Indenture, certain of these and other covenants will be suspended and cease to be in effect.

Events of Default. The Indenture also provides for certain customary events of default, including, among others, nonpayment of principal or interest, failure to pay final judgments in excess of a specified threshold, failure of a guarantee to remain in effect, bankruptcy and insolvency events, and cross acceleration, which would permit the principal, premium, if any, interest and other monetary obligations on all the then outstanding Senior Notes to be declared due and payable immediately.

Intercreditor Agreement

On July 1, 2019, in connection with the Emergence, JPMorgan Chase Bank, N.A., as collateral agent under each of the Credit Facilities, and the Company and certain of its subsidiaries entered into an ABL Intercreditor Agreement that, among other things, sets forth the relative lien priorities of the secured parties under the Credit Facilities on the collateral shared by the ABL Facility and the Term Loan Facility.

Other Borrowings

The Company’s Australian Term Loan Facility has a variable interest rate equal to the 90 day Australian or New Zealand Bank Bill Rates plus an applicable margin. The agreement also provides access to a $ i i 7 / revolving credit facility of which there were i no outstanding borrowings at December 31, 2020 and $ i 1 at December 31, 2019. In February 2021, the Company extended its Australian Term Loan Facility through February 2026.

The Brazilian bank loans represent various bank loans, primarily for working capital purposes and to finance the construction of manufacturing facilities.

The Company’s other debt obligations represent various international credit facilities in China and Korea to fund working capital needs and capital expenditures. While these facilities are primarily unsecured, portions of the lines are collateralized by equipment and cash and short term investments at December 31, 2020.

The Company’s lease obligations classified as debt on the Consolidated Balance Sheets include finance leases and sale leaseback financing arrangements, which range from one to fifteen year terms for equipment, pipeline, land and buildings.

Scheduled Maturities

Aggregate maturities of debt, excluding amortization of debt discounts, at December 31, 2020 for the Company are as follows:


Year	Debt
2021	$	i 84
2022	i 35
2023	i 17
2024	i 9
2025	i 9
2026 and thereafter	i 1,651
Total minimum payments	i 1,805
Less: Amount representing interest	( i 3)
Present value of minimum payments	$	i 1,802

13. i Leases

The Company leases certain buildings, warehouses, rail cars, land and operating equipment under both operating and finance leases expiring on various dates through 2044. Leases with an initial term of 12 months or less are not recorded on the balance sheet and the Company recognizes lease expense for these leases on a straight-line basis over the lease term. For lease agreements entered into or reassessed after the adoption of Topic 842, the Company combines lease and non-lease components.

The tables and discussion below represent the Company’s continuing operations and exclude the Held for Sale Business.

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Lease Costs

The table below summarizes the lease costs for the year ended December 31, 2020 and the Successor period July 2, 2019 through December 31, 2019 and the Predecessor period January 1, 2019 through July 1, 2019:

Classification

Successor

Predecessor

Operating lease expense

Operating (loss) income

i 29

i 18

i 16

Short-term lease expense

Operating (loss) income

i 5

i 2

i 5

Amortization expense

Operating (loss) income

i 2

i 1

Interest expense from financing leases

Interest expense, net

Variable lease expense

Operating (loss) income

i 3

i 2

Balance Sheet Classification

i The table below presents the lease-related assets and liabilities recorded on the Consolidated Balance Sheets:

Successor

Classification

Assets:

Operating(1)

Operating lease assets

i 103

i 110

Finance(2)

Machinery and Equipment

i 13

i 10

Total leased assets

i 116

i 120

Liabilities:

Current

Operating

Current portion of operating lease liabilities

i 19

i 20

Finance

Debt payable within one year

i 2

i 4

Noncurrent

Operating

Operating lease liabilities

i 76

i 82

Finance

Long-term debt

i 6

i 3

Total leased liabilities

i 103

i 109

(1) Operating lease assets include $ i 8 and $ i 9 of favorable leasehold interests as of December 31, 2020 and 2019, respectively.

(2) Finance lease assets are recorded net of accumulated amortization of $ i 3 and $ i 1 as of December 31, 2020 and 2019, respectively.

Other Lease Information

i Cash paid for operating leases approximated operating lease expense and non-cash right-of-use asset amortization for the year ended December 31, 2020, the Successor period July 2, 2019 through December 31, 2019 and the Predecessor period January 1, 2019 through July 1, 2019. The table below presents other cash and noncash consideration detail for the year ended December 31, 2020, the Successor period July 2, 2019 through December 31, 2019 and the Predecessor period January 1, 2019 through July 1, 2019:

Successor

Predecessor

Cash paid for finance leases

i 4

i 2

Right-of-use assets obtained in exchange for operating lease

i 13

i 2

i 1

Right-of-use assets obtained in exchange for finance lease obligations

i 5

i —

i 3

The tables below present supplemental information related to leases as of December 31, 2020 and 2019:

Successor

Weighted-average remaining lease term (years)

Operating leases

i 10.0

i 10.7

Finance leases

i 4.8

i 1.7

Weighted-average discount rate

Operating leases

i 5.24

i 5.74 %

Finance leases

i 7.73

i 10.00

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i i

The table below reconciles the undiscounted cash flows for each of the first five years and the total of the remaining years to the finance lease liabilities and operating lease liabilities recorded on the Company’s Consolidated Balance Sheet as of December 31, 2020:

Year

Minimum Rentals Under Operating Leases

Minimum Payments Under Finance Leases(1)

2021

i 23

i 2

2022

i 16

i 1

2023

i 11

i 1

2024

i 9

i 1

2025

i 9

i 1

2026 and thereafter

i 58

i 3

Total lease payments

i 126

i 9

Less: Amount representing interest

( i 31)

( i 1)

Present value of lease liabilities

i 95

i 8

/ /

(1) Amounts exclude sale leaseback financing arrangements which are not considered leases under Topic 842.

14. i Commitments and Contingencies

Environmental Matters

The Company’s operations involve the use, handling, processing, storage, transportation and disposal of hazardous materials. The Company is subject to extensive environmental regulation at the federal, state and local levels as well as foreign laws and regulations, and is therefore exposed to the risk of claims for environmental remediation or restoration. In addition, violations of environmental laws or permits may result in restrictions being imposed on operating activities, substantial fines, penalties, damages or other costs, any of which could have a material adverse effect on the Company’s business, financial condition, results of operations or cash flows.

The following table summarizes all probable environmental remediation, indemnification and restoration liabilities, including related legal expenses, at December 31, 2020 and 2019:

Liability

Range of Reasonably Possible Costs as of December 31, 2020

Successor

Site Description

December 31, 2020(1)

December 31, 2019(1)

Low

High

Geismar, LA

i 12

i 9

i 22

Superfund and offsite landfills – allocated share:

Less than 1%

i 3

i 2

i 6

Equal to or greater than 1%

i 6

i 5

i 14

Currently-owned

i 8

i 4

i 14

Formerly-owned:

Remediation

i 18

i 21

i 14

i 36

Monitoring only

i —

i 1

i —

i 1

Total

i 47

i 51

i 34

i 93

(1)The table includes approximately $ i i 2 / of environmental remediation liabilities related to the Held for Sale Business at both December 31, 2020 and 2019. These associated liabilities have been included in “Long-term liabilities associated with assets held for sale” within the Consolidated Balance Sheets.

These amounts include estimates for unasserted claims that the Company believes are probable of loss and reasonably estimable. The estimate of the range of reasonably possible costs is less certain than the estimates upon which the liabilities are based. To establish the upper end of a range, assumptions less favorable to the Company among the range of reasonably possible outcomes were used. As with any estimate, if facts or circumstances change, the final outcome could differ materially from these estimates. At December 31, 2020 and 2019, $ i 14 and $ i 18, respectively, has been included in “Other current liabilities” in the Consolidated Balance Sheets with the remaining amount included in “Other long-term liabilities.”

Following is a discussion of the Company’s environmental liabilities and the related assumptions at December 31, 2020

Geismar, LA Site—The Company formerly owned a basic chemicals and polyvinyl chloride business that was taken public as Borden Chemicals and Plastics Operating Limited Partnership (“BCPOLP”) in 1987. The Company retained a 1% interest, the general partner interest and the liability for certain environmental matters after BCPOLP’s formation. Under a Settlement Agreement approved by the United States Bankruptcy Court for the District of Delaware among the Company, BCPOLP, the United States Environmental Protection Agency and the Louisiana Department of Environmental Quality, the Company agreed to perform certain of BCPOLP’s obligations for soil and groundwater contamination at BCPOLP’s Geismar, Louisiana site. The Company bears the sole responsibility for these obligations because there are no other potentially responsible parties (“PRP”) or third parties from whom the Company could seek reimbursement.

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A groundwater pump and treat system to remove contaminants is operational, and natural attenuation studies are proceeding. If closure procedures and remediation systems prove to be inadequate, or if additional contamination is discovered, costs that would approach the higher end of the range of possible outcomes could result.

Due to the long-term nature of the project, the reliability of timing and the ability to estimate remediation payments, a portion of this liability was recorded at its net present value, assuming a i 3% discount rate and a time period of 20 years. The range of possible outcomes is discounted in a similar manner. The undiscounted liability, which is expected to be paid over the next i 20 years, is approximately $ i 16. Over the next five years, the Company expects to make ratable payments totaling $ i 5.

Superfund Sites and Offsite Landfills—The Company is currently involved in environmental remediation activities at a number of sites for which it has been notified that it is, or may be, a PRP under the United States Comprehensive Environmental Response, Compensation and Liability Act or similar state “superfund” laws. The Company anticipates approximately 50% of the estimated liability for these sites will be paid within the next five years, with the remainder over the next twenty-five years. The Company generally does not bear a significant level of responsibility for these sites, and as a result, has little control over the costs and timing of cash flows.

The Company’s ultimate liability will depend on many factors including its share of waste volume, the financial viability of other PRPs, the remediation methods and technology used, the amount of time necessary to accomplish remediation and the availability of insurance coverage. The range of possible outcomes takes into account the maturity of each project, resulting in a more narrow range as the project progresses. To estimate both its current reserves for environmental remediation at these sites and the possible range of additional costs, the Company has not assumed that it will bear the entire cost of remediation of every site to the exclusion of other known PRPs who may be jointly and severally liable. The Company has limited information to assess the viability of other PRPs and their probable contribution on a per site basis. The Company’s insurance provides very limited, if any, coverage for these environmental matters.

Sites Under Current Ownership—The Company is conducting environmental remediation at a number of locations that it currently owns, of which ten sites are no longer in operation. As the Company is performing a portion of the remediation on a voluntary basis, it has some control over the costs to be incurred and the timing of cash flows. The factors influencing the ultimate outcome include the methods of remediation elected, the conclusions and assessment of site studies remaining to be completed, and the time period required to complete the work. No other parties are responsible for remediation at these sites.

Formerly-Owned Sites—The Company is conducting, or has been identified as a PRP in connection with, environmental remediation at a number of locations that it formerly owned and/or operated. Remediation costs at these former sites, such as those associated with our former phosphate mining and processing operations, could be material. The Company has accrued those costs for formerly-owned sites which are currently probable and reasonably estimable. One such site is the Coronet Industries, Inc. Superfund Alternative Site in Plant City, Florida. The Company signed a settlement agreement in 2016 with the current site owner and a past site owner, pursuant to which the Company paid $ i 10 for past remediation costs and accepted a 40% allocable share of specified future remediation costs at this site. The Company estimates its allocable share of future remediation costs to be approximately $ i 8. The final costs to the Company will depend on natural variations in remediation costs, including unforeseen circumstances, agency requests, new contaminants of concern and the ongoing financial viability of the other PRPs.

Monitoring Only Sites—The Company is responsible for a number of sites that require monitoring where no additional remediation is expected. The Company has established reserves for costs related to these sites. Payment of these liabilities is anticipated to occur over the next ten or more years. The ultimate cost to the Company will be influenced by fluctuations in projected monitoring periods or by findings that are different than anticipated.

Indemnifications—In connection with the acquisition of certain of the Company’s operating businesses, the Company has been indemnified by the sellers against certain liabilities of the acquired businesses, including liabilities relating to both known and unknown environmental contamination arising prior to the date of the purchase. The indemnifications may be subject to certain exceptions and limitations, deductibles and indemnity caps. While it is reasonably possible that some costs could be incurred, except for those sites identified above, the Company has inadequate information to allow it to estimate a potential range of liability, if any.

Non-Environmental Legal Matters

The Company is involved in various legal proceedings in the ordinary course of business and had reserves of $ i i 1 / at both December 31, 2020 and 2019, respectively, for all non-environmental legal defense costs incurred and settlement costs that it believes are probable and estimable. At December 31, 2020 and 2019, $ i 2 and $ i 1 has been included in “Other current liabilities” in the Consolidated Balance Sheets with the remaining amount included in “Other long-term liabilities.”

Other Legal Matters—The Company is involved in various other product liability, commercial and employment litigation, personal injury, property damage and other legal proceedings in addition to those described above, including actions that allege harm caused by products the Company has allegedly made or used, containing silica, vinyl chloride monomer and asbestos. The Company believes it has adequate reserves and that it is not reasonably possible that a loss exceeding amounts already reserved would be material. Furthermore, the Company has insurance to cover claims of these types.

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Other Commitments and Contingencies

The Company has entered into contractual agreements with third parties for the supply of site services, utilities, materials and facilities and for operation and maintenance services necessary to operate certain of the Company’s facilities on a stand-alone basis. The duration of the contracts range from less than one year to 20 years, depending on the nature of services. These contracts may be terminated by either party under certain conditions as provided for in the respective agreements; generally, 90 days notice is required for short-term contracts and three years notice is required for longer-term contracts (generally those contracts in excess of five years). Contractual pricing generally includes a fixed and variable component.

In addition, the Company has entered into contractual agreements with third parties to purchase feedstocks or other services. The terms of these agreements vary from one to fifteen years and may be extended at the Company’s request and are cancelable by either party as provided for in each agreement. Feedstock prices are based on market prices less negotiated volume discounts or cost input formulas. i The Company is required to make minimum annual payments under these contracts as follows:


Year	Minimum Annual Purchase Commitments
2021	$	i 190
2022	i 134
2023	i 94
2024	i 50
2025	i 49
2026 and beyond	i 253
Total minimum payments	i 770
Less: Amount representing interest	( i 31)
Present value of minimum payments	$	i 739

15. i Pension and Non-Pension Postretirement Benefit Plans

The Company sponsors defined benefit pension plans covering certain U.S. associates and certain non-U.S. associates primarily in Netherlands, Germany, Canada and Belgium. Benefits under these plans are generally based on eligible compensation and / or years of credited service. Retirement benefits in other foreign locations are primarily structured as defined contribution plans. During 2009, the Company implemented a change in its U.S. retirement benefits to shift to a defined contribution platform. Benefits under the defined benefit U.S. pension plan were frozen and the Company added an annual Company contribution to the U.S. defined contribution plan for eligible participants. Effective March 1, 2018, the Canadian pension plan was frozen to new entrants.

Certain active participants in the Company’s German defined benefit pension plan relate to the Held for Sale Business. These employees will transfer with the Held for Sale business at closing and therefore, the pension liability and expense associated with these employees is included within discontinued operations. As the Company’s German defined benefit pension plan is unfunded, there is no impact on the Company’s Pension Plan assets. i See below table for a summary of the pension liability and expense amounts included in discontinued operations.

Pension Benefits

Successor

Discontinued Operations

U.S.
Plans

Non-U.S.
Plans

U.S.
Plans

Non-U.S.
Plans

Benefit obligation

i —

i 36

i —

i 29

Pension Benefits

Successor

Predecessor

Year ended December 31, 2020

Year ended December 31, 2018

Discontinued Operations

U.S.
Plans

Non-U.S.
Plans

U.S.
Plans

Non-U.S.
Plans

U.S.
Plans

Non-U.S.
Plans

U.S.
Plans

Non-U.S.
Plans

Net expense

i —

i 5

i —

$ < i 1

i —

i 6

i —

i 1

The Company also provides non-pension postretirement benefit plans to certain U.S. associates, to Canadian associates, to Brazilian associates and to certain associates in the Netherlands. The U.S. benefit primarily consists of a life insurance benefit for a grandfathered group of retirees, for which premiums are paid by the Company. Effective December 31, 2018, this life insurance benefit was transferred to a third party financial institution, which moved the liability from the Company to the third party. The Canadian plans provide retirees and their dependents with medical and life insurance benefits, which are supplemental benefits to the respective provincial healthcare plan in Canada. The Brazilian plan became effective in 2012 as a result of a change in certain regulations, and provides retirees that contributed towards coverage while actively employed with access to medical benefits, with the retiree being responsible for 100% of the premiums. In 2014, the

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plan was amended such that 100% of the premiums of active employees are paid by the Company. The Netherlands’ plan provides a lump sum payment at retirement for grandfathered associates.

The following table presents the change in benefit obligation, change in plan assets and components of funded status for the Company’s defined benefit pension and non-pension postretirement benefit plans for the year ended December 31, 2020, the Successor period from July 2, 2019 through December 31, 2019, and the Predecessor period January 1, 2019 through July 1, 2019:

Pension Benefits

Successor

Predecessor

U.S.
Plans

Non-U.S.
Plans

U.S.
Plans

Non-U.S.
Plans

U.S.
Plans

Non-U.S.
Plans

Change in Benefit Obligation

Benefit obligation at beginning of period

i 225

i 688

i 228

i 678

i 216

i 583

Service cost

i 2

i 18

i 2

i 8

i 2

i 7

Interest cost

i 6

i 3

i 4

Actuarial losses

i 17

i 43

i 3

i 12

i 14

i 93

Foreign currency exchange rate changes

i —

i 61

i —

( i 8)

i —

( i 3)

Benefits paid

( i 15)

( i 13)

( i 8)

( i 6)

( i 8)

( i 6)

Expenses paid from assets

( i 3)

i —

( i 3)

i —

Employee contributions

i —

i 1

i —

Benefit obligation at end of period

i 232

i 804

i 225

i 688

i 228

i 678

Benefit obligation at end of period - discontinued operations

i —

i 36

i —

i 29

i —

i 29

Benefit obligation at end of period - continuing operations

i 232

i 768

i 225

i 659

i 228

i 649

Change in Plan Assets

Fair value of plan assets at beginning of period

i 197

i 483

i 196

i 470

i 185

i 404

Actual return on plan assets

i 18

i 58

i 10

i 9

i 19

i 60

Foreign currency exchange rate changes

i —

i 45

i —

( i 5)

i —

( i 2)

Employer contributions

i —

i 40

i 2

i 15

i —

i 14

Benefits paid

( i 15)

( i 13)

( i 8)

( i 6)

( i 8)

( i 6)

Expenses paid from assets

( i 3)

i —

( i 3)

i —

Employee contributions

i —

i 1

i —

Fair value of plan assets at end of period

i 197

i 614

i 197

i 483

i 196

i 470

Funded status of the plan at end of period

( i 35)

( i 190)

( i 28)

( i 205)

( i 32)

( i 208)

Funded status of the plan at end of period - discontinued operations

i —

( i 36)

i —

( i 29)

i —

( i 29)

Funded status of the plan at the end of period - continuing operations

( i 35)

( i 154)

( i 28)

( i 176)

( i 32)

( i 179)

Non-Pension Postretirement Benefits

Successor

Predecessor

U.S.
Plans

Non-U.S.
Plans

U.S.
Plans

Non-U.S.
Plans

U.S.
Plans

Non-U.S.
Plans

Change in Benefit Obligation

Benefit obligation at beginning of period

i —

i 13

i —

i 17

i —

i 13

Interest cost

i —

i 1

i —

Actuarial (gains) losses

i —

( i 1)

i —

( i 4)

i —

i 4

Foreign currency exchange rate changes

i —

( i 1)

i —

Plan settlements

i —

Benefit obligation at end of period

i —

i 12

i —

i 13

i —

i 17

Change in Plan Assets

Fair value of plan assets at beginning of period

i —

Employer contributions

i —

Plan settlements

i —

Fair value of plan assets at end of period

i —

Funded status of the plan at end of period

i —

( i 12)

i —

( i 13)

i —

( i 17)

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Pension Benefits

Non-Pension Postretirement Benefits

U.S.
Plans

Non-U.S.
Plans

U.S.
Plans

Non-U.S.
Plans

U.S.
Plans

Non-U.S.
Plans

U.S.
Plans

Non-U.S.
Plans

Amounts recognized in the Consolidated Balance Sheets consists of:

Noncurrent assets

i —

i 52

i —

i 8

i —

Other current liabilities

i —

( i 6)

i —

( i 5)

i —

( i 1)

i —

( i 1)

Long-term pension and post employment benefit obligations

( i 35)

( i 236)

( i 28)

( i 208)

i —

( i 11)

i —

( i 12)

Accumulated other comprehensive loss

i —

Net amounts recognized

( i 35)

( i 190)

( i 28)

( i 205)

i —

( i 12)

i —

( i 13)

Net amounts recognized - discontinued operations

i —

( i 36)

i —

( i 29)

i —

Net amounts recognized - continued operations

( i 35)

( i 154)

( i 28)

( i 176)

i —

( i 12)

i —

( i 13)

Accumulated benefit obligation

i 232

i 757

i 225

i 648

Accumulated benefit obligation for funded plans

i 232

i 525

i 225

i 446

Pension plans with underfunded or non-funded accumulated benefit obligations:

Aggregate projected benefit obligation(1)

i 232

i 258

i 225

i 224

Aggregate accumulated benefit obligation

i 232

i 250

i 225

i 216

Aggregate fair value of plan assets

i 197

i 16

i 197

i 13

Pension plans with projected benefit obligations in excess of plan assets:

Aggregate projected benefit obligation

i 232

i 285

i 225

i 287

Aggregate fair value of plan assets

i 197

i 42

i 197

i 74

(1)Aggregate projected benefit obligation related to the Company’s Held for Sale Business was $ i 36 at December 31, 2020 and is included in the table above with the Company’s continuing operations.

The foreign currency impact reflected in these rollforward tables are primarily for changes in the euro versus the U.S. dollar.

The Pension Protection Act of 2006 (the “2006 PPA”) provides for minimum funding levels on U.S. plans, and plans not meeting the minimum funding requirement may be subject to certain restrictions.

Following are the components of net pension and postretirement expense (benefit) recognized for the year ended December 31, 2020, the Successor period July 2, 2019 through December 31, 2019, the Predecessor period January 1, 2019 through July 1, 2019 and the year ended December 31, 2018:

Pension Benefits

U.S. Plans

Successor

Predecessor

Year Ended December 31, 2018

Service cost

i 2

i 3

Interest cost on projected benefit obligation

i 6

i 3

i 4

i 7

Expected return on assets

( i 12)

( i 7)

( i 6)

( i 14)

Unrealized actuarial loss(1)

i 11

i —

i 1

i 11

Net expense (benefit)

i 7

( i 2)

i 1

i 7

Non-U.S. Plans

Successor

Predecessor

Year Ended December 31, 2018

Service cost

i 18

i 8

i 7

i 17

Interest cost on projected benefit obligation

i 6

i 4

i 10

Expected return on assets

( i 13)

( i 6)

( i 13)

Unrealized actuarial (gain) loss(1)

( i 2)

i 9

i 39

( i 26)

Net expense (benefit)(2)

i 9

i 15

i 44

( i 12)

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Non-Pension Postretirement Benefits

U.S. Plans

Successor

Predecessor

Year Ended December 31, 2018

Interest cost on projected benefit obligation

i —

Unrealized actuarial loss(1)

i —

Net (benefit) expense

i —

Non-U.S. Plans

Successor

Predecessor

Year Ended December 31, 2018

Interest cost on projected benefit obligation

i 1

i —

i 1

Unrealized actuarial(gain) loss(1)

( i 1)

( i 4)

i 4

i 2

Net (benefit) expense

i —

( i 4)

i 4

i 3

(1)Upon the application of fresh start accounting, the Company’s pension and other non-pension postretirement liabilities were remeasured as of the Predecessor period July 1, 2019. As a result, for the Predecessor period January 1, 2019 through July 1, 2019, total unrealized actuarial losses of $44 were recorded to “Reorganization, net” in the Consolidated Statements of Operations, $5 of which relate to the Company’s Held for Sale business.

(2)Net expense (benefit) related to the Company’s Held for Sale Business was $ i 5, $< i 1, $ i 6 and $ i 1 for the year ended December 31, 2020, the Successor period from July 2, 2019 to December 31, 2019, the Predecessor period from January 1, 2019 through July 1, 2020 and the year ended December 31, 2018, respectively, and is included in the table above.

Determination of actuarial assumptions

The Company’s actuarial assumptions are determined based on the demographics of the population, target asset allocations for funded plans, regional economic trends, statutory requirements and other factors that could impact the benefit obligation and plan assets. For our European plans, most assumptions are set by country, as the plans within these countries have similar demographics, and are impacted by the same regional economic trends and statutory requirements.

The discount rates selected reflect the rate at which pension obligations could be effectively settled. The Company selects the discount rates based on cash flow models using the yields of high-grade corporate bonds or the local equivalent with maturities consistent with the Company’s anticipated cash flow projections. The Company’s pension and OPEB liabilities and related service and interest cost are calculated using a split-rate interest discounting methodology, whereby expected future cash flows related to these liabilities are discounted using multiple interest rates on a forward curve that correspond to the timing of the expected cash flows.

The expected rates of future compensation level increases are based on salary and wage trends in the chemical and other similar industries, as well as the Company’s specific long-term compensation targets by country. Input is obtained from the Company’s internal Human Resources group and from outside actuaries. These rates include components for wage rate inflation and merit increases.

The expected long-term rates of return on plan assets are determined based on the plans’ current and projected asset mix. To determine the expected overall long-term rate of return on assets, the Company takes into account the rates on long-term debt investments held within the portfolio, as well as expected trends in the equity markets, for plans including equity securities. Peer data and historical returns are reviewed and the Company consults with its actuaries, as well as the Plan’s investment advisors, to confirm that the Company’s assumptions are reasonable.

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The weighted average rates used to determine the benefit obligations were as follows for the year ended December 31, 2020, the Successor period July 2, 2019 through December 31, 2019, and the Predecessor period January 1, 2019 through July 1, 2019:

Pension Benefits

Successor

Predecessor

U.S.
Plans

Non-U.S.
Plans

U.S.
Plans

Non-U.S.
Plans

U.S.
Plans

Non-U.S.
Plans

Discount rate

i 2.2

i 0.8

i 3.1

i 1.2

i 3.3

i 1.3

Rate of increase in future compensation levels

i —

i 3.6

i —

i 3.4

i —

i 3.4

Non-Pension Postretirement Benefits

Successor

Predecessor

U.S.
Plans

Non-U.S.

Plans

U.S.
Plans

Non-U.S.

Plans

U.S.

Plans

Non-U.S.

Plans

Discount rate

i —

i 4.6

i —

i 5.2

i —

i 6.9

Rate of increase in future compensation levels

i —

The weighted average assumed health care cost trend rates are as follows:

Health care cost trend rate assumed for next year

i —

i 6.8

i —

i 5.7

i —

i 6.2

Rate to which the cost trend rate is assumed to decline (the ultimate trend rate)

i —

i 4.5

i —

i 4.0

i —

i 4.0

Year that the rate reaches the ultimate trend rate

—

i 2040

—

i 2040

—

i 2040

/ i

The weighted average rates used to determine net periodic pension expense (benefit) were as follows for the year ended December 31, 2020, the Successor period July 2, 2019 through December 31, 2019, the Predecessor period January 1, 2019 through July 1, 2019 and the year ended December 31, 2018:

Pension Benefits

U.S. Plans

Non-U.S. Plans

Successor

Predecessor

Successor

Predecessor

Year Ended December 31, 2018

Year Ended December 31, 2018

Discount rate

i 3.1

i 3.3

i 4.1

i 3.5

i 1.2

i 1.3

i 1.9

Rate of increase in future compensation levels

i —

i 3.4

i 2.3

i 2.4

Expected long-term rate of return on plan assets

i 6.6

i 6.7

i 3.1

i 2.6

i 3.1

Non-Pension Postretirement Benefits

U.S. Plans

Non-U.S. Plans

Successor

Predecessor

Successor

Predecessor

Year Ended December 31, 2018

Year Ended December 31, 2018

Discount rate

i —

i 4.1

i 3.2

i 5.2

i 6.9

i 6.3

i 5.3

Rate of increase in future compensation levels

i —

Expected long-term rate of return on plan assets

i —

A one-percentage-point change in the assumed health care cost trend rates would change the projected benefit obligation for international non-pension postretirement benefits by approximately $ i 2 and service cost and interest cost by $ i 1. The impact on U.S. plans is negligible.

