Solutia Wins $70M Interest Claim Fight

New York, NY, November 13, 2007--A judge has ruled against a group of Solutia Inc. senior secured bondholders who said they were owed about $70 million more than the company plans to give them under its Chapter 11 plan.

U.S. Bankruptcy Judge Prudence Carter Beatty on Friday said holders of Solutia's 11.25% senior secured notes due in 2009 will get what the company says it owes them -- an estimated $210 million. Bondholders claimed they were entitled to collect $280 million or more when the chemical maker exits bankruptcy.

The bankruptcy judge had instructed the company and senior noteholders to sit down and come up with a final calculation. But in a 28-page ruling, she sided with the company and its official committee of unsecured creditors and against the senior bondholders on a series of legal arguments over the debt issue.

Solutia is slated to emerge from bankruptcy by the end of the year. The company's Chapter 11 plan calls for unsecured creditors to be repaid about 83 cents for every dollar they're owed.

Other creditors negotiated with Solutia in recent months over how they'll fare under the company's Chapter 11 plan. Senior secured bondholders, with Bank of New York Mellon Corp. as trustee, refused to bargain away their legal differences with the company, despite urgings from the judge.

In a decision issued Friday, Beatty granted partial summary judgment to the company. She said the bondholders are not entitled to recoup the original issue discount on the bonds or interest once Solutia is out of bankruptcy. Bondholders said they were entitled to damages because they had expected to keep collecting up until the maturity date on the debt issue, which will be past the time Solutia exits Chapter 11.

Solutia plans to pay off the senior secured notes in full when it exits Chapter 11, so the company argued that it shouldn't have to keep paying interest once the debt is paid. The judge agreed.

Friday's ruling says the company's calculation of its debts doesn't deprive the senior secured bondholders of money they were entitled to receive under the bond deal.