Solutia agrees to provide confidential information to noteholders, including plan proposal

By Caroline Salls

Pittsburgh, Dec. 28 - Solutia Inc. entered into a confidentiality agreement with some holders of its 6.72% notes due Oct. 15, 2037 and 7 3/8% notes due Oct. 15, 2027 under which Solutia agreed to provide confidential information to the noteholders to enable discussions on a potential resolution of issues in Solutia's Chapter 11 cases, according to an 8-K filing with the Securities and Exchange Commission.

To assure that the restrictions on the noteholders' ability to trade would be limited, Solutia agreed to publicly disseminate the confidential information by Dec. 28.

In connection with the agreement, Solutia:

• Provided a draft to the noteholders on Dec. 8 of the company's revised business plan, which includes both historical and projected financial information;

• Solutia provided its proposal for an amended plan of reorganization to the noteholders on Dec. 8, which was designed to act as a framework for negotiations among Solutia, the noteholders and Solutia's other major stakeholders; and

• On Dec. 8, Solutia made a presentation to the noteholders regarding the status of Solutia's efforts to obtain proposals for the sale of the equity in the reorganized company.

Plan proposal details

Under the plan, the company would have a total enterprise value of $2.507 billion, net debt of $1.507 billion and implied equity value of $1 billion.

Solutia would acquire Akzo-Nobel's 50% joint venture ownership in Flexsys and sell a business unit.

The plan includes a general unsecured claims pool of $765 million, and 108.3 million common shares will be issued upon emergence, with 75 million shares to be distributed directly to noteholders, general unsecured creditors, Monsanto and retirees, and another 33.3 million shares distributed to holders of noteholder claims, general unsecured claims, Monsanto and retirees under a $250 million rights offering.

Holders of equity interests will not receive a distribution under the plan.

The rights offering price would be $7.50 per share, a 25% discount to the plan stock price.

Solutia said the rights offering will be backstopped by a market participant.

In addition, the company's post-reorganization board of directors will initially consist of nine members, including chairman and chief executive officer Jeffry Quinn and two continuing directors.

The ad hoc noteholders' committee will select two directors and the official committee of unsecured creditors and Monsanto will select one director each.

The remaining two directors will be selected by the other seven directors from a panel of candidates identified by a national search firm.

Solutia, a St. Louis-based manufacturer and provider of performance films, specialty chemicals and an integrated family of nylon products, filed for bankruptcy on Dec. 17, 2003 in the U.S. Bankruptcy Court for the Southern District of New York. Its Chapter 11 case number is 03-17949.

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