Exhibit 99.1
[SOLUTIA logo]
News
SOLUTIA INC.
575 Maryville Centre Drive
St. Louis, Missouri 63141
P.O. Box 66760
St. Louis, Missouri 63166-6767
FOR IMMEDIATE RELEASE
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MEDIA: Dan Jenkins (314) 674-8552
INVESTORS: Tim Spihlman (314) 674-5206
SOLUTIA INC. FILES PLAN OF REORGANIZATION
AND DISCLOSURE STATEMENT
o PROVIDES SIGNIFICANT RELIEF FROM LEGACY LIABILITIES
o IMPROVES COST STRUCTURE AND BALANCE SHEET
o ENSURES CONTINUED ENVIRONMENTAL STEWARDSHIP,
SECURES RETIREE WELFARE BENEFITS, AND PRESERVES PENSION PLAN
o POSITIONS SOLUTIA TO EMERGE FROM CHAPTER 11
o FILING SUPPORTED BY OFFICIAL COMMITTEE OF UNSECURED CREDITORS,
MONSANTO COMPANY, PHARMACIA CORPORATION,
AND OFFICIAL COMMITTEE OF RETIREES
ST. LOUIS - FEBRUARY 14, 2006 -- Solutia Inc. (OTCBB: SOLUQ), a leading
manufacturer and provider of interlayers for laminated glass, aftermarket
window films, specialty chemicals and an integrated family of nylon
products, today announced it has filed its Plan of Reorganization and
Disclosure Statement with the Bankruptcy Court for the Southern District of
New York. The filing of the Plan of Reorganization was supported by the
Official Committee of Unsecured Creditors (the "Creditors Committee"),
Monsanto Company (NYSE: MON) ("Monsanto"), Pharmacia Corporation
("Pharmacia"), and the Official Committee of Retirees (the "Retirees
Committee").
"While we still have much to do in order to complete this process,
filing our Plan of Reorganization takes us one significant step closer to
successfully reorganizing Solutia," said Jeffry N. Quinn, president and CEO,
Solutia Inc. "This Plan of Reorganization will enable Solutia to emerge from
Chapter 11 later this year with an improved competitive position."
RELIEF FROM LEGACY LIABILITIES
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The Plan of Reorganization will provide Solutia with significant
relief from the legacy liabilities it was required to assume when spun off
from Pharmacia (formerly known as Monsanto) in 1997 ("The Solutia Spinoff").
These legacy liabilities include: 1.) retiree medical, retiree life
insurance, and disability benefits ("Retiree Welfare Benefits") for those
individuals whom retired or became disabled prior to The Solutia Spinoff
("Pre-Spin Retirees"); 2.) environmental remediation costs related to
activities of the chemicals business of Pharmacia that occurred prior to The
Solutia Spinoff; and 3.) toxic tort litigation costs relating to chemical
exposure associated with the activities of Pharmacia that occurred prior to
The Solutia Spinoff.
"After many months of complex negotiations, we have filed a Plan
of Reorganization with the support of our Creditors Committee, Monsanto,
Pharmacia and the Retirees Committee," said Quinn. "Through the
contributions of these parties, and Monsanto in particular, we will improve
our cost structure, strengthen our balance sheet, and greatly reduce the
risk profile of the company. Importantly, we will do so while ensuring all
environmental remediation commitments will be met, securing and providing
significant funding for retiree welfare benefits, and preserving the pension
plan."
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$250 MILLION OF NEW INVESTMENT
The Plan of Reorganization provides for $250 million of new
investment in Reorganized Solutia. This investment will be in the form of a
rights offering to certain unsecured creditors, whom will be given the
opportunity to purchase 22.7% of the common stock in the reorganized
company. Monsanto will backstop the rights offering, meaning it will commit
to purchase up to the entire $250 million of stock, thereby making up for
any amount of the rights offering left unsubscribed by the unsecured
creditors. Of this $250 million, $175 million will be set aside in a
Voluntary Employees' Beneficiary Association (VEBA) Retiree Trust to fund
the Retiree Welfare Benefits for those Pre-Spin Retirees whom receive these
benefits from Solutia; $50 million will be used by Reorganized Solutia to
fund its environmental remediation commitments in Anniston, Ala., and
Sauget, Ill.; and $25 million will be used by Reorganized Solutia to pay for
any of the legacy liabilities that are being retained by the company.
