PVB interlayer manufacturer Solutia Inc., announced 16 May 2007 that it has filed an Amended Plan of Reorganization and Disclosure Statement with the Bankruptcy Court for the Southern District of New …
PVB interlayer manufacturer Solutia Inc., announced 16 May 2007 that it has filed an Amended Plan of Reorganization and Disclosure Statement with the Bankruptcy Court for the Southern District of New York. The filing was supported by the Official Unsecured Creditors Committee, Monsanto, Pharmacia Corporation, the Official Committee of Retirees, and the Ad Hoc Committee of Trade Creditors. “We are pleased to have filed a plan that positions Solutia to emerge from chapter 11 with an improved cost structure, strengthened balance sheet, and greatly reduced risk profile”, said Jeffry N. Quinn, chairman, president and chief executive officer of Solutia Inc. “Importantly, we will do so while providing significant recoveries for our creditors, ensuring all environmental remediation commitments will be met, securing and providing significant funding for retiree welfare benefits, and preserving our pension plan”. The plan maintains the key benefits provided for Solutia under the Original Plan of Reorganization filed by the company in February 2006, but provides greater recoveries for creditors due to a rise in the estimated equity value of the reorganized company. In addition, there has been some reallocation of the equity ownership. The plan provides significant relief from the legacy liabilities that Solutia was required to take on when spun off from Pharmacia (formerly known as Monsanto Company) in 1997. These legacy liabilities include retirement and medical benefits, environmental remediation costs and toxic tort litigation costs. Under the plan, as between it and Solutia, Monsanto will assume financial responsibilities in the areas of tort litigation and environmental remediation, although Solutia will remain responsible for the environmental liabilities at sites that it presently owns or operates. Solutia and Monsanto will share financial responsibility for two sites. The plan provides for USD 250 million of new investment in the form of a rights offering in the reorganized Solutia. Of the USD 250 million, USD 175 million will go into a Voluntary Employees“ Beneficiary Association (VEBA) Retiree Trust for pre-spin-off retirees who receive welfare benefits from Solutia. USD 75 million will be used by reorganized Solutia to pay other legacy liabilities it will keep. The plan provides for the same comprehensive retiree settlement which was negotiated with the Retirees Committee and included in the original plan. In consideration of the contemplated modification in benefits, retirees will receive an unsecured claim of USD 35 million in Solutia“s chapter 11 case. The common stock received in reorganized Solutia on account of this claim will be deposited into the VEBA Retiree Trust, along with the USD 175 million from the rights offering described above. The VEBA Retiree Trust will be a bankruptcy-remote entity and will be managed by an independent trustee. “As a result of the successful execution of our reorganization strategy, we have substantially increased the value of the company since the filing of the original plan”, said Mr. Quinn. Under the plan, Solutia estimates that the enterprise value of reorganized Solutia will be USD 2.85 billion, with corresponding implied reorganization equity value of approximately USD 1.2 billion. “The plan provides for substantially enhanced creditor recoveries compared to the original plan filed in February 2006. Under the original plan, unsecured creditors would have received recoveries of approximately 52%, compared with estimated recoveries of nearly 85% under the current plan”, added Mr. Quinn. “And, with the bankruptcy court“s recent ruling regarding the unsecured status of certain of our noteholders, we are able to move forward without the significant creditor classification issues that bogged down moving the original plan toward confirmation”. Under the plan, Solutia“s senior secured notes will be paid in full in cash from proceeds from an exit finance package to be arranged by the company. The plan also provides for distributions to certain creditors and equity interest holders. Unsecured Claims will receive their pro rata share of 34.1% of the new common stock (estimated at USD 0.848 per dollar). Holders of Allowed Noteholder Claims will receive their pro rata share of 44.1% of the new common stock (USD 0.848 per dollar). Monsanto will receive 20% of the new common stock. Retirees as a class will receive 1.8% of the new common stock, which will be added to the VEBA Retiree Trust to pay retiree welfare benefits. Holders of Equity Interests in Solutia will receive no distributions on account of such equity interests. Solutia currently estimates that the size of the unsecured noteholder claims pool will be USD 455.4 million; and that the general unsecured claims pool will range from USD 327-377 million. Reorganized Solutia will be an independent, publicly traded company listed on a national exchange. The nine-member Board of Directors will consist of Jeffry N. Quinn, Solutia“s current chairman, president and chief executive officer; one continuing director of Solutia; one director designated by Monsanto; and six directors designated by the Creditors Committee. The six directors will be designated by the Creditors“ Committee in consultation with the company and Monsanto. Solutia will request a court hearing on the amended disclosure statement in early July 2007. If the court approves the statement, then claim holders will be asked to vote on the plan.