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Pension Investment Policies and Strategies

The Company’s investment strategy for the assets of its North American defined benefit pension plans is to maximize the long-term return on plan assets using a mix of equities, fixed income and alternative investments with a prudent level of risk. Risk tolerance is established through careful consideration of plan liabilities, plan funded status and expected timing of future cash flow requirements. The investment portfolio contains a diversified blend of equity, fixed-income and alternative investments. For U.S. plans, equity investments are also diversified across U.S. and international stocks, as well as growth, value and small and large capitalization investments, while the Company’s Canadian plan includes a blend of Canadian securities with U.S. and other foreign investments. The alternative investments are allocated in a diversified fund structure with exposure to a variety of hedge fund strategies. Investment risk and performance is measured and monitored on an ongoing basis through periodic investment portfolio reviews, annual liability measurements and periodic asset and liability studies. As plan funded status changes, adjustments to the diversified portfolio may be considered to reduce funded status volatility and better match the duration of plan liabilities.

The Company periodically reviews its target allocation of North American plan assets among the various asset classes. The targeted allocations are based on anticipated asset performance, discussions with investment professionals and on the projected timing of future benefit payments.

The Company observes local regulations and customs governing its European pension plans in determining asset allocations, which generally require a blended weight leaning toward more fixed income securities, including government bonds.


	Actual				Target 2020
	2020		2019
Weighted average allocations of U.S. pension plan assets at December 31:
Equity securities	i 32	%	i 35	%	i 35	%
Debt securities	i 55	%	i 53	%	i 55	%
Cash, short-term investments and other	i 13	%	i 12	%	i 10	%
Total	i 100	%	i 100	%	i 100	%
Weighted average allocations of non-U.S. pension plan assets at December 31:
Equity securities	i 22	%	i 22	%	i 23	%
Debt securities	i 76	%	i 75	%	i 77	%
Cash, short-term investments and other	i 2	%	i 3	%	i —	%
Total	i 100	%	i 100	%	i 100	%

Fair Value of Plan Assets

•Level 1: Inputs are quoted prices (unadjusted) for identical assets or liabilities in active markets.

•Level 2: Pricing inputs are other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reported date.

Certain investments measured at net asset value (“NAV”), as a practical expedient for fair value, have been excluded from the fair value hierarchy.

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The following table presents U.S. pension plan investments measured at fair value on a recurring basis as of December 31, 2020 and 2019:

Fair Value Measurements Using

2020

2019

Quoted

Prices in

Active

Markets for

Identical

Assets

(Level 1)

Significant
Other
Observable
Inputs
(Level 2)

Unobserv-able
Inputs
(Level 3)

Total

Quoted

Prices in

Active

Markets for

Identical

Assets

(Level 1)

Significant
Other
Observable
Inputs
(Level 2)

Unobserv-able
Inputs
(Level 3)

Total

Large cap equity funds (1)

i —

i 35

i —

i 35

i —

i 37

i —

i 37

Small/mid cap equity funds (1)

i —

i 5

i —

i 5

i —

i 6

i —

i 6

International equity funds (1)

i —

i 25

i —

i 25

i —

i 27

i —

i 27

Fixed income securities (1)

i —

i 107

i —

i 107

i —

i 103

i —

i 103

Cash equivalents (2)

i —

i 2

i —

i 2

i —

i 2

i —

i 2

i —

i 174

i —

i 174

i —

i 175

i —

i 175

Investments measured at fair value using net asset value as a practical expedient:

Other funds (3)

i 23

i 22

Total

i 197

The following table presents non-U.S. pension plan investments measured at fair value on a recurring basis as of December 31, 2020 and 2019:

Fair Value Measurements Using

2020

2019

Quoted

Prices in

Active

Markets for

Identical

Assets

(Level 1)

Significant
Other
Observable
Inputs
(Level 2)

Unobserv-able
Inputs
(Level 3)

Total

Quoted

Prices in

Active

Markets for

Identical

Assets

(Level 1)

Significant
Other
Observable
Inputs
(Level 2)

Unobserv-able
Inputs
(Level 3)

Total

Pooled insurance products with fixed income guarantee (1)

i —

i 15

i —

i 15

i —

i 13

i —

i 13

Cash equivalents (2)

i —

i 1

i —

i 1

i —

i 15

i —

i 15

i —

i 14

i —

i 14

Investments measured at fair value using net asset value as a practical expedient:

Other international equity funds (3)

i 135

i 108

Other fixed income securities (3)

i 464

i 361

Total

i 614

i 483

(1)Level 2 equity and fixed income securities are primarily in pooled asset and mutual funds and are valued based on underlying net asset value multiplied by the number of shares held. The underlying asset values are based on observable inputs and quoted market prices.

(2)Cash equivalents represent investment in a collective short term investment fund, which is a cash sweep for uninvested cash that earns interest monthly. For these investments, book value is assumed to equal fair value due to the short duration of the investment term.

(3)Represents investments in commingled funds with exposure to a variety of hedge fund strategies, which are not publicly traded and have ongoing redemption restrictions. The Company’s interest in these investments is measured at net asset value per share as a practical expedient for fair value, which is derived from the underlying asset values in these funds, only some of which represent observable inputs and quoted market prices.

Projections of Plan Contributions and Benefit Payments

The Company expects to make contributions totaling $ i 36 to its defined benefit pension plans in 2021.

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Estimated future plan benefit payments as of December 31, 2020 are as follows:

Pension Benefits

Non-Pension

Postretirement Benefits

Year

U.S.

Plans

Non-U.S.
Plans

U.S.

Plans

Non-U.S.
Plans

2021

i 17

i 16

i —

i 1

2022

i 16

i —

2023

i 15

i 17

i —

2024

i 15

i 19

i —

2025

i 15

i 17

i —

2026-2030

i 64

i 118

i —

i 2

Defined Contribution Plans

The Company sponsors a number of defined contribution plans for its associates, primarily in the U.S., Canada, Europe and in the Asia-Pacific region. Full-time associates are generally eligible to participate immediately and may make pre-tax and after-tax contributions subject to plan and statutory limitations. For certain plans, the Company has the option to make contributions above the match provided in the plan based on financial performance.

As previously discussed, U.S retirement income benefits are provided under the Company's defined contribution plan (the “401(k) Plan”). This plan allows eligible associates to make pre-tax contributions from 1% to 15% of eligible earnings for associates who meet the IRS definition of a highly compensated employee and up to 25% for all other associates up to the federal limits for qualified plans. Associates contributing to the 401(k) are eligible to receive matching contributions from the Company at 100% on contributions of up to 5% of eligible earnings. An additional matching contribution may be made if the Company achieves specified annual financial targets established at the beginning of each plan year. In addition, the Company makes an annual retirement contribution ranging from 3% to 7% of eligible compensation depending on years of benefit service. All associates who are actively employed on the last day of the year are eligible for the true-up match and annual retirement contribution, unless otherwise determined by collective bargaining agreements. Effective January 2, 2018, the 401(k) Plan added the option for eligible participants to make after-tax contributions to a Roth 401(k).

The Company incurred expense for contributions under its defined contribution plans of $ i 14, $ i 6, $ i 7 and $ i 17 during the year ended December 31, 2020, the Successor period July 2, 2019 through December 31, 2019, the Predecessor period January 1, 2019 through July 1, 2019 and the year ended December 31, 2018, respectively.

Non-Qualified and Other Retirement Benefit Plans

The Company provides key executives in some locations with non-qualified benefit plans that provide participants with an opportunity to elect to defer compensation or to otherwise provide supplemental retirement benefits in cases where executives cannot fully participate in the defined benefit or defined contribution plans because of plan or local statutory limitations. Most of the Company's supplemental benefit plans are unfunded and benefits are paid from the general assets of the Company. The liabilities related to defined benefit supplemental benefits are included in the previously discussed defined benefit pension disclosures.

The Company maintains a non-qualified defined contribution plan (the “SERP”) that provides annual employer credits to eligible U.S. associates of 5% of eligible compensation above the IRS limit for qualified plans. The Company can also make discretionary credits under the SERP; however, no participant contributions are permitted. The account credits are made annually to an unfunded phantom account, in the following calendar year. Certain executives also previously earned benefits under U.S. non-qualified executive supplemental plans that were frozen prior to 2010.

The Company’s liability for these non-qualified benefit plans was $ i 4 and $ i 5 at December 31, 2020 and 2019, and is included in “Other long-term liabilities” in the Consolidated Balance Sheets.

The Company’s German subsidiaries offer a government subsidized early retirement program to eligible associates called Altersteilzeit or ATZ Plans. The German government provides a subsidy in certain cases where the participant is replaced with a qualifying candidate. The Company had liabilities for these arrangements of $ i 3 and $ i 2 at December 31, 2020 and 2019, respectively. The Company incurred expense for these plans of $ i 1, less than $ i 1, less than $ i 1 and $ i 1 for the year ended December 31, 2020, the Successor period July 2, 2019 through December 31, 2019, the Predecessor period January 1, 2019 through July 1, 2019 and the year ended December 31, 2018, respectively.

Also included in the Consolidated Balance Sheets at both December 31, 2020 and 2019 are other post-employment benefit obligations relating to long-term disability and for liabilities relating to European jubilee benefit plans of $ i i 4 / .

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16. i Stock Based Compensation

Cancellation and Expiration of Outstanding Predecessor Equity Awards

As of the Effective Date, in conjunction with the Company’s emergence from Chapter 11, all outstanding unvested unit options and restricted deferred units of the Predecessor Company’s parent company, TopCo, were canceled, effective immediately (See Note 6 for more information). There was no financial statement impact as a result of these cancellations.

Successor Company Stock Based Awards

The following is a summary of the new stock based compensation plans issued after Emergence and their related outstanding shares as of December 31, 2020:

Plan Name

Grant Date

Shares Outstanding(1)

Plan Expiration

Vesting Terms/Status

Number of Shares Authorized

Hexion Holdings Corporation 2019 Omnibus Incentive Plan

August 2029

i 7,635,389

Restricted Stock Units (“RSUs”) and Performance Stock Units (“PSUs”):

2019 Grants

RSUs

September 2019

i 1,034,100

Time-vest ratably over 3 years, but must be employed on July 1, 2022 in order to receive shares; Accelerated vesting upon change in control.

PSUs

September 2019

i 2,412,894

Performance based with market conditions: Step vest over 4 years based on a 20 consecutive trading-day volume weighted average price per share from $20 to $30 per share. PSUs that vest by June 30, 2022 will be settled in July 2022 and remaining PSUs that vest by June 30, 2023 will be settled in July 2023.

2020 Grants

RSUs

March 2020

i 692,441

Time-vest ratably over 3 years; Accelerated vesting upon change in control.

PSUs

March 2020

i 811,425

Performance based: 50% vest upon achievement of adjusted return on invested capital targets as of December 31, 2022. 50% vest upon achievement of Hexion Segment EBITDA Margin targets as of December 31, 2022. PSUs that vest will be settled in July 2023.

2020 Non-employee Grants

RSUs

January 2020

i 73,332

Time-vest ratably over 3 years; Accelerated vesting upon change in control. Settled upon vesting.

RSUs

August 2020

i 60,664

100% vest on June 1, 2021; Accelerated vesting upon change in control. RSUs that vest will be settled upon the date the non-employee director leaves board service.

(1)Shares outstanding includes shares awarded to associates related to the Held for Sale Business.

Summary of Plans

On August 8, 2019, the Board of Directors of Hexion Holdings approved the Hexion Holdings Corporation 2019 Omnibus Incentive Plan (the “2019 Incentive Plan”), whereby Hexion Holdings is reserving shares of Class B Common Stock, par value $0.01 per share, representing 10% of Hexion Holding’s fully diluted equity as of the date of approval of the 2019 Incentive Plan, for issuance to employees, directors, and other key service providers in connection with stock options, restricted stock units, performance-based stock units and other equity-based awards (such as performance stock units) to be awarded from time to time as the Board determines. The restricted and performance stock units are deemed to be equivalent to one share of common stock of Hexion Holdings. The awards contain restrictions on transferability and other typical terms and conditions.

Restricted Stock Units - Employee Grants

In September 2019, Hexion Holdings granted RSUs that time vest over three years with an aggregate grant date fair value of approximately $ i 16. The fair value was determined using the estimated aggregate fair value of equity per share on the grant date. Compensation cost is recognized equally over the 3 year service period. For certain retirement eligible associates, the stock-based compensation cost is accelerated according to the plan documents. Upon vesting, RSUs are settled in shares at the end of the three year vesting period. As of December 31, 2020, a total of i 344,700 RSUs had vested.

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In March 2020, Hexion Holdings granted additional RSUs to certain employees that time vest over three years with an aggregate grant date fair value of approximately $ i 11. The fair value was determined using the estimated aggregate fair value of equity per share on the grant date. Compensation cost is recognized equally over the 3 year service period. For certain retirement eligible associates, the stock-based compensation cost is accelerated according to the plan documents. Upon vesting, RSUs are settled in shares at the end of the three year vesting period. As of December 31, 2020, no RSUs had vested.

Restricted Stock Units - Director Grants

In January 2020, Hexion Holdings granted RSUs to certain non-employee directors that time vest over three years with an aggregate grant date fair value of approximately $ i 2. The fair value was determined using the estimated aggregate fair value of equity per share on the grant date. Compensation cost is recognized equally over the 3 year service period. Upon vesting, RSUs are settled in shares. As of December 31, 2020, a total of i 36,666 shares had vested and settled.

In August 2020, Hexion Holdings granted RSUs to certain non-employee directors that time vest over one year with an aggregate grant date fair value of approximately $ i 1. The fair value was determined using the estimated aggregate fair value of equity per share on the grant date. Compensation cost is recognized equally over the 1 year service period. RSUs that vest are settled in shares upon the date the non-employee director leaves board service. As of December 31, 2020, no shares had vested.

Performance Stock Units

In September 2019, Hexion Holdings granted PSUs with market conditions with an aggregate grant date fair value of approximately $ i 29. The fair value was estimated at the grant date using a Monte Carlo valuation method. The Monte Carlo valuation method requires the use of a range of assumptions that includes the risk-free interest rates of 1.49% to 1.87% and expected volatility rates ranged from 39% to 60%. The expected life assumption is not used in the Monte Carlo valuation method, but the output of the model indicated a weighted-average expected life of 3.8 years. The PSUs step vest over four years upon the achievement of the pre-established goals by the end of the fourth year of the term. PSUs that vest by June 30, 2022 will be settled in shares in July 2022 and remaining PSUs that vest by June 30, 2023 will be settled in shares by July 2023. As of December 31, 2020, the market conditions have not been met and no PSUs have vested. Compensation cost will be recognized over 3.8 years and adjusted accordingly as vesting conditions are met. For certain retirement eligible associates, the recognition of stock-based compensation cost is accelerated according to the plan documents.

In March 2020, Hexion Holdings granted PSUs with performance conditions with an aggregate grant date fair value of approximately $ i 13. The fair value was determined using the estimated aggregate fair value of equity per share on the grant date. The PSUs vest upon achievement of the performance metrics. 50% of the PSUs vest upon achievement of an adjusted return on invested capital target as of December 31, 2022. 50% vest upon achievement of Hexion Segment EBITDA Margin target as of December 31, 2022, and will be settled in shares in July 2023. Compensation cost will be recognized when a performance condition is deemed probable and adjusted accordingly as vesting conditions are met. As of December 31, 2020, the performance conditions have not been deemed probable, thus no PSUs have vested and no compensation cost has been recorded.

i i

The following is a summary of Company’s RSU and PSU plan activity for the year ended December 31, 2020:

Hexion Holdings Common RSUs

Weighted Average Grant Date Fair Value

Hexion Holdings Common PSUs

Weighted Average Grant Date Fair Value

Nonvested at December 31, 2019

i 1,034,100

i 15.37

i 2,412,894

i 11.97

Units granted

i 882,422

i 15.80

i 823,619

i 15.80

Units forfeited

( i 16,348)

i 15.80

( i 12,194)

i 15.80

Units vested

( i 381,366)

i 15.41

i —

Nonvested at December 31, 2020(1)

i 1,518,808

i 15.60

i 3,224,319

i 12.93

(1)Nonvested shares include shares awarded to associates related to discontinued operations.

/ /

Financial Statement Impact

Although the 2019 Incentive Plan was issued by Hexion Holdings, the underlying share-based compensation cost represents compensation costs paid for by Hexion Holdings on Hexion’s behalf, as a result of the employees’ service to Hexion. The compensation costs for RSUs and PSUs are recorded over the requisite service period on a graded-vesting basis and over the derived service period, respectively.

Share-based compensation costs are recognized, net of actual forfeitures, over the requisite service period on a graded-vesting basis for RSUs. Stock-based compensation cost is recognized, net of forfeitures, over the requisite service period on a graded-vesting basis over the derived service period for PSUs. The Company adjusts compensation expense periodically for forfeitures. Stock based compensation costs are included in “Non-cash stock based compensation expense” on the Consolidated Statements of Cash Flows.

The Company recognized $ i 17 and $ i 8 share-based compensation costs for the year ended December 31, 2020 and the Successor period from July 2, 2019 through December 31, 2019, respectively. The amount of expense for associates related to discontinued operations was less than $1 for both the year ended December 31, 2020 and the Successor period from July 2, 2019 through December 31, 2019. There were no share-based compensation costs for the Predecessor period from January 1, 2019 through July 1, 2019, and year ended December 31, 2018, respectively. The amounts are included in “Selling, general and administrative expense” in the Consolidated Statements of Operations.

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The Company’s Parent had 57,568,295 shares of common stock outstanding as of December 31, 2020.

17. i Income Taxes

During 2018, the Company recognized income tax expense of $ i 31, primarily as a result of income from certain foreign operations. In the United States, disallowed interest expense resulted in current year taxable income which utilized a net operating loss carryforward. The disallowed interest expense carryforward of $ i 283 generated a deferred tax asset. The decrease in the valuation allowance due to the net operating loss utilization was offset by an increase in the valuation allowance recorded on the interest expense carryforward deferred tax asset. The Company had a Global Intangible Low Tax Income (“GILTI”) inclusion of $ i 21, which was fully offset by our net operating loss. This further reduced our valuation allowance.

During the Predecessor period January 1, 2019 through July 1, 2019, the Predecessor Company recorded income tax expense of $ i 40 for reorganization adjustments, primarily consisting of tax expense of $ i 50 for the gain recognized between fair value and tax basis (the gain in Predecessor Company will be substantially offset by the Predecessor Company’s tax attributes, including net operating losses and previously disallowed interest expense). A tax benefit of $ i 10 was recorded for the removal of a valuation allowance for certain foreign jurisdictions. Pursuant to the Plan, the Successor Company is obligated to indemnify the Predecessor Company for any tax related liabilities. The Predecessor Company recorded income tax expense of $ i 201 in the Predecessor period, primarily related to the increase in deferred tax liabilities resulting from fresh start accounting.

The Predecessor Company’s U.S. net operating loss carryforward of $ i 1,053 and certain state net operating loss carryforwards, along with other tax attributes, have been utilized or forfeited as a result of the taxable gain realized upon Emergence. Certain foreign net operating losses and other carryforwards of the Predecessor Company were forfeited upon Emergence.

During the Successor period July 2, 2019 through December 31, 2019, the Company recognized income tax benefit of $ i 10, primarily as a result of losses from certain foreign operations of which the deferred tax asset created is not offset by a valuation allowance. Losses in the United States created a deferred tax asset which was completely offset by an increase to the valuation allowance. The Company recognized a GILTI inclusion of $ i 5, which was fully offset by our net operating loss and further reduced our valuation allowance. As previously discussed above, the Company elected bonus depreciation in 2019.

i Income tax expense detail for the Company for year ended December 31, 2020, the Successor period July 2, 2019 through December 31, 2019, the Predecessor period January 1, 2019 through July 1, 2019 and the year ended December 31, 2018 is as follows:

Successor

Predecessor

Year Ended December 31, 2018

Current:

Federal

( i 14)

( i 1)

i 36

( i 4)

State and local

i —

i 4

i 13

i 1

Foreign

i 22

i 1

i 11

i 25

Total current

i 8

i 4

i 60

i 22

Deferred:

Federal

i 3

i 9

( i 2)

i 1

State and local

( i 1)

i 1

i —

Foreign

i 4

( i 24)

i 143

i 8

Total deferred

i 6

( i 14)

i 141

i 9

Income tax expense (benefit) (1)

i 14

( i 10)

i 201

i 31

(1)Excludes income tax expense of $ i 1, $ i 1, $ i 21, and $ i 9 for the year ended December 31, 2020, the Successor period July 2, 2019 through December 31, 2019, the Predecessor period January 1, 2019 through July 1, 2019, and the year ended December 31, 2018, respectively, related to the Held for Sale Business.

i A reconciliation of the Company’s combined differences between income taxes computed at the federal statutory tax rate of i i i i 21 / / / % and the provisions for income taxes for the year ended December 31, 2020, the Successor period July 2, 2019 through December 31, 2019, the Predecessor period January 1, 2019 through July 1, 2019 and the year ended December 31, 2018: /

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Successor

Predecessor

Year Ended December 31, 2018

Income tax (benefit) expense computed at federal statutory tax rate

( i 31)

( i 21)

i 622

( i 35)

State tax (benefit) expense, net of federal benefit

( i 5)

( i 2)

i 9

i 1

Foreign tax rate expense differential

i 1

i 2

i 33

i 13

Foreign source income subject to U.S. taxation

i —

i 3

i 1

i 2

Non-deductible losses and other expenses

i —

i 5

i 9

Increase (decrease) in the taxes due to changes in valuation allowance

i 46

i 17

( i 433)

i 25

Additional (benefit) expense on foreign unrepatriated earnings

( i 3)

i —

i 1

Additional (benefit) expense for uncertain tax positions

( i 4)

i —

i 44

i 15

Tax recognized in other comprehensive income

i —

( i 1)

( i 4)

i —

Changes in enacted tax laws and tax rates

i 6

i —

Tax benefit for fresh start accounting and reorganization adjustments

i —

( i 68)

i —

Other decrease (increase) of deferred tax assets

i 4

( i 8)

i —

Income tax expense (benefit)(1)

i 14

( i 10)

i 201

i 31

The domestic and foreign components of the Company’s loss before income taxes for year ended December 31, 2020, the Successor period July 2, 2019 through December 31, 2019, the Predecessor period January 1, 2019 through July 1, 2019 and the year ended December 31, 2018:

Successor

Predecessor

Year Ended December 31, 2018

Domestic

( i 138)

( i 46)

i 2,754

( i 216)

Foreign

( i 11)

( i 58)

i 206

i 52

Total(1)

( i 149)

( i 104)

i 2,960

( i 164)

(1)Excludes (loss) income before income taxes of $( i 70), $ i 5, $ i 155, and $ i 38 for the year ended December 31, 2020, the Successor period July 2, 2019 through December 31, 2019, the Predecessor period January 1, 2019 through July 1, 2019 and the year ended December 31, 2018, respectively, related to the Held for Sale Business.

i The tax effects of significant temporary differences, net operating losses, interest expense limitation, and credit carryforwards, which comprise the Company’s deferred tax assets and liabilities at December 31, 2020 and 2019 are as follows:


	December 31, 2020		December 31, 2019
Assets:
Non-pension post-employment	$	i 4	$	i 4
Accrued and other expenses	i 61		i 97
Property, plant and equipment	i —		i 4
Loss, expense, and credit carryforwards	i 240		i 163
Intangible assets	i 11		i —
Pension and postretirement benefit liabilities	i 47		i 14
Gross deferred tax assets	i 363		i 282
Valuation allowance	( i 217)		( i 122)
Net deferred tax asset	i 146		i 160
Liabilities:
Property, plant and equipment	( i 227)		( i 228)

Unrepatriated earnings of foreign subsidiaries	( i 7)		( i 10)
Intangible assets	( i 66)		( i 65)
Gross deferred tax liabilities	( i 300)		( i 303)
Net deferred tax liability(1)	$	( i 154)	$	( i 143)

(1)Excludes net deferred tax liability of $ i 20 and $ i 15 for the years ended December 31, 2020 and 2019, respectively, related to the Held for Sale Business.

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The following table summarizes the presentation of the Company’s net deferred tax liability in the Consolidated Balance Sheets at December 31, 2020 and 2019:


	December 31, 2020		December 31, 2019
Assets:
Long-term deferred income taxes	$	i 7	$	i 6
Liabilities:

Long-term deferred income taxes	( i 161)		( i 149)
Net deferred tax liability(1)	$	( i 154)	$	( i 143)

(1)Excludes net deferred tax liability of $ i 20 and $ i 15 for the years ended December 31, 2020 and 2019 respectively, related to the Held for Sale Business.

Hexion Holdings, and its direct subsidiary Hexion Intermediate Holding 1, Inc. and its direct subsidiary Hexion Intermediate Holding 2, Inc. (the “Eligible Subsidiaries”) are not members of the registrant. Hexion Holdings and its Eligible Subsidiaries file a consolidated U.S. Federal income tax return. Therefore, the Company can utilize Hexion Holdings and its Eligible Subsidiaries’ tax attributes or vice versa.

As of December 31, 2020, the Company had a $ i 217 valuation allowance against its net deferred tax assets that management believes, more likely than not, will not be realized. The Company’s deferred tax assets include federal, state and foreign net operating loss carryforwards as well as an interest expense carryforward. The federal net operating loss carryforwards available are $ i 636, which excludes the cumulative income from Hexion Holdings and its Eligible Subsidiaries, as described above. The federal net operating loss will be carried forward indefinitely, but beginning in 2021, will be subject to an 80% limitation on U.S. taxable income. A valuation allowance has been recorded against these loss carryforwards. The Company has provided a valuation allowance against its state deferred tax assets, primarily related to state net operating loss carryforwards of $ i 19. A valuation allowance of $ i 97 has been recorded against a portion of foreign net operating loss carryforwards, primarily in the Netherlands.

The Company continues to not assert indefinite reinvestment of undistributed earnings of its foreign subsidiaries outside of the United States. Accordingly, a related deferred tax liability of $ i 7 is recorded.

i The following table summarizes the changes in the valuation allowance for the year ended December 31, 2020, and the Successor period July 2, 2019 through December 31, 2019, the Predecessor period January 1, 2019 through July 1, 2019 and the year ended December 31, 2018:

Balance at
Beginning
of Period

Changes in
Related Gross
Deferred Tax
Assets/Liabilities

Charge / (Release)

Balance at
End of
Period

Valuation allowance on Deferred tax assets:

Predecessor

Year ended December 31, 2018

i 498

i —

i 27

i 525

i 525

i —

( i 427)

i 98

Successor

i 98

i —

i 24

i 122

Year ended December 31, 2020(1)

i 122

i 41

i 54

i 217

(1)The changes in related gross deferred tax assets/liabilities is related to the application of discontinued operations accounting to asset sale entities for tax purposes.

Examination of Tax Returns

The Company conducts business globally and, as a result, certain of its subsidiaries file income tax returns in the U.S. federal jurisdiction and various state and foreign jurisdictions. In the normal course of business, the Company is subject to examinations by taxing authorities throughout the world, including major jurisdictions such as the United States, Brazil, Canada, China, Germany, Italy, Netherlands and the United Kingdom.

With minor exceptions, the Company’s closed tax years for major jurisdictions are years prior to: 2016 for United States, 2013 for Brazil, 2010 for Canada, 2015 for China, 2016 for Germany, 2016 for Italy, 2010 for Netherlands and 2017 for the United Kingdom.

The Company continuously reviews issues that are raised from ongoing examinations and open tax years to evaluate the adequacy of its liabilities. As the various taxing authorities continue with their audit/examination process, the Company will adjust its reserves accordingly to reflect the current status and settlements.

