Solutia bonds better on deal with Monsanto, creditors; Meridian Auto loan plunges on poor numbers

By Paul Deckelman and Sara Rosenberg

New York, June 7 - Solutia Inc. bonds were seen solidly higher Tuesday after the bankrupt St. Louis-based chemical company said that it had reached agreement with its former corporate parent, chemical giant Monsanto Co., and an unsecured creditors committee on the shape of its restructuring plan.

In the bank loan market, Meridian Automotive Systems Inc.'s debt - especially the second-lien paper - plummeted after the company came out with financials that fell far below expectations, a trader said.

Solutia's 7 3/8% subordinated notes due 2027 were seen by a trader as having started the session at 78.5 bid, 79.5 offered, before pushing as high as 84.5 bid, 85.5 offered. A trader saw the bonds falling back late in the day, but still ending up with a gain at 82.5 bid, 83.5 offered.

At the same time, though, its 11¼% notes due 2009 were essentially unchanged at 101.5 bid, 102.5 offered.

The subordinated bonds shot up after the company said on Tuesday that it had reached an agreement with Monsanto and an unsecured creditors committee on a plan to reorganize the company, which Monsanto spun off in 1997.

Solutia was never really able to make a go of it, and ended up filing for bankruptcy protection in 2003, overwhelmed by huge liabilities related to environmental lawsuits and employee benefits it Monsanto left it holding.

Under the terms of the agreement launched Tuesday, Monsanto will invest as much as $250 million of new equity in Solutia, bringing its equity stake in its former unit as high as 52.5%, depending on the response to a rights issue.

Meridian loans drop

In bank debt dealings, Meridian Automotive's second-lien paper was quoted at 50 offered, looking for a bid, compared to previous levels of 55 bid, 60 offered.

The company's first-lien bank debt was also quoted down by about a point or two at 89 bid, 91 offered, the trader said.

Meridian is a Dearborn, Mich., supplier of front and rear end modules, lighting, exterior composites, console modules, instrument panels and other interior systems to automobile and truck manufacturers.

Collins & Aikman steady

Also in the automotive sphere, traders saw little movement in the troubled Collins & Aikman Products Co., even as General Motors Corp. - a key Collins & Aikman customer - announced plans to shutter a number of U.S. factories and abolish as many as 25,000 jobs through 2008.

A trader said the bankrupt Troy, Mich.-based automotive interior components' 10¾% senior notes due 2011 were pretty much rock-steady at 42 bid,43 offered. "Not much movement there," he opined.

Salton up

The trader did see Salton Inc.'s bonds "seeming to move a little bit," despite a lack of fresh definitive news about the Lake Forest, Ill.-based maker of the popular "George Forman" electric hotdog and hamburger grills.

He saw Salton's 12¼% notes due 2008 up a point at 45, while its 10¾% notes due 2005 were also up a point, at 51.

Members of the investment community have been questioning how the company plans to pay off its 2005 bonds, which are scheduled to mature in mid-December.

Calpine second lien loans trade

Elsewhere, Calpine Corp.'s second-lien bank debt was pretty active on Tuesday on no particular news, with the paper quoted higher by about three eighths of a point, according to a trader.

More specifically, the San Jose, Calif.-based power company's second-lien loan closed out the session with quotes of 77 bid, 78 offered, the trader said.

Calpine's bonds meantime "looked pretty unchanged," a trader said, with the 8½% notes due 2008 at 60 bid, 62 offered.

However, a trader at another desk saw the company's bonds down two points, with the 8½% notes due 2011 at 59.5 bid, 60.5 offered, and its 8½ % notes due 2008 at 60 bid, 61 offered.

A trader blamed the fall on profit-taking, noting that the bonds "were up eight points" over the past week to 10 days.

Delta edges higher, UAL jumps

Among the airlines, Delta Air Lines Inc. was seen up about a half a point, after the Atlanta-based airline operator's 8.30% notes due 2029 at 28.75 bid, 29.75 offered, and its benchmark 7.70% notes due 2005 at 85.5 bid, 86.5 offered.

The standout again in the airline grouping, a trader said, was UAL Corp.'s bonds, which rose to 11.75 bid, 12.25 offered, up at least half a point on the session. UAL investors have lately been encouraged by remarks CEO Glen Tilton made in a newspaper interview, in which he predicted the Illinois-based giant carrier - bankrupt since 2002 - would emerge from Chapter 11 later this year, ahead of some market expectations. Tilton also told The Chicago Tribune that he expects UAL to be back in the black by next year.

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