RELIEF FROM TORT LITIGATION AND ENVIRONMENTAL REMEDIATION LIABILITIES
Under the Plan of Reorganization, as between it and Solutia,
Monsanto also will assume financial responsibilities in the areas of tort
litigation and environmental remediation.
o Monsanto will be financially responsible for all current and
future tort litigation costs arising from Pharmacia's chemical
business prior to The Solutia Spinoff. This includes
litigation arising from exposure to PCBs and other chemicals.
o Monsanto will accept financial responsibility for
environmental remediation obligations at all sites for which
Solutia was required to assume responsibility at The Solutia
Spinoff but which were never owned or operated by Solutia.
This includes more than 50 sites with active remediation
projects and approximately 200 additional known sites and
off-site disposal facilities, as well as sites that are not
yet identified at this time.
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o Monsanto will share with Solutia financial responsibility for
off-site remediation costs in Anniston, Ala. and Sauget, Ill.
Under this cost-sharing mechanism, Solutia will pay the first
$50 million out of the proceeds from the rights offering (as
mentioned above); Monsanto would pay the next $50 million,
minus amounts it paid toward these sites during Solutia's
Chapter 11 case; Solutia would have responsibility for the
next $325 million, if needed; after which Monsanto and Solutia
would share responsibility equally. Under certain
circumstances, Solutia would be able to defer paying certain
off-site remediation costs relating to these sites that exceed
$30 million in any calendar year, up to $25 million in the
aggregate. Any deferred amounts would be paid in the interim
by Monsanto, but subject to repayment by Solutia at a later
date.
RETIREE SETTLEMENT
The Plan of Reorganization provides for a comprehensive retiree
settlement that was negotiated with the Retirees Committee, which represents
more than 23,000 people whom are former employees of Pharmacia and Solutia
and their dependents. Although the settlement includes benefit
modifications, the Plan of Reorganization provides significant current
funding of these benefit obligations, which greatly improves Solutia's
ability to meet these benefit obligations going forward. Under the
settlement, retirees will retain their company-provided medical benefits,
although their costs for such benefits will increase. Most retirees will
retain their company-provided life insurance benefits, although some will
experience a modification in the benefit provided. The settlement also
maintains Solutia's rights according to a separate 2001 settlement and a
post-settlement retiree medical plan, under which the company intends to
make certain changes effective Jan. 1, 2007, including the elimination of
company-provided medical benefits for certain groups of retirees that also
are eligible for Medicare coverage. Although Solutia is communicating
directly with retirees regarding this settlement, retirees may also visit
http://www.solutia.com/reorganization/retirees.asp for further details.
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In consideration for the contemplated modification in benefits, the
retirees will receive an unsecured claim for $35 million in Solutia's
Chapter 11 case. The common stock received in Reorganized Solutia on account
of this claim would be deposited into a Voluntary Employees' Beneficiary
Association (VEBA) Retiree Trust that would be used to pay Retiree Welfare
Benefits. This is in addition to the $175 million from the rights offering
that will be deposited into the VEBA Retiree Trust as stated above. The VEBA
Retiree Trust will be a bankruptcy-remote entity and will be managed by an
independent trustee.
ADDITIONAL MATTERS
The Plan of Reorganization includes an assumption and extension of
commercial and operating agreements between Solutia and Monsanto. The Plan
also seeks a discharge for Solutia from most pre-petition claims. Except for
those liabilities for which Monsanto is specifically assuming financial
responsibility as described above, the Plan seeks a release for Monsanto and
Pharmacia from certain pre-Solutia Spinoff liabilities, including those
related to Retiree Welfare Benefits. Under the Plan, Reorganized Solutia
will be an independent, publicly traded company.
ANTICIPATED RECOVERIES AND VALUATION
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The Plan of Reorganization contains details regarding how the
claims of each class of creditors and interest holders will be treated.
Solutia's senior secured notes and debtor-in-possession financing will be
repaid in full from proceeds from an exit financing package to be arranged
by the company to the extent that claims relating to such are allowed by the
court. Monsanto will be financially responsible for legacy tort claims,
which are unimpaired under the
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Plan. In consideration for its contributions described in the Plan, the
resolution of its claim in Solutia's Chapter 11 case, and the settlement of
ongoing and potential litigation in the case, among other things, Monsanto
will receive common stock in Reorganized Solutia. If Monsanto is required to
make the full new money investment contemplated by the rights offering due
to its backstop commitment, and based upon the range of unsecured claims as
stated below, Monsanto's equity interest in the reorganized company would
range from approximately 45% to 49%. The holders of allowed general
unsecured claims would receive the remainder of the common stock in
Reorganized Solutia. Under the Plan, holders of equity interests in Solutia
will receive no distributions on account of such equity interests.
