New York, August 20--A federal bankruptcy judge last week agreed to allow Solutia Inc. to put on a joint defense with Monsanto Co. and Pharmacia Corp. over some environmental cleanup liabilities.
U.S. Bankruptcy Court Judge Prudence C. Beatty approved a joint defense agreement in which the companies would be allowed to share confidential information as part of developing a settlement strategy for resolving certain environmental liabilities. The agreement was submitted without objection from any parties involved in Solutia's bankruptcy proceedings.
However, Solutia has the option to opt out of the settlement strategy if it doesn't ultimately agree, according to court documents.
Solutia, a St. Louis maker of chemical-based materials, filed for Chapter 11 bankruptcy protection in December 2003, citing heavy financial obligations.
It inherited those financial obligations - including retiree benefits, environmental liabilities and litigation costs - when it was spun off from the old Monsanto company in 1997. Monsanto merged with Pharmacia & Upjohn Inc. in 1999, forming Pharmacia Corp. Its biotechnology and agricultural businesses were spun off as the current Monsanto in 2002. Pharmacia has since been acquired by Pfizer Inc.
Judge Beatty also signed off on Solutia making a $11 million contribution into its pension plan, avoiding potential problems with the Pension Benefit Guaranty Corp. The contribution gives Solutia the ability to cover 80% of its current liabilities, according to court documents.
Solutia is seeking to rid itself of those retirement obligations and has filed suit asking the courts to transfer those liabilities back to Monsanto and Pharmacia.
At the same time, the bankruptcy court approved a plan in which it will enter certain secured hedging transactions with Citibank, a unit of Citigroup Inc., in order to insulate itself against fluctuations in natural gas prices. The company said it would be unable to manage its fuel costs without such transactions.
Meanwhile, the debtors of Solutia have agreed to give the equity committee in its bankruptcy case certain information regarding the spinoff of Solutia in 1997.
The equity committee had asked the court to allow the committee to conduct a probe of Monsanto, Pharmacia and investment banker Goldman Sachs (GS) about the spinoff.
An attorney for Monsanto and Pharmacia told the court Thursday that the companies would be willing to fill in gaps in requested information, but felt the committee's initial information request was too broad.
The court adjourned its ruling on the matter to allow the parties time to exchange information.
