Solutia Doing Well After 3 Years of Bankruptcy

St. Louis, MO, August 16, 2007--Solutia Inc. is doing well and marshalling resources, filling vacant wings of its headquarters with energized executives and new hires, according to the St. Louis Post-Dispatch.

Solutia last week reported first-half net income of $48 million on sales of $1.6 billion, up from $8 million net income and $1.4 billion in sales in the year-ago period.

Chief Executive Jeffry Quinn told the newspaper he is proud of the growth, but says it is a blessing and a curse in the company's more than three-year-old bankruptcy reorganization.

"The businesses have improved. We've improved profitability," he said. "At some points, that has encouraged stakeholders to continue to elbow to try to get a bigger share of the pie, as opposed to fueling a great sense of urgency to get the company out of bankruptcy" as would be the case if the company were losing value and money.

"Surprisingly, perhaps, that has been a part of why we're still in bankruptcy," Quinn said. He predicted that Solutia will emerge from bankruptcy this fall.

The company certainly is more valuable today than when it filed for Chapter 11 reorganization protection in December 2003.

Solutia's consultants said last month that its enterprise value — what the market believes the company's ongoing operations are worth — will be about $2.8 billion if it emerges soon. That's about three times the enterprise value those same consultants placed on Solutia in February 2006, according to court documents.

So, what's behind the growth?

During its reorganization, Solutia has shed unprofitable units and acquired others that are doing well. It cut production costs, while successfully raising prices to offset record-high energy and raw material rates. And the company became more global, increasing its focus on rapidly expanding Asian markets.

Perhaps most significantly, Solutia stopped paying for liabilities such as retiree insurance and environmental cleanup costs that it inherited from its former parent, the old Monsanto Co. Solutia was created in 1997 from that company's chemical division.

"Our mantra here is of (changing) a portfolio that at one time was just what was left when Monsanto decided to exit the chemical business," Quinn told the newspaper. "We're investing in good businesses to really drive them to a high level of performance."