Solutia Settles Claims with Monsanto

New York, NY, August 17, 2007—Solutia, according to reports, has settled claims with former parent Monsanto, bondholders and shareholders, bringing the company closer to emerging from court protection.

The agreement, which requires court approval, cuts Monsanto's stake in the reorganized company from an estimated $240 million to $204 million and gives stock to bondholders and old equity holders in exchange for support of a reorganization plan, said Bennett Murphy, an attorney for the bondholders.

The agreement resolves disputes over environmental liabilities between Monsanto and Solutia. Solutia faces more than $20 billion in tort, environmental and retiree-related claims. The company, in bankruptcy since 2003, has been fighting with creditors as to how much of that liability Monsanto should bear due to a 1997 spinoff that gave Solutia responsibility for claims related to old Monsanto businesses.

A settlement between Solutia and Monsanto that resolved those claims had been filed under seal with the bankruptcy court, and bondholders and equity holders objected to it. 

Under the terms of the deal, Monsanto will get 17% of equity in the new company, rather than 20% called for in a prior agreement. The difference will go to bondholders, who will get 2 percentage points more, and equity holders, who will get 1 percentage point more. Based on Solutia's own estimate that its equity will be worth $1.2 billion, the increase in stakes for bondholders and equity holders will be valued at about $24 million and $12 million, respectively.

The deal also gives noteholders and trade creditors the opportunity to acquire equity at a one-third discount to the plan's value in a rights offering.

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