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January 24, 2008 |
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SOLUTIA INC: DuPont Demands Payment of US$1,394,718 Admin. Claim E.I. DuPont de Nemours and Company asks the U.S. Bankruptcy Court for the Southern District of New York to compel Solutia Inc. and its debtor-affiliates to immediately pay a US$1,394,718 administrative claim. DuPont sold certain product on an exclusive basis to Solutia Inc., pursuant to a contract dated Jan. 1, 2002. The Contract was assumed by Solutia pursuant to an order approved by the Court in Oct. 19, 2005. Allan L. Hill, Esq., at Phillips Lytle LLP, in New York, relates that the Contract contained a "Meet or Release" provision, which provided that if Solutia received an offer from a third party supplier to supply Material to Solutia at a lower price than the price currently charged by DuPont, then Solutia could demand that DuPont either match the price of the new offer or release Solutia from its obligation to purchase the Material from DuPont. By letter dated Feb. 17, 2006, Solutia invoked the "Meet or Release" provision. DuPont elected to "meet" the offer of the third party supplier, effective immediately, subject to a third party audit to determine whether Solutia met the terms of the "Meet or Release" provision, Mr. Hill says. Solutia and DuPont entered into an amendment to the Contract as of March 1, 2006, to reflect those new terms. The Contract Second Amendment states that "if the third party auditor . . . concludes that Solutia has failed to comply with the meet or release clause of the Contract . . . this Amendment shall be null and void and the Contract shall continue as if this Amendment were never executed." By letter agreement dated March 31, 2006, Solutia and DuPont agreed to the terms under which a third party auditor would make the determination of whether Solutia properly invoked the "Meet or Release" provision. On Aug. 29, 2007, BDO Seidman LLP, the third party auditor, issued a report setting forth its conclusion that "Solutia did not meet the terms of the 'Meet or Release' clause." As a result of the BDO report, the Contract Second Amendment setting forth reduced prices for the Material provided by DuPont to Solutia is, by its own terms, null and void. Mr. Hill contends that DuPont is entitled to the difference between what Solutia paid for Material between March 1, 2006, and Dec. 31, 2006, and what Solutia should have paid in absence of the Contract Second Amendment, plus interest and certain rebates. Solutia has refused to pay the Claim Amount. 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. 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, Issue No. 114; 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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