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Unrecognized Tax Benefits

i A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:

Successor

Predecessor

Year Ended December 31, 2020

Balance at beginning of period

i 130

i 133

i 94

Additions based on tax positions related to the current year

i 4

i 2

i 41

Additions for tax positions of prior years

i 14

i —

i 5

Reductions for tax positions of prior years

( i 20)

( i 3)

( i 6)

Settlements

( i 1)

( i 4)

i —

Foreign currency translation

i 2

( i 1)

Balance at end of period(1)

i 129

i 130

i 133

(1)Includes unrecognized tax benefits of $ i 6, $ i 5, and $ i 11 for the year ended December 31, 2020, the Successor period July 2, 2019 through December 31, 2019 and the Predecessor period January 1, 2019 through July 1, 2019 associated with the Held for Sale business.

During the year ended December 31, 2020 and the Successor period July 2, 2019 through December 31, 2019, the Company decreased the amount of its unrecognized tax benefits, including its accrual for interest and penalties, by $ i 10 and $ i 1, respectively, primarily as a result of decreases in the unrecognized tax benefit from negotiations with foreign jurisdictions, lapses of statute of limitations and settlements, offset by increases of unrecognized tax benefits for various intercompany transactions. During the year ended December 31, 2020, the Successor period July 2, 2019 through December 31, 2019, the Predecessor period January 1, 2019 through July 1, 2019 and the year ended December 31, 2018, the Company recognized approximately $ i 9, $ i 2, $ i 3 and $ i 3, respectively, in interest and penalties. The Company had approximately $ i 56, $ i 56, and $ i 54 accrued for the payment of interest and penalties at December 31, 2020 and 2019, and July 1, 2019, respectively.

$ i 129 of unrecognized tax benefits, if recognized, would affect the effective tax rate; however, a portion of the unrecognized tax benefit would be in the form of a net operating loss carryforward, which would be subject to a full valuation allowance. The Company anticipates recognizing less than $ i 15 of the total amount of unrecognized tax benefits within the next 12 months as a result of lapses of statute of limitations, negotiations with foreign jurisdictions, settlements, and completion of audit examinations.

18. i Dispositions

ATG

On January 8, 2018, the Company completed the sale of its Additives Technology Group business (“ATG”) to MÜNZING CHEMIE GmbH. ATG was previously included within the Company’s Forest Products Resins segment and includes manufacturing sites located in Somersby, Australia and Sungai Petani, Malaysia. The ATG business produced a range of specialty chemical materials for the engineered wood, paper impregnation and laminating industries, including catalysts, release agents and wetting agents.

The Company received gross cash consideration for the ATG business in the amount of $ i 49, which was used for general corporate purposes. The Company recorded a gain on this disposition of $ i 44 which is included in “Gain on dispositions” in the Predecessor Company’s Consolidated Statements of Operations for the year ended December 31, 2018.

19. i Summarized Financial Information of Unconsolidated Affiliates

i Summarized financial information of the Company’s unconsolidated affiliates, which are listed below, as of December 31, 2020 and 2019 and for the years ended December 31, 2020, and 2019 is as follows:

•Momentive UV Coatings (Shanghai) Co., Ltd

•Hexion Australia Pty Ltd

•MicroBlend Columbia S.A.S.

Excluded from the table below is the summarized financial information for the Russia JV since it is part of the Held for Sale Business (See Note 4).


	December 31, 2020		December 31, 2019
Current assets	$	i 38	$	i 32
Non-current assets	i 7		i 6
Current liabilities	i 20		i 10
Non-current liabilities	i —		i —

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Successor

Predecessor

Year Ended December 31, 2018

Net sales

i 59

i 33

i 39

i 88

Gross profit

i 16

i 8

i 9

i 22

Pre-tax income

i 8

i 3

i 4

i 13

Net income

i 6

i 2

i 3

i 9

20. i Segment and Geographic Information

Realignment of Reportable Segments in 2020

As part of the Company’s continuing efforts to drive growth and greater operating efficiencies, in January 2020, the Company changed its reporting segments to align around its two growth platforms: (i) Adhesives and (ii) Coatings and Composites. At December 31, 2020, the Company’s continuing operations has three reportable segments which consist of the following businesses:

•Coatings and Composites: these businesses focus on the global coatings and composites market. They include the Company’s base and specialty epoxy resins and Versatic™ Acids and Derivatives businesses.

•Corporate and Other: primarily corporate general and administrative expenses that are not allocated to the other segments, such as

shared service and administrative functions and foreign exchange gains and losses.

The Company has recast its Net Sales and Segment EBITDA (as defined below) for the Successor period July 2, 2019 through December 31, 2019 and for the Predecessor periods July 1, 2019 and January 1, 2019 through July 1, 2019 to reflect the new reportable segments.

Reportable Segments

Following are net sales, Segment EBITDA and other financial information from continuing operations by reportable segment. Segment EBITDA is defined as EBITDA (earnings before interest, income taxes, depreciation and amortization) adjusted for certain non-cash items and other income and expenses. Segment EBITDA is the primary performance measure used by the Company’s senior management, the chief operating decision-maker and the board of directors to evaluate operating results and allocate capital resources among segments. Segment EBITDA is also the profitability measure used to set management and executive incentive compensation goals. Corporate and Other is primarily corporate general and administrative expenses that are not allocated to the other segments, such as shared service and administrative functions and foreign exchange gains and losses not allocated to continuing segments.

Net Sales(1):

Following is continuing operations revenue by reportable segment. Product sales within each reportable segment share economically similar risks. These risks include general economic and industrial conditions, competitive pricing pressures and the Company’s ability to pass on fluctuations in raw material prices to its customers. A substantial number of the Company’s raw material inputs are petroleum-based and their prices fluctuate with the price of oil. Due to differing regional industrial and economic conditions, the geographic distribution of revenue may impact the amount, timing and uncertainty of revenue and cash flows from contracts with customers.

Successor

Predecessor

Year Ended December 31, 2018

Adhesives

i 1,188

i 693

i 761

i 1,641

Coatings and Composites

i 1,322

i 630

i 720

i 1,496

Total

i 2,510

i 1,323

i 1,481

i 3,137

(1) Intersegment sales are not significant and, as such, are eliminated within the selling segment.

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Segment EBITDA:

Successor

Predecessor

Year Ended December 31, 2018

Adhesives(1)

i 214

i 116

i 135

i 252

Coatings and Composites(2)

i 151

i 60

i 96

i 200

Corporate and Other

( i 71)

( i 37)

( i 30)

( i 71)

Total

i 294

i 139

i 201

i 381

(1) Included in Adhesives Segment EBITDA are “Earnings from unconsolidated entities, net of taxes” of less than $ i i i 1 / / for the year ended December 31, 2020, the Successor period July 2, 2019 through December 31, 2019 and the Predecessor Period January 1, 2019 through July 1, 2019 and $ i 1 for the Predecessor year ended December 31, 2018.

(2) Included in Coatings and Composites Segment EBITDA are “Earnings from unconsolidated entities, net of taxes” of $ i 2, $ i 2, $ i 1 and $ i 3 for the year ended December 31, 2020, the Successor period July 2, 2019 through December 31, 2019, the Predecessor period January 1, 2019 through July 1, 2019 and the year ended December 31, 2018, respectively.

Depreciation and Amortization Expense:

Successor

Predecessor

Year Ended December 31, 2018

Adhesives (1)

i 97

i 47

i 21

i 50

Coatings and Composites

i 90

i 44

i 20

i 44

Corporate and Other

i 4

i 2

i 4

Total

i 191

i 93

i 43

i 98

(1) Includes accelerated depreciation of $ i 2 and $ i 4 for the years ended December 31, 2020 and 2018. There was no accelerated depreciation in either the Successor period July 2, 2019 through December 31, 2019 or in the Predecessor period January 1, 2019 through July 1, 2019.

Total Assets(1):


	December 31, 2020		December 31, 2019
Adhesives	$	i 2,202	$	i 2,374
Coatings and Composites	i 1,404		i 1,371
Corporate and Other	i 396		i 401
Total	$	i 4,002	$	i 4,146

(1)Includes assets held for sale at December 31, 2020 and 2019.

Capital Expenditures(1):

Successor

Predecessor

Year Ended December 31, 2018

Adhesives

i 62

i 21

i 18

i 35

Coatings and Composites

i 43

i 22

i 43

Corporate and Other

i 3

i 4

i 1

i 3

Total

i 108

i 47

i 41

i 81

(1) Includes capitalized interest costs that are incurred during the construction of property and equipment.

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Geographic Information

Net Sales(1):

Successor

Predecessor

Year Ended December 31, 2018

United States

i 1,142

i 617

i 693

i 1,449

Netherlands

i 523

i 240

i 308

i 652

Canada

i 278

i 153

i 154

i 362

China

i 259

i 121

i 229

Brazil

i 123

i 83

i 91

i 194

Other international

i 185

i 109

i 114

i 251

Total

i 2,510

i 1,323

i 1,481

i 3,137

(1) Sales are attributed to the country in which the individual business locations reside.

/ i

Following is net sales by reportable segment disaggregated by geographic region(1):

Successor

Adhesives

Coatings and Composites

Total

Adhesives

Coatings and Composites

Total

North America

i 910

i 510

i 1,420

i 517

i 255

i 772

Europe

i 20

i 521

i 541

i 12

i 236

i 248

Asia Pacific

i 124

i 291

i 415

i 69

i 139

i 208

Latin America

i 134

i —

i 134

i 95

i —

i 95

Total

i 1,188

i 1,322

i 2,510

i 693

i 630

i 1,323

Predecessor

Year Ended December 31, 2018

Adhesives

Coatings and Composites

Total

Adhesives

Coatings and Composites

Total

North America

i 562

i 286

i 848

i 1,215

i 596

i 1,811

Europe

i 15

i 305

i 320

i 37

i 644

i 681

Asia Pacific

i 81

i 129

i 210

i 170

i 254

i 424

Latin America

i 103

i —

i 103

i 219

i 2

i 221

Total

i 761

i 720

i 1,481

i 1,641

i 1,496

i 3,137

(1) Intersegment sales are not significant and, as such, are eliminated within the selling segment.

Long-Lived Assets(1):


	December 31, 2020		December 31, 2019
United States	$	i 1,520	$	i 1,605
Netherlands	i 556		i 526
Brazil	i 79		i 105
Canada	i 113		i 116
Other international	i 234		i 218
Total	$	i 2,502	$	i 2,570

(1)Long-lived assets consist of property, plant and equipment, net; goodwill; and other intangible assets, net.

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Reconciliation of Net Loss to Segment EBITDA:

Successor

Predecessor

Year Ended December 31, 2020

Year Ended December 31, 2018

Reconciliation:

Net (loss) income attributable to Hexion Inc.

( i 230)

( i 89)

i 2,894

( i 162)

Add: Net income (loss) attributable to noncontrolling interest

i —

i 1

( i 1)

Less: Net (loss) income from discontinued operations

( i 69)

i 4

i 135

i 28

Net (loss) income from continued operations

( i 161)

( i 92)

i 2,760

( i 191)

Income tax expense (benefit)

i 14

( i 10)

i 201

i 31

Interest expense, net

i 100

i 55

i 89

i 365

Depreciation and amortization (1)

i 191

i 93

i 43

i 98

EBITDA

i 144

i 46

i 3,093

i 303

Adjustments to arrive at Segment EBITDA:

Asset impairments and write-downs

i 16

i —

i 32

Business realignment costs (2)

i 69

i 22

i 14

i 27

Realized and unrealized foreign currency losses (gains)

i —

i 4

( i 7)

i 28

Gain on dispositions

i —

( i 44)

Unrealized losses (gains) on pension and OPEB plan liabilities

i 4

i 5

i —

( i 13)

Transaction costs (3)

i 6

i 11

i 26

i 13

Reorganization items, net (4)

i —

( i 2,943)

i —

Non-cash impact of inventory step-up(5)

i —

i 27

( i 27)

i —

Accelerated deferred revenue (6)

i —

i 18

i —

Other non-cash items (7)

i 43

i 10

i 9

i 14

Other (8)

i 12

i 14

i 18

i 21

Total adjustments

i 150

i 93

( i 2,892)

i 78

Segment EBITDA

i 294

i 139

i 201

i 381

Segment EBITDA:

Adhesives

i 214

i 116

i 135

i 252

Coatings and Composites

i 151

i 60

i 96

i 200

Corporate and Other

( i 71)

( i 37)

( i 30)

( i 71)

Total

i 294

i 139

i 201

i 381

(1)For the year ended December 31, 2020 and 2018 accelerated depreciation of $ i 2 and $ i 4 has been included in “Depreciation and amortization.” There was no accelerated deprecation in either the Successor year ended December 31, 2019 or in the Predecessor period January 1, 2019 through July 1, 2019.

(2)Business realignment costs for the Successor and Predecessor periods below included:

Successor

Predecessor

Year Ended December 31, 2020

Year Ended December 31, 2018

Severance costs

i 16

i 9

i 8

i 9

In-process facility rationalizations

i 11

i 5

i 3

i 11

Contractual costs from exited business

i 8

i —

Business services implementation

i 22

i —

Legacy environmental reserves

i 9

i 7

i 1

i 5

Other

i 3

i 1

i 2

(a) The Company had $8 of severance liabilities accrued within “Other current liabilities” on the Consolidated Balance Sheets at both December 31, 2020 and 2019. The Company expects the amounts associated with these severance liabilities to be paid over the next 12 months.

(3)For the year ended December 31, 2020, transaction costs included certain professional fees related to strategic projects. For the Successor period from July 2, 2019 through December 31, 2019 and the Predecessor period from January 1, 2019 through July 1, 2019, transaction costs primarily included $ i 6 and $ i 23, respectively, of certain professional fees and other expenses related to the Company’s Chapter 11 proceedings.

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(5)Represents $27 of non-cash expense related to the step up of finished goods inventory on July 1 as part of fresh start accounting that was expensed

in the successor period upon the sale of the inventory.

(6)For the Predecessor period from January 1, 2019 through July 1, 2019, $ i 18 of deferred revenue was accelerated on July 1 as part of Fresh Start accounting.

(7)Other non-cash items for the Successor and Predecessor periods presented below included:

Successor

Predecessor

Year Ended December 31, 2020

Year Ended December 31, 2018

Fixed asset write-offs

i 13

i 6

i 3

i 6

Stock-based compensation costs

i 17

i 8

i —

Long-term retention programs

i 9

( i 2)

i 5

i 8

One-time capitalized variance impact of inventory fresh start step-up

i —

( i 4)

i —

Other

i 4

i 2

i 1

i —

(8)Other for Successor and Predecessor periods presented below included:

Successor

Predecessor

Year Ended December 31, 2020

Year Ended December 31, 2018

Legacy and other non-recurring items

i 8

i 7

i 3

i 7

IT outage (recoveries) costs, net

( i 4)

i —

i 9

i —

Financing fees and other

i 8

i 7

i 6

i 14

21. i Changes in Accumulated Other Comprehensive Loss

Following is a summary of changes in “Accumulated other comprehensive loss” for December 31, 2020, the Successor period July 2, 2019 through December 31, 2019, the Predecessor period of January 1, 2019 through July 1, 2019 and the year ended December 31, 2018:

Defined Benefit Pension and Postretirement Plans

Foreign Currency Translation Adjustments

Cash Flow Hedge

Total

Predecessor

Balance at December 31, 2018

( i 1)

( i 17)

i —

( i 18)

Change in value

i —

( i 8)

i —

( i 8)

Elimination of Predecessor Company accumulated other comprehensive loss

i 1

i 25

i —

i 26

Balance at July 1, 2019

i —

Successor

Balance at July 2, 2019

i —

Change in value

i —

( i 3)

i 2

( i 1)

Balance at December 31, 2019

i —

( i 3)

i 2

( i 1)

Change in value

i —

( i 8)

( i 18)

( i 26)

Balance at December 31, 2020

i —

( i 11)

( i 16)

( i 27)

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22. i Selected Unaudited Quarterly Financial Data

Condensed Consolidated Statements of Operations

Successor

Three Months Ended December 31, 2020

Three Months Ended September 30, 2020

(as revised) (1)

Three Months Ended June 30, 2020

Three Months Ended March 31, 2020

Net sales

i 655

i 634

i 534

i 687

Operating (loss) income

( i 10)

i 8

( i 28)

( i 34)

Net (loss) income from continuing operations, net of taxes

( i 37)

( i 26)

( i 36)

( i 62)

Net income (loss) from discontinued operations, net of taxes

i 2

( i 68)

( i 6)

i 3

Net loss

( i 35)

( i 94)

( i 42)

( i 59)

(1) “Net income (loss) from discontinued operations” and “Net loss” for the three months ended September 30, 2020 includes a revision of approximately $ i 8 of income to correct an overstatement of expense in previously issued interim financial statements. See below for additional information.

Successor

Predecessor

Three Months Ended December 31, 2019

July 2, 2019 through September 30, 2019

July 1, 2019(1)

Three Months Ended June 30, 2019(2)

Three Months Ended March 31, 2019

Net sales

i 630

i 693

i —

i 750

i 731

Operating (loss) income

( i 30)

( i 18)

i —

i 40

i 27

Net (loss) income from continuing operations, net of taxes

( i 48)

( i 44)

i 2,935

( i 118)

( i 57)

Net income from discontinued operations, net of taxes

i 3

i 1

i 119

i 10

i 6

Net (loss) income

( i 45)

( i 43)

i 3,054

( i 108)

( i 51)

Net income attributable to noncontrolling interest

( i 1)

i —

( i 1)

Net (loss) income attributable to Hexion Inc.

( i 46)

( i 43)

i 3,054

( i 108)

( i 52)

(1) During the Emergence on July 1, 2019, the Predecessor recognized $ i 3,126 of reorganization adjustments, which relate to gains on the settlement of liabilities under the Plan, offset by the incremental costs incurred directly as a result of the Bankruptcy Petitions and the net impact of fresh start accounting adjustments, are classified as “Reorganization items, net” in the Consolidated Statements of Operations (see Note 6 and Note 7 for more information).

(2) During the three months ended June 30, 2019, the Predecessor recognized $ i 156 of incremental costs directly as a result of Bankruptcy Petitions. These costs are classified as “Reorganization items, net” in the Consolidated Statements of Operations (see Note 6 and Note 7 for more information).

In the fourth quarter 2020, we identified certain errors within our condensed consolidated financial statements for the three and nine months ended September 30, 2020:

–Approximately $ i 13 associated with an insurance premium financing arrangement was incorrectly disclosed as a non-cash financing activity but should have been classified as an operating cash outflow from continuing operations and financing cash inflow;

–“Net cash used in operating activities from continuing operations” was overstated by approximately $ i 13 and “Net cash (used in) provided by operating activities from discontinued operations” was understated by approximately $ i 13 due to activity within “Other assets, current and non-current” being incorrectly classified; and

–The impairment charge recognized with respect to our Held for Sale Business was overstated by approximately $ i 8 which also resulted in an understatement of the Assets Held for Sale as of September 30, 2020.

Based upon quantitative and qualitative assessments, we have determined that these adjustments were not material to the previously issued interim financial statements. The impacts to the previously issued interim financial statements will be revised in our Form 10-Q filing for the quarterly period ended September 30, 2021 and are shown in the tables below.

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Condensed Consolidated Statement of Cash Flows (Nine Months Ended September 30, 2020) (unaudited)

Line Item

As Previously Reported

Adjustments

As Revised

Net (loss) income

( i 203)

i 8

( i 195)

(Loss) income from discontinued operations, net of taxes

( i 79)

i 8

( i 71)

Other assets, current and non-current

( i 1)

( i 26)

( i 27)

Net cash (used in) provided by operating activities from continuing operations

( i 11)

( i 26)

( i 37)

Net cash (used in) provided by operating activities from discontinued operations

( i 1)

i 13

i 12

Net cash (used in) provided by operating activities

( i 12)

( i 13)

( i 25)

Net short-term debt repayments

( i 25)

i 13

( i 12)

Net cash provided by (used in) financing activities

i 7

i 13

i 20

Condensed Consolidated Statement of Operations (Three Months Ended September 30, 2020) (unaudited)

Line Item

As Previously Reported

Adjustment (1)

As Revised

(Loss) income from discontinued operations, net of taxes

( i 76)

i 8

( i 68)

Net (loss) income

( i 102)

i 8

( i 94)

Net (loss) income attributable to Hexion Inc.

( i 102)

i 8

( i 94)

Condensed Consolidated Statement of Operations (Nine Months Ended September 30, 2020) (unaudited)

Line Item

As Previously Reported

Adjustment (1)

As Revised

(Loss) income from discontinued operations, net of taxes

( i 79)

i 8

( i 71)

Net (loss) income

( i 203)

i 8

( i 195)

Net (loss) income attributable to Hexion Inc.

( i 203)

i 8

( i 195)

(1) The $ i i 8 / adjustment summarized above impacts the “Asset impairments” caption within the financial results table in the Discontinued Operations footnote. The adjustment also impacts “Comprehensive loss” and “Accumulated deficit.”

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Report of Independent Registered Public Accounting Firm

To the Board of Directors and Shareholder of Hexion Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Hexion Inc. and its subsidiaries (Successor) (the “Company”) as of December 31, 2020 and 2019, and the related consolidated statements of operations, of comprehensive (loss) income, of equity (deficit) and of cash flows for the year ended December 31, 2020 and for the period from July 2, 2019 through December 31, 2019, including the related notes and schedule of valuation and qualifying accounts for the year ended December 31, 2020 and for the period from July 2, 2019 through December 31, 2019 listed in the index appearing under Item 8 (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2020 and 2019, and the results of its operations and its cash flows for the year ended December 31, 2020 and for the period from July 2, 2019 through December 31, 2019 in conformity with accounting principles generally accepted in the United States of America.

Basis of Accounting

As discussed in Note 5 to the consolidated financial statements, the United States Bankruptcy Court for the district of Delaware confirmed the Company's Second Amended Joint Chapter 11 Plan of Reorganization of Hexion Holdings LLC and its Debtor Affiliates under Chapter 11 (the "plan") on June 25, 2019. Confirmation of the plan resulted in the discharge of all claims against the Company that arose before April 1, 2019 and terminates all rights and interests of equity security holders as provided for in the plan. The plan was substantially consummated on July 1, 2019 and the Company emerged from bankruptcy. In connection with its emergence from bankruptcy, the Company adopted fresh start accounting as of July 1, 2019.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits of these consolidated financial statements in accordance with the standards of the PCAOB and in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Goodwill Impairment Assessments – Forest Products and Versatics Reporting Units

As described in Note 2 to the consolidated financial statements, the Company’s consolidated goodwill balance from continuing operations was $164 million as of December 31, 2020, including $127 million related to the Forest Products (“FPD”) reporting unit and $36 million related to the Versatics reporting unit. Management tests goodwill annually for impairment of value or more frequently when potential impairment triggering events are present. Goodwill is tested for impairment by comparing the estimated fair value of a reporting unit to its carrying value. Management uses a weighted market and income approach to estimate the fair value of its reporting units. Management’s market approach is based on the EBITDA (earnings before interest, income taxes, depreciation and amortization) multiple technique. Management’s income approach is based on a discounted cash flow model. The key assumptions and estimates utilized in the market and income approaches primarily include market multiples, discount rates, and future levels of revenue growth and operating margins.

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The principal considerations for our determination that performing procedures relating to the goodwill impairment assessments of the FPD and Versatics reporting units is a critical audit matter are (i) the significant judgment by management when determining the fair value estimates of the reporting units; (ii) the high degree of auditor judgment, subjectivity and effort in performing procedures and evaluating the significant assumptions used in management’s fair value estimates related to market multiples, discount rates, and future levels of revenue growth and operating margins; and (iii) the audit effort involved in the use of professionals with specialized skill and knowledge.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included, among others, (i) testing management’s process for determining the fair value estimates of the FPD and Versatics reporting units; (ii) evaluating the appropriateness of the weighted market and income approaches; (iii) testing the completeness and accuracy of the underlying data used in the market and income approaches; and (iv) evaluating the reasonableness of the significant assumptions used by management related to market multiples, discount rates, and future levels of revenue growth and operating margins. Evaluating management’s assumptions related to the future levels of revenue growth and operating margins involved evaluating whether the assumptions were reasonable considering (i) current and past performance of the reporting units; (ii) the consistency with external market and industry data; and (iii) whether these assumptions were consistent with evidence obtained in other areas of the audit. Professionals with specialized skill and knowledge were used to assist in evaluating (i) the appropriateness of the weighted market and income approaches and (ii) the reasonableness of significant assumptions related to the market multiples and the discount rates.

/s/ PricewaterhouseCoopers LLP

Columbus, Ohio

Incorporated by Reference

We have served as the Company's auditor since 2005.

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Report of Independent Registered Public Accounting Firm

To the Board of Directors and Shareholder of Hexion Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated statements of operations, of comprehensive (loss) income, of equity (deficit) and of cash flows of Hexion Inc. and its subsidiaries (Predecessor) (the “Company”) for the period from January 1, 2019 through July 1, 2019 and for the year ended December 31, 2018, including the related notes and schedule of valuation and qualifying accounts for the period from January 1, 2019 through July 1, 2019 and for the year ended December 31, 2018 listed in the index appearing under Item 8 (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the results of the Company’s operations and its cash flows for the period from January 1, 2019 through July 1, 2019 and for the year ended December 31, 2018 in conformity with accounting principles generally accepted in the United States of America.

Basis of Accounting

As discussed in Note 5 to the consolidated financial statements, the Company, Hexion Holdings LLC, Hexion LLC and certain of the Company’s subsidiaries filed petitions on April 1, 2019 with the United States Bankruptcy Court for the district of Delaware for reorganization under the provisions of Chapter 11 of the Bankruptcy Code. The Company’s Second Amended Joint Chapter 11 Plan of Reorganization of Hexion Holdings LLC and its Debtor Affiliates under Chapter 11 was substantially consummated on July 1, 2019 and the Company emerged from bankruptcy. In connection with its emergence from bankruptcy, the Company adopted fresh start accounting.

Changes in Accounting Principles

As discussed in Note 2 to the consolidated financial statements, the Company changed the manner in which it accounts for leases in 2019 and the manner in which it accounts for revenues from contracts with customers in 2018.

Basis for Opinion

/s/ PricewaterhouseCoopers LLP

Columbus, Ohio

March 3, 2020, except for the effects of discontinued operations discussed in Note 4 and the change in composition of reportable segments discussed in Note 20 to the consolidated financial statements, as to which the date is March 10, 2021

We have served as the Company's auditor since 2005.

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Schedule II – Valuation and Qualifying Accounts


Description	Balance at Beginning of Period		Additions				Deductions(2)		Balance at End of Period
			Charged to cost and expenses(1)		Charged to other accounts
Allowance for Doubtful Accounts:
Successor
Year Ended December 31, 2020	$	3	$	1	$	—	$	(1)	$	3
Period from July 2, 2019 through December 31, 2019	—		5		—		(2)		3
Predecessor
Period from January 1, 2019 through July 1, 2019	$	16	$	—	$	—	$	(16)	$	—
Year Ended December 31, 2018	19		—		—		(3)		16

(1)Includes the impact of foreign currency translation.

(2)Deductions for the Predecessor period January 1, 2019 through July 1, 2019 include the elimination of the predecessor allowance for doubtful accounts in conjunction with the application of fresh start accounting as described in Note 6 in Item 8 of Part II of this Annual Report on Form 10-K.

ITEM 9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

ITEM 9A - CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

As of the end of the period covered by this Annual Report on Form 10-K, we, under the supervision and with the participation of our Disclosure Committee and our management, including our President and Chief Executive Officer and our Executive Vice President and Chief Financial Officer, carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as such term is defined in Exchange Act Rules 13a-15(e) and 15d-15(e). Based on that evaluation, our President and Chief Executive Officer, and Executive Vice President and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of December 31, 2020.

Management’s Annual Report on Internal Control Over Financial Reporting

We are responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

We have assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2020. In making this assessment, we used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Control - Integrated Framework (2013). Based on our assessment, we have concluded that, as of December 31, 2020, the Company’s internal control over financial reporting was effective based on those criteria.

Changes in Internal Control Over Financial Reporting

During the three months ended December 31, 2020, we continued to transition certain of our information technology, procurement administration, accounting and finance functions to our new third party business services partner. We expect to be fully transitioned in early 2021. No other changes occurred in the Company’s internal control over financial reporting during the Company’s most recent fiscal quarter that materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

ITEM 9B - OTHER INFORMATION

None.

