Solutia Could File Chapter 11 To Address Liquidity
St. Louis, MO, Aug. 19--Solutia Inc. said it's considering all alternatives, including a potential reorganization under Chapter 11 bankruptcy, to address its future liquidity needs, according to the company's quarterly report filed Monday with the Securities and Exchange Commission.
The chemical company said that without a "substantial improvement" in operating results, cash flow from operations won't be a significant source of liquidity to meet certain requirements, including current litigation costs, pension contributions and debt payments.
The company said in the filing that it will be required to make quarterly contributions currently expected to be about $175 million to its pension plan during 2005.
The company is involved in litigation in Alabama related to pollution caused by the alleged release of polychlorinated biphenyls, or PCBs, and has said that the overhang of litigation will "significantly restrict" alternatives to address future liquidity requirements such as bonds maturing in late 2004.
Solutia has previously said it is "considering all available alternatives" to address the PCB litigation and liquidity needs.
Solutia's $300 million credit line expires Aug. 13, 2004, and the holders of 6.72% debentures have the right to demand repayment of $150 million of bonds in October 2004.
The company recently got a waiver of covenant violations through Sept. 29, and expects to refinance the $300 million loan before the waiver expires, according to the filing.
At June 30, the company had capacity to borrow up to $62 million, and had $84 million of cash and cash equivalents available for general corporate purposes and debt repayment.
