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January 25, 2008 |
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SOLUTIA INC: Credit Woes Delay Chapter 11 Exit Solutia Inc. discloses that the effective date of its confirmed plan of reorganization and its emergence from Chapter 11 will be delayed from the previously anticipated Jan. 25, 2008 emergence date. As previously reported, Solutia's Consensual Plan, which was confirmed on Nov. 29, 2007, is subject to numerous closing conditions, including entering into an exit financing facility. The lead arrangers of Solutia's exit financing -- Citigroup Global Markets Inc. and certain of its affiliates, Goldman Sachs Credit Partners L.P., Deutsche Bank Trust Company Americas and Deutsche Bank Securities Inc. -- informed Solutia yesterday that, in their view, due to continuing conditions in the credit markets, they have not been able to complete the exit financing they committed to on October 25, 2007. The exit financing consists of a US$1,200,000,000 senior secured term loan facility, a US$400,000,000 senior secured asset-based revolving credit facility and US$400,000,000 aggregate principal amount of senior unsecured notes. Under the terms of the commitment, the lead arrangers of the exit financing have an obligation, subject to certain conditions, to provide the term loan facility, the revolving credit facility and, in case they are not able to successfully market the senior unsecured notes, a US$400,000,000 senior unsecured bridge facility. The commitment expires on Feb. 29, 2008. Solutia said in a statement that one of the conditions of the lead arrangers' obligations to provide those credit facilities is the absence of any adverse change since Oct. 25, 2007, in the loan syndication, financial or capital markets generally that, in their reasonable judgment, materially impairs syndication of the proposed loan facilities. The lead arrangers have asserted that this condition has not been satisfied. Solutia, however, believes that the ongoing conditions in the credit markets began long before October 25, 2007. Accordingly, the company believes that the lead arrangers are required to fund their commitments on or before Feb. 29, 2008. "While we disagree with the position asserted by the lead arrangers, we intend to continue to work with them to successfully syndicate the exit facility," said Jeffry N. Quinn, Chairman, President and Chief Executive Officer of Solutia. The delayed deal has ramifications for recoveries throughout the capital markets and for companies that go into default, said Matthew Dundon, head of research at Miller Tabak Roberts Securities, according to Reuters. "An obvious conclusion is the market is demanding better terms and higher spreads now than it was then," Mr. Dundon said. "It indicates that the bank loan market remains strained. "In fact it is not just hard to sell debt that you agreed to originate before last summer, it may be hard to sell debt that you agreed to originate in October," Mr. Dundon added, citing changes in fiscal policy, the economic outlook and concerns about the liquidity of credit markets and bond insurance. About Solutia Inc. Headquartered in St. Louis, Missouri, Solutia Inc. (OTCBB:SOLUQ) -- http://www.solutia.com/ -- and its subsidiaries, engage in the manufacture and sale of chemical-based materials, which are used in consumer and industrial applications worldwide. Solutia has operations in Malaysia, China, Singapore, Belgium, and Colombia. The company and 15 debtor-affiliates filed for chapter 11 protection on Dec. 17, 2003 (Bankr. S.D.N.Y. Case No. 03-17949). When the Debtors filed for protection from their creditors, they listed US$2,854,000,000 in assets and US$3,223,000,000 in debts. Solutia is represented by Richard M. Cieri, Esq., Jonathan S. Henes, Esq., and Michael A. Cohen, Esq., at Kirkland & Ellis LLP, in New York, as lead bankruptcy counsel, and David A. Warfield, Esq., and Laura Toledo, Esq., at Blackwell Sanders LLP, in St. Louis Missouri, as special counsel. Trumbull Group LLC is the Debtor's claims and noticing agent. Daniel H. Golden, Esq., Ira S. Dizengoff, Esq., and Russel J. Reid, Esq., at Akin Gump Strauss Hauer & Feld LLP represent the Official Committee of Unsecured Creditors, and Derron S. Slonecker at Houlihan Lokey Howard & Zukin Capital provides the Creditors' Committee with financial advice. The Official Committee of Retirees of Solutia, Inc., et al., is represented by Daniel D. Doyle, Esq., Nicholas A. Franke, Esq., and David M. Brown, Esq., at Spencer Fane Britt & Browne, LLP, in St. Louis, Missouri, and Frank M. Young, Esq., Thomas E. Reynolds, Esq., R. Scott Williams, Esq., at Haskell Slaughter Young & Rediker, LLC, in Birmingham, Alabama. On Feb. 14, 2006, the Debtors filed their Reorganization Plan & Disclosure Statement. On May 15, 2007, they filed an Amended Reorganization Plan and on July 9, 2007, filed a 2nd Amended Reorganization Plan. The Bankruptcy Court approved the Debtors' amended Disclosure Statement on Oct. 19, 2007. On Oct. 22, 2007, the Debtor re-filed a Consensual Plan & Disclosure Statement and on Nov. 29, 2007, the Court confirmed the Debtors' Consensual Plan. (Solutia Bankruptcy News; Bankruptcy Creditors' Service, Inc., http://bankrupt.com/newsstand/ or 215/945-7000). * * * As reported in the Troubled Company Reporter on Dec. 10, 2007, Standard & Poor's Ratings Services assigned its 'B+' loan rating to Solutia Inc.'s (D/--/--) proposed US$1.2 billion senior secured term loan and a '3' recovery rating, indicating the likelihood of a meaningful (50%-70%) recovery of principal in the event of a payment default. The ratings are based on preliminary terms and conditions. S&P also assigned its 'B-' rating to the company's proposed US$400 million unsecured notes. Standard & Poor's expects to assign its 'B+' corporate credit rating to Solutia if the company and its subsidiaries emerge from Chapter 11 bankruptcy proceedings in early 2008 as planned. S&P expect the outlook to be stable. |
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