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PART III

ITEM 10 - DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

Directors, Executive Officers, Promoters and Control Persons

The supervision of our management and the general course of the Company’s affairs and business operations is entrusted to the Board of Directors of our indirect parent, Hexion Holdings.

Set forth below are the names, ages and current positions of our executive officers and the members of the Hexion Holdings Board of Directors as of March 1, 2021.

Name

Age

Position

Craig A. Rogerson

Director, Chairman, President and Chief Executive Officer

Director

Director

Director

Director

Director

Director

Director

Director

Executive Vice President and Chief Financial Officer

Douglas A. Johns

Executive Vice President and General Counsel

John P. Auletto

Executive Vice President – Human Resources

Nathan E. Fisher

Executive Vice President – Procurement

Matthew A. Sokol

Executive Vice President - Chief Administrative Officer

Paul G. Barletta

Executive Vice President - Operations

Ann Frederix

Senior Vice President & General Manager, Global Epoxies

Mark Alness

Senior Vice President, Global Resins

Craig A. Rogerson was elected Chairman, President and Chief Executive Officer and a director of the Company effective July 9, 2017 and of Hexion Holdings Corporation in July 2019. He served as Chairman, President and Chief Executive Officer of Chemtura Corporation from December 2008 to April 2017. He was President, Chief Executive Officer and Director of Hercules Incorporated from December 2003 to November 2008. Mr. Rogerson joined Hercules in 1979 and served in a number of management positions, including President of the FiberVisions and Pinova Divisions, Vice President of Global Procurement and Chief Operating Officer. He was President and Chief Executive Officer of Wacker Silicones Corporation from 1997-2000. In May 2000, he rejoined Hercules and became President of its BetzDearborn division in August 2000. Mr. Rogerson is an independent Chair of the board of PPL Corporation and serves on the boards of the American Chemistry Council, the Society of Chemical Industry, and the Pancreatic Cancer Action Network. He also serves on the Alumni board of the Michigan State University College of Engineering and on the Advisory board of the MSU Chemical Engineering & Materials Science College. For Hexion Holdings Corporation, he serves on the Listing Committee.

Patrick J. Bartels is the Managing Member of Redan Advisors LLC, a firm that provides fiduciary services, including board of director representation and strategic planning advisory services for domestic and international public and private business entities. Prior to founding Redan Advisors LLC, Mr. Bartels was a senior investment professional with 20 years of experience. His professional experience includes investing in complex financial restructurings and process-intensive situations in North America, Asia and Europe in a broad universe of industries and he has served as a director on numerous public and private boards of directors. Mr. Bartels currently serves on the board of directors of Arch Resources, Inc. and Monitronics International, Inc. From 2002 to December 2018, Mr. Bartels served as a Managing Principal at Monarch Alternative Capital LP, a private investment firm that focused primarily on event-driven credit opportunities. Prior to Monarch, he served as Research Analyst for high yield investments at INVESCO, where he analyzed primary and secondary debt offerings of companies in various industries. Mr. Bartels began his career at Pricewaterhouse Coopers LLP, where he was a Certified Public Accountant. He holds the Chartered Financial Analyst designation. For Hexion Holdings Corporation, he serves on the Audit, Listing and Nominating & Corporate Governance Committees.

Jeffrey D. Benjamin has been Senior Advisor to Cyrus Capital Partners, L.P. from 2008 to the present. He is currently Chairman of A-Mark Precious Metals, Inc. since 2014, and he has been on the American Airlines Group Inc. board since 2013. He has also been on the board of Rackspace Technology Inc. since 2016. Past Directorships and Committees include Chemtura Corp., Caesar’s Entertainment Corp., Exco Resources, Inc. (Chairman), and Spectrum Group International. Private Directorships consist of ImOn Communications LLC (Chairman), Involta LLC and Shutterfly, Inc. He has executive leadership experience in the investment industry, including UBS Securities LLC and Salomon Brothers Inc. For Hexion Holdings Corporation, he is Lead Director, Chair of the Compensation Committee and serves on the Audit and Listing Committees.

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James N. Chapman is a non-executive Advisory Director of SkyWorks Capital, LLC and serves as a member of the Board of Directors of Arch Resources, Inc. (NYSE: ARCH), California Resources Corporation (NYSE: CRC) and Denbury, Inc. (NYSE: DEN) as well as Eco-Bat Technologies, LLC and Neenah Enterprises, Inc. Previously, he has served on numerous other public and private boards, including AerCap NV, American Media, Inc., Bennu Oil & Gas, LLC, Broadview Networks Inc., Chrysler LLC, CSC ServiceWorks, Inc., Hayes- Lemmerz, Inc., Jack Cooper, Inc., National/Alamo Rental Car, Inc., SSA Global, Inc., Teleglobe, Inc., Tembec, Inc. and Tower International, Inc. Mr. Chapman has also previously worked for Regiment Capital Advisors, LP, The Renco Group, Inc. and was a founding principal of Fieldstone Private Capital Group. Prior to joining Fieldstone, Mr. Chapman worked for Bankers Trust Company. He has been a capital markets and strategic planning consultant with over 35 years of investment banking experience in a wide range of industries including aviation, mining, energy, automotive and general manufacturing. For Hexion Holdings Corporation, he is Chair of the Listing Committee, and serves on the Audit Committee and Compensation Committee.

Joaquín Delgado worked at 3M Company from 1987 until his retirement in July 2019. He most recently served as Executive Vice President since July 2009, having operating responsibility for three Business Groups consecutively: Electro-Communications Business Group, Health Care Business Group and Consumer Business Group. He has been on the Board of Directors of Stepan Company from 2011 to present, serving on all Committees. He also serves on the Ballet Austin Board of Directors and also on the Executive Committee. In addition, Dr. Delgado serves as a member of Board of Trustees of Goldman Sachs Trust and Goldman Sachs Variable Insurance Trust. Dr. Delgado has a PhD in polymer science and engineering from Lehigh University. For Hexion Holdings Corporation, he serves on the Environmental Health & Safety Committee and on the Nominating & Corporate Governance Committee.

Carol S. Eicher is a Director, Chair of the Governance Committee and member of the Compensation Committee of Tennant Co. and a Director, Chair of the Governance Committee and member of the Audit Committee of Advanced Emissions Solutions, Inc. She is also a Director and member of the Governance Committee of Arconic Corp. Previously, she was a Director of A. Schulman Co. and President, CEO and Director of Innocor, Inc. She also held senior management positions with Dow Chemical Co., Rohm and Haas Co., Ashland, Inc. and E.I. DuPont de Nemours and Co. She has been in the chemical industry since 1979 and has extensive experience with operating leadership positions in the industry. For Hexion Holdings Corporation, she is Chair of the Nominating & Corporate Governance Committee and serves on the Environmental Health & Safety Committee.

Michael J. Shannon is a board member of Quaker Houghton (KWR), serving on the Audit Committee since Aug 2019 and the Sustainability Committee since 2020. Mr. Shannon is the former Chief Executive Officer and a board member of Houghton International Inc. and served in these roles since his appointment in December 2015. Immediately prior to this appointment, Mr. Shannon served as Chief Operating Officer responsible for all global commercial and operational activities. Previously, Mr. Shannon spent 24 years at Ashland Inc. as a Corporate Officer and President of Global Supply Chain and Senior VP of the Performance Materials Group. He has also served on the board of Reichhold, Inc. Mr. Shannon has a BS in Chemical Engineering from the University of Pennsylvania and an MBA from Temple University. For Hexion Holdings Corporation, he is Chair of the Environmental Health & Safety Committee and serves on the Nominating & Corporate Governance Committee.

John K. Wulff serves on the Board of Directors of Celanese Corporation (Chairman, Audit Committee, and as of February 2021, moved from membership on the Nominating and Corporate Governance Committee to the Environmental, Health, Safety Public policy and Quality Committee), and of Atlas Air Worldwide Holdings, Inc. (Member, Audit and Compensation Committees). Mr. Wulff is the former Chairman of the Board of Hercules Inc. and, in the past five years, has served on the boards and committees of Moody's Corp. and of Chemtura Corp. He has also served as a member of the Financial Accounting Standards Board (FASB), CFO of Union Carbide Corp, a partner of KPMG LLP, and officer of other governance and financial organizations. He has substantial chemical industry, strategy and financial expertise. For Hexion Holdings Corporation, he is Chair of the Audit Committee and serves on the Compensation Committee.

Stephen D. Newlin is non-executive Chairman of Oshkosh Corp. and he serves as a director on the Univar Solutions (UNVR) board. He served as Chairman, President and Chief Executive Officer of Univar from 2016-2018 after being elected to the board in 2014. Mr. Newlin previously served as Executive Chairman of the Board of PolyOne Corp. (POL) from 2014-2016, and Chairman, President and CEO of PolyOne from 2006-2014, following 27 years at Nalco and Ecolab (now merged). At Nalco he became President, COO and Vice-Chair, and at Ecolab he was President of Ecolab's Industrial Sector. In addition, he has held previous board positions at Chemours Corporation (CC), The National Association of Manufacturers and others. For Hexion Holdings Corporation, he serves on the Compensation and the Environmental Health & Safety Committees.

George F. Knight was elected Executive Vice President and Chief Financial Officer of the Company effective January 1, 2016. From 2016 to July 2019 he was also a director of Hexion Holdings. He served as Senior Vice President - Finance and Treasurer of the Company from June 1, 2005 to December 31, 2015, having been Vice President, Finance and Treasurer since July 2002. Mr. Knight also served as Senior Vice President-Finance and Treasurer for MPM and Hexion Holdings from October 1, 2010 and November 1, 2010, respectively, until December 31, 2015. Mr. Knight joined the Company in 1997 and served until 1999 as Director and then Vice President of Mergers and Acquisitions - Finance for Borden, Inc. From 1999-2001 he served as Vice President of Finance for Borden Foods Corporation. He began his career at Deloitte & Touche after earning a Master’s Degree in Accounting at Syracuse University.

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Douglas A. Johns joined the Company on May 9, 2015 but had served as Executive Vice President and General Counsel under the Shared Services Agreement with MPM since October 1, 2010. He also serves as Executive Vice President, General Counsel and Secretary of Hexion Holdings. Mr. Johns was employed by Momentive Performance Materials Inc., serving as its General Counsel and Secretary from its formation on December 4, 2006 until October 24, 2014. Prior to that time, Mr. Johns served as General Counsel for GE Advanced Materials, a division of the General Electric Company from 2004 to December 2006. Mr. Johns began his career as a trial lawyer at the U.S. Department of Justice and was in private practice before joining GE in 1991, where he served as Senior Counsel for global regulatory and environmental matters and Senior Business Counsel at GE Plastics’ European headquarters in Bergen Op Zoom, The Netherlands from 2001 to 2004. He graduated with honors from Oberlin College, and holds an MBA from University of Massachusetts, Amherst and a JD from Northeastern University School of Law.

John P. Auletto was elected Executive Vice President - Human Resources effective May 15, 2016. Mr. Auletto joined the Company in September 1999 as Director of Human Resources for the Performance Resins Group. Since then he has held various positions with increasing responsibilities in human resources, including most recently, Vice President- Human Resources for the Epoxy, Phenolic and Coating Resins Division from April 2013 to May 15, 2016. Prior to joining the Company, Mr. Auletto served in human resources roles with Associates National Bank, W.L. Gore & Associates, and The Bank of New York.

Nathan E. Fisher was elected Executive Vice President - Procurement of the Company on June 1, 2005. He served as Executive Vice President - Procurement of Momentive Performance Materials Inc., having been elected to that position on October 1, 2010 and ending on 12/31/2019. Mr. Fisher joined the Company in March 2003 as Director of Strategic Sourcing and was promoted to Vice President - Global Sourcing in September 2004. Previously, Mr. Fisher worked in Procurement Management and Supply Chain at Eastman Chemical and as in industrial engineering at Texas Instruments. He earned a bachelor’s degree in industrial engineering from Tennessee Technological University and a master’s degree in business administration from East Tennessee State University.

Matthew A. Sokol has been Chief Administrative Officer of the Company since February 21, 2019. He joined the Company in November 2017 as Executive Vice President, Business Development and Strategy. Mr. Sokol came from Lanxess Solutions, Inc. (formerly Chemtura Corporation), where he served as Interim Vice President of HR and M&A (NAFTA) for Lanxess. Mr. Sokol joined Chemtura in October 2005 and held a number of senior leadership roles including leading M&A, which ultimately culminated in the sale of the company to Lanxess in April 2017. Previous roles at Chemtura included: Head of Corporate Development & Investor Relations; General Manager, Flame Retardants; and Director, Strategic Corporate Development. While at Chemtura, Mr. Sokol also served as Associate General Counsel, IEP Segment, and Assistant General Counsel. Prior to Chemtura, Mr. Sokol served as senior litigation associate at Tyler, Cooper & Alcon, LLP from September 1999 to October 2005.

Paul G. Barletta was elected Executive Vice President of Operations of the Company as of February 2019. Prior to that, he was Senior Vice President, Environmental Health and Safety and Global Epoxy Manufacturing in 2018. From 2005 to 2018 he held various management roles including Vice President of Global Epoxy Manufacturing. He has been at Hexion since its formation in 2005. His previous experience also includes Site Manager at Resolution Performance Products, Inc. from 2000 to 2005 and its predecessor company, Shell Chemical. He joined Shell in 1980 and has held a variety of roles in manufacturing including Engineering, Production, Maintenance, EHS, Manufacturing Excellence, Quality, and Special Projects. He served on the Louisiana Chemical Association Board of Directors from 2006 to 2019. He holds a BS in Chemical Engineering from Wayne State University.

Ann Frederix has 30 years of experience in the chemical industry. She has been with Hexion from its formation in 2005, and has been Senior Vice President and General Manager, Global Epoxy & Versatics since June 2019. She was Vice President Epoxy Specialties from 2016 to 2019 and was Business Director and Global Marketing Manager from 2009 to 2014. Her previous experience also includes Technology Director Europe at Resolution Performance Products and Manager at Hexion’s predecessor company Shell Chemicals. In her current role, she is responsible for developing and executing strategy for the Business. Dr. Frederix earned a PhD in organic chemistry from Catholic University of Leuven in 1990.

Mark Alness has been Senior Vice President - Global Resins of the Company since July 1, 2019. Throughout his career at Hexion, he has held numerous positions in all segments of the Forest Products business including North America Commercial Director, Global Business Director and Senior Vice President Americas. He joined the Company in June 1978 as a technical service representative in Forest Products Resins. Mr. Alness was hired directly from the University of Minnesota after receiving his Bachelor of Science degree in Forest Product Engineering.

Nominating & Corporate Governance Committee

Hexion’s indirect parent, Hexion Holdings, utilizes a Nominating & Corporate Governance Committee (“NomGov Committee”), which is chaired by Ms. Eicher. The Charter for the NomGov Committee is available to shareholders on the Company’s website, located at http://investors.hexion.com/governance-highlights. The NomGov Committee consists of Messrs. Eichel, Shannon, Delgado and Bartels. For purposes of complying with the disclosure requirements of the SEC, we have adopted the definition of independence used by the New York Stock Exchange, and under that definition each of the foregoing members of the NomGov Committee is considered independent. The NomGov Committee’s process for identifying and evaluating nominees for director involves assessing candidates’ knowledge relevant to the businesses and industries in which the Company operates, as well as their ability to contribute unique and diverse thinking for the benefit of the Board.

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Audit Committee Financial Expert

Since neither Hexion or its indirect parent, Hexion Holdings, are listed issuers, there are no requirements that we have an independent Audit Committee. However, for purposes of complying with the disclosure requirements of the SEC, we have adopted the definition of independence used by the New York Stock Exchange, and under that definition our Audit Committee is considered independent. Hexion Holdings’ Audit Committee consists of Messrs. Bartels, Benjamin, Chapman, and Wulff, each of whom qualifies as an audit committee financial expert, as such term is defined in Item 407(d)(5) of Regulation S-K.

Code of Conduct

We have a Code of Conduct that applies to all associates, including our Chief Executive Officer and senior financial officers. These standards are designed to deter wrongdoing and to promote the honest and ethical conduct of all employees. Our Code of Conduct is posted on our website: www.hexion.com under “Investor Relations – Corporate Governance.” Any substantive amendment to, or waiver from, any provision of the Code of Conduct with respect to any senior executive or financial officer shall be posted on this website.

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ITEM 11 - EXECUTIVE COMPENSATION

COMPENSATION DISCUSSION AND ANALYSIS

In this Compensation Discussion and Analysis, we describe our process for determining the compensation and benefits provided to our “Named Executive Officers” (“NEOs”) and any material compensation and benefits decisions we have made with respect to our NEOs for 2020. Our 2020 NEOs are


Name			Title & Position
Craig A. Rogerson			President & Chief Executive Officer
George F. Knight			Executive Vice President & Chief Financial Officer
Douglas A. Johns			Executive Vice President & General Counsel
Ann Frederix			Senior Vice President and General Manager, Coatings & Composites
Mark I. Alness			Senior Vice President and General Manager, Global Adhesives

Executive Summary

Fiscal 2020 Company Performance

Despite negative COVID-19 economic headwinds in the first half of 2020, Hexion showed consecutive quarter over quarter growth in the second half of 2020 due to recovering economic demand in many key end markets as we recovered from the global pandemic. We also had our highest fourth quarter Segment EBITDA1 from continuing operations in the last seven years. Despite overall softer earnings and the ongoing pandemic in 2020, we were able to generate strong cash flow from operations2 of $116 million and positive free cash flow3 of $8 million in 2020. We exited the year in a strong financial position with significant liquidity of $561 million to support our ongoing business initiatives. In addition to our strong liquidity performance in 2020, we also had strong environmental health & safety (“EH&S”) safety performance for the year.

1 Segment EBITDA is defined as EBITDA (earnings before interest, income taxes, depreciation and amortization) adjusted for certain non-cash items, other income and expenses and discontinued operations. Segment EBITDA is the primary performance measure used by our senior management, the chief operating decision-maker and the board of directors to evaluate operating results and allocate capital resources among segments. For further information, see Note 20 in Part I of this Annual Report on Form 10-K and below for reconciliation of net (loss) income to Segment EBITDA.

2 Cash Flow From Operations is defined as the Cash Flow provided by Operating activities for its continuing operations from the Company’s 2020

10-K Consolidated Statement of Cashflow for the year ended December 31, 2020.

3 Free cash flow is a non-GAAP financial measure and is a liquidity measure used by the Company. Free cash flow is defined by the Company as net cash provided by (used in) operating activities less capital expenditures on property, plant and equipment.

4 Third Quarter 2019 Segment EBITDA results excludes $18 of previously recorded deferred contract revenue that was accelerated as a result of

the application of fresh start accounting in 2019.

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Human Capital Management

At Hexion, We Do the Right Thing. We act ethically and with integrity.

Our commitment to acting ethically is non-negotiable.

•We treat others with respect – regardless of gender, race, age, orientation or background.

•We conduct business with integrity – comply with all anti-trust, anti-bribery, workplace harassment, and conflict-of-interest requirements.

•We engage with each other and remind one another of our commitment to act with integrity.

•We speak up if we witness misconduct or have a compliance concern.

Diversity, Equity and Inclusion

We are focused on accelerating our organization’s commitment to diversity, equity and inclusion worldwide, including developing and implementing a strategy to attract, retain and develop diverse talent and promote an inclusive environment where associates at all levels can perform their best. This is a top priority for us in 2021 and long term. In addition, our Chief Executive Officer (“CEO”) has joined with other company’s CEO’s by signing the “CEO Action for Diversity & Inclusion pledge”. We also recently hired a Director of Diversity, Equity and Inclusion to help implement these goals.

At Hexion, Safety is Our Highest Priority. Our work is never more important than performing it safely.

Enhancing worker safety/well-being sustainability goals

In addition to our future sustainability goals, by 2022, Hexion will offer a voluntary well-being program that addresses associate physical, mental, and financial well-being with the goal of 50% associate participation in the program by 2025. Hexion also re-affirmed its commitment to continue to drive toward zero recordable injuries.

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Oversight of Executive Compensation

The Board of Directors of the Company’s parent holding company, Hexion Holdings Corporation, is responsible for governance of the Company, including the responsibility for determining the compensation and benefits of our executive officers. All executive compensation decisions made during 2020 for our NEOs were made by the Compensation Committee of the Hexion Holdings Corporation Board of Directors (the “Committee”).

The Committee sets the principles and strategies that guide the design of our executive compensation program. The Committee annually evaluates the performance and compensation levels of the NEOs. This annual compensation review process includes an evaluation of key objectives and measurable contributions to ensure that incentives are not only aligned with the Company’s strategic goals, but also enable us to attract and retain a highly qualified and effective management team. Based on this evaluation, the Committee approves each executive officer’s compensation level, including base salary, annual incentive opportunities and long-term incentive opportunities.

In order to obtain a general understanding of current compensation practices when setting total compensation levels for our NEOs, the Committee considers broad-based competitive market data on total compensation packages provided to executive officers with similar responsibilities at comparable companies. Such companies include those within the chemical industry, as well as those with similar revenues and operational complexity outside the chemical industry. As warranted, the Committee may use data obtained from third-party executive compensation salary surveys such as those published by Willis Towers Watson and AonHewitt when determining appropriate total compensation levels for our NEOs. The Committee retained its own executive compensation consultant, Lyons Benenson & Company, Inc., to review and advise the Committee on the Company’s executive compensation program and practices. In 2020, the specific peer companies used by Lyons Benenson & Company, Inc. were the following:


2020 Peer Companies
AdvanSix Inc.	Albemarle Corporation	Ashland Global Holdings, Inc.
Avient Corporation	Celanese Corporation	Eastman Chemical Company
H.B. Fuller Company	Huntsman Corporation	Kraton Corporation
Kronos Worldwide, Inc.	NewMarket Corporation	Olin Corporation
RPM International Inc.	Stepan Company	The Chemours Company

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Executive Summary

Executive Compensation Objectives and Strategy

Our executive compensation program is designed to set compensation and benefits at a level that is appropriate, internally equitable and externally competitive. Specifically, the Committee is guided by the following principles:


Principle			Description
Pay for Performance			We emphasize pay for performance, as measured by achievement of company operational and financial objectives, and the realization of personal goals. We believe that a significant portion of each executive officer’s total compensation should be variable and contingent upon the achievement of specific and measurable financial and operational performance goals.
Align Incentives with Shareholders			Our executive compensation program is designed to focus our NEOs on our key strategic, financial and operational goals that will translate into long-term value-creation for our shareholders.
Balance Critical Short-Term Objectives and Long-Term Strategy			We believe that the compensation packages we provide to our NEOs should include a mix of short-term, cash-based incentive awards that encourage the achievement of annual goals, and long-term cash and equity elements that reward long-term value-creation for the business.
Attract, Retain and Motivate Top Talent			We design our executive compensation program to be externally competitive in order to attract, retain and motivate the most talented executive officers who will drive company objectives.
Pay for Individual Achievement			We believe that each executive officer’s total compensation should correlate to the scope of his or her responsibilities and relative contributions to the Company’s performance.

CEO Total Direct Compensation

The CEO’s target total direct compensation for 2020 is consistent with our pay for performance philosophy and focuses a significant portion on variable compensation that is closely aligned with Company performance. In the chart below, the CEO’s targeted pay mix is compared to the pay mix reflected in actual delivered compensation for 2020. The major difference when comparing target to actual is driven by the annual incentive payout, which was significantly below target based on 2020 performance. Like many other companies in the chemical industry, our revenues were significantly lower in the second quarter due to the worldwide impact of the coronavirus. This reduction in revenues led to EBITDA performance that missed the target we had set for the second quarter. While our EBITDA performance in the third and fourth quarters of 2020 was higher than the prior year, it was not enough to fully offset the impact of the second quarter, and led to a 0% payout on the EBITDA portion under our annual incentive plan.

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2020 Executive Compensation Updates

•Mr. Rogerson, the Company’s CEO, was on a paid medical leave that began March 25, 2020. Mr. Rogerson returned to full-time work on September 14, 2020, although he was working on a part-time basis beginning June 22, 2020. Until Mr. Rogerson returned to full-time work, the Chief Financial Officer, Mr. Knight, served as the Company’s interim Chief Executive Officer.

•The Company continued its focus on (i) motivating our NEOs to deliver improved performance and (ii) retaining key talent during difficult business cycles through the use of the goals set in our annual and long term incentive plans.

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•The Committee reviewed the base salaries of our NEOs in the first quarter of the year. After considering the accomplishments of our NEOs, internal equity dynamics and external market factors, the Committee determined to increase the base salaries of four of our NEOs. We delivered these annual merit base salary increases effective July 2020, consistent with our recent past practice. Details of the increases can be found in the “Components of Our Executive Compensation Program- Base Salary” section below.

•The Company is not currently required to hold a shareholder advisory “say-on-pay” vote.

Evaluating Company and Individual Performance

In determining compensation, the Committee considered both prior year accomplishments as well as the accomplishments of our NEOs in 2020:


Named Executive Officer			2020 Accomplishments
Mr. Rogerson Chairman, President and Chief Executive Officer			•Despite negative COVID-19 economic headwinds in the first half of 2020, led the Company to consecutive quarter over quarter growth in the second half of the year. •Provided key leadership to strategic portfolio optimization efforts during the year. •Led the Company to excellent cash performance for the year despite missing the annual EBITDA goal due to the impact of the global pandemic.
Mr. Knight Executive Vice President and Chief Financial Officer			•Served as interim CEO and successfully drove initiatives forward. •Provided key leadership to the sale of our Phenolic Specialty Resin, Hexamine and European-based Forest Products Resins businesses. •Provided critical support to significant initiatives including the Company’s global Business Services rollout.
Mr. Johns Executive Vice President and General Counsel			•Provide significant legal support to the Company’s sale of our Phenolic Specialty Resin, Hexamine and European-based Forest Products Resins businesses. •Led the Company’s continued compliance training program. •Provides significant counsel and advice on key strategic business initiatives.
Ms. Frederix Senior Vice President and General Manager, Coatings & Composites			•Provided key leadership to the Coatings and Composites segment’s recovery from the impact of the global pandemic. •Delivered solid working capital management. •Strong focus on margin improvement.
Mr. Alness Senior Vice President and General Manager, Global Adhesives			•Established a new product development team and process to deliver on key market opportunities. •Successfully took actions to wind down non-performing business. •Effectively managed operations at a key Latin America site.

Components of Our Executive Compensation Program

The principal components of our executive compensation program are shown in the table below. The following section describes each of these components in further detail.


Type			Components
Annual Cash Compensation			Base Salary
			Annual Cash Incentive Awards
			Discretionary Awards
Long-Term Incentives			Equity Awards
			Long-Term Cash Awards
Benefits			Health and Welfare Benefits
			Retirement Benefits
Other			International Assignment Compensation
			Change-in-Control and Severance Benefits

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1. Annual Cash Compensation

Base Salaries

The base salaries of our NEOs are designed to be commensurate with the position’s overall responsibility, complexity and difficulty, and scope and impact within the organization, as well as the executive’s performance in the role and ability to assume increasing levels of responsibility within Hexion. The annual base salaries of our NEOs are also intended to be internally equitable and externally competitive with the market.

The Committee reviews our NEOs' base salary levels (i) annually, in conjunction with annual performance reviews, or (ii) in connection with promotions or significant changes in job responsibilities. When evaluating base salary increases, the Committee considers various factors, such as job performance, total target compensation, internal equity, impact on value-creation and the external competitive marketplace.

The base salary change for each NEO is shown in the table below. No base salary increase was granted to Mr. Rogerson based on market considerations. The effective date of the salary increases for Messrs. Knight, Johns and Alness was June 29, 2020, and Ms. Frederix’s salary increase was effective July 1, 2020, both consistent with our past practice in delivering annual merit increases.


Name	2019 Base Salary	2020 Base Salary	2020 Increase (Decrease)
Mr. Rogerson Chairman, President and Chief Executive Officer	$1,250,000	$1,250,000	—	%
Mr. Knight Executive Vice President and Chief Financial Officer	$524,579	$540,316	3.00	%
Mr. Johns Executive Vice President and General Counsel	$530,660	$543,927	2.50	%
Ms. Frederix (1) Senior Vice President and General Manager, Coatings & Composites	$401,049	$413,080	3.00	%
Mr. Alness Senior Vice President and General Manager, Global Adhesives	$460,000	$473,800	3.00	%

(1)Ms. Frederix’s local currency salary was converted from Euros to US Dollars based on a 2020 average exchange rate of 1.1389 Euros per US Dollar.

