Solutia expects new credit facility to be secured by working capital, some fixed assets

New York, July 30 - Solutia Inc. said it expects its planned new credit facility will be secured by working capital and some fixed assets.

The new facility is also expected to take a borrowing base approach, Marlene Judge, Solutia's director of investor relations, said during a conference call.

The refinancing is for a $300 million revolving credit facility.

Solutia announced that it had begun discussions about the refinancing on July 3. It also said at that time that it obtained an amendment of some financial covenants for the period June 30 through Sept. 29 in anticipation of weaker-than-expected second quarter results.

Judge said Wednesday that ahead of the amendment Solutia made additional borrowings on the facility.

"As we were working through the amendment approval process, we became concerned the approval process would not be completed until early July and therefore we took the conservative approach of drawing down additional funds on the revolver to ensure we had adequate liquidity at through to the approval process," Judge said.

Litigation over PCB's, a liability Solutia inherited as part of its spin off from Pharmacia, continues to overshadow the company, added John Hunter, chairman and chief executive officer of the St. Louis chemical company.

Attempts to settle the claims have so far been unsuccessful and he said it is likely to be several more years before the issue is resolved.

"Without a dramatic change in circumstances the overhand of this litigation - which we were saddled with by the Pharmacia spin - will significantly restrict the alternatives we have to address our future liquidity requirements," Hunter said.

Specifically he mentioned the company's bond maturities in late 2004 and early 2005 and the contributions to its pension fund that begin in 2005.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.