ST. Louis, NO, June 25--The biggest hurdle that Solutia Inc. faces between now and the time it emerges from Chapter 11 bankruptcy proceedings is how its legacy liability issues are addressed, President and Chief Executive Jeffry Quinn told Dow Jones Newswires.
The specialty chemical company filed for Chapter 11 bankruptcy protection on Dec. 17, citing legacy liabilities it inherited when it was spun off from the Monsanto Co. that existed in 1997. Those legacy liabilities include medical, disability and retiree benefit obligations.
Quinn became the head of Solutia on June 1, after John C. Hunter retired as chairman, president and CEO. Quinn previously had been the company's general counsel and chief restructuring officer.
Whether Solutia and the current Monsanto Co. can reach an agreement on the legacy liabilities outside of the courtroom remains to be seen, although any deal would have to be approved by the bankruptcy court.
The Monsanto that existed after Solutia's spinoff later merged with Pharmacia & Upjohn Inc. to form Pharmacia Corp. Pharmacia later spun off the current Monsanto, and Pharmacia and the remaining part of the old Monsanto were eventually purchased by Pfizer Inc. (PFE).
Quinn declined to comment on exactly what Solutia and Monsanto executives are discussing, but he did say that Monsanto is involved in every aspect of the bankruptcy case because it has representatives on the creditors committee. Solutia discusses all facets of its business with that committee, he said.
"I would describe our relationship and Monsanto's involvement in the overall case as productive and meaningful," Quinn said. "We understand that in any reorganization of Solutia, Monsanto will play a significant role."
Quinn reiterated that his goal is to have Solutia emerge from bankruptcy protection in mid-2005.
"That's probably pretty aggressive, given the complexity of the case and that there are many factors in this case that we don't have exclusive control of, but that's our goal," he said.
The complexity of the bankruptcy filing stems from several issues, Quinn said. The first is that Solutia spun off of the Monsanto that eventually became part of Pharmacia but is now part of Pfizer. Another factor is the contractual relationship among Solutia, Monsanto and Pfizer. The legacy liabilities are also in play.
Also, Solutia's two businesses - nylon and performance products - are very different from one another, Quinn said. The company manufactures nylon and acrylic fibers used in products such as carpets and fabrics. Solutia also makes a plastic interlayer for laminated glass that's used in cars and buildings.
The company recently filed a motion with the U.S. Bankruptcy Court in Manhattan for an extension of the exclusivity period to file a reorganization plan and have creditors vote on it. The period is set to expire July 14, but an approval of Solutia's motion would give it 90 days more to file the plan. A hearing in the matter is scheduled for June 30.
Solutia's business plan, which is part of its reorganization plan, is being presented to the parties involved in its bankruptcy proceedings, including retirees and equity holders. Quinn declined to discuss the details of the business plan, saying that it will become public when Solutia's plan of reorganization is proposed.
As for what Solutia will look like when it emerges from bankruptcy, Quinn said it will have a competitive cost structure, the capacity to meet its financial obligations and a portfolio of global businesses with good margins and strong brands with good growth opportunities.
"You don't want to come out in a manner that's not viable and which can't sustain the debt and liability load," he said.