Annual Incentive Awards

Our annual incentive compensation plan (“ICP”) is a short-term performance-based plan designed to reward participants for delivering increased value to the organization relative to specific financial and other critical business objectives that have been approved by the Committee at the beginning of each performance year . Annual incentive compensation awards are targeted at a level that, when combined with base salaries and other components of our total rewards program, is intended to yield total annual cash compensation that is competitive in the external marketplace, while awards for performance that exceeds the established targets are intended to result in total annual cash compensation above the market median.

The performance targets under the ICP are identical for our top executives and other ICP eligible, salaried associates. We strive to set annual incentive award measures and goals that are achievable only through strong performance, believing that this motivates our executives and other participants to deliver ongoing value-creation, while allowing the Company to attract and retain highly talented senior executives. Annual ICP measures and goals are determined in connection with the development of an overall budget for Hexion Holdings Corporation and its subsidiaries. Performance goals may be based on a number of factors, such as our prior-year performance, current market trends, anticipated synergies, integration efforts around acquired assets or businesses, potential pricing actions, raw material projections, the realization of planned productivity initiatives, expansion plans, new product development, environmental, health and safety, and other financial and/or strategic factors that could potentially impact operations.

The 2020 Annual Incentive Compensation Plan

In early 2020, the Committee approved the 2020 ICP for the Company and its subsidiaries, which we refer to as the “2020 ICP.” Under the 2020 ICP, our NEOs and other eligible participants had the opportunity to earn annual cash incentive compensation based upon the achievement of certain financial and environmental health & safety (“EH&S”) goals.

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The Hexion performance goals were established based on the following measures:


Measure	Description	2020 ICP Target
Segment EBITDA	Equals earnings before interest, taxes, depreciation and amortization, adjusted to exclude discontinued operations, certain non-cash and other unusual income and expense items. See Items 7 & 8 of Part II of this Annual Report on Form 10-K for a reconciliation of Hexion Net Income to Segment EBITDA.	Hexion Segment EBITDA (1) ($415.0 million) Coatings & Composites Segment EBITDA ($164.4 million) Global Resins Segment EBITDA ($211.1 million)
Cash Flow from Operations	Encompasses Segment EBITDA, net trading capital improvement and/or usage, capital spending and interest paid along with other operating cash flow items such as income taxes paid and pension contributions. Cash flow from operations excludes restructuring, unusual financing transactions, Business Services implementation costs and any proceeds/costs relative to acquisitions and divestitures.	Hexion Global Cash Flow (Net cash generation of $100 million)
SIFs	Severe or high-potential incidents.	Three (3) incidents
OIIR	Occupational illness and injury rate.	0.53 Which would represent top quartile performance among medium-sized companies in the American Chemistry Council.
ERI	Total environmental incidents	15 incidents A reduction of five (5) incidents or 25% improvement from the prior year.

(1)Reflects EBITDA reported for the overall company (globally), including Corporate costs that are not allocated to the segments.

Each of the 2020 performance goals was measured independently such that a payout for the achievement of one element was not dependent upon the achievement of any other performance measure. This was intended to keep associates focused on driving continuous improvement in EH&S and cash flow, in addition to EBITDA.

Awards under the 2020 ICP were calculated as follows: each participant was designated a target award under the 2020 ICP based on a percentage of his or her base salary, which varies by participant based on the scope of the participant’s responsibilities and externally competitive benchmarks. The target bonus percentages for the NEOs are reflected in the chart below.

Note: For the EBITDA and Cash Flow goals, no payout is earned at the minimum level of achievement. NEOs begin to earn a payout only when achievement exceeds the minimum. See table below for payout percentages for EH&S goals.

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In 2020, for the EBITDA and Cash Flow goals, the Committee established a minimum level of performance at or below which there is no payout for that component. Above the minimum level of performance, each NEO earns a payout calculated on a linear path up to and including the target level of performance (100% payout). Above the target level of performance, each NEO earns a payout calculated on a linear path up to and including the maximum level of performance (200% payout). The Committee established fixed payout percentages for our NEOs for the EH&S goals. The Committee established minimum (30% payout), target (100% payout) and maximum (200% payout) levels of performance for OIIR and ERI. Only target (100% payout) and maximum (200% payout) levels of performance were established for SIFs.


	Minimum	Target	Maximum
Hexion Segment EBITDA (1)	$375.0	$415.0	$450.0
Coatings & Composites Segment EBITDA (1)	$148.6	$164.4	$178.3
Global Resins Segment EBITDA (1)	$190.7	$211.1	$228.9
Hexion Global Cash Flow (1)	$60	$100	$140
Payout percentages applicable to achievement of EBITDA and Cash Flow goals	—	100%	200%
EH&S Goal - SIFs (2)	NA	3	1
EH&S Goal - OIIR	0.65	0.53	0.35
EH&S Goal - ERI	18	15	12
Payout percentages applicable to achievement of EH&S goals	30%	100%	200%

(1)Amounts reflected are in millions.

(2)Reflects number of incidents.

The following table summarizes the target awards, performance measures, weightings, achievements and payouts for the 2020 ICP awards granted to our NEOs. The 2020 ICP award amounts are reflected in the “Non-Equity Incentive Plan Compensation” column of the Summary Compensation Table. Each NEO’s actual bonus under the 2020 ICP is calculated based on the information provided in the table below. In each case, the “Target Award” amount for each NEO is multiplied by the weighting percentage and performance achieved percentage for each individual component to determine the payout for that component. The total bonus payout is the sum of the individual component payouts.

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Name	Incentive Target (% of Base Salary)	Target Award ($)(1)	Performance Criteria / Weighting %	Performance Achieved (%)	2020 ICP Payout ($)

Mr. Rogerson	125%	1,562,500	Hexion Global EBITDA - Corp / 65%	0%	—
			Hexion SIF / 5%	200%	126,099
			Hexion OIIR / 2.5%	144%	45,536
			Hexion ERI / 2.5%	200%	63,050
			Hexion Cash Flow / 25%	58%	181,268

Mr. Knight	70%	378,221	Hexion Global EBITDA / 65%	0%	—
			Hexion SIF / 5%	200%	37,822
			Hexion OIIR / 2.5%	144%	13,658
			Hexion ERI / 2.5%	200%	18,911
			Hexion Cash Flow / 25%	58%	54,369

Mr. Johns	70%	380,749	Hexion Global EBITDA - Corp / 65%	0%	—
			Hexion SIF / 5%	200%	38,075
			Hexion OIIR / 2.5%	144%	13,749
			Hexion ERI / 2.5%	200%	19,037
			Hexion Cash Flow / 25%	58%	54,733

Ms. Frederix	60%	247,848	Hexion Global EBITDA - BU / 32.5%	0%	—
			Hexion Coatings & Composites EBITDA - BU / 32.5%	10%	8,136
			Hexion SIF / 5%	200%	24,785
			Hexion OIIR / 2.5%	144%	8,950
			Hexion ERI / 2.5%	200%	12,392
			Hexion Cash Flow / 25%	58%	35,628

Mr. Alness	60%	284,280	Hexion Global EBITDA - BU / 32.5%	0%	—
			Hexion Global Resins EBITDA - BU / 32.5%	0%	—
			Hexion SIF / 5%	200%	28,428
			Hexion OIIR / 2.5%	144%	10,266
			Hexion ERI / 2.5%	200%	14,214
			Hexion Cash Flow / 25%	58%	40,865

(1)Ms. Frederix’s ICP target award and payout was converted from Euros to US Dollars based on a 2020 average exchange rate of 1.1389 Euros per US Dollar.

Discretionary Awards

The CEO periodically uses discretionary awards to reward exemplary efforts. Often, such efforts are required by atypical business conditions or are related to special projects impacting long-term business results. Discretionary awards are also used for retention purposes or in connection with a new hiring or promotion. Any discretionary award to an executive officer must be approved by the Committee. In 2020, Mr. Rogerson recommended, and the Committee approved, a discretionary award for Mr. Knight to reward him for the significant additional contributions he made during the period Mr. Knight served as both CFO and interim CEO of the Company while Mr. Rogerson was out on a medical leave. In addition, the Committee approved a discretionary award for Mr. Rogerson which resulted in a total payout relative to target consistent with the other NEOs in corporate roles. Please see Footnote 1 to our Summary Compensation Table below for details of both awards.

2. Long-Term Incentive Awards

Equity Awards

The Committee believes that equity awards play an important role in creating incentives to maximize Company performance, motivating and rewarding long-term value-creation, and further aligning the interests of our executive officers with those of our shareholders. Our NEOs, as well as other members of the leadership team and other eligible associates, participate in the equity plan sponsored by Hexion Holdings Corporation. Awards under these plans are factored into the executive compensation program established by the Committee.

Our long-term strategy includes the use of periodic grants as well as ongoing annual grants of equity. We believe that periodic grants provide an incentive toward a projected long-term equity value and keep participants focused on the achievement of that long-term objective. Annual equity grants are a tool to both retain key associates and drive toward the achievement of longer-term business objectives. Our equity awards contain performance- and service-vesting requirements. Awards that are conditioned on service-vesting requirements

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function as a retention incentive, while awards that are conditioned on performance- and service-vesting requirements are linked to the attainment of specific longer-term financial goals.

In August 2019, the Board adopted the Hexion Holdings Corporation 2019 Omnibus Incentive Plan (the “2019 Plan”). Under the 2019 Plan, annual grants were made in March 2020 to the NEOs, which included the following types of equity awards: (i) time-based restricted stock units (“RSUs”) and (ii) performance-based stock units (“PSUs”). These equity awards were granted to our NEOs and other selected management team executives who are critical to delivering on the current and future performance goals of Hexion Holdings Corporation. These awards were granted to management in order to retain these executives and align their interests to those of our shareholders.

The stock units granted are non-voting units of measurement which are deemed for bookkeeping purposes to be equivalent to one share of common stock of Hexion Holdings Corporation. Of the stock units granted to the NEOs in March 2020, forty percent (40%) are RSUs and the remaining sixty percent (60%) are PSUs. The RSUs vest in equal installments on the first three anniversaries of the grant date.

The PSUs are divided into two equal tranches. The first tranche (50% of the PSUs granted) is earned based on achievement of adjusted return on invested capital (“Adjusted ROIC”) for the trailing 12 month period ending December 31, 2022. The second tranche (50% of the PSUs granted) is earned based on achievement of EBITDA margin (“EBITDA Margin”) for the trailing 12-month period ending December 31, 2022. Any PSUs earned based on the performance criteria become vested when settled in July 2023. The performance targets and percentage of PSUs eligible to be earned are reflected in the tables below.


Adjusted ROIC	Percentage of Adjusted ROIC PSUs earned	EBITDA Margin	Percentage of EBITDA Margin PSUs Earned
13.0%	50.0%	13.0%	50.0%
14.0%	100.0%	15.0%	100.0%
15.0%	150.0%	17.0%	150.0%

If the executive resigns without good reason prior to the settlement date:

•Vested RSUs are retained and any unvested RSUs are cancelled as of the resignation date.

▪Earned and unearned PSUs are cancelled as of the resignation date.

If the executive is terminated by the Company without cause, or the executive resigns for good reason prior to the settlement date:

•Vested RSUs are retained. The tranche of the RSUs that would vest on the immediately succeeding vesting date following the termination date of the executive accelerate and become immediately vested upon the executive’s termination date. Unvested RSUs as of the termination date are cancelled on the termination date.

•A pro-rata number of the PSUs remain eligible to be earned based on the number of days the executive is employed by the Company during the January 1, 2020 through December 31, 2022 period. The remaining PSUs are cancelled on the termination date.

If the executive dies or becomes disabled prior to the settlement date:

•The RSUs vest in full and all vested RSUs are settled as soon as administratively feasible, but in no event later than 30 days following such date of termination.

•Earned PSUs immediately vest and are settled as soon as administratively feasible, but in no event later than 30 days following the executive’s termination date. Unearned PSUs are cancelled upon the executive’s termination date.

Upon the executive’s retirement following attainment of age 60 with at least five years of service with the Company, and upon the executive providing the Company with four (4) months advance notice of the executive’s retirement date:

•Any unvested RSUs continue to vest in full.

Unless otherwise noted above, vested RSUs and earned PSUs are subject to settlement in July 2023.

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If a change-in-control transaction takes place during the RSU vesting period, all unvested RSUs will automatically vest and be settled in cash as soon as administratively feasible, but in no event later than 14 days following such change in control. If a change in control takes place prior to December 31, 2022, a pro-rata number of PSUs shall be deemed earned based on the number of days that elapsed from January 1, 2020 through the date of the change in control. Such earned PSUs vest immediately upon such change in control and will be settled in cash as soon as administratively feasible, but in no event later than 14 days following such change in control.

Unless otherwise noted above, (i) vested RSUs are subject to settlement and delivery of the underlying shares of common stock in July 2023; and (ii) earned PSUs are subject to settlement and delivery of the underlying shares of common stock in July 2023 unless, prior to the settlement date, the executive resigns his or her employment. Termination of employment for cause will result in the executive forfeiting earned, vested or unvested awards upon the termination date.

The details of the grants made to our NEOs are shown in the “Grants of Plan-Based Awards” table below.

Cash Awards

The Committee may, from time to time, approve long-term cash awards or plans for our key associates, including our NEOs. These awards are designed to pay over extended performance periods subject to the achievement of specified, measurable performance goals, and are further conditioned upon continued employment. As such, these awards are useful for providing a defined value for achievement of our financial targets, as well as leadership stability. In addition, long-term cash awards help complement equity awards that are not yet liquid.

In November 2016, in an effort to retain key talent in a challenging business environment, long-term cash awards were granted under the Momentive Performance Materials Holdings LLC Long-Term Cash Incentive Plan (the “LTIP”) to all of our NEOs other than the CEO. The LTIP awards vest based upon service and/or performance metrics, depending upon the grantee.

In July 2017, following the retirement announcement of Mr. Craig Morrison, our former CEO, a modification was made to the 2016 awards to ensure stability and retention of key associates; including the NEOs, except for Mr. Rogerson. A portion of these awards that were payable based on achievement of performance metrics were converted into time-based awards payable in 2020 or 2021 as applicable. The LTIP was assumed by Hexion Holdings Corporation upon emergence from the balance sheet restructuring process on July 1, 2019. The amounts paid in July 2020 to Messrs. Knight, Johns, and Alness were $791,666, $862,021, and $352,296, respectively. Ms. Frederix will receive payment of the remaining tranche of her 2016 award in July 2021.

The above amounts are reported in the “Bonus” column of the Summary Compensation Table below.

3. Benefits and Perquisites

Benefits

The Company provides a comprehensive suite of benefits to eligible associates, including our NEOs. Our benefit programs are designed to provide market-competitive benefits for associates and their covered dependents. Each of our NEOs (other than Ms. Frederix) is covered under a health and welfare program that provides medical, prescription drug, dental, vision, life insurance and disability insurance benefits. Ms. Frederix is covered under the applicable health and welfare benefits program offered to associates in Belgium.

Each of our NEOs, other than Ms.Frederix, also participates in our savings plan, a defined contribution plan (the “401(k) Plan”), which allows eligible U.S. associates to make pre-tax contributions from 1% to 15% of eligible earnings up to the U.S. tax limits for qualified plans. Those associates are also eligible to receive matching contributions from the Company equal to 100% on contributions of up to 5% of eligible earnings. In addition, the Company makes an annual retirement contribution, ranging from 3% to 7% of eligible earnings depending on years of service, to eligible associates actively employed on the last day of the year. An additional company contribution may be made if we achieve specified annual financial goals established at the beginning of each plan year. Ms. Frederix participates in a defined benefit pension plan offered to our Belgium associates, as further described in the Narrative to the Pension Benefits Table below.

Each of our NEOs, other than Messrs. Johns and Rogerson and Ms. Frederix, participated in a qualified cash balance pension plan on substantially the same terms as other plan participants (the “Hexion U.S. Pension Plan”). The Hexion U.S. Pension Plan was frozen in 2009, as discussed further in the Narrative to the Pension Benefits table below. In addition, because individuals are subject to U.S. tax limitations on contributions to qualified retirement plans, the Company provided a non-qualified retirement plan intended to provide plan participants, including our NEOs, with an incremental benefit on eligible earnings above the U.S. tax limits for the qualified plan (the “Hexion Supplemental Plan”). The benefits in the Hexion Supplemental Plan associated with the Hexion U.S. Pension Plan were also frozen in 2009. Our NEOs participated in the Hexion Supplemental Plan on the same basis as our other highly compensated salaried associates.

Additionally, because individuals are subject to U.S. tax limitations on contributions to a qualified retirement plan, and following the freezing of the Hexion Supplemental Plan, the Company established a non-qualified Supplemental Executive Retirement Plan (“SERP”) in 2011, which provides a benefit on eligible earnings that exceed the U.S. tax limit applicable to our 401(k) Plan. In 2020, our NEOs, other than Ms. Frederix, were eligible to receive a 5% company contribution on eligible earnings in excess of $285,000, which is the same benefit received by our other highly compensated salaried associates.

There were no significant changes to the Company’s benefit plans in 2020 that would impact our NEOs. There are descriptions of these plans in the Narrative to the Pension Benefits Table and Narrative to the Nonqualified Deferred Compensation Table below.

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The Company may provide certain additional benefits to an executive officer if he or she is on a temporary international or domestic assignment. These benefits are externally competitive and a means to compensate the executive officer for financial expenses that would not exist if the executive remained in his or her home. For example, the Company may provide family travel and housing allowances, other one-time allowances, tax equalization payments, and reimbursements or payments for relocation from the executive officer’s home. In addition, pursuant to the Company’s relocation policy, certain expenses are grossed up to protect the executive from the tax consequences associated with those certain relocation expenses. We believe that, as a global company, it is necessary to offer this benefit to encourage key associates and executives to temporarily relocate for strategic business reasons. None of our NEOs received additional benefits related temporary assignment or relocation in 2020.

Perquisites

A company-leased car is provided to Ms. Frederix and Mr. Alness in connection with their commercial responsibilities. Ms. Frederix pays a statutorily-determined tax based on the fiscal price of the car and a CO2 emission rate, consistent with market practice. The Company imputes income to Mr. Alness each year, and withholds appropriate taxes, based on the value of the car and the percentage of time Mr. Alness uses the company car for his personal benefit, also consistent with market practice.

Employment Agreements and Restrictive Covenants

We entered into an employment agreement with Mr. Rogerson effective July 1, 2019. Otherwise, we don’t have employment agreements with our NEOs other than in countries where it is common practice to employ an executive by contract.

Change-in-Control and Severance Benefits

Our NEOs are generally entitled to change-in-control and severance protections. We believe that appropriate change-in-control and severance protections accomplish two objectives. First, they create an environment where key executives are able to take actions in the best interest of the Company without incurring undue personal risk. Second, they foster management stability during periods of potential uncertainty. We are also cognizant that excessive pay in the form of change-in-control and severance protection would not be in the best interest of the Company because such pay may encourage undue risk-taking. In an attempt to balance the delicate equation, the Committee has determined to provide these benefits very selectively. The arrangements for our NEOs other than Mr. Rogerson were implemented in prior years. The arrangement for Mr. Rogerson was implemented in connection with the Emergence and was an important tool to ensure his continued service during this critical time for the Company. The change-in-control and severance benefits payable to our NEOs are discussed in the Narrative to the Summary Compensation Table and in the discussion on Potential Payments Upon Termination of Employment below.

COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION(1)

The Committee has reviewed and discussed with management the disclosures contained in the above Compensation Discussion and Analysis. Based upon this review and discussion, the Committee recommended to our Board of Directors that the Compensation Discussion and Analysis section be included in our Annual Report on Form 10-K.


Compensation Committee of the Board of Managers

Jeffrey D. Benjamin (Chairman)
James N. Chapman
Stephen D. Newlin
John K. Wulff

(1)SEC filings sometimes “incorporate information by reference.” This means the Company is referring the reader to information that has previously been filed with the SEC, and that this information should be considered as part of the filing. Unless the Company specifically states otherwise, this report shall not be deemed to be incorporated by reference and shall not constitute soliciting material or otherwise be considered filed under the Securities Act or the Securities Exchange Act.

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SUMMARY COMPENSATION TABLE

The following table provides information about the compensation of our Chief Executive Officer, Chief Financial Officer, and our three next most highly compensated executive officers whom we collectively refer to as our NEOs.


Name and Principal Position(a)	Year (b)	Salary ($) (c)	Bonus ($) (d) (1)	Stock Awards ($) (e)	Options Awards ($) (f)	Non-Equity Incentive Plan Compensation ($) (g) (2)	Change in Pension Value and Nonqualified Deferred Compensation Earnings ($)(h) (3)	All Other Compensation ($) (i) (4)	Total ($) (j)
Craig A. Rogerson President and Chief Executive Officer	2020	1,250,000	99,445	5,925,000	—	415,953	2,235	115,041	7,807,674
	2019	1,125,000	—	23,814,996	—	1,068,178	330	202,013	26,210,517
	2018	1,000,000	—	—	—	916,000	—	374,556	2,290,556

George F. Knight Executive Vice President and Chief Financial Officer	2020	532,447	1,041,666	1,022,228	—	124,760	16,476	69,229	2,806,806
	2019	515,464	250,113	1,602,096	—	306,139	49,028	67,772	2,790,612
	2018	496,612	475,000	—	—	324,672	—	53,412	1,349,696

Douglas A. Johns Executive Vice President and General Counsel	2020	537,293	862,021	894,343	—	125,594	1,414	66,598	2,487,263
	2019	523,936	208,428	1,255,704	—	309,688	430	64,306	2,362,492
	2018	517,213	517,213	—	—	331,637	—	50,548	1,416,611

Ann Frederix Senior Vice President and General Manager Global Epoxies	2020	407,065	—	520,436	—	89,891	1,049,294	13,667	2,080,353
	2019	375,986	290,626	974,250	—	105,232	793,347	—	2,539,441


Mark I. Alness Senior Vice President Global Resins	2020	466,900	352,296	605,661	—	93,773	13,770	61,315	1,593,715

(1)The amounts shown in column (d) for 2020 reflect time-based amounts paid under the LTIP and for Messrs. Rogerson and Knight, also includes a discretionary bonuses of $99,445 and $250,000, respectively, as described in the Compensation Discussion & Analysis above.

(2)The amounts shown in column (g) for 2020 reflect the amounts earned under the 2020 ICP, based on performance achieved for 2020. The material terms of the 2020 ICP are described in the Compensation Discussion & Analysis above. Payments under the 2020 ICP were made in March 2021.

(3)The amounts shown in column (h) reflect the net actuarial increase in the present value of benefits under the Hexion U.S. Pension Plan and the Hexion Supplemental Plan for Messrs Knight and Alness. The increase in net present value for 2020 includes: for Mr. Knight, a $11,211 increase; and for Mr. Alness, a $9,142 increase in net present value. Mr. Rogerson, Ms. Frederix, and Mr. Johns are not participants in these plans. In addition, the amounts reported include excess interest credits in the Hexion non-qualified deferred compensation plans for Messrs. Rogerson, Knight, Johns and Alness. The amount reported for Ms. Frederix is the net present value increase in 2020 to her accrued benefit in the Hexion Belgium Pension Plan. See the Pension Benefits Table below, including the Narrative to Pension Benefits Table, for additional information regarding our pension calculations, including the assumptions used for these calculations.

(4)The amounts shown in the All Other Compensation column for 2020 include: for Mr. Rogerson: $115,041 of company contributions made or accrued to the defined contribution plans,, for Mr. Knight: $69,229 of company contributions made or accrued to the defined contribution plans; for Mr. Johns: $66,598 of company contributions made or accrued to the defined contribution plans; for Mr. Alness: $61,315 of company contributions made or accrued to the defined contribution plans, as well as the cost associated with personal use of his company car; and for Ms.Frederix $13,667, reflecting the cost associated with personal use of her company car.

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GRANTS OF PLAN-BASED AWARDS

The following table presents information about grants of plan-based awards during the year ended December 31, 2020, including the annual incentive compensation plan (2020 ICP) and annual equity awards granted under the 2019 MIP.


Name (a)	Estimated Future Payouts Under Non-Equity Incentive Plan Awards			Estimated Future Payouts Under Equity Incentive Plan Awards(1)			All Other Stock Awards: Number of Shares of Stock or Units (#) (h) (2)	All Other Option Awards: Number of Securities Underlying Options (#) (i)	Exercise or Base Price of Option Awards ($/share) (j)	Grant Date Fair Value of Stock and Option Awards ($)(k)(3)
	Threshold ($) (b)	Target ($) (c)	Maximum ($) (d)	Threshold (#) (e)	Target (#) (f)	Maximum (#) (g)
Craig A. Rogerson
2020 ICP	3,906	1,562,500	3,125,000	—	—	—	—	—	—	—
2020 Equity Grant
RSUs	—	—	—	—	—	—	150,000	—	—	2,370,000
PSUs	—	—	—	112,500	225,000	337,500	—	—	—	3,555,000
George F. Knight
2020 ICP	946	378,221	756,442	—	—	—	—	—	—	—
2020 Equity Grant
RSUs	—	—	—	—	—	—	25,879	—	—	408,888
PSUs	—	—	—	19,410	38,819	58,229	—	—	—	613,340
Douglas A. Johns
2020 ICP	620	380,749	761,497	—	—	—	—	—	—	—
2020 Equity Grant
RSUs	—	—	—	—	—	—	22,642	—	—	357,744
PSUs	—	—	—	16,981	33,962	50,943	—	—	—	536,600
Ann Frederix
2020 ICP	952	247,848	435,229	—	—	—	—	—	—	—
2020 Equity Grant
RSUs	—	—	—	—	—	—	13,176	—	—	208,181
PSUs	—	—	—	9,837	19,673	29,510	—	—	—	312,255
Mark I. Alness
2020 ICP	711	284,280	568,560	—	—	—	—	—	—	—
2020 Equity Grant
RSUs	—	—	—	—	—	—	15,333	—	—	242,261
PSUs	—	—	—	11,500	23,000	34,500	—	—	—	363,400

(1) The number reported reflects the number of performance-based stock units that could be earned based on achievement of the performance criteria at minimum, target and maximum. The aggregate Target Award was converted into a performance-based award (60%) based on a Hexion Holdings Corporation stock price of $15.00 per share.

(2) The number reported reflects the number of time-based restricted stock units granted. The aggregate Target Award value was converted into a time-based award (40%) based on a Hexion Holdings Corporation stock price of $15.00 per share.

(3) The values shown are based on a fair value of $15.80 per share for the time-based restricted stock units and the performance based stock units at Target.

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Narrative to Summary Compensation Table and Grants of Plan-Based Awards Table

Employment Agreements

The Company has employment agreements or employment letters with each of our NEOs, which provide for their terms of compensation, benefits, severance, and certain restrictive covenants. Details regarding the severance and restrictive covenant provisions are provided below under “Potential Payments upon a Termination or Change in Control.”

Mr. Rogerson’s Employment Agreement dated July 1, 2019, includes (i) a base salary at the rate of one million two hundred fifty thousand dollars ($1,250,000) per annum, (ii) an annual cash bonus with a target amount equal to 125% of his base salary, based on Mr. Rogerson’s and/or the Company’s attainment of certain criteria as determined by the Board, and (iii) a commitment that Mr. Rogerson will participate in the Company’s equity incentive program upon terms and conditions established by the Board.

Mr. Knight’s Terms of Employment dated October 22, 2015 provides that he is entitled to (i) receive an annual base salary of $475,000 for his first year (“Base Salary”), (ii) be eligible to receive annual cash incentive compensation payments (the “Annual Bonus”) with a target Annual Bonus opportunity of 70% of his Base Salary; and (iii) be eligible to receive severance equal to 18 months of Base Salary in the event of a termination by the Company without cause. Mr. Knight will not receive additional compensation for serving as a director of the Company.

