Solutia Pays $131M in Bankruptcy Fees

Washington, DC, April 18, 2007--A judge has authorized Solutia Inc. to pay more than $18 million in fees to the lawyers and consultants working on its bankruptcy reorganization, raising the total over the past three years to at least $131 million.

Judge Prudence Carter Beatty of the U.S. Bankruptcy Court in Manhattan last week approved $16.6 million in fees and $1.5 million in expenses for 23 law firms and consulting firms that worked on Solutia's Chapter 11 case from August through November 2006.

Solutia has been in bankruptcy reorganization since December 2003. Its exit from Chapter 11 protection has been delayed by two lawsuits filed by the company's bondholders and shareholders. Shareholders have complained the reorganization has become "stagnant" and "mired in litigation" and have asked a judge to end the company's control of the Chapter 11 process.

The delays have saddled Solutia, which listed $2.9 billion in assets at the time of its bankruptcy filing, with professional bills that are as large as those in much bigger bankruptcy cases.

For example, professional fees racked up in the case of collapsed brokerage Refco Inc., which listed assets of about $17 billion at the time of its 2005 bankruptcy filing, have so far totaled about $160 million. Fees in the Chapter 11 reorganization of electricity provider Calpine Corp. have exceeded $200 million since December 2005.

In Solutia's case, the largest fees involved the company's main law firm, Kirkland & Ellis. It charged Solutia a total of $33 million through November 2006, according to court documents. Another law firm, Gibson, Dunn & Crutcher billed the company $25 million in fees. The restructuring firm Kroll Zolfo Cooper accounted for $13.6 million of the fees Solutia incurred.

One of the two lawsuits that have stalled the company's reorganization was filed by JP Morgan Chase, the indenture trustee for Solutia's bondholders. JP Morgan sued the company for downgrading the bondholders' status as secured creditors to those of unsecured creditors. The suit, involving $450 million in bonds, went to trial in July but a judge hasn't yet ruled on the matter.

The second lawsuit was filed by the company's shareholders against Monsanto Co. and seeks the elimination of legacy liabilities transferred to Solutia after it broke from the parent company in 1997.