St. Louis, MO, February 14, 2006--Solutia Inc., today filed its plan of reorganization, revealing the winners and losers in a more than two-year bankruptcy case that sets the fate of hundreds of local workers and retirees.
The chemical maker said it hopes to emerge midyear as a public company, independent but with up to 49 percent of its shares owned by Monsanto Co.
Solutia will continue to produce window films and glass interlayers for vehicles and buildings, as well as nylon products, such as the fiber in Wear-Dated carpets. The former products will provide growth and sizzle, while sales of the latter flatten out. Pharmaceutical services and specialty chemicals for niche markets are smaller pieces of the product mix.
The company will continue to provide retiree pensions and benefits, but there will be changes to health care plans, such as higher co-pays and deductibles.
A retirees' fund also will receive a $35 million unsecured claim against Solutia. Paid off in the expected range of 48 percent to 56 percent for all allowed unsecured claims, it would be worth about $17 million to $20 million.
Reorganized Solutia is a smaller company, with about 5,400 employees, down 15 percent from December 2003 when it filed for Chapter 11 bankruptcy protection. Solutia and Dutch partner Akzo Nobel also are seeking a buyer for joint venture Flexsys, a supplier of chemicals to the rubber industry with 2005 sales of $640 million and nearly 1,000 employees.
Solutia chief executive Jeffry Quinn said it has taken about a year longer than expected to reach this point. But Solutia has made it through complex and often contentious negotiations with a host of creditors, rethought and reorganized its business units, and--most important--shed, or determined how to manage a pile of legacy liabilities that had cost the company about $100 million a year since its creation in 1997.
"It is overwhelming, really, to look at what's been accomplished by this organization, from managers to people on the factory floor," Quinn said. "Solutia has a lot going for it. (We) have some great businesses and a chance to define ourselves and how we do business."
Monsanto is the linchpin of Solutia's reorganization, as well as the biggest beneficiary.
The companies share a parent--the old Monsanto Co., a firm founded a century ago that produced chemicals, pharmaceuticals, sweetener and herbicides.
Solutia was created from the chemical division, but loaded down with debt and expensive liabilities: providing health care, disability benefits and life insurance for 23,000 retirees and their dependents; cleaning up environmental damage done by the old Monsanto; and defending lawsuits over exposure to polychlorinated biphenyls, or PCBs, asbestos, dioxins and other chemicals. The company blames its bankruptcy on these liabilities, along with record-high raw material and energy costs and an overall economic downturn.
Old Monsanto's agricultural division in 2000 became new Monsanto, now the world's leading provider of genetically modified crops. It was spawned in part as a backstop to Solutia, responsible for those legacy liabilities if the chemical company should fail.
Spurred by that prospect, Monsanto agreed to:
Buy up to 22.7 percent of Solutia's new shares of stock for $250 million, if no other unsecured creditors purchased any from that pool.
Take over legacy tort litigation, estimated by Solutia at $20 million a year for the foreseeable future.
Clean up at least 50 sites never owned or operated by Solutia, at an estimated total cost of more than $100 million.
Share the cost of cleanups beyond plant property in Sauget, Ill., and Anniston, Ala.
These last environmental projects will be the most costly and complex. Solutia's filing estimates the expense at $234 million total through 2015. After that, the annual expense will decline.