Ms. Frederix’s Employment Agreement, as amended July 1, 2019, provides for (i) a base salary at the rate of three hundred fifty-two thousand one hundred and twenty-seven euros (EUR 352,127) per annum, (ii) an annual cash bonus with a target amount equal to 60% of her base salary, based on the achievement of certain targets determined annually by the Board, and (iii) a commitment that Ms. Frederix will participate in the Company’s equity incentive program upon terms and conditions established by the Board.In addition, Ms. Frederix receives a company car benefit under the company car policy for Europe.

Mr. Johns’ Employment Agreement dated May 6, 2015 includes (i) a base salary of $497,319.68 per year (“Base Salary”); (ii) annual cash incentive compensation payments (“Annual Bonus”) with an annual target of 70% of his Base Salary; and (iii) eligibility to receive severance equal to 18 months of Base Salary in the event of a termination by the Company without cause. In addition, Mr. Johns received service credit for his prior years of service with MPM and GE for purposes of calculating his retirement benefits.

Mr. Alness’s Terms of Employment dated July 1, 2019 provide for (i) a base salary at the rate of four hundred sixty thousand dollars ($460,000) per year, (ii) an annual cash bonus with a target amount equal to 60% of base salary, based on the achievement of certain targets determined annually by the Board, and (iii) health and welfare and retirement benefits on the same terms and conditions as other eligible associates. In addition, Mr. Alness receives a company car under the company car arrangements offered to eligible U.S. associates.

Grants of Plan-Based Awards

Each of our NEOs received an annual equity grant on March 9, 2020. The grant was delivered in a mix of time-based restricted stock units (40% of total award value) and performance-based stock units (60% of total award value). The time-based restricted stock units vest in equal installments on each of the first three anniversaries of the grant date and will be settled as soon as administratively feasible in July 2023. Fifty percent (50%) of the performance-based stock units are earned based on achievement of EBITDA margin for the trailing twelve month period ending December 31, 2022. A minimum of 50% will be earned if EBITDA margin of 13% is achieved, and a maximum of 150% will be earned if EBITDA margin of 17% is achieved. The remaining 50% of the performance-based stock units are earned based on achievement of adjusted return on invested capital (“Adjusted ROIC”) for the trailing twelve month period ending December 31, 2022. A minimum of 50% will be earned if Adjusted ROIC of 13% is achieved, and a maximum of 150% of the target shares will be earned if Adjusted ROIC of 15% is achieved. Any shares earned will vest and be settled as soon as administratively feasible in July 2023.

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OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END

The following table presents information about outstanding stock awards held by our NEOs as of December 31, 2020. The securities underlying the awards are common shares of Hexion Holdings, and the awards were granted under the Hexion Holdings Corporation 2019 Omnibus Incentive Plan. See the footnotes and Narrative to Outstanding Equity Awards Table below, as well as the description of Equity Awards above, for a discussion of this plan and the vesting conditions applicable to the awards.


	Stock Awards(1)
Name (a)		Number of Shares or Units of Stock That Have Not Vested (#) (b) (2)	Market Value of Shares or Units or Stock That Have Not Vested ($) (c) (3)	Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) (d) (4)	Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($)(e) (3)
Craig A. Rogerson
Restricted Stock Units		700,000	8,575,000	―	―
Performance Stock Units		―	―	1,508,333	18,477,079

George F. Knight
Restricted Stock Units		62,879	770,268	―	―
Performance Stock Units		—	—	125,152	1,533,112

Douglas A. Johns
Restricted Stock Units		51,642	632,615	―	―
Performance Stock Units		—	—	101,629	1,244,955

Ann Frederix
Restricted Stock Units		35,676	437,031	―	―
Performance Stock Units		—	—	72,263	885,222

Mark I. Alness
Restricted Stock Units		40,333	494,079	―	―
Performance Stock Units		—	—	81,333	996,329

(1)Reflects grants made on September 9, 2019 and March 9, 2020

(2)The award granted September 9, 2019 vests in three equal annual installments on the first three anniversaries of July 1, 2019 however, is subject to forfeiture based on resignation prior to the settlement date. Settlement of vested awards that have not been forfeited will occur and will be settled within 10 days following July 1, 2022. The award granted March 9, 2020 vests in three equal annual installments on the first three anniversaries of the grant date and will be settled as soon as administratively feasible in July 2023.

(3)The market values shown in Columns (h) and (j) are based on the closing price of a share of Hexion Holdings Corporation common stock on the over-the-counter market as of December 31, 2020.

(4)Twenty-five percent (25%) of the award granted September 9, 2019 vests when, at any time during the Vesting Period, a $20 .00 volume-weighted average price (VWAP) is attained. Thereafter, an additional 7.5% of the award will vest with each $1.00 increase in the VWAP during the Vesting Period, until 100% of the award is vested if a $30.00 VWAP is attained during the Vesting Period. Any portion of the award that vests prior to July 1, 2022 areis subject to settlement and delivery of the underlying shares of common stock in July 2022, and any portion of the award that vests on or after July 1, 2022, but before July 1, 2023, is subject to settlement and delivery of the underlying shares of common stock in July 2023. Fifty percent (50%) of the award granted March 9, 2020 is earned based on achievement of EBITDA margin for the trailing twelve month period ending December 31, 2022. A minimum of 50% of the target shares will be earned if EBITDA margin of 13% is achieved and a maximum of 150% of the target shares will be earned if EBITDA margin of 17% is achieved. The remaining 50% of the award granted on March 9, 2020 is earned based on achievement of adjusted return on invested capital (“Adjusted ROIC”) for the trailing twelve month period ending December 31, 2022. A minimum of 50% of the target shares will be earned if Adjusted ROIC of 13% is achieved and a maximum of 150% of the target shares will be earned if Adjusted ROIC of 15% is achieved. Any shares earned will vest and be settled as soon as administratively feasible in July 2023.

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Narrative to Outstanding Equity Awards Table

2019 MIP

In August 2019, the Board of Directors of Hexion Holdings Corporation approved a new long-term equity incentive plan for employees and directors of the Company (the “2019 MIP”). Grants under the 2019 MIP are denominated in common shares of Hexion Holdings Corporation. Under the 2019 MIP, participants may receive grants of options to purchase shares, stock appreciation rights, restricted stock, restricted stock units, and other stock-based awards upon terms and conditions determined by the Board.

Grants of time-based and performance-based stock units were made in September 2019 and March 2020 to a select group of certain Company leaders, including our Named Executive Officers. The amount of each award was based on the executive’s scope of responsibility, market data, contribution to value creation and other relevant factors determined by the Board in its discretion. Grants of time-based restricted stock units and performance-based stock units were made. The time-based awards require continued service and function as a retention incentive, while the performance-based awards vest upon achievement of certain stock prices over a four-year period financial metrics, which we believe provides both a retention incentive and encourages the attainment of specific long-term financial objectives. The material terms of the grants made to our Named Executive Officers under the 2019 MIP in 2020 are further described in the Narrative to the Grants of Plan-Based Awards table.

OPTION EXERCISES AND STOCK VESTED

The Option Exercises and Stock Vested table is omitted since there were no such transactions for our NEOs during the year ended December 31, 2020.

PENSION BENEFITS

The following table presents information regarding the benefits payable to each of our NEOs at, following, or in connection with their retirement under the qualified and non-qualified defined benefit pension plans of the Company as of December 31, 2020. The table does not provide information regarding the Company’s qualified or non-qualified defined contribution plans. The amounts shown in the table for each participant represent the present value of the annuitized benefit and do not represent the actual cash value of a participant’s account.


Name (a)	Plan Name (b)	Number of Years Credited Service (#) (c) (1)	Present Value of Accumulated Benefit ($) (d)	Payments During Last Fiscal Year ($) (e)
Craig A. Rogerson(2)	Hexion U.S. Pension Plan	—	—	—
	Hexion Supplemental Plan	—	—	—
George F. Knight	Hexion U.S. Pension Plan	12.23	213,099	—
	Hexion Supplemental Plan	11.74	102,774	—
Douglas A. Johns(2)	Hexion U.S. Pension Plan	—	—	—
	Hexion Supplemental Plan	—	—	—
Ann Frederix (2)	Hexion Belgium Pension Plan	29.92	4,917,556	—
Mark Alness	Hexion U.S. Pension Plan	31	258,706	—
	Hexion Supplemental Plan	30.51	54,539

(1)The number of years of credited service set forth in column (c) reflects the number of years between the NEO’s hire date and the earlier of (i) the plan freeze date, and (ii) December 31, 2020. The number of years of credited service is used to determine benefit accrual under the applicable plan.

(2)Messrs. Rogerson and Johns, and Ms. Frederix, do not participate in the Hexion U.S. Pension Plan or the Hexion Supplemental Plan.

Narrative to Pension Benefits Table

Hexion U.S. Pension Plan, Hexion Supplemental Plan and Hexion Belgium Pension Plan

The benefits associated with the Hexion U.S. Pension Plan and Hexion Supplemental Plan were frozen June 30, 2009, and January 1, 2009, respectively. Although participants will continue to receive interest credits under the plans, no additional benefit credits will be provided. Prior to the freeze, the Hexion U.S. Pension Plan provided benefit credits equal to 3% of earnings up to the social security wage base for the year, plus 6% of eligible earnings in excess of the social security wage base for the year, subject to the IRS-prescribed limit applicable to tax-qualified plans.

The Hexion Supplemental Plan provided non-qualified pension benefits in excess of allowable limits for the qualified pension plans. The benefit formula mirrored the qualified Hexion U.S. Pension Plan but applied only to eligible compensation above the federal limits for qualified plans. The accrued benefits are unfunded and are paid from our general assets upon the participant’s termination of employment with the Company.

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Under both the Hexion U.S. Pension Plan and Hexion Supplemental Plan, eligible earnings included annual incentive awards that were paid currently, but excluded any long-term incentive awards. Historically, the accrued benefits earned interest credits based on one-year Treasury bill rates until the participant begins to receive benefit payments. Effective January 1, 2012, the plans were amended to provide a minimum interest crediting rate of 300 basis points. Participants vest after the completion of three years of service.

Messrs. Knight and Alness are currently eligible for early retirement under the Hexion U.S. Pension Plan, having met the eligibility criteria of having reached age 55 with 10 years of service with the Company.

Ms. Frederix, our NEO in Belgium, participates in a contributory defined benefit pension plan covering certain employees in Belgium. The benefit is determined based on salary as well as service history with the company. The employee contributes between 1.5% to 5% of eligible earnings based on a specified formula and the company is responsible for the remainder of the cost.

For a discussion of the assumptions applied in calculating the benefits reported in the table above, please see Note 16 to our Consolidated Financial Statements included in Part II of Item 8 in this Annual Report on Form 10-K.

NONQUALIFIED DEFERRED COMPENSATION

The following table presents information with respect to each defined contribution or other plan that provides for the deferral of compensation on a basis that is not tax-qualified.


Name (a)	Executive Contributions in Last FY ($) (b)	Registrant Contributions in Last FY ($) (c) (1)	Aggregate Earnings (Loss) in Last FY ($) (d)	Aggregate Withdrawals/ Distributions ($) (e)	Aggregate Balance at Last FYE ($) (f)
Craig A. Rogerson
Hexion Supplemental Plan	—	—	—	—	—
Hexion SERP	—	88,050	4,191	—	190,660
George F. Knight
Hexion Supplemental Plan	—	―	6,394	—	216,616
Hexion SERP	—	28,007	3,478	—	133,327
Douglas A. Johns
Hexion Supplemental Plan	—	―	—	—	—
Hexion SERP	—	28,779	2,652	—	105,744
Ann Frederix
Hexion Supplemental Plan	—	―	—	—	—
Hexion SERP	—	—	—	—	—
Mark I. Alness
Hexion Supplemental Plan	—	―	5,293	—	179,332
Hexion SERP	—	14,974	3,384	—	122,927

(1) The amount shown in column (c) for the Hexion SERP is included in the All Other Compensation column of the Summary Compensation Table for 2020. These amounts were earned in 2019 and credited to the accounts by Hexion in 2020.

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Narrative to the Nonqualified Deferred Compensation Table

Hexion Supplemental Plan

Effective January 1, 2009, the benefits associated with this plan were frozen. This plan provided supplemental retirement benefits in the form of voluntary associate deferral opportunities and employer match on compensation earned above the IRS limit on qualified plans. The Hexion Supplemental Plan benefits are unfunded and paid from our general assets upon the associate’s termination of employment. Effective January 1, 2016, interest credits are made to the participants’ accounts at an interest rate determined by the Company, which has been defined as the greater of (i) the rate in the fixed income fund of the 401(k) Plan and (ii) 3%.

Hexion SERP

The Company adopted the Hexion SERP in 2011 to provide certain of our executives and other highly compensated associates, including our NEOs, an annual contribution of 5% of eligible earnings above the maximum limitations set by the IRS for contributions to a qualified defined contribution plan. Under the Hexion SERP, an unfunded non-qualified plan, eligible earnings are limited to base salary and amounts earned under the Company’s annual incentive compensation plan. Account credits are made to the plan during the third quarter of each year. Interest credits are provided in participants’ SERP accounts at an interest rate determined by the Company. Effective January 1, 2016, the interest rate determined by the Company is the greater of (i) the rate in the fixed income fund of the 401(k) Plan and (ii) 3%. This deferred compensation is paid six months following termination of employment.

POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE-IN-CONTROL

The Company has employment agreements or letters with Rogerson, Knight, and Johns. The section below describes the payments that may be made to our Named Executive Officers upon separation, pursuant to these individual agreements, applicable corporate practices, or in connection with a change in control. For payments made upon a retirement, other than in connection with a separation or change in control, also see the discussion in the Pension Benefits and Nonqualified Deferred Compensation tables and related narratives above.

Severance/Termination Payments

The employment agreement with Mr. Rogerson provides that if Mr. Rogerson’s employment is terminated by the Company without cause or he resigns for good reason (as defined in his employment agreement), the Company will provide him with an amount equal to two times the sum of (x) his annual base salary and (y) his target annual bonus, paid in equal installments for 24 months, and continued COBRA coverage for 18 months at the expense of the Company (or until Mr. Rogerson becomes ineligible for such coverage), subject to his execution of a release of claims against the Company and his continued compliance with post-termination covenants. And provided further, if such termination of employment occurs following a change of control (as defined in the agreement), then the severance payment shall be equal to three times the sum of his annual base salary plus target bonus, such amounts to be paid in substantially equal installments for a period ending in 36 months. In addition, any accrued but unpaid compensation through the termination date (such as accrued but unpaid base salary, earned but unpaid bonus, and accrued and unused vacation) will be paid in a lump-sum payment at the time of termination. The employment agreement also contains an agreement to not disclose non-public information and a 12 month post-termination non-competition and non-solicitation agreement.

In addition, the employment agreement with Mr. Rogerson provides that if Mr. Rogerson’s employment is terminated by the Company upon or following a change-in-control (as defined in his employment agreement), the Company will provide him with an amount equal to three times the sum of (x) his annual base salary and (y) his target annual bonus, paid in equal installments for 36 months, and continued COBRA coverage for 18 months at the expense of the Company (or until Mr. Rogerson becomes ineligible for such coverage), subject to his execution of a release of claims against the Company and his continued compliance with post-termination covenants.

Under Mr. Knight’s terms of employment, he would receive 18 months of continued base salary if his employment is terminated through no fault of his own. In addition to agreeing to not disclose non-public information, pursuant to the Management Investor Rights Agreement under the 2011 Equity Plan, Mr. Knight has agreed not to compete with the Company during the period he receives severance payments from the Company and not to solicit Company associates for one year following the date he ceases receiving severance payments from the Company.

Under Mr. Johns’ terms of employment, he would receive 18 months of continued base salary if his employment is terminated by the Company without cause. In addition to agreeing to not disclose non-public information, pursuant to the Management Investor Rights Agreement under the 2011 Equity Plan, Mr. Johns has agreed not to compete with the Company during the period he receives severance payments from the Company and not to solicit Company associates for one year following the date he ceases receiving severance payments from the Company.

Ms. Frederix is entitled to severance based on local legislation in the event of involuntary termination without cause.

Mr. Alness is entitled to severance based on the standard guidelines for an E1 level executive from the March 2014 MPM Severance Plan, which was adopted by Hexion Holdings Corporation following emergence from Chapter 11. The standard guideline for an E1 level executive are two (2) weeks of severance per year of service with a minimum of thirty-six (36) weeks and a maximum of fifty-two (52) weeks. Based on his years of service with the company, Mr. Alness would receive fifty-two (52) weeks.

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Termination Payments

The following table describes payments our NEOs would have received had the individual’s employment been terminated by the Company without cause, or in the case of Rogerson, by the executive for good reason or a change-in-control, as of December 31, 2020.


Name	Cash Severance ($)(1)	Estimated Value of Benefits ($)(2)	2019 LTI (3)	Restricted Stock Units(4)	Performance Stock Units (Refer to footnote)	Pension and Nonqualified Plan Payouts(5)
Craig A. Rogerson
Termination Without Cause	5,625,000	35,195	1,667,420	2,858,333	(6)	190,660
Resignation with Good Reason	5,625,000	35,195	―	2,858,333	(6)	190,660
Termination Due to Change-in-Control	8,437,500	35,195	1,667,420	8,575,000	(7)	190,660
Change in Control	—	—	—	8,575,000	(7)	—
George F. Knight
Termination Without Cause	810,474	24,186	250,113	256,755	(6)	665,816
Resignation with Good Reason	—	—	—	—	(8)	665,816
Termination Due to Change-in-Control	—	—	250,113	770,268	(7)	665,816
Change in Control	—	—	—	770,268	(7)	—
Douglas A. Johns
Termination Without Cause	815,890	47,479	208,428	210,870	(6)	105,744
Resignation with Good Reason	—	—	—	—	(8)	105,744
Termination Due to Change-in-Control	—	—	208,428	632,615	(7)	105,744
Change in Control	—	—	—	632,615	(7)	—
Ann Frederix
Termination Without Cause	—	—	118,702	145,677	(6)	—
Resignation with Good Reason	—	—	—	―	(8)	—
Termination Due to Change-in-Control	—	—	118,702	437,031	(7)	—
Change in Control	—	—	—	437,031	(7)	—
Mark I. Alness
Termination Without Cause	473,800	19,840	166,742	164,693	(6)	615,504
Resignation with Good Reason	—	—	—	—	(8)	615,504
Termination Due to Change-in-Control	—	—	166,742	494,079	(7)	615,504
Change in Control	—	—	—	494,079	(7)	—

(1)This column reflects cash severance payments due under the NEO’s employment agreement, or under the applicable severance guidelines of the Company, as described above, based on salary as of December 31, 2020. The cash severance due to Ms. Frederix would be based on applicable local legislation and company guidelines.

(2)This column reflects the estimated value of health care benefits and outplacement services. Under the Company’s severance guidelines, each NEO, other than Ms.Frederix, would be entitled to 12 months of executive outplacement services in the event of a termination through no fault of their own. The values are based upon the Company’s estimated cost of providing such benefits as of December 31,2020.

(3)The amount shown in this column is the amount that would be due pursuant to the 2019 LTI plan provisions.

(4)Amounts shown reflect the value of outstanding restricted stock units that would be due pursuant to plan and award agreement provisions, calculated based on the year-end stock price of Hexion Holdings Corporation.

(5)The amounts shown reflect the value of vested benefits as of December 31, 2020 for each of the other NEOs.

(6)The performance stock units granted on September 9, 2019 (the “2019 PSUs”) vest based on stock price and, upon termination without cause and, in Mr. Rogerson’s case, resignation with good reason, on December 31, 2020, the 2019 PSUs would continue to have the opportunity to vest, based on stock price, for the one-year period following termination of employment. Any 2019 PSUs that subsequently vest during the one-year period following termination of employment would be settled in shares of Hexion Holdings Corporation common stock in July 2022. The performance stock units granted on March 9, 2020 (the “2020 PSUs”) are earned based on achievement of specified Company performance criteria measured for the trailing twelve month period ending December 31, 2022. Upon termination without cause and, in Mr. Rogerson’s case, resignation with good

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reason, on December 31, 2020, one-third of the 2020 PSUs would remain outstanding and eligible to be earned based on achievement of the performance criteria. Any 2020 PSU’s subsequently earned would vest and be settled in shares of Hexion Holdings Corporation common stock in July 2023.

(7)With respect to the 2019 PSUs, upon a change in control, the 20 consecutive trading-day volume weighted average price per share of Hexion Holdings Corporation common stock (“VWAP”) shall be deemed to equal the per share price of Hexion Holdings Corporation common stock implied (or actually paid) in the change in control transaction as of such change in control, and the performance period shall expire immediately following such change in control. Any PSUs that vest based on the VWAP, as well as any previously vested PSUs, shall be settled within 10 days following such change in control in an amount of cash equal to the fair market value of such PSUs on the date of the change in control. With respect to the 2020 PSUs, if a change in control occurs prior to the end of the performance period, the performance period shall expire immediately following such change in control, and a number of PSUs equal to the product of (x) the number of PSUs granted multiplied by (y) a fraction, the numerator of which is the number of days that elapsed from January 1, 2020 through the date of the change in control and the denominator of which is the number of days from January 1, 2022 through December 31, 2022, shall be deemed earned and shall vest immediately upon such change in control. Any PSUs that are deemed earned shall vest and be settled as soon as administratively feasible, but in no event later than 14 days following such change in control, in an amount of cash equal to the fair market value of such vested PSUs on the date of the change in control.

(8)Messrs. Knight, Johns, Alness, and Ms. Frederix, do not have a resignation with good reason provision in employment arrangements that would entitle them to any additional benefits beyond any benefits that have already vested as of December 31, 2020.

In addition to these benefits, our NEOs would also generally be entitled to receive the benefits set forth above in the Pension Benefits Table and Nonqualified Deferred Compensation Table following a termination of employment for any reason.

Other Change-in-Control Payments

NEOs will be entitled to accelerated vesting of their outstanding unvested equity awards under the 2019 MIP, as reflected above, in connection with certain corporate transactions or change-in-control transactions. In addition, under the 2016 LTIP Awards, the service components of the awards would be deemed satisfied upon a change-in-control transaction but the performance conditions would not be deemed satisfied upon a change-in-control transaction.

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PAY RATIO DISCLOSURE

As required by Section 953(b) of the Dodd-Frank Wall Street Reform and Consumer Protection Act, and Item 402(u) of Regulation S-K, following is information about the relationship of the annual total compensation of our employees and the total compensation of Mr. Craig Rogerson, our CEO. The pay ratio included in this information is a reasonable estimate calculated in a manner consistent with Item 402(u) of Regulation S-K.

For the most recently completed fiscal year ended December 31, 2020:

•The median of the annual total compensation of all our employees (other than our CEO) was $78,495; and

•The annual total compensation of our CEO was $7,807,674.

Pay Ratio


Annual Total Compensation of Mr. Rogerson, our CEO	Median of the Annual Total Compensation of All Employees	Pay Ratio
$7,807,674	$78,495	99

Methodology

Consistent with Item 402(u) of Regulation S-K, we have determined the median paid employee’s to-date average foreign exchange rates were used to translate the local currency to U.S dollars for the median paid employee for 2020. The pay ratio was 357 to 1 in 2019, primarily due to the one-time stock award granted to Mr. Rogerson in 2019. In 2020, the pay ratio decreased to 99 to 1, as Mr. Rogerson’s 2020 annual grant was less than his one-time stock award in 2019.

The table below lists the components of total compensation for Mr. Rogerson:


Compensation Component	Annualized Amount
Salary	$	1,250,000
Bonus	99,445
Stock Awards	5,925,000
Non-Equity Incentive Plan	415,953
Change in Pension Value and Non-qualified Deferred Compensation Earnings	2,235
All Other Compensation:
Employer 401(k) match (qualified plan)	14,250
Employer annual retirement contribution (qualified plan)	8,550
Employer supplemental executive retirement plan contribution, including interest credits (non-qualified plan)	92,241
Commuting and housing allowance, including tax gross-up	—
Total annualized compensation	$	7,807,674

DIRECTOR COMPENSATION

The following table presents information regarding the compensation earned or paid during 2020 to our directors who are not also NEOs and who served on the Board of Directors of Hexion Holdings during the year.


Name	Fees Earned or Paid in Cash ($)	Stock Awards	Total ($)
Carol S. Eicher(1)	117,500	326,523	444,023
Patrick Bartels(1)	125,000	326,523	451,523
Joaquin Delgado(1)	110,000	326,523	436,523
Jeffrey D. Benjamin(1)	170,000	410,800	580,800
James N. Chapman(1)	140,000	326,523	466,523
Stephen D. Newlin(1)	110,000	326,523	436,523
Michael J. Shannon(1)	125,000	326,523	451,523
John K. Wulff(1)	130,000	326,523	456,523

Narrative to the Director Compensation Table

The members of the new independent board of directors were selected based on their qualifications and prior experience in the chemical industry and prior service on similar boards. The Company engaged a consultant to assist with determining our new directors’ compensation arrangements based on a review and analysis of the director compensation arrangements of the Company’s peer group of companies. Based on that analysis and the consultant’s recommendation, as well as the level of activity expected of the Company’s directors

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over the next few years, the Company adopted the following compensation arrangement for directors which will be evaluated on an annual basis:


Compensation Type						Amount ($)
Regular Board Service Annual Cash Retainer						100,000
Regular Board Service Annual Equity Grant						110,000
Lead Director Annual Cash Retainer						130,000
Lead Director Annual Equity Grant						140,000
Audit Committee Chair Retainer						25,000
Compensation Committee Chair Retainer						20,000
Nominating & Governance Committee Chair Retainer						12,500
Environmental, Health & Safety Committee Chair Retainer						20,000
Listing Committee Chair Retainer						25,000
Audit Committee Member Retainer						10,000
Listing Committee Member Retainer						10,000
Compensation Committee Member Retainer						5,000
Nominating & Governance Committee Member Retainer						5,000
Environmental, Health & Safety Committee Member Retainer						5,000

During 2020, Directors received grants of time-based restricted stock units (RSUs) on January 31, 2020 and August 14, 2020. The RSUs granted on January 31, 2020 reflect the initial equity grant made to directors following the Company’s emergence from Chapter 11 on July 1, 2019. These RSUs vest in three equal annual installments on July 1, 2020, July 1, 2021 and July 1, 2022. The RSUs granted on August 14, 2020 reflect the 2020 annual equity grant and vest in three equal annual installments on June 1, 2021, June 1, 2022 and June 1, 2023. Settlement of the RSUs granted on August 14, 2020 is deferred until the Director leaves Board service. The table below shows the current number of unvested RSUs held by each of our directors.


Name						Unvested RSUs
Carol S. Eicher						16,222
Patrick Bartels						16,222
Joaquin Delgado						16,222
Jeffrey D. Benjamin						20,445
James N. Chapman						16,222
Stephen D. Newlin						16,222
Michael J. Shannon						16,222
John K. Wulff						16,222

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

Messrs. Benjamin, Chapman, Newlin, and Wulff, whose names appear on the Compensation Committee Report above, are not employed by Hexion Holdings. None of these directors is or has been an executive officer of the Company. None of our executive officers served as a director or a member of a compensation committee (or other committee serving an equivalent function) of any other entity, the executive officers of which served as a director or member of our Compensation Committee during the fiscal year ended December 31, 2020.

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ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED SHAREHOLDER MATTERS

Hexion Holdings is our ultimate parent company and indirectly owns 100% of our capital stock. The following table sets forth information available to the Company regarding the beneficial ownership of Hexion Holdings, as of December 31, 2020, unless otherwise noted below, and showing the combined number of Class B common Stock and warrants, granting rights to purchase Class B Common Stock, and the percentage owned by:

•each person known to beneficially own more than 5% of the Class B common Stock of Hexion Holdings;

•each of Hexion’s 2020 Named Executive Officers;

•each current member of the Board of Directors of Hexion Holdings; and

•all of the executive officers and current members of the Board of Directors of Hexion Holdings as a group.

