St. Louis, MO, May 9, 2006--Shifting deadlines and a pair of unresolved legal disputes indicate that the bankruptcy reorganization of Solutia Inc., is taking longer than the chemical maker had anticipated, according to the St. Louis Post-Dispatch.
The newspaper reported that Solutia in February filed a plan of reorganization in its more than two-year-old bankruptcy case. At the time, chief executive Jeffry Quinn said he looked forward to leaving bankruptcy at mid year.
However, a hearing on Solutia's financial-disclosure statement, which would have signaled the final phase of reorganization, was moved to June 7 from May 1.
Solutia received, according to the Post-Dispatch, an extension of the time in which only its reorganization plan will be considered, rather than allowing others to submit plans. That deadline now is Oct. 10.
On Friday, spokesman Dan Jenkins said that Solutia's emergence is "months away."
"The mechanisms of the process alone take time," he said. And before those gears can begin to turn, the Bankruptcy Court must resolve separate disputes brought by a Solutia creditor, JPMorgan Chase Bank, and a court-appointed committee representing equity security holders.
A trial in the JPMorgan case is set for May 23 and expected to require a few days.
JPMorgan claims Solutia improperly refinanced its debt in October 2003 to strip JPMorgan of a secured claim for $450 million--an amount that would have made it Solutia's second-largest secured creditor. If the bank prevails, its claim could disrupt Solutia's reorganization plan, which took more than two years to formulate.
"We are very confident of our position" in the case, Jenkins said. The company's reorganization cannot proceed until the dispute is resolved.
Another hurdle is a suit brought by the equity-holders' committee against Monsanto Co., and Pharmacia Inc., to which Solutia is related.
The committee argues that Solutia was improperly created and weighted down with debt and liabilities by its former parent, making its bankruptcy inevitable. The parties are exchanging evidence in that case.
The equity holders also have won permission from Bankruptcy Judge Prudence Carter Beatty in New York to examine documents related to Solutia's financial disclosures and reorganization plan. Solutia has until Friday to produce them.
The documents ordinarily would be available to any party with rights to vote on Solutia's reorganization plan, Jenkins said. But they typically are requested at the hearing on the disclosure statement and provided after, rather than causing a delay in that hearing as in this case.
The delays are hurting Solutia's limited pocketbook. Reorganization expenses totaled $14 million in the first quarter, according to a filing with the Securities and Exchange Commission. Fees for lawyers and other professional-service providers alone run more than $4 million a month, Jenkins said.
But, he said, the company's employees, customers and suppliers are holding up as they wait for the bankruptcy to end.
"Our employees recognize that there are pieces of this process that we cannot control. (So), we are just running the business day to day," he said. "Our customers have stuck with us. That took a little bit of faith at first, but they've seen, 'Yeah, (Solutia) continues to take care of us."'
