Solutia's 2009 noteholders trustee urges court to reconsider partial summary judgment motion

By Reshmi Basu

New York, Nov. 15 - Solutia, Inc.'s senior secured notes trustee asked a federal judge to reconsider her ruling in which she said the company's senior secured noteholders were not entitled to any interest payments on the bonds once the company exits bankruptcy protection.

The trustee, Bank of New York, argued that judge Prudence Carter Beatty's written ruling is based on certain factual and legal errors, according to a Thursday filing with the U.S. Bankruptcy Court for the Southern District of New York.

The trustee contended that the court misinterpreted the reading of the indenture, specifically the provision related to the automatic acceleration of the notes once the company filed for bankruptcy, arguing that judge Beatty was wrong to interpret the contract as saying that the notes could never be accelerated.

The noteholders contend they are owed at least $223 million, which they claim is the principal value of the 11¼% senior unsecured notes due 2009, along with interest accrued through the date the notes mature in 2009.

Solutia, along with the creditor's committee, countered that the 2009 noteholders have greatly exaggerated their claim and that the actual amount is $209.9 million, which includes $181.7 million, the amount Solutia was advanced when the notes were issued, plus accrued interest of $28.2 million.

During an Oct. 31 hearing, judge Beatty urged the parties to reach a decision. However, last Friday, the judge sided with the company, ruling that Solutia would not have to pay further interest once it pays off the senior noteholders on the effective date of the plan nor are they entitled to go after the original issue discount on the paper.

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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