Solutia unsecured creditors seek order disbanding equity holders' committee

By Jeff Pines

Washington, March 30 - Solutia Inc.'s official committee of unsecured creditors wants an order disbanding the official equity holders' committee. It filed a motion with the U.S. Court for the Southern District of New York on March 30 requesting the action.

It was a mistake to appoint the committee since the company "appears to be hopelessly insolvent," the committee said. The U.S. trustee appointed the members of the equity committee on March 24.

The unsecured creditors argued that the valuation prepared by the Huron Consulting Group for the ad hoc shareholders' committee used to persuade the trustee was "fundamentally flawed" because it understated funded debt liabilities by $269.5 million, failed to include $12 million in interest and used "outdated or incorrect benchmarks."

In addition the company had a negative book value of equity for the last nine quarters. Solutia's unsecured bonds trade at 38 cents on the dollar and that the stock trades at 44 cents per share so the equity holders, the committee argued, are unlikely to get anything out of a reorganization.

Another reason for disbanding the committee is the cost of providing its members with professional services, it said.

Solutia, which filed for Chapter 11 on Dec. 17, also has an official committee representing retirees.

The U.S. trustee's response to the motion is due April 6.

An April 13 hearing is scheduled.

The St. Louis-based chemical company's Chapter 11 case number is 03-17949.

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