Solutia Proposal Anticipates Emergence from Bankruptcy
by Q3 2007
Solutia Inc., St. Louis, Mo., recently unfurled an ambitious new reorganization
plan to pull itself out of bankruptcy by the third quarter of 2007.
If accepted by Bankruptcy Court of the Southern District of New
York, the plan would shift responsibility of certain 'legacy liabilities'
to its former parent company, Monsanto, and provides for an infusion
of $250 million in new investment.
In exchange for 20 percent of the stock in a reorganized Solutia,
Monsanto will take responsibility for all current and future tort
litigation costs arising from its chemical business prior to the
separation from Monsanto. Monsanto would also assume responsibility
for environmental remediation and cleanup of all sites under Solutia's
purview at the time of the spinoff, which were never owned or operated
In total, the 'legacy liabilities,' which include retiree benefits
for approximately 20,000 former employees of Monsanto, in addition
to the above liabilities, cost Solutia an estimated $100 million
annually, according to Solutia vice president of communications,
The restructured proposal also calls for $250 million in new investments
for Solutia through a rights offering to certain unsecured creditors.
With this offering, unsecured creditors will have the opportunity
to purchase up to 27.9 percent of the common stock in the reorganized
Approximately $175 million of the new investment would be put toward
the retiree benefits, with another $75 million going toward remaining
legacy liabilities not covered by Monsanto.
As a result of the proposed reorganization, Solutia, which has
an enterprise value of $2.85 billion, anticipates a 31 percent increase
in its rate of return, from 53 percent to 84 percent, according
"With our current momentum, I believe Solutia will be able
to emerge from chapter 11 as a strong and viable company in the
third quarter," said Solutia chief executive officer Jeffry