Solutia: $400 million Chapter 11 exit financing high-yield bridge has 15½% coupon

By Paul A. Harris

St. Louis, May 12 - Solutia Inc. disclosed in a filing Monday with the Securities and Exchange Commission that its $400 million high-yield bridge loan will pay interest at 15½%.

The company also disclosed that it may make in-kind, as opposed to cash, interest payments. The amount of in-kind payments the company can make, as a percentage of the overall payment, begins at 3½% and declines annually to 1½%.

In early April an informed source said that all of the $400 million of high-yield bridge debt related to Solutia's Chapter 11 exit financing has been distributed.

In February Solutia marked down a $430 million face amount of 12½% eight-year senior notes (B2/B-) to 93.00.

The deal traveled a full investor roadshow in mid-January and subsequently became a source of disagreement between Solutia and its underwriters, Citigroup, Goldman Sachs & Co. and Deutsche Bank Securities.

The underwriters asserted that the market deterioration since the Oct. 25, 2007 commitment date satisfied a material adverse conditions (MAC) clause in the financing agreement. But in late February the underwriters waived that MAC provision and funded the commitment.

The company initially filed for bankruptcy protection in December 2003.

Solutia is a St. Louis-based manufacturer and provider of performance films, specialty chemicals and nylon products.

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