Solutia 2009 notes' indenture trustee disputes committee's attempt to dictate claim payment

By Caroline Salls

Pittsburgh, Jan. 9 - Solutia Inc. indenture trustee The Bank of New York objected to the official committee of unsecured creditors' motion to increase the disputed claims reserve for the holders of the company's 11¼% senior secured notes due 2009, according to a Wednesday filing with the U.S. Bankruptcy Court for the Southern District of New York.

The Bank of New York said the committee cannot simply assume the power to force non-payment and non-compliance with previous orders and agreements "based upon its new-found subjective belief that the senior secured notes claim is disputed."

As previously reported, the committee is asking the court to increase the disputed claims reserve by the amount of a $12.2 million overpayment to aid the plan confirmation process.

Through its motion, the committee is also asking the court to order the company to pay the 2009 noteholders only the $197.8 million undisputed claim amount on the effective date of its plan of reorganization.

As another alternative, the committee said Solutia could pay the noteholders $210 million on the plan effective date and add the next coupon payment due on the 2009 notes to the disputed claims reserve.

According to the objection, at the last hearing on the claim dispute issues, the court brought to light various deficiencies in the committee's "last-minute attempt to claw back prior payments of pendency interest" on the 2009 notes.

The indenture trustee said in the objection that the claims reserve increase motion does not fix any of those deficiencies "and instead highlights just how aggressively the creditors' committee is willing to renege on prior commitments to pursue its leverage tactic."

Through the motion, The Bank of New York said the committee is trying to force the company to pay less than $209.9 million plus pendency interest on the notes trustee's claim on the effective date of Solutia's plan of reorganization.

However, the indenture trustee said this request violates the company's cash collateral order, its plan of reorganization and related disclosure statement, a summary judgment ruling that detailed the amount to be paid on the noteholders' claim and a stipulation that resolved the bank's objection to confirmation of the company's plan.

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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