Solutia Investors Want Monsanto Details

New York, NY, July 18, 2007--A group of Solutia Inc. bondholders says the company shouldn't be allowed to proceed with its Chapter 11 reorganization plan until it provides more information about a proposed deal with Monsanto.

In papers filed Monday with the U.S. Bankruptcy Court in Manhattan, the bondholders asked a judge not to approve Solutia's Chapter 11 disclosure statement until after a hearing is held on the Monsanto (nyse: MON - news - people ) settlement. That hearing is set for Sept. 5.

The bondholders - who call themselves the ad hoc committee of noteholders - consist of hedge funds and Wall Street investment banks. According to court documents filed in May, members included hedge funds Highland Capital Management and King Street Capital Management and investment bank Banc of America Securities.

Solutia, a St. Louis company that was spun off from Monsanto in 1997, has been in bankruptcy reorganization since 2003. A key part of its Chapter 11 plan involves a settlement under which St. Louis-based Monsanto would assume the costs for all current and future lawsuits involving Solutia's environmental liabilities.

Solutia's Chapter 11 plan would provide unsecured creditors and bondholders, owed about $800 million, about 85 cents for every dollar they're owed. Creditors and Monsanto will all receive shares in the reorganized company.

But the bondholders group said in court papers that creditors can't assess the soundness of the Chapter 11 plan without additional details about the Monsanto pact.

"We believe that to move forward without knowing that critical part of the plan is going to be approved" would be inappropriate, said Joshua Morse, an attorney for the ad hoc committee of noteholders. "Also, substantial evidence will be brought forward during (the Sept. 5) hearing that we believe creditors should have."

Solutia spokesman Dan Jenkins said the company will continue to address objections as they arise.

Companies under Chapter 11 protection must get court approval for a disclosure statement about the Chapter 11 plan before it can be sent to creditors for a vote. U.S. Bankruptcy Judge Prudence Carter Beatty began a hearing on the disclosure statement last week, but has indicated approval may not come quickly.

Beatty said she would not rule on the disclosure statement until the company provided more and clearer details about the claims of people who say they were injured by chemicals at Solutia sites. The hearing on the disclosure statement is set to resume Tuesday.

The bondholders group said that as of Monday afternoon Solutia hadn't provided the additional information that Beatty sought. If it provided that information at the hearing Tuesday, the bondholders wouldn't have enough time to analyze it, they said.

Solutia's attorneys have said the bondholders were unhappy that they didn't achieve the status of secured creditors in the case.