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August 5, 2002
Volume 80, Number 31
CENEAR 80 31 p. 9
ISSN 0009-2347
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BUSINESS
SOLUTIA CLEARS UP DEBTS WOES FOR NOW
But questions remain over whether company can handle PCB liabilities
MARC REISCH
Last month, Solutia successfully raised $200 million in notes due in 2009 that will pay holders a hefty 13.5%. And it secured $600 million in credit from its bankers.
But, although Solutia has finally completed financial arrangements to satisfy current obligations, questions linger over its long-term ability to pay should it be held responsible in current and pending lawsuits stemming from a former polychlorinated biphenyl plant in Anniston, Ala.
Chief Financial Officer Robert A. Clausen admits that todays economic climate has made this [refinancing] challenging. It has been especially challenging given Solutias PCB obligations, which were one reason why, early last month, credit ratings agency Fitch lowered ratings on some of Solutias secured bank debt from a fairly weak credit risk to a significantly weak risk.
When Solutia was spun off from Monsanto in 1997, it indemnified Monsantotook on its financial responsibilