Since 2003, Solutia Inc. (OTC BB: SOLQ) has trudged its way through bankruptcy hearings and the drawing of blueprints for a reorganization plan that will hopefully assist in a successful emergence from Chapter 11 protection. Paired with a bankruptcy judge’s latest ruling and its recent acquisition of the remaining stake of Flexsys may prove a wise move.
The company filed for bankruptcy through the Southern District of New York in December 2003 and faces quite a lengthy list of creditors. Tuesday, Judge Prudence Carter Beatty ruled Solutia’s 7.375 percent notes due in October 2027 and its 6.72 percent notes due in October 2037 are not entitled to a lien on any of the company’s assets.
This could be a break in the clouds for Solutia. MN1 placed numerous calls to the company that have not yet been returned, but comments in recent press releases seem to reflect that thought.
“We are pleased to have our position sustained by the court and this decision clarifies an important legal issue concerning the status of one of our major creditor constituents that will allow for Solutia to emerge from bankruptcy,” said Jeffry N. Quinn, CEO of Solutia.“Our priority remains to maximize the value of the estate for all stakeholders and we look forward to filing a revised Plan of Reorganization shortly.”
Michael Myers, an attorney practicing in bankruptcy rights in Dallas agrees, adding the company’s plan must be somewhat on track for the company to get court approval for an acquisition.
Just a day after word of the judge’s decision, the company issued a press release announcing its acquisition of Flexsys, a chemical supplier to the rubber industry. Flexsys was created in 1995 as part of a 50/50 joint venture between Solutia and Akzo Nobel N.V.
“It has to have some level of merit for a bankruptcy judge to say ‘ok – I’m going to let you spend money that you owe your creditors [to pick up the remaining interest]’,” Myers told Market News First.
Acquiring the remaining stake, Solutia will add Flexsys to its portfolio of businesses: Safelex; CPFilms; Nylon Plastics and Fibers and Specialty Products. Flexsys could be a key part in strengthening Solutia’s business plan.
“Flexsys brings Solutia a portfolio of strong products, a great team of people, and unparalleled knowledge of the technology and the market,” said James R. Voss, senior vice president and president of Flexsys. Voss formerly served as Solutia’s senior vice president.
“Solutia will contribute clear strategy, crisp decision-making and strong corporate leadership,” Voss added.
Solutia, in operation with its previously mentioned subsidiaries, manufactures and markets chemical-based materials delivered to consumer and industrial applications across North America, Europe, Africa, Asia Pacific and Latin America.
In midday trading, shares of Solutia were trading down 2 cents (5 percent) at 36 cents per share on volume of 167,600.