Solutia restructures 6¼% euro notes

New York, Feb. 3 - Solutia Inc. said its Solutia Europe SA/NV subsidiary successfully restructured its 6¼% euro notes due 2005.

The St. Louis chemical company added that the restructuring allows Solutia Europe to continue normal operations while Solutia Inc. and its domestic subsidiaries reorganize under Chapter 11.

Under terms of the restructuring, the euro notes were modified to:

* Eliminate the cross default provisions that would have been triggered by Solutia's Chapter 11 filing;

* Extend the maturity to Dec. 15, 2008 from Feb. 15, 2005;

* Increase the coupon to 10%;

* Grant holders a security interest in substantially all the assets of Solutia Europe SA/NV and certain of its subsidiaries excluding Flexsys Holding BV;

* Modify the redemption provisions. Partial redemption is allowed as a result of permitted asset sales. Full redemption is barred for 18 months, then full redemption is allowed at 105% of par for the next year, 103% of par for the year after that, 101% of par for the year after that and par after that;

* Add covenants limiting Solutia Europe SA/NV's ability to transfer assets or cash until the euro notes are paid;

* Add financial reporting requirements and indemnify holders against certain liabilities.

"By extending the maturity of the euro notes, we have given ourselves time to finalize the reorganization of Solutia Inc. and its domestic subsidiaries in the United States prior to the maturity of the euro notes," said Jeffry N. Quinn, senior vice president, general counsel and chief restructuring officer of Solutia Inc., in a news release.

Solutia said it completed the restructuring on Jan. 30 by entering into definitive documents with holders.

Solutia filed for Chapter 11 on Dec. 17 in the U.S. Bankruptcy Court for the Southern District of New York. The case is number 03-17949.

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