Solutia requests DIP waiver to use all Astaris sale proceeds for general corporate purposes

By Caroline Salls

Pittsburgh, Nov. 8 - Solutia Inc. requested approval to enter into a waiver agreement under its debtor-in-possession financing agreement that would allow the company to have access to all $95 million net proceeds from its sale of Astaris LLC for general corporate purposes, according to a Monday filing with the U.S. Bankruptcy Court for the Southern District of New York.

Under the terms of the DIP agreement, Solutia is entitled to use a portion of the proceeds of the sale for general corporate purposes.

Originally, the company had intended to use other portions of the proceeds to pay down the DIP term loans. However, according to the motion, as a result of intervening events, it is important for Solutia to have access to all proceeds for general corporate purposes.

Specifically, the motion said the effects of Hurricanes Katrina and Rita on the Southeastern United States resulted in increased raw material costs and limited supplies of raw material inputs in the industry, which, in turn, caused a decrease in the amount of excess liquidity maintained by Solutia as a buffer against future uncertainty.

In response to these conditions and to maintain flexibility during the resulting uncertainty in the market, Solutia determined that retaining all of the proceeds for general business purposes will provide an important liquidity cushion, which will reassure Solutia's customers, suppliers and other trade creditors, while supply chains are rebuilt and the chemicals industry returns to normal operations.

A hearing is scheduled for Nov. 17.

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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