Solutia amends financial covenants, seeking refinancing of revolver

By Sara Rosenberg

New York, July 3 - Solutia Inc. sought and received an amendment of certain financial covenants under its $300 million revolving credit agreement for the period June 30 through Sept. 29. Furthermore, the company initiated talks with lenders regarding a refinancing of the revolver.

The amendment was sought after due to the anticipation of weaker-than-expected second quarter results.

"The second quarter has proven to be a very difficult one for Solutia as our businesses continued to be adversely impacted by the weakened state of the manufacturing sector, characterized by significant overcapacity and persistently high raw material and energy costs," said John C. Hunter, chairman and chief executive officer, in a news release.

"Our financial performance also continues to be adversely influenced by the continued drain from legacy issues we assumed as part of the spin-off from what is now Pharmacia," stated Hunter. "Most notable of the legacy liabilities with which we are saddled is the PCB litigation in Alabama, which continues to be the most challenging issue I have dealt with in my 30-plus year business career. The verdicts in the property damage phase of Abernathy continued to mount in the second quarter. These verdicts and the lack of approval by the federal court in the second quarter of the proposed consent decree with the U.S. EPA have significantly dampened our earlier hopes of reaching a global resolution of the PCB issues in Anniston."

Solutia is a St. Louis manufacturer and seller of high-performance chemical-based materials.

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