Solutia granted exclusivity extension; noteholder, equityholder committees' termination requests denied

By Jennifer Lanning Drey

Portland, Ore., May 1 - Solutia Inc. was granted a 90-day extension to its exclusive periods to file a plan of reorganization and solicit votes on the plan from the U.S. Bankruptcy Court for the Southern District of New York, which subsequently denied noteholders' and equity holders' motions to terminate exclusivity, according to a source familiar with the case.

The company's exclusive plan-filing period was extended to July 30 from April 30 and the solicitation period to Sept. 28 from June 29.

Solutia's official committee of equity security holders and an ad hoc noteholders committee had each filed an objection to the company's motion requesting the extension. Both committees wanted to file their own separate plans of reorganization, according to court documents.

In a motion filed April 20 by the informal noteholders, the committee said it sought to terminate the company's exclusivity so that it could submit an alternative plan that provides for Monsanto Corp. and the noteholders "to make major concessions in a fair and reasonable compromise of pending litigation."

The noteholders also said their plan offers a fair compromise to general unsecured creditors and is confirmable whether that class votes to accept the plan or not.

In a motion filed April 12 by the official committee of equity holders, that committee said that based on Solutia's conduct to date, it was concerned that in any plan proposed by the company, Solutia will fail in its fiduciary obligations to all the constituents in the bankruptcy case by providing little or no recovery to public shareholders.

The equity holders said Solutia would instead gift the hidden value in its businesses to Monsanto, the bondholders and other unsecured creditors in violation of the absolute priority rule.

The committee said its plan would include the sale of some of Solutia's businesses and the company would reorganize around remaining businesses, allowing a possible full recovery for unsecured creditors and a meaningful recovery for equity holders.

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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