Solutia sees $34 million-plus savings as lenders jockey for its business

By Jeff Pines

Washington, Jan. 15 - Solutia Inc. continues seeking more favorable terms for its debtor-in-possession financing facility as lenders jockey for its business - potentially saving upwards of $34 million in borrowing costs over two years and increasing the size of the loan.

Pending a final hearing, the U.S. Bankruptcy Court for the Southern District of New York approved a $515 million DIP facility, according to a filing with the court. Of that, Solutia could borrow $85 million immediately.

Surprisingly, three of Solutia's pre-bankruptcy lenders, who gave it the cold shoulder when the company first came looking for DIP financing, are shaving their prices to give Solutia the best deal.

Citibank U.S.A., Inc.'s term sheet arrived first on Jan. 8, followed by JP Morgan Chase Bank.

As a pre-bankruptcy lender to Solutia, Citibank is familiar with the company's business so it does not need to conduct the same due diligence a newcomer would have to do, the company said. Citibank said it had resolved the issues that kept it from previously offering any financing. Its commitment letter provided a savings of $30 million in interest and fees over two years.

With Citibank's terms in hand, Solutia turned to Ableco, its current DIP lender, to see if it could get a better deal. Ableco matched the deal.

But by Wednesday's close of business, Citibank shaved another $4 million-$5 million off the cost of its deal. JP Morgan Chase and Bank of America told Solutia they were preparing terms even more attractive than those of Citibank's.

Solutia is also seeking $25 million more in borrowing power. Citibank is offering a total of $525 million including a $15 million carve out for professional's fees and Ableco's total lending commitment is $540 million.

In addition, the modified DIP would allow Solutia to make interest payments to its 2009 noteholders during the bankruptcy proceedings and pay the fees and expenses of an ad hoc committee of these noteholders.

According to the filing, the firm's assets are valued at $1.095 billion.

The hearing on the DIP is set for Jan. 16 at which point Solutia will present the most favorable borrowing option to the court.

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