Solutia, Banks Reach Agreement on Financing

St. Louis, MO, February 26, 2008--Solutia Inc. on Monday said it will be able to emerge from Chapter 11 bankruptcy on Feb. 28 after it reached an agreement Monday with lenders on its exit financing package.

The settlement avoided a court decision. Solutia had sued the lenders, who backed out of the deal, claiming market conditions had changed. As part of the agreement, it dropped the lawsuit filed Feb. 6.

Solutia reached an agreement with Citigroup Global Markets Inc., Goldman Sachs Credit Partners LP and Deutsche Bank Securities Inc. to fund Solutia's exit financing package.

Under the terms of the revised package, the banks will to increase the size of the senior secured asset-based revolving credit facility from $400 million to $450 million; provide a $1.2 billion senior secured term loan facility; and a $400 million senior unsecured bridge facility.

Solutia will pay a higher interest rate on a $1.2 billion senior secured term loan: 5 percentage points in addition to LIBOR, the rate that banks charge one another for loans. Solutia initially had agreed to pay LIBOR plus 3.5 points.

In addition, Solutia and its banks agreed to set a floor on how far they would follow the falling London-based LIBOR rate, which has steadily dropped as European central banks added liquidity to the struggling global monetary system. As a result, Solutia's interest rate will not drop below 8.5 percent for the first four years of the loan.The banks also agreed to waive the market material adverse change provision in the original loan documents, Solutia said.

The U.S. Bankruptcy Court for the Southern District of New York must approve the revised package. That hearing is scheduled for this morning.

Solutia filed for Chapter 11 bankruptcy protection in December 2003.