Solutia, banks reach settlement
Solutia Inc. and its banks reached a settlement on a $2 billion loan package that clears the way for the company to end its four-year-old bankruptcy reorganization on Thursday.
The settlement ends a dispute between Solutia and its banks — Citigroup Inc., Deutsche Bank AG and Goldman Sachs Group Inc. — that threatened to derail the emergence of the plastics and window-film maker.
The banks last month had wanted to pull out of an October deal to provide Solutia’s financing, citing a downturn in the overall economy and an inability to find secondary lenders willing to buy a portion of Solutia’s debt. Solutia sued the banks and a trial began Feb. 21; it was set to conclude on Tuesday.
Solutia, based in Town and Country, said it will pay a higher interest rate on a $1.2 billion senior secured term loan facility: 5 percent on top of LIBOR, the rate that banks charge each other for loans. Solutia initially had agreed to pay LIBOR plus 3.5 percent.
In addition, Solutia and its banks agreed to set a floor on how far they would follow the falling London-based LIBOR rate, which has steadily dropped as European central banks added liquidity to the struggling global monetary system. As a result, Solutia’s interest rate will not drop below 8.5 percent for the first four years of the term loan facility.
Nevertheless, the company said the total cost of its financing has not substantially changed since it crafted a complex plan of reorganization. The debt package also includes a $400 million senior unsecured bridge facility; and a $450 million senior secured asset-based revolving credit facility.
Solutia said it will ask U.S. Bankruptcy Court Judge Prudence Carter Beatty to confirm the reorganization plan along with the financing package on Thursday. If she does so, Solutia’s reorganization will end.
“This agreement enables Solutia to emerge with the plan of reorganization intact, providing significant recoveries for our stakeholders and providing a firm foundation for Solutia’s further success,” said Chief Executive Jeffry Quinn in a statement.
