Solutia equity committee asks court to terminate exclusivity, proposes plan based on business sales

By Caroline Salls

Pittsburgh, April 11 - Solutia Inc.'s official committee of equity security holders asked the U.S. Bankruptcy Court for the Southern District of New York to terminate the company's exclusivity to file a plan of reorganization and solicit votes on the plan, saying Solutia's Chapter 11 case has been "stagnant for almost four years," according to a Wednesday court filing.

According to the motion, the company remains "mired in litigation with the ad hoc committee of noteholders, and, at the same time, cling[s] to the core of a proposed settlement with Monsanto Co. and Pharmacia Corp. that significantly limits the debtors' reorganization options."

Based on Solutia's conduct to date, the committee said it is concerned that any in plan proposed by the company, Solutia will fail in its fiduciary obligations to all the constituents in the bankruptcy case by providing little or no recovery to public shareholders.

The committee said Solutia will instead gift the hidden value in its businesses to Monsanto, the bondholders and other unsecured creditors in violation of the absolute priority rule.

The equity committee said Solutia has had more than enough time to consider a variety of plan alternatives and its exclusivity should be terminated so the committee can propose a plan of its own.

The committee said its plan would include the sale of some of Solutia's businesses, and the company would reorganize around remaining businesses, allowing a possible full recovery for unsecured creditors and a meaningful recovery for equity holders.

"Accordingly, cause exists for this court to terminate the debtors' exclusive periods so the debtors can no longer hide behind exclusivity and deprive the equity committee from marketing the sale businesses," the committee said in the motion.

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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