Within the Disclosure Statement, Solutia currently estimates that
the amount of allowed general unsecured claims in the Chapter 11 case will
be approximately $0.8 billion to $1.0 billion. However, the ultimate size of
the general unsecured claims pool may vary from this estimate, and the
actual general unsecured claims pool may be outside the estimated range. The
company also estimates that the enterprise value range of Reorganized
Solutia will be approximately $2.0 billion to $2.3 billion, with
corresponding implied reorganization equity value of approximately $0.7
billion to $1.1 billion. At the mid-point of the estimated range of implied
reorganized equity value, the estimated potential range of recoveries for
holders of general unsecured claims will be approximately 48% to 56%, based
upon the range stated above of the general unsecured claims pool. Recoveries
may be impacted by the resolution of litigation pending in the case, as set
forth in the Disclosure Statement, and are subject to dilution as a result
of the exercise of certain rights including any equity issued to employees
or future directors and any options or other rights to acquire shares.
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MEETING THE FOUR OBJECTIVES OF THE SOLUTIA REORGANIZATION STRATEGY
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Since beginning the Chapter 11 process, Solutia has been
implementing a reorganization strategy focused on four objectives in order
to maximize the value of the estate, address the factors that led to the
Chapter 11 filing, and enable Solutia to emerge from Chapter 11. Solutia has
taken significant steps to meet these four objectives, as discussed below:
1.) MANAGE THE BUSINESS TO ENHANCE SOLUTIA'S PERFORMANCE. Solutia
has conducted thorough strategic reviews of its businesses;
adopted a more proactive commercial approach; implemented more
performance-based compensation programs; and begun to shape a
new, more proactive corporate culture. In addition, the
company has implemented a series of successful cost-reduction
initiatives at the plant and corporate level; reduced employee
headcount; achieved significant cost savings through changes
to both non-union and union employee benefits as well as
retirement and other post-employment benefits; and achieved
substantial cost savings by rejecting or renegotiating
numerous contracts and leases.
2.) MAKE CHANGES TO SOLUTIA'S ASSET PORTFOLIO TO MAXIMIZE THE
VALUE OF THE ESTATE. Solutia has invested in key growth
businesses. Specifically, the company has entered into an
agreement to purchase the remaining 51% stake in its Quimica M
joint venture, which includes a polyvinyl butryal (PVB)
interlayer plant in Puebla, Mexico; begun the construction of
a new PVB interlayer plant in Suzhou, China; installed new
production lines for metallized films and dyed films at its
site in Martinsville, Va.; and doubled its production capacity
of heat transfer fluids in Suzhou, China.
Solutia also has closed unprofitable businesses such as
acrylic fibers and chlorobenzenes, as well as unprofitable
operations including the nylon industrial fiber part of its
plant in Pensacola, Fla. and the J.F. Queeny plant in St.
Louis.
In addition, Solutia has divested non-core assets such as its
50 percent stake in the Astaris phosphates joint venture and
the Axio Research Corporation component of its pharmaceutical
services business. Also, Solutia and Akzo-Nobel are exploring
the possible sale of Flexsys, their 50/50 rubber chemicals
joint venture.
3.) ACHIEVE REALLOCATION OF LEGACY LIABILITIES. Solutia has
negotiated and filed a Plan of Reorganization under which it
would gain significant relief from the legacy environmental,
tort and retiree liabilities, as described above.
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4.) NEGOTIATE AN APPROPRIATE CAPITAL STRUCTURE. Solutia has
negotiated and filed a Plan of Reorganization that would allow
Reorganized Solutia to convert a significant portion of its
pre-petition debt to equity. In addition, Solutia's proposed
capital structure under the Plan would include pre-funding of
a significant portion of its pension funding obligations. As a
result of this Plan, Reorganized Solutia would gain an
improved balance sheet and a more appropriate capital
structure.
THE BUSINESSES OF REORGANIZED SOLUTIA
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Actions taken by Solutia management have positioned Reorganized
Solutia with a strong portfolio of businesses, many of which have
industry-leading positions within their markets. These four business lines
include:
1.) INTEGRATED NYLON - Solutia is one of the world's largest
integrated producers of Nylon 6,6, with products including
nylon plastics, carpet fibers and intermediate chemicals. In
2005, Integrated Nylon comprised about 58% of Solutia's net
sales.
