Solutia's unsecured creditors seek return of $12.1 million from 2009 noteholders

By Reshmi Basu

New York, Nov. 27 - Solutia, Inc.'s official committee of unsecured creditors wants a federal judge to reduce the amount of the claim allowed by the company's senior secured noteholders to $187.4 million from $223 million, according to a Tuesday filing with the U.S. Bankruptcy Court for the Southern District of New York.

According to the court papers, the 2009 noteholders have received a $223 million claim, which the noteholders contended was the principal amount of the 11¼% senior unsecured notes due 2009.

The creditors committee, however, argued that the $223 million principal amount was exaggerated, and furthermore, their belief was corroborated by judge Prudence Carter Beatty's recent decision, in which she said that the noteholders were not entitled to any interest payments once the company exits Chapter 11.

Moreover, judge Beatty ruled that as of Solutia's bankruptcy filing, the principal amount was actually $187.4 million - not $223 million.

The noteholders, therefore, received a $12.1 million windfall, the creditor's committee noted, arguing that the excess amount should be returned.

A preliminary hearing is scheduled for Nov. 29.

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. Its Chapter 11 case number is 03-17949.

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