Table of Contents HEXION INC. Notes to Consolidated Financial Statements (In millions, except share data) 1. Background and Basis of Presentation 2. Chapter 11 Bankruptcy Filing (Subsequent Event) • Amended and Restated Asset-Based Revolving Credit Agreement, dated as of December 21, 2016, by and among Hexion LLC, the Company, certain subsidiaries of the Company, the lenders party thereto and the other parties thereto with respect to approximately $297 of borrowings outstanding, plus accrued and unpaid interest thereon; • Indenture, dated as of December 15, 1987, by and between the Company and The Bank of New York, as trustee, with respect to an aggregate principal amount of approximately $74 of 9.20% Debentures due 2021 and approximately $189 of 7.875% Debentures due 2023, in each case, plus accrued and unpaid interest thereon; • Indenture, dated as of November 5, 2010, by and among the Company, as successor issuer, Hexion Nova Scotia Finance, ULC, a Nova Scotia unlimited liability company, as the Nova Scotia issuer, certain subsidiaries of the Company and Wilmington Trust Company, as trustee, with respect to an aggregate principal amount of approximately $574 of 9.0% Second-Priority Senior Secured Notes due 2020 plus accrued and unpaid interest thereon; Operation and Implications of the Bankruptcy Filing Bankruptcy Petitions Going Concern 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, 2018, the Company had 47 production and manufacturing facilities, with 21 located in the United States. The Company’s business is organized based on the products offered and the markets served. At December 31, 2018, the Company had three reportable segments: Epoxy, Phenolic and Coating Resins; Forest Products Resins; and Corporate and Other. The Company’s direct parent is Hexion LLC, a holding company and wholly owned subsidiary of Hexion Holdings LLC (“Hexion Holdings”), the ultimate parent entity of Hexion. Hexion Holdings is controlled by investment funds managed by affiliates of Apollo Management Holdings, L.P. (together with Apollo Global Management, LLC and its subsidiaries, “Apollo”). As of December 31, 2018, the Company has elected not to apply push-down accounting of its parent’s basis as a result of the prior combination of Hexion and Momentive Performance Materials Inc. (“MPM”), a former subsidiary of Hexion Holdings. The Company has concluded its financial condition and its projected operating results, the defaults under its debt agreements, and the risks and uncertainties surrounding its Chapter 11 proceedings raise substantial doubt as to the Company’s ability to continue as a going concern. The Company has $1.9 billion of First Priority Senior Secured Notes maturing in April 2020. If 91 days prior to the scheduled maturity of these notes, more than $50 aggregate principal amount is outstanding, the Company’s senior secured asset-based revolving loan facility (the "ABL Facility"), would have accelerated and become immediately due and payable. Additionally, the Company has $0.6 billion of Second Priority Notes maturing in November 2020. Based on the Company’s current liquidity position, the acceleration of the ABL Facility and the Company’s Chapter 11 Cases (as discussed in Note 2), the Company’s current projections of operating results, cash flows and liquidity over the next twelve months are not expected to be sufficient to fund its most significant cash obligations necessary to continue as a going concern. The accompanying Consolidated Financial Statements included in this Annual Report on Form 10-K have been prepared assuming that the Company will continue as a going concern basis of accounting, which contemplates continuity of operations, realization of assets and satisfaction of liabilities and commitments in the normal course of business. The Company has made certain adjustments to the Consolidated Financial Statements including the reclassification of certain outstanding debt to current liabilities and the write-off of unamortized deferred financing costs related to such debt (see Note 3). To address the risk of not being able to continue as a going concern, the Company has undertaken steps to restructure its balance sheet (see Note 2). On April 1, 2019 (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 are being jointly administered under the caption  In re Hexion Holdings LLC, No. 19-10684  (the “Chapter 11 Cases”). The Debtors will continue 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. The filing of the Bankruptcy Petitions constitutes an event of default that accelerated the Company’s obligations under the following debt instruments (the “Debt Instruments”): 52