As of December 31, 2020, Hexion Holdings had 58,529,727 Class B Common Stock issued and 57,568,295 outstanding as well as 10,177,908 outstanding warrants. The amounts and percentages of common units and warrants beneficially owned are reported on the basis of regulations of the SEC governing the determination of beneficial ownership of securities. Under the rules of the SEC, a person is deemed to be a “beneficial owner” of a security if that person has or shares “voting power,” which includes the power to vote or to direct the voting of such security, or “investment power,” which includes the power to dispose of or to direct the disposition of such security. A person is also deemed to be a beneficial owner of any securities of which that person has a right to acquire beneficial ownership within 60 days. Under these rules, more than one person may be deemed a beneficial owner of the same securities and a person may be deemed a beneficial owner of securities as to which he has no economic interest. Except as otherwise indicated in the footnotes below, each of the beneficial owners has, to our knowledge, sole voting and investment power with respect to the indicated Class B Common Stock and warrants, and has not pledged any such units as security.


	Beneficial Ownership of Equity Securities
Name of Beneficial Owner	Amount of Beneficial Ownership	Percent of Outstanding Equity
Funds affiliated with Goldentree Asset Management, LP(1)	13,423,984	21.5%
Funds and managed accounts affiliated with Cyrus Capital Partners, L.P.(2)	9,205,306	14.9%
Funds affiliated with Monarch Alternative Capital LP(3)	6,603,589	11.2%
Funds affiliated with Blackstone(4)	5,568,963	9.7%
Funds affiliated with Brigade Capital Management, L.P.(5)	4,628,811	8.0%
Funds affiliated with Davidson Kempner Capital Management, L.P.(6)	3,911,170	6.8%
Funds affiliated with Capital Research & Management Company (U.S.)(7)	3,185,752	5.5%
Funds affiliated with Oak Hill Advisors, L.P.(8)	3,127,867	5.4%
Funds affiliated with Loomis Sayles & Company, L.P.(9)	3,055,040	5.3%
Patrick J. Bartels(10)	—	*
Jeffrey D. Benjamin(10)	—	*
James N. Chapman(10)	—	*
Joaquin Delgado(10)	—	*
Carol S. Eicher(10)	—	*
Michael J. Shannon(10)	—	*
John K. Wulff(10)	—	*
Stephen D. Newlin(10)	—	*
Craig A. Rogerson (11)	—	*
George F. Knight (11)	—	*
John P. Auletto (11)	—	*
Nathan E. Fisher (11)	—	*
Douglas A. Johns (11)	—	*
Matthew A. Sokol (11)	—	*
Paul G. Barletta (11)	—	*
Ann Frederix (11)	—	*
Mark Alness(11)	—	*
All Directors and Executive Officers as a group	—	*

* less than 1%

(1)As of February 16, 2021. Includes 4,762,314 shares issuable upon exercise of a warrants issued on July 1, 2019. The shares and warrants are owned by funds managed by GoldenTree Asset Management, LP, whose address is 300 Park Ave, New York, NY 10022.

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(2)As of February 16, 2021. Includes 4,151,668 shares issuable upon exercise of a warrants issued on July 1, 2019. The address of Cyrus Capital Partners, LP is 65 East 55 Street, 34th Floor, New York, NY 10022

(3)As of February 16, 2021. Includes 1,263,926 shares issuable upon exercise of a warrants issued on July 1, 2019. Monarch Alternative Capital LP (“MAC”) serves as advisor or agent to certain funds and entities that hold the securities referenced. By virtue of the agreements governing such relationships, MAC may be deemed to beneficially own such securities. MDRA GP LP (“MDRA GP”) is the general partner of MAC and Monarch GP LLC (“Monarch GP”) is the general partner of MDRA GP. By virtue of such relationships, MAC, MDRA GP and Monarch GP may be deemed to share voting and dispositive power over the securities. The address for these entities is 535 Madison Avenue, 26th Floor, New York, New York 10022.

(4)As of February 16, 2021. Represents (i) 375,006 shares held directly by GSO Churchill Partners LP, (ii) 1,708,340 shares held directly by GSO Credit Alpha II Trading (Cayman) LP, and (iii) 3,485,617 shares held directly by GSO CSF III Holdco (Cayman) LP (and, collectively with GSO Churchill Partners LP and GSO Credit Alpha II Trading (Cayman) LP, the “BXC Funds”). GSO Churchill LLC is the general partner of GSO Churchill Partners LP. GSO Credit Alpha Associates II LP is the general partner of GSO Credit Alpha II Trading (Cayman) LP. The general partners of GSO Credit Alpha Associates II LP are GSO Credit Alpha Associates II (Delaware) LLC and GSO Credit Alpha Associates II (Cayman) Ltd. GSO Capital Solutions Associates III LP is the general partner of GSO CSF III Holdco (Cayman) LP. The general partners of GSO Capital Solutions Associates III LP are GSO Capital Solutions Associates III (Delaware) LLC and GSO Capital Solutions Associates III (Cayman) Ltd. GSO Holdings I L.L.C. is the managing member of each of GSO Churchill LLC, GSO Credit Alpha Associates II (Delaware) LLC and GSO Capital Solutions Associates III (Delaware) LLC, and a shareholder of each of GSO Credit Alpha Associates II (Cayman) Ltd. and GSO Capital Solutions Associates III (Cayman) Ltd. Blackstone Holdings II L.P. is the managing member of GSO Holdings I L.L.C. with respect to securities beneficially owned by the BXC Funds. Blackstone Holdings I/II GP L.L.C. is the general partner of Blackstone Holdings II L.P. The Blackstone Group Inc. is the sole member of Blackstone Holdings I/II GP L.L.C. Blackstone Group Management L.L.C. is the sole holder of the Class C common stock of The Blackstone Group Inc. Blackstone Group Management L.L.C. is wholly-owned by Blackstone’s senior managing directors and controlled by its founder, Stephen A. Schwarzman. Each of the foregoing entities and Mr. Schwarzman disclaims beneficial ownership of the securities held directly by the BXC Funds (other than the BXC Funds to the extent of their direct holdings). The principal business address of each is 345 Park Avenue, New York, NY 10154.

(5)As of February 17, 2021. Brigade is Brigade Capital Management, LP (on behalf of its various funds and accounts). The address is 399 Park Avenue, 16th Floor, New York, NY 10022.

(6)The address of Davidson Kempner Capital Management, L.P. is 520 Madison Avenue, 30th Floor, New York, NY 10022. The share amount listed has been obtained from a third-party source and has not been confirmed by Davidson Kempner Capital Management, L.P.

(7)As of January 22, 2021. The address of Capital Research & Management Company is 333 S. Hope St., 55th Floor, Los Angeles, CA 90071. The share amount listed has been obtained from a third-party source and has not been confirmed by Capital Research & Management Company.

(8)As of January 22, 2021. The address of Oak Hill Advisors, L.P. is 114 Avenue of the Americas, 27th Floor, New York, NY 10036. The share amount listed has been obtained from a third-party source and has not been confirmed by Oak Hill Advisors, L.P.

(9)The address of Loomis, Sayles & Company, L.P. is One Financial Ctr., Boston, MA 02111.

(10)The address for Messrs. Bartels, Benjamin, Chapman, Delgado, Shannon, Wulff, Newlin and Ms. Eicher is c/o Hexion Inc., 180 E. Broad St., Columbus, Ohio 43215

(11)The address for Messrs. Rogerson, Knight, Auletto, Fisher, Johns, Sokol, Barletta, Alness and Ms. Frederix is c/o Hexion Inc., 180 E. Broad St., Columbus, Ohio 43215.

As of December 31, 2020, Hexion Inc. has no compensation plans that authorize issuing our common stock to employees or non-employees. In addition, there have been no sales or repurchases of our equity securities during the past fiscal year. However, our Parent Company, Hexion Holdings, has issued and may issue from time to time equity awards to our employees and directors that are denominated in or based upon the Class B Common Stock of Hexion Holdings. As the awards were granted in exchange for service to us these awards are included in our consolidated financial statements. For a discussion of these equity plans see Note 16 in Item 8 of Part II and Item 11 of Part III of this Annual Report on Form 10-K. Additionally, our Parent Company, Hexion Holdings, has repurchased 961,432 Class B Common Stock and 47,537 warrants during the year ended December 31, 2020.

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ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

Review, Approval or Ratification of Transactions with Related Persons

We have a written Statement of Policy and Procedures Regarding Related Person Transactions that has been adopted by our Board of Directors.

The policy requires the Company to establish and maintain procedures for identifying potential or existing transactions between the Company and related persons. The policy generally adopts the definitions of “related person” and “transaction” set forth in Regulation S-K Item 404 under the Securities Act of 1933 and the Securities Exchange Act of 1934.

The types of transactions that are covered by our policy include financial and other transactions, arrangements or relationships in which the Company or any of its subsidiaries is a participant and in which a related person has a direct or indirect material interest, where the amount involved exceeds $75,000.

Related persons include directors and director nominees, executive officers, shareholders beneficially owning more than 5% of the Company’s voting stock, and immediate family members of any of the previously described persons. A related person could also be an entity in which a director, executive officer or 5% shareholder is an employee, general partner or 5% shareholder.

Transactions identified by management that are between the Company and a related person that involve amounts exceeding $75,000 will be reviewed by the Board of Directors, the Audit Committee, or another appropriate committee of the Board of Directors. In certain situations, the Board or a committee may delegate authority to an individual Board member to review related person transactions.

Under the policy, the Board of Directors or a committee of the Board of Directors is directed to approve only those related person transactions that are determined by them in good faith to be in, or not inconsistent with, the best interest of the Company and its shareholders. In making this determination, all available, relevant facts and circumstances will be considered, including the benefits to the Company; the impact of the transaction on the related person’s independence; the availability of other sources of comparable products or services; the terms of the transaction; and the terms available to unrelated third parties or to employees in general.

Our policy recognizes that there are situations where related person transactions may be in, or may not be inconsistent with, the best interests of the Company and its shareholders, especially while we are a “controlled company.”

There were no material related person transactions where our policies and procedures did not require review, approval or ratification or where such policies and procedures were not followed.

Related Transactions

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. The disclosures below are through July 1, 2019 and only reflect the time period when Apollo was a related party. Sales to various Apollo affiliates were $1 million and $2 million for the Predecessor period January 1, 2019 through July 1, 2019 and for the year ended December 31, 2018. There were no purchases during the Predecessor period January 1, 2019 through July 1, 2019 and for the year ended December 31, 2018.

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 million 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, MPM was no longer under the common control of Apollo and, accordingly, is no longer a related party to the Company. During the year ended December 31, 2018, the Company sold less than $1 million of products to MPM. 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 and the year ended December 31, 2018, the Company earned less than $1 million from MPM as compensation for acting as distributor of products and had purchases of $10 million and $32 million, respectively.

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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 and the year ended December 31, 2018, the Company incurred approximately $15 million and $28 million, respectively, of net costs for shared services and MPM incurred approximately $14 million and $21 million of net costs for shared services. Included in the net costs incurred during the Predecessor period January 1, 2019 through July 1, 2019 and the year ended December 31, 2018 were net billings from Hexion to MPM of $11 million and $14 million, respectively.

Other Transactions and Arrangements

In March 2020, the Company entered into a $10 million 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 million non-cash distribution to its Parent treated as a return of capital to settle this affiliate loan. The Company made an additional $3 million return of capital distribution to its Parent to fund additional Parent share repurchases in December 2020. This return of capital reduced “Paid-in capital” in the Consolidated Balance Sheet at December 31, 2020.

The Company sells products and provides services to, and purchases products from, its other joint ventures which are accounted for 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				Predecessor
	Year Ended December 31, 2020		July 2, 2019 through December 31, 2019		January 1, 2019 through July 1, 2019		Year Ended December 31, 2018
(in millions)
Sales to joint ventures(1)(2)	$	2	$	2	$	2	$	9
Purchases from joint ventures(2)	1		2		2		6

(1)Sales to joint ventures includes sales to the Russia JV of $1 million, $1 million, $1 million, and $7 million for the year ended December 31, 2020, the Successor period July 2, 2019 through December 31, 2019, the Predecessor period January 1, 2019 through July 1, 2019 and the year ended December 31, 2018 and is included in the Held for Sale Business.

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


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

In addition to the accounts receivable from joint ventures disclosed above, the Company had a loan receivable of $4 million and $7 million as of December 31, 2020 and 2019, respectively, from the Russia JV. This loan receivable has been included in “Long-term assets held for sale” within the Consolidated Balance Sheets.

Director Independence

We and Hexion Holdings have no securities listed for trading on a national securities exchange or in an automated inter-dealer quotation system of a national securities association which has requirements that a majority of our Board of Directors be independent. However, for purposes of complying with the disclosure requirements of the Securities and Exchange Commission, we and Hexion Holdings have adopted the definition of independence used by the New York Stock Exchange. Under the New York Stock Exchange’s definition of independence, Messrs. Bartels, Benjamin, Chapman, Delgado, Shannon, Wulff, Newlin and Ms. Eicher are independent.

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ITEM 14 - PRINCIPAL ACCOUNTING FEES AND SERVICES

PricewaterhouseCoopers LLP (“PwC”) is the Company’s principal accounting firm. The following table sets forth the fees billed by PwC to the Company in 2020 and 2019 (in millions):


	PwC
	2020		2019
Audit fees (1)	$	4.2	$	7.0
Audit-related fees (2)	0.2		0.2
Tax fees (3)	0.6		1.5
Other fees (4)	1.4		0.1
Total	$	6.4	$	8.8

(1)Audit Fees: This category includes fees and expenses billed by PwC for the audits of the Company’s financial statements and for the reviews of the financial statements included in the Company’s Quarterly Reports on Form 10-Q. This category includes audit fees and expenses for engagements performed at U.S. and international locations.

(2)Audit-Related Fees: This category includes fees and expenses billed by PwC for assurance and related services that are reasonably related to the performance of the audit or review of the Company’s financial statements. This category includes fees for the reviews of SEC registration statements and other SEC reporting services as well as audit fees for other stand-alone financial statements of certain entities of the registrant.

(3)Tax Fees: This category includes fees and expenses billed by PwC for domestic and international tax compliance, planning services, tax advice and assistance with bankruptcy.

(4)Other Fees: This category includes other fees billed for non-recurring work, related to transactions, due diligence or other one-time services.

Pre-Approval Policy and Procedures

Under a policy adopted by the Audit Committee, all audit and non-audit services provided by our principal accounting firms must be pre-approved by the Audit Committee or a member designated by the Audit Committee. All services pre-approved by the designated member are reported to the full Audit Committee at its next regularly scheduled meeting. The pre-approval of audit and non-audit services may be made at any time up to a year before the commencement of the specified service. Under the policy, the Company is prohibited from using its principal accounting firms for certain non-audit services, the list of which is based upon the list of prohibited activities in the SEC’s rules and regulations. Pursuant to the pre-approval provisions set forth above, the Audit Committee approved all services related to the Audit Fees described in (1) above.

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PART IV

ITEM 15 - EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(1)Consolidated Financial Statements – The financial statements and related notes of Hexion Inc., and the reports of independent registered public accounting firms are included at Item 8 of this report.

(2)Financial Statement Schedules – Schedule II – Valuation and Qualifying Accounts and Reserves. All other schedules are omitted because they are not applicable or not required, or because that required information is shown in either the Consolidated Financial Statements or in the notes thereto.

(3)Exhibits Required by SEC Regulation S-K – The following Exhibits are filed herewith or incorporated herein by reference:


		Incorporated by Reference
Exhibit Number	Exhibit Description	Form	File Number	Exhibit	Filing Date	Filed Herewith
2.1†	Transaction Agreement dated as of April 22, 2005 among RPP Holdings, Resolution Specialty Materials Holdings LLC, BHI Acquisition Corp., BHI Merger Sub One, BHI Merger Sub Two Inc. and Borden Chemical Inc.	S-1/A	333-124287	2.1	7/15/2005
2.2†	SOC Resins Master Sale Agreement dated July 10, 2000 among Shell Oil Company, Resin Acquisition, LLC and Shell Epoxy Resins Inc.	S-4	333-57170	2.1	3/16/2001
2.3†	SPNV Resins Sale Agreement dated as of September 11, 2000 between Shell Petroleum N.V. and Shell Epoxy Resins Inc.	S-4	333-57170	2.2	3/16/2001
2.4	Assignment and Assumption Agreement dated November 13, 2000 between Shell Epoxy Resins Inc. and Shell Epoxy Resins LLC	S-4	333-57170	2.3	3/16/2001
2.5	Assignment and Assumption Agreement dated November 14, 2000 between Resin Acquisition, LLC and RPP Holdings LLC	S-4	333-57170	2.4	3/16/2001
3.1	Restated Certificate of Incorporation of Hexion Inc. dated as of January 15, 2015	10-K	001-00071	3.1	3/10/2015
3.2	Amended and Restated Bylaws of Hexion Inc.	10-K	001-00071	3.2	3/10/2015
4.1	Form of Indenture between Borden, Inc. and The Bank of New York, as Trustee, dated as of December 15, 1987, as supplemented by the First Supplemental Indenture dated as of December 15, 1987, the Second Supplemental Indenture dated as of February 1, 1993 and the Third Supplemental Indenture dated as of June 26, 1996, related to the $200,000,000 9.20% Debentures due 2021 and $750,000,000 7.875% Debentures due 2023	S-3	33-45770	4(a) thru 4(d)
4.2	Indenture, dated as of January 29, 2010, by and among Hexion Finance Escrow LLC, Hexion Escrow Corporation and Wilmington Trust FSB, as trustee, related to the $1,000,000,000 8.875% Senior Secured Notes due 2018	8-K	001-00071	4.1	2/4/2010
4.3	Supplemental Indenture, dated as of January 29, 2010, by and among Hexion U.S. Finance Corp., Hexion Nova Scotia Finance, ULC, the guarantors party thereto and Wilmington Trust FSB, as trustee, related to the 8.875% Senior Secured Notes due 2018	8-K	001-00071	4.2	2/4/2010
4.4	Supplemental Indenture, dated as of June 4, 2010, by and among NL COOP Holdings LLC, Hexion U.S. Finance Corp., Hexion Nova Scotia Finance, ULC, the guarantors party thereto and Wilmington Trust Company, as trustee, related to the 8.875 Senior Secured Notes due 2018	8-K	001-00071	4.1	6/9/2010
4.5	Second Supplemental Indenture, dated as of January 14, 2013, among Hexion U.S. Finance Corp., Hexion Nova Scotia Finance, ULC, Momentive Specialty Chemicals Inc., the subsidiary guarantors party thereto and Wilmington Trust, National Association, as trustee, related to the additional $200,000,000 8.875% Senior Secured Notes due 2018	8-K	001-00071	4.1	1/18/2013
4.6	Third Supplemental Indenture, dated as of December 2, 2014, by and among Momentive Specialty Chemicals Inc., Hexion Nova Scotia Finance ULC, the guarantors party thereto and Wilmington Trust, National Association, as trustee, related to the 8.875% Senior Secured Notes due 2018	8-K	001-00071	4.2	12/5/2014
4.7	Indenture, dated as of November 5, 2010, among Hexion U.S. Finance Corp., Hexion Nova Scotia Finance, ULC, the Company, the guarantors named therein and Wilmington Trust Company, as trustee, related to the $574,016,000 9.0% Second-Priority Senior Secured Notes due 2020	8-K	001-00071	4.1	11/12/2010
4.8	First Supplemental Indenture, dated as of December 2, 2014, by and among Momentive Specialty Chemicals Inc., Hexion Nova Scotia Finance ULC, the guarantors party thereto and Wilmington Trust Company, as trustee, related to the 9.00% Second-Priority Senior Secured Notes due 2020	8-K	001-00071	4.3	12/2/2014
4.9	Second Supplemental Indenture, dated as of June 19, 2018 among Hexion Deer Park LLC, Hexion Inc, Hexion Nova Scotia Finance, ULC and Wilmington Trust Company, as trustee.	10-Q	001-00071	4.5	11/13/2018
4.10	Indenture, dated as of March 14, 2012, among Hexion U.S. Finance Corp., Momentive Specialty Chemicals Inc., the guarantors named therein and Wilmington Trust, National Association, as trustee, related to the $450,000,000 First-Priority Senior Secured Notes due 2020	8-K	001-00071	4.1	3/20/2012

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		Incorporated by Reference
Exhibit Number	Exhibit Description	Form	File Number	Exhibit	Filing Date	Filed Herewith
4.11	First Supplemental Indenture, dated as of January 31, 2013, among Hexion U.S. Finance Corp., Momentive Specialty Chemicals Inc., the subsidiary guarantors party thereto and Wilmington Trust, National Association, as trustee, related to the additional $1,100,000,000 First-Priority Senior Secured Notes due 2020	8-K	001-00071	4.1	2/6/2013
4.12	Second Supplemental Indenture, dated as of March 28, 2013, by and among Hexion U.S. Finance Corp., the guarantors party thereto and Wilmington Trust, National Association, as trustee, related to the 6.625% First-Priority Senior Secured Notes due 2020	8-K	001-00071	4.1	4/3/2013
4.13	Third Supplemental Indenture, dated as of December 2, 2014, by and among Momentive Specialty Chemicals Inc., the guarantors party thereto and Wilmington Trust, National Association, as trustee, related to the 6.625% First-Priority Senior Secured Notes due 2020	8-K	001-00071	4.1	12/2/2014
4.14	Fourth Supplemental Indenture, dated as of June 19, 2018, among Hexion Deer Park LLC, Hexion Inc. and Wilmington Trust, National Association, as trustee.	10-Q	001-00071	4.1	11/13/2018
4.15	Indenture, dated as of April 15, 2015, by and among Hexion Inc., the Guarantors named therein and Wilmington Trust, National Association, as trustee, related to the $315,000,000 10.00% First-Priority Senior Secured Notes due 2020	8-K	001-00071	4.1	4/15/2015
4.16	First Supplemental Indenture, dated as of June 19, 2018, among Hexion Inc., Hexion Deer Park LLC and Wilmington Trust, National Association, as trustee.	10-Q	001-00071	4.2	11/13/2018
4.17	Indenture, dated as of February 8, 2017, between Hexion 2 U.S. Finance Corp. and Wilmington Trust, National Association, as trustee, related to the $485,000,000 10.375% First-Priority Senior Secured Notes due 2022.	8-K	001-00071	4.1	2/10/2017
4.18	Supplemental Indenture, dated as of February 8, 2017, among Hexion Inc., the guarantors party thereto and Wilmington Trust, National Association, as trustee, related to the $485,000,000 10.375% First-Priority Senior Secured Notes due 2022.	8-K	001-00071	4.2	2/10/2017
4.19	Second Supplemental Indenture, dated as of May 12, 2017, by and among Hexion Inc., the guarantors party thereto and Wilmington Trust, National Association, as trustee, related to the $75,000,000 additional 10.375% First-Priority Senior Secured Notes due 2022.	8-K	001-00071	4.1	5/12/2017
4.20	Third Supplemental Indenture, dated as of June 19, 2018, among Hexion Inc., Hexion Deer Park LLC and Wilmington Trust, National Association, as trustee.	10-Q	001-00071	4.3	11/13/2018
4.21	Indenture, dated as of February 8, 2017, among Hexion Inc., the guarantors named therein and Wilmington Trust, National Association, as trustee, related to the $225,000,000 13.75% Senior Secured Notes due 2022.	8-K	001-00071	4.3	2/10/2017
4.22	First Supplemental Indenture, dated as of June 19, 2018, among Hexion Inc., Hexion Deer Park LLC and Wilmington Trust, National Association, as trustee.	10-Q	001-00071	4.4	11/13/2018
4.23	Indenture, dated as of July 1, 2019, by and among Hexion Inc., the subsidiary guarantors party thereto from time to time named therein and Wilmington Trust, National Association as Trustee, related to the $	8-K	001-00071	4.1	7/2/2019
4.24	Agreement of Resignation, Appointment and Acceptance, dated as of March 29, 2019, among Hexion Inc., Wilmington Trust, National Association and Wilmington Savings Fund Society, FSB, related to the 13.75% Senior Secured Notes due 2022.	8-K	001-00071	4.1	4/1/2019
4.25	Agreement of Resignation, Appointment and Acceptance, dated as of April 9, 2019, among Hexion Inc., Wilmington Trust, National Association and U.S. Bank National Association, related to the 6.625% First-Priority Senior Secured Notes due 2020, the 10.00% First-Priority Senior Secured Notes due 2020 and the 10.375% First-Priority Senior Secured Notes due 2022.	10-K	001-00071	4.24	4/11/2019
10.1‡	BHI Acquisition Corp. 2004 Deferred Compensation Plan	10-Q	001-00071	10(iv)	11/15/2004
10.2‡	BHI Acquisition Corp. 2004 Stock Incentive Plan	10-Q	001-00071	10(v)	11/15/2004
10.3‡	Resolution Performance Products Inc. 2000 Stock Option Plan	S-4	333-57170	10.26	3/16/2001
10.4‡	Resolution Performance Products Inc. 2000 Non - Employee Directors Stock Option Plan	S-4	333-57170	10.27	3/16/2001
10.5‡	Amended and Restated Resolution Performance Products, Inc. Restricted Unit Plan, as amended and restated May 31, 2005	S-1/A	333-124287	10.34	9/19/2005
10.6‡	Form of Non-Qualified Stock Option Agreement between BHI Acquisition Corp. and certain optionees	S-4	333-122826	10.12	2/14/2005
10.7‡	Resolution Specialty Materials Inc. 2004 Stock Option Plan	S-1/A	333-124287	10.52	7/15/2005
10.8‡	Form of Nonqualified Stock Option Agreement for Resolution Specialty Materials Inc. 2004 Stock Option Plan	S-1/A	333-124287	10.53	7/15/2005
10.9‡	Form of Nonqualified Stock Option Agreement for Resolution Performance Products Inc. 2000 Stock Option Plan	S-1/A	333-124287	10.54	7/15/2005

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		Incorporated by Reference
Exhibit Number	Exhibit Description	Form	File Number	Exhibit	Filing Date	Filed Herewith
10.10‡	Form of Nonqualified Stock Option Agreement for Resolution Performance Products Inc. 2000 Non-Employee Director Stock Option Plan	S-1/A	333-124287	10.55	7/15/2005
10.11‡	Hexion LLC 2007 Long-Term Incentive Plan dated April 30, 2007	10-Q	001-00071	10.1	8/14/2007
10.12	Amended and Restated Investor Rights Agreement dated as of May 31, 2005 between Hexion LLC, Hexion Specialty Chemicals, Inc. and the holders that are party thereto	S-1/A	333-124287	10.63	7/15/2005
10.13	Registration Rights Agreement dated as of May 31, 2005 between Hexion Specialty Chemicals, Inc. and Hexion LLC	S-1/A	333-124287	10.64	7/15/2005
10.14‡	Amended and Restated Executives’ Supplemental Pension Plan for Hexion Specialty Chemicals, Inc., dated as of September 7, 2005	8-K	001-00071	10	9/12/2005
10.15‡	Amended and Restated Employment Agreement dated as of August 12, 2004 between Hexion Specialty Chemicals, Inc. and Joseph P. Bevilaqua	10-Q	001-00071	10(ii)	11/15/2004
10.16‡	Summary of Terms of Employment between Hexion Specialty Chemicals, Inc. and Joseph P. Bevilaqua dated August 10, 2008	10-K	001-00071	10.23	3/9/2010
10.17‡	Momentive Specialty Chemicals Inc. Supplemental Executive Retirement Plan, dated as of December 31, 2011	8-K	001-00071	99.1	1/6/2012
10.18	Master Asset Conveyance and Facility Support Agreement, dated as of December 20, 2002, between Borden Chemical and Borden Chemicals and Plastics Operating Limited Partnership	10-K	001-00071	(10)(xxvi)	3/28/2003
10.19	Environmental Servitude Agreement, dated as of December 20, 2002, between Borden Chemical and Borden Chemicals and Plastics Operating Limited Partnership	10-K	001-00071	(10)(xxvii)	3/28/2003
10.20	Intellectual Property Transfer and License Agreement and Contribution Agreement dated as of November 14, 2000 between Shell Oil Company and Shell Epoxy Resins LLC	S-4	333-57170	10.13	3/16/2001
10.21	Intellectual Property Transfer and License Agreement and Contribution Agreement dated as of November 14, 2000 between Shell Internationale Research Maatschappij B.V. and Shell Epoxy Resins Research B.V	S-4	333-57170	10140	3/16/2001
10.22	First Amended and Restated Deer Park Site Services, Utilities, Materials and Facilities Agreement dated November 1, 2000 between Shell Chemical Company, for itself and as agent for Shell Oil Company, and Shell Epoxy Resins LLC	S-4	333-57170	10190	3/16/2001
10.23	First Amended and Restated Pernis Site Services, Utilities, Materials and Facilities Agreement dated November 1, 2000 between Resolution Europe B.V. (f/k/a Resolution Nederland B.V., f/k/a Shell Epoxy Resins Nederland B.V.) and Shell Nederland Raffinaderij B.V.	S-4	333-57170	10210	3/16/2001
10.24	First Amended and Restated Pernis Site Services, Utilities, Materials and Facilities Agreement dated November 1, 2000 between Resolution Europe B.V. (f/k/a Resolution Nederland B.V., f/k/a Shell Epoxy Resins Nederland B.V.) and Shell Nederland Chemie B.V.	S-4	333-57170	10220	3/16/2001
10.25†	Second Amended and Restated Norco Site Services, Utilities, Materials and Facilities Agreement dated November 1, 2004 between Shell Chemical L.P. and Resolution Performance Products LLC.	10-K	001-00071	10450	3/22/2007
10.26	Deer Park Ground Lease and Grant of Easements dated as of November 1, 2000 between Shell Oil Company and Shell Epoxy Resins LLC	S-4	333-57170	10230	3/16/2001
10.27	Norco Ground Lease and Grant of Servitudes dated as of November 1, 2000 between Shell Oil Company and Shell Epoxy Resins LLC	S-4	333-57170	10240	3/16/2001
10.28	Amended and Restated Agreement of Sub-Lease (Pernis) dated as of November 1, 2000 between Resolution Europe B.V. (f/k/a Resolution Nederland B.V., f/k/a Shell Epoxy Resins Nederland B.V.) and Shell Nederland Raffinaderij B.V.	S-4	333-57170	10250	3/16/2001
10.29	Amended and Restated Management Consulting Agreement dated as of May 31, 2005 between Borden Chemical, Inc. and Apollo Management V, L.P.	S-1/A	333-124287	10660	7/15/2005
10.30	Collateral Agreement dated as of November 3, 2006 among Hexion Specialty Chemicals, Inc. and subsidiary parties thereto, and Wilmington Trust Company, as Collateral Agent	10-K	001-00071	10570	3/11/2009
10.31	Credit Agreement with exhibits and schedules dated as of March 3, 2009 among Hexion Specialty Chemicals, Inc., Borden Luxembourg S.a.r.l., Euro V (BC) S.a.r.l., Euro VI (BC) S.a.r.l. and AAA Co-Invest VI (EHS-BC) S.a.r.l.	10-Q	001-00071	10400	8/13/2009
10.32	SUPPLEMENT dated as of June 4, 2010, to the Collateral Agreement dated as of November 3, 2006, among HEXION SPECIALTY CHEMICALS, INC., a New Jersey corporation, each Subsidiary Party party thereto and WILMINGTON TRUST COMPANY, as Collateral Agent (in such capacity, the “Collateral Agent”) for the Secured Parties (as defined therein)	8-K	001-00071	10500	6/9/2010
10.33	Joinder and Supplement to Collateral Agreement dated November 5, 2010 among the Company and subsidiary parties thereto, and Wilmington Trust Company, as trustee and collateral agent	8-K	001-00071	10200	11/12/2010

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		Incorporated by Reference
Exhibit Number	Exhibit Description	Form	File Number	Exhibit	Filing Date	Filed Herewith
10.34‡	Form of Restricted Deferred Unit Award Agreement of Momentive Performance Materials Holdings LLC	S-4	333-172943	10.70	3/18/2011
10.35‡	Form of Unit Option Agreement of Momentive Performance Materials Holdings LLC	S-4	333-172943	10.71	3/18/2011
10.36‡	Form of Director Unit Option Agreement of Momentive Performance Materials Holdings LLC	S-4	333-172943	10.72	3/18/2011
10.37‡	Management Investor Rights Agreement, dated as of February 23, 2011 by and among Momentive Performance Materials Holdings LLC and the Holders	S-4	333-172943	10.73	3/18/2011
10.38	Master Confidentiality and Joint Development Agreement entered into on March 17, 2011 by and between Momentive Performance Materials Inc. and Momentive Specialty Chemicals Inc.	8-K	001-00071	10.2	3/17/2011
10.39	Fourth Joinder and Supplement to Intercreditor Agreement, dated as of March 14, 2013, by and among Wilmington Trust, National Association, as trustee, JPMorgan Chase Bank N.A., as intercreditor agent, Wilmington Trust Company, as trustee and collateral agent and as second-priority agent, Momentive Specialty Chemicals Holdings LLC, Momentive Specialty Chemicals Inc. and each subsidiary of Momentive Specialty Chemicals Inc. party thereto.	8-K	001-00071	10.5	3/20/2012
10.40‡	First Amended Resolution Specialty Materials Inc 2004 Stock Option Plan	10-Q	001-00071	10.1	11/13/2012
10.41‡	First Amended Hexion LLC 2007 Long-Term Incentive Plan	10-Q	001-00071	10.2	11/13/2012
10.42	Fifth Joinder and Supplement to Intercreditor Agreement, dated January 14, 2013, by and among Wilmington Trust, National Association, as trustee, JPMorgan Chase Bank N.A., as intercreditor agent, Wilmington Trust, National Association, as trustee and collateral agent and as second-priority agent, Momentive Specialty Chemicals Holdings LLC, Momentive Specialty Chemicals Inc. and each subsidiary of Momentive Specialty Chemicals Inc. party thereto.	8-K	001-00071	10.2	1/18/2013
10.43	Amended and Restated Intercreditor Agreement, dated as of January 31, 2013, among JPMorgan Chase Bank, N.A., as intercreditor agent, Wilmington Trust Company, as trustee and as collateral agent, Wilmington Trust, National Association (as successor by merger to Wilmington Trust FSB), as senior-priority agent for the holders of the notes issued under the 1.5 Lien Indenture (as defined therein), Wilmington Trust, National Association, as senior-priority agent for the holders of the notes issued under the First Lien Indenture (as defined therein), Momentive Specialty Chemicals Holdings LLC, Momentive Specialty Chemicals Inc. and subsidiaries of Momentive Specialty Chemicals Inc. party thereto.	8-K	001-00071	10.1	2/6/2013
10.44	Additional Secured Party Consent, dated January 31, 2013, among Wilmington Trust Bank, National Association, as trustee and as authorized representative, JPMorgan Chase Bank, N.A., as applicable first lien representative and collateral agent, Momentive Specialty Chemicals Holdings LLC, Momentive Specialty Chemicals Inc. and subsidiaries of Momentive Specialty Chemicals Inc. party thereto.	8-K	001-00071	10.2	2/6/2013
10.45	Amendment No. 1 to the Momentive Performance Materials Holdings LLC 2011 Equity Incentive Plan	8-K	001-00071	10.1	3/6/2013
10.46	Form of Restricted Deferred Unit Agreement of Momentive Performance Materials Holdings LLC	8-K	001-00071	10.2	3/6/2013
10.47	Form of Unit Option Agreement of Momentive Performance Materials Holdings LLC	8-K	001-00071	10.3	3/6/2013
10.48‡	Momentive Performance Materials Holdings LLC 2012 Long-Term Cash Incentive Plan	10-K	001-00071	10.92	4/1/2013
10.49‡	Amended and Restated Momentive Performance Materials Holdings LLC 2011 Equity Incentive Plan	10-K	001-00071	10.93	4/1/2013
10.50	ABL Intercreditor Agreement, dated as of March 28, 2013, by and among JPMorgan Chase Bank, N.A., as the ABL facility collateral agent, Wilmington Trust, National Association, as applicable first-lien agent and first-lien collateral agent, Momentive Specialty Chemicals Inc. and subsidiaries of Momentive Specialty Chemicals Inc. party thereto.	8-K	001-00071	10.2	4/3/2013
10.51	Collateral Agreement, dated as of March 28, 2013, by and among Momentive Specialty Chemicals Inc., subsidiaries of Momentive Specialty Chemicals Inc. party thereto and JPMorgan Chase Bank, N.A. as collateral agent.	8-K	001-00071	10.3	4/3/2013
10.52	Collateral Agreement, dated as of March 28, 2013, by and among Momentive Specialty Chemicals Inc., subsidiaries of Momentive Specialty Chemicals Inc. party thereto and Wilmington Trust, National Association, as collateral agent.	8-K	001-00071	10.4	4/3/2013

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Exhibit
Number

Exhibit Description

Form

File Number

Exhibit

Filing
Date

Filed
Herewith

10.53

Joinder and Supplement to Second Lien Intercreditor Agreement, dated as of March 28, 2013, among JPMorgan Chase Bank, N.A., as ABL credit agreement agent, former intercreditor agent and new intercreditor agent, Wilmington Trust Company, as second-lien trustee, Wilmington Trust, National Association, as 1.5 lien trustee, Wilmington Trust, National Association, as first lien trustee, Momentive Specialty Chemicals Holdings LLC, Momentive Specialty Chemicals Inc. and subsidiaries of Momentive Specialty Chemicals Inc. party thereto.

8-K

Momentive Performance Materials Holdings LLC 2014 Incentive Compensation Plan

10.6

4/3/2013

10.54‡

10-K

Second Amended and Restated Shared Services Agreement, dated as of October 24, 2014, by and among Momentive Specialty Chemicals Inc., Momentive Performance Materials Inc., and the subsidiaries of the Momentive Performance Materials Inc., party thereto

10.87

3/31/2014

10.55‡

8-K

Momentive Performance Materials Holdings LLC Long-Term Cash Incentive Plan

10.1

10/30/2014

10.56‡

10-Q

Form of 2014 Cash-based Long-Term Incentive Award Agreement

10.1

11/10/2014

10.57‡

10-Q

Summary of Terms of Employment between Momentive Performance Materials Inc. and Douglas Johns dated October 3, 2010

10.2

11/10/2014

10.58‡

10-K

First Lien Intercreditor Agreement, dated as of April 15, 2015, among Wilmington Trust, National Association, as collateral agent, Wilmington

10.82

3/10/2015

10.59

8-K

Additional Secured Party Consent, dated April 15, 2015, among Wilmington Trust, National Association, as authorized representative for the new secured parties, Wilmington Trust, National Association, as collateral agent, and Hexion Inc.

10.1

4/15/2015

10.60

8-K

Fourth Joinder and Supplement to Intercreditor Agreement, dated as of April 15, 2015, by and among JPMorgan Chase Bank, N.A., as intercreditor agent, JPMorgan Chase Bank, N.A., as senior-priority agent for the ABL secured parties, Wilmington Trust, National Association, as senior-priority agent for the existing first lien notes, Wilmington Trust, National Association, as trustee and senior-priority agent for the new first lien notes, Wilmington Trust, National Association, as trustee and second-priority agent for the existing 1.5 lien notes, Hexion LLC, Hexion Inc. and subsidiaries of Hexion Inc. party thereto.

10.2

4/15/2015

10.61

8-K

Second Joinder and Supplement to Intercreditor Agreement, dated as of April 15, 2015, by and among JPMorgan Chase Bank, N.A., as intercreditor agent, JPMorgan Chase Bank, N.A., as senior-priority agent for the ABL secured parties, Wilmington Trust, National Association, as trustee and senior-priority agent for the existing first lien notes, Wilmington Trust, National Association, as senior-priority agent for the new first lien notes, Wilmington Trust, National Association, as senior-priority agent for the 1.5 lien notes, Wilmington Trust Company, as trustee and second-priority agent for the existing second lien notes, Hexion LLC, Hexion Inc. and subsidiaries of Hexion Inc. party thereto.

10.3

4/15/2015

10.62

8-K

Joinder Agreement to ABL Intercreditor Agreement, dated as of April 15, 2015, by and among JPMorgan Chase Bank, N.A., as ABL facility collateral agent, Wilmington Trust, National Association, as new representative, applicable first-lien agent and first-lien collateral agent, and Hexion Inc.

10.4

4/15/2015

10.63

8-K

Hexion Holdings LLC 2015 Incentive Compensation Plan

10.5

4/15/2015

10.64‡

10-Q

Summary of Terms of Employment between Hexion Inc. and Douglas A. Johns dated May 6, 2015

10.1

5/13/2015

10.65‡

10-Q

Amendment Agreement, dated as of July 27, 2015, among Hexion LLC, Hexion Inc., as U.S. borrower, Hexion Canada Inc., as Canadian borrower, Hexion B.V., as Dutch borrower, Hexion UK Limited and Borden Chemical UK Limited, as U.K. borrowers, Hexion GmbH, as German borrower, the other subsidiaries of Hexion LLC party thereto, as loan parties, the lenders party thereto and JPMorgan Chase Bank, N.A., as administrative agent and collateral agent.

10.1

8/12/2015

10.66

10-Q

Summary of Terms of Employment between Hexion Inc. and George F. Knight dated October 22, 2015

10.2

8/12/2015

10.67‡

10-K

2015 Audited Financial Statements of Unconsolidated Affiliate of Hexion Inc.

10.79

3/14/2016

10.68

10-K

Hexion Holdings LLC 2016 Incentive Compensation Plan

10.80

3/14/2016

10.69‡

8-K

Form of 2016 Cash-Based Long-Term Incentive Award Agreement

10.2

5/6/2016

10.70‡

10-Q

Amendment Agreement, dated as of December 21, 2016, among Hexion LLC, certain subsidiaries of Hexion LLC party thereto, the lenders party thereto and JPMorgan Chase Bank, N.A., as administrative agent and collateral agent.

10.1

11/14/2016

10.71

8-K

2016 Cash-Based Long-Term Incentive Award Agreement for Nathan E. Fisher dated January 3, 2017

10.1

12/23/2016

10.72‡

10-K

2016 Audited Financial Statements of Unconsolidated Affiliate of Hexion Inc.

10.76

3/8/2017

10.73

10-K

Incorporated by Reference

10.77

3/8/2017

Hexion Inc. | 160 | 2020 Form 10-K

Table of Contents


		Incorporated by Reference
Exhibit Number	Exhibit Description	Form	File Number	Exhibit	Filing Date	Filed Herewith
10.74	Additional Secured Party Consent, dated as of February 8, 2017, among Wilmington Trust, National Association, as authorized representative for the new secured parties, Wilmington Trust, National Association, as collateral agent, Wilmington Trust, National Association, as authorized representative of the new secured parties, Wilmington Trust, National Association, as authorized representative for the notes obligations, Wilmington Trust, National Association, as authorized representative for the initial other first priority obligations, Hexion Inc. and subsidiaries of Hexion Inc. party thereto.	8-K	001-00071	10.1	2/10/2017
10.75	Third Joinder and Supplement to Intercreditor Agreement, dated as of February 8, 2017, by and among JPMorgan Chase Bank, N.A., as intercreditor agent, JPMorgan Chase Bank, N.A., as senior-priority agent for the ABL secured parties, Wilmington Trust, National Association, as trustee and senior-priority agent for the existing first lien notes, Wilmington Trust, National Association, as senior-priority agent for the new first lien notes, Wilmington Trust, National Association, as senior-priority agent for the new 1.5 lien notes, Wilmington Trust Company, as trustee and second-priority agent for the existing second lien notes, Hexion LLC, Hexion Inc. and subsidiaries of Hexion Inc. party thereto.	8-K	001-00071	10.2	2/10/2017
10.76	Second Joinder Agreement to ABL Intercreditor Agreement, dated as of February 8, 2017, among JPMorgan Chase Bank, N.A., as ABL facility collateral agent, Wilmington Trust, National Association, as new representative, applicable first-lien agent and first-lien collateral agent, and Hexion Inc.	8-K	001-00071	10.3	2/10/2017
10.77	Collateral Agreement, dated as of February 8, 2017, among Wilmington Trust, National Association, as collateral agent, Hexion Inc. and subsidiaries of Hexion Inc. party thereto.	8-K	001-00071	10.4	2/10/2017
10.78	Amended and Restated Intercreditor Agreement, dated as of February 8, 2017, among JPMorgan Chase Bank, N.A., as intercreditor agent, JPMorgan Chase Bank, N.A., as senior-priority agent for the ABL secured parties, Wilmington Trust, National Association, as senior-priority agent for the existing first lien notes, Wilmington Trust, National Association, as trustee and senior-priority agent for the new first lien notes, Wilmington Trust, National Association, as trustee and second-priority agent for the new 1.5 lien notes, Hexion LLC, Hexion Inc. and subsidiaries of Hexion Inc. party thereto.	8-K	001-00071	10.5	2/10/2017
10.79	Fourth Joinder and Supplement to Intercreditor Agreement, dated as of February 8, 2017, among JPMorgan Chase Bank, N.A., as intercreditor agent, JPMorgan Chase Bank, N.A., as senior-priority agent for the ABL secured parties, Wilmington Trust, National Association, as trustee and senior-priority agent for the existing first lien notes, Wilmington Trust, National Association, as senior-priority agent for the new first lien notes, Wilmington Trust, National Association, as senior-priority agent for the new 1.5 lien notes, Wilmington Trust Company, as trustee and second-priority agent for the existing second lien notes, Hexion LLC, Hexion Inc. and subsidiaries of Hexion Inc. party thereto.	8-K	001-00071	10.6	2/10/2017
10.80	Additional Extending Lender Joinder Agreement and Amendment, dated as of January 18, 2017, related to the Amended and Restated Asset-Based Revolving Credit Agreement, dated as of December 21, 2016, among Hexion LLC, Hexion Inc., as U.S. Borrower, Hexion Canada Inc., as Canadian Borrower, Hexion B.V., as Dutch Borrower, Hexion UK Limited and Borden Chemical UK Limited, as UK Borrowers, Hexion GmbH, as German Borrower, each subsidiary loan party party thereto, the lenders party thereto from time to time and JPMorgan Chase Bank, N.A., as administrative agent, collateral agent, swingline lender and initial issuing bank.	10-K	001-00071	10.84	3/8/2017
10.81‡	Hexion Holdings LLC 2017 Incentive Compensation Plan	10-Q	001-00071	10.3	5/5/2017
10.82	Additional Secured Party Consent, dated as of May 12, 2017, among Wilmington Trust, National Association, as authorized representative for the new secured parties, Wilmington Trust, National Association, as collateral agent, Wilmington Trust, National Association, as authorized representative for the notes obligations, Wilmington Trust, National Association, as authorized representative for the initial other first priority obligations, Hexion Inc. and subsidiaries of Hexion Inc. party thereto.	8-K	001-00071	10.1	5/12/2017
10.83	Fifth Joinder and Supplement to Intercreditor Agreement, dated as of May 12, 2017, by and among JPMorgan Chase Bank, N.A., as intercreditor agent, JPMorgan Chase Bank, N.A., as senior-priority agent for the ABL secured parties, Wilmington Trust, National Association, as trustee and senior-priority agent for the existing first lien notes, Wilmington Trust, National Association, as senior-priority agent for the new notes, Wilmington Trust, National Association, as senior-priority agent for the 1.5 lien notes, Wilmington Trust Company, as trustee and second-priority agent for the existing second lien notes, Hexion LLC, Hexion Inc. and subsidiaries of Hexion Inc. party thereto.	8-K	001-00071	10.2	5/12/2017
10.84‡	Employment Agreement, by and between Hexion Inc. and Craig A. Rogerson	10-Q	001-00071	10.2	8/11/2017
10.85‡	Long Term Incentive Compensation Award Agreement, by and between Hexion Inc. and Craig A. Rogerson	10-Q	001-00071	10.3	8/11/2017

Hexion Inc. | 161 | 2020 Form 10-K

Table of Contents


		Incorporated by Reference
Exhibit Number	Exhibit Description	Form	File Number	Exhibit	Filing Date	Filed Herewith
10.86	2017 Audited Financial Statements of Unconsolidated Affiliate of Hexion Inc.	10-K	001-00071	10.90	3/2/2018
10.87‡	Hexion Holding LLC 2018 Incentive Compensation Plan	10-Q	001-00071	10.1	5/14/2018
10.88	The Deer Park Site Services, Utilities, Materials & Facilities Agreement, dated as of April 1, 2018, by and between Shell Chemical LP, on its own behalf and as authorized agent of Shell Oil Company pursuant to the Shell Chemical Authorization Agreement dated March 1, 1995 and Hexion Deer Park LLC as successor in interest to Shell Epoxy Resins LLC and Hexion Inc.	10-Q	001-00071	10.2	5/14/2018
10.89	Moerdijk Vad Site Services, Utilities, Materials and Facilties Agreement, dated as of April 1, 2018, between Hexion Vad B.V. and Shell Nederland Chemie B.V.	10-Q	001-00071	10.3	5/14/2018
10.90	Pernis Vad Site Services, Utilities, Materials and Facilities Agreement, dated as of April 1, 2018, between Hexion Vad B.V. and Shell Nederland Raffin Aderij B.V.	10-Q	001-00071	10.4	5/14/2018
10.91	Pernis Beri Site Services, Utilities, Materials and Facilities Agreement, dated as of April 1, 2018 between Hexion B.V. and Shell Nederland Raffin Aderij B.V.	10-Q	001-00071	10.5	5/14/2018
10.92	Assignment & Assumption of Deep Park Ground Lease and Grant of Easements and Extension of Term, dated as of April 1, 2018, by and between Shell Chemical LP, on its own behalf and as authorized agent of Shell Oil Company pursuant to the Chemical Authorization dated March 1, 1995, Hexion Inc., as successor in interest to Shell Epoxy Resins LLC and Hexion Deer Park LLC.	10-Q	001-00071	10.6	5/14/2018
10.93	Partial Assignment & Extension of the Amended and Restated Agreement of Sub-lease (Pernis), dated as of April 1, 2018, between Hexion Pernis Lease B.V., Hexion Vad B.V., and Shell Nederland Raffin Aderij B.V.	10-Q	001-00071	10.7	5/14/2018
10.94	First Amended and Restated Moerdijk Agreement of Lease, between Shell Nederland Chemie B.V. and Shell Epoxy Resins Nederland B.V.	10-Q	001-00071	10.8	5/14/2018
10.95	Extension of the Amended and Restated Agreement of Lease (Moerdijk), dated as of April 1, 2018, between Hexion Moerdijk Lease B.V. and Shell Nederland Chemie B.V.	10-Q	001-00071	10.9	5/14/2018
10.96	Restructuring Support Agreement, dated as of April 1, 2018, among Hexion Holdings LLC, Hexion LLC, Hexion Inc., certain subsidiaries of Hexion Inc. and certain equityholders and creditors of Hexion Inc.	8-K	001-00071	10.1	4/1/2019
10.97	Amended and Restated Senior Secured Debtor-in-Possession Asset-Based Revolving Credit Agreement, dated as of April 3, 2019, among Hexion LLC, Hexion Inc., Hexion Canada Inc., Hexion B.V., Hexion UK Limited, Borden Chemical UK Limited, Hexion GMBH, the lenders party thereto, JPMorgan Chase Bank, N.A., as administrative agent and collateral agent.	8-K	001-00071	10.1	4/8/2019
10.98	Reaffirmation Agreement, dated as of April 3, 2019, among Hexion LLC, Hexion Inc., Hexion Canada Inc., Hexion B.V., Hexion UK Limited, Borden Chemical UK Limited, Hexion GMBH, each Subsidiary of Hexion Inc. party thereto and JPMorgan Chase Bank, N.A., as administrative agent and collateral agent.	8-K	001-00071	10.2	4/8/2019
10.99	Senior Secured Term Loan Agreement, dated as of April 3, 2019, among Hexion LLC, Hexion Inc., Hexion International Holdings B.V., the lenders party thereto and JPMorgan Chase Bank, N.A., as administrative agent and collateral agent.	8-K	001-00071	10.3	4/8/2019
10.100	Guarantee Agreement, dated as of April 3, 2019, among Hexion LLC, Hexion Inc., Hexion International Holdings B.V., each Subsidiary Loan Party identified therein and JPMorgan Chase Bank, N.A., as administrative agent.	8-K	001-00071	10.4	4/8/2019
10.101	2018 Audited Financial Statements of Unconsolidated Affiliate of Hexion Inc.	10-K	001-00071	10.101	4/11/2019
10.102‡	Hexion Holding LLC 2019 Incentive Compensation Plan	10-K	001-00071	10.102	4/11/2019
10.103‡	Separation Agreement by and between Hexion Inc. and Joseph Bevilaqua	10-K	001-00071	10.103	4/11/2019
10.104	Senior Secured Asset-Based Revolving Credit Agreement, dated as of July 1, 2019, among Hexion Intermediate Holding 2, Inc., Hexion Inc., Hexion Canada Inc., Hexion B.V. Hexion GmbH and Hexion UK Limited as lenders party thereto and JP Morgan Chase Bank, N.A. as administrative agent and collateral agent	8-K	001-00071	10.1	7/2/2019
10.105	Senior Secured Credit Agreement, dated as of July 1, 2019, among Hexion Intermediate Holding 2, Inc., Hexion Inc., Hexion International Coӧperatief U.A., the lenders party thereto and JPMorgan Chase Bank, N.A., as administrative agent and collateral agent.	8-K	001-00071	10.2	7/2/2019

Hexion Inc. | 162 | 2020 Form 10-K

Table of Contents

Exhibit
Number

Exhibit Description

Form

File Number

Exhibit

Filing
Date

Filed
Herewith

10.106

ABL Intercreditor Agreement, dated as of July 1, 2019, among JPMorgan Chase Bank, N.A., as administrative agent and collateral agent for the ABL Facility Secured Parties referred to therein, JPMorgan Chase Bank, N.A., as Applicable First-Lien Agent and administrative agent and collateral agent for the First-Lien Secured Parties referred to therein, Hexion Inc., Hexion Intermediate Holding 2, Inc., Hexion International Coӧperatief U.A., the other subsidiaries of Hexion Inc. party thereto, each other First-Priority Lien Obligations and each Other First-Priority Lien Obligations Collateral Agent from time to time party thereto.

8-K

Hexion Holdings Corporation 2020 Incentive Compensation Plan

10.3

7/2/2019

10.107‡

10-K

2019 PERFORMANCE STOCK UNIT AWARD AGREEMENT

10.107

3/3/2020

10.108‡

10-Q

2019 RESTRICTED STOCK UNIT AWARD AGREEMENT

10.2

5/14/2020

10.109‡

10-Q

Hexion Holdings Corporation 2021 Incentive Compensation Plan

10.3

5/14/2020

10.110‡

10-K

18.1

Letter from PricewaterhouseCoopers, dated May 13, 2015 regarding preferability of a change in accounting principle

10-Q

List of Subsidiaries of Hexion Inc.

18.1

5/13/2015

21.1

31.1

Rule 13a-14 Certifications:

(a) Certificate of the Chief Executive Officer

(b) Certificate of the Chief Financial Officer

32.1

Section 1350 Certifications

101.INS*

XBRL Instance Document

101.SCH*

XBRL Schema Document

101.CAL*

XBRL Calculation Linkbase Document

101.LAB*

XBRL Label Linkbase Document

101.PRE*

XBRL Presentation Linkbase Document

101.DEF*

XBRL Definition Linkbase Document

† The schedules and exhibits to these agreements are omitted pursuant to Item 601(b)(2) of Regulation S-K. The Company agrees to furnish supplementally to the SEC, upon request, a copy of any omitted schedule or exhibit.

‡ Represents a management contract or compensatory plan or arrangement.

* Attached as Exhibit 101 to this report are documents formatted in XBRL (Extensible Business Reporting Language). The financial information in the XBRL-related documents is “unaudited” or “unreviewed.”

Hexion Inc. | 163 | 2020 Form 10-K

Table of Contents

ITEM 16 - FORM 10-K SUMMARY

None.

Hexion Inc. | 164 | 2020 Form 10-K

Table of Contents

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


HEXION INC.

By:			/s/ *George F. Knight*
			George F. Knight
			Executive Vice President and Chief Financial Officer

Date: March 10, 2021

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Name

Title

Signature

Date

Craig A. Rogerson

Director, President and Chief Executive Officer (Principal Executive Officer) and Director, Hexion Holdings Corporation

/s/ Craig A. Rogerson

George F. Knight

Director, Executive Vice President and Chief Financial Officer
(Principal Financial Officer)

/s/ George F. Knight

Colette B. Barricks

Senior Vice President and General Controller (Principal Accounting Officer)

/s/ Colette B. Barricks