2.) LAMINATED GLAZING INTERLAYERS - Solutia is the world's largest
producer of polyvinyl butryal (PVB) interlayers, which are
used by engineers and architects to improve the properties of
laminated glass found in automobiles and buildings. In 2005,
Laminated Glazing Interlayers comprised about 22% of Solutia's
net sales.
3.) CPFILMS - Solutia is the world's largest producer of
high-quality branded aftermarket window films, which are
primarily used by consumers to improve the properties of glass
already present in automobiles and buildings. In 2005, CPFilms
comprised about 7% of Solutia's net sales.
4.) SPECIALTY PRODUCTS AND SERVICES - Solutia operates a unique
set of five specialty businesses: Plastic Products, Technical
Products, Heat Transfer Fluids, Aviation Fluids, and
Pharmaceutical Services. These businesses are well-positioned,
and, in many cases, are world leaders. Together, these
businesses comprised about 13% of the company's net sales in
2005.
"As the Disclosure Statement details, we believe Solutia will
emerge from Chapter 11 capable of producing solid financial returns," said
Quinn. "Reorganized Solutia will be comprised of high-potential businesses.
With our improved cost structure, strengthened balance sheet and reduced
risk profile, we will be in a position to achieve that potential after
emergence."
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NEXT STEPS IN REORGANIZATION PROCESS
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The next step in the reorganization process will be to conduct a
hearing to consider the legal adequacy of the Disclosure Statement. This
hearing date has not yet been set by the Bankruptcy Court. If the Court
determines that the Disclosure Statement provides sufficient information for
claim holders and other interested parties to vote on the Plan of
Reorganization, then the Disclosure Statement and Plan of Reorganization
would be sent to claim holders for voting purposes. Following the voting
process, Solutia will ask the Bankruptcy Court to hold a hearing to consider
approval or "confirmation" of the Plan of Reorganization. If the Court
confirms the Plan of Reorganization, Solutia would emerge from Chapter 11
shortly thereafter. Solutia currently anticipates this process will take
several months.
Solutia's Plan of Reorganization and Disclosure Statement are
available at http://www.solutia.com/reorganization.
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FORWARD LOOKING STATEMENTS
This press release may contain forward-looking statements, which
can be identified by the use of words such as "believes," "expects," "may,"
"will," "intends," "plans," "estimates" or "anticipates," or other
comparable terminology, or by discussions of strategy, plans or intentions
and include, but are not limited to, any discussions regarding Reorganized
Solutia's valuation, the amount of allowed general unsecured claims, and the
percentage of recovery for holders of general unsecured claims. These
statements are based on management's current expectations and assumptions
about the industries in which Solutia operates, the valuation of Reorganized
Solutia, the terms of the Plan of Reorganization, and confirmation of the
Plan of Reorganization. Forward-looking statements are not guarantees of
future performance or of the terms of any plan of reorganization that will
ultimately be confirmed by the bankruptcy court in the Chapter 11 Cases and
are subject to significant risks and uncertainties that may cause actual
results or achievements to be materially different from the future results
or achievements expressed or implied by the forward-looking statements.
These risks and uncertainties include, but are not limited to, those
described in the Disclosure Statement, Solutia's most recent Annual Report
on Form 10-K, under "Cautionary Statement About Forward-Looking Statements,"
Solutia's quarterly reports on Form 10-Q, and in filings with the U.S.
Bankruptcy Court in connection with the Chapter 11 case of Solutia Inc. and
14 of its U.S. subsidiaries. These reports and filings can be accessed
through the "Reorganization" and "Investors" sections of Solutia's website
at www.solutia.com. Solutia disclaims any intent or obligation to update or
revise any forward-looking statements in response to new information,
unforeseen events, changed circumstances or any other occurrence.
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CORPORATE PROFILE
Solutia (http://www.Solutia.com) uses world-class skills in applied
chemistry to create value-added solutions for customers, whose products
improve the lives of consumers every day. Solutia is a world leader in
performance films for laminated safety glass and after-market applications;
process development and scale-up services for pharmaceutical fine chemicals;
specialties such as water treatment chemicals, heat transfer fluids and
aviation hydraulic fluid and an integrated family of nylon products
including high-performance polymers and fibers.
Solutia ... Solutions for a Better Life.
SOURCE: SOLUTIA INC.
ST. LOUIS
2/14/06
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