St. Louis, MO, Dec. 20--Solutia Inc. was granted access Friday to $85 million in bankruptcy financing, dearly important funds for a company whose liquidity had dwindled to about $20 million.
In her Friday order, U.S. Bankruptcy Judge Prudence Carter Beatty gave Solutia interim access to its $500 million debtor-in-possession financing agreement it announced when entering Chapter 11 Wednesday. Of that sum, Solutia plans to use $350 million to replace a bank facility Solutia secured in October. Judge Beatty's order Friday gives access to half of the remaining $150 million in DIP funds plus an extra $10 million for certain professional fees.
The bankruptcy financing was arranged by a syndicate of lenders led by Ableco Finance LLC, Congress Financial Group and Wells Fargo Foothill. It carries an interest rate of 13 3/8%.
Judge Beatty's order only gives Solutia interim access to the DIP. A January hearing will be held to consider whether the specialty chemicals maker should be allowed to use the other $75 million the syndicate agreed to lend.
The U.S. Trustee in Manhattan, the government body that oversees bankruptcy cases in this federal district, as well as the ad hoc committee of Solutia bondholders raised objections to the DIP arrangement, but agreed to defer them until the January hearing.
Ira Dizengoff, an attorney with Akin Gump Strauss Hauer & Feld LLP which is representing the bond committee, said the issue was over technical details of the funding deal, not its overall economic terms. He wouldn't be more specific; neither would a representative of the U.S. Trustee's office.
Solutia blamed its bankruptcy filing on the environmental and pension liabilities it was saddled with upon its formation six years ago. The economic downturn, which hurt sales and increased costs, helped push Solutia over the edge.
Solutia is seeking to have either Monsanto, the agricultural firm, or Pharmacia, the drug developer, take on some of that nearly $500 million burden.
Paul J. Berra III, an in-house Solutia attorney, said Thursday that his firm intends not to leave the 20,000 retirees covered by its pension in the lurch and to instead have Monsanto and Pharmacia help pick up the tab.
As part of that attempt, Solutia wants Judge Beatty to invalidate the 1997 agreement under which Pharmacia made Solutia responsible for these environmental liabilities. Pharmacia has another wall of protection, having indemnified itself a second time when it spun off Monsanto, the agricultural company.
