Solutia gets approval of backstop commitment for $250 million rights offering

By Reshmi Basu

New York, Nov. 6 - Solutia Inc. obtained approval Tuesday of the backstop commitment for its $250 million rights offering from the U.S. Bankruptcy Court for the Southern District of New York.

As previously reported, the backstop investors include Highland Crusader Holding Corp., Longacre Fund Management, LLC, Merrill Lynch, Pierce, Fenner & Smith Inc., GMAM Investment Funds Trust II, ReCap International (Master) Ltd., Institutional Benchmarks Series (Master Feeder) Ltd., Southpaw Asset Management LP and UBS Securities LLC.

In exchange for their agreement to backstop the rights offering, the backstop investors will receive an up to $6.25 million backstop fee; reimbursement of up to $1.3 million in expenses and the right to purchase 2.81 million shares of new common stock being offered in the rights offering.

The rights offering will give Solutia's noteholders and general unsecured creditors the right to buy 15.94 million shares of new common stock in the reorganized company at a price of $13.33 each, which represents a 33.3% discount to the implied equity value.

In addition, each rights offering participant that exercises its rights in full will be entitled to subscribe for more shares of new common stock at the $13.33 price if other rights offering participants do not exercise all of their rights.

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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