Hexion Inc. is a specialty chemical company. It has a complicated, high-yield debt structure, consisting of first lien debt (loans and bonds), secured bonds, second lien bonds, and senior unsecured debt, due to a series of mergers as well as a leveraged buyout in 2005. Exhibit 18 is a simplified depiction of the company’s debt structure, as well as some key credit-related statistics.

Using the information provided, address the following:

Why might Hexion have so much secured debt relative to unsecured debt (both senior and subordinated)?

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EXHIBIT 18 Hexion Inc. Debt and Leverage Structure as of Year-End 2017 Financial Information ($ millions) Cash Total debt Net debt Interest expense EBITDA Debt Structure ($ millions) First lien debt (loans and bonds) Secured bonds Second lien bonds Senior unsecured bonds TOTAL DEBT $115 $3,668 $3,553 $329 $365 $2,607 $225 $574 $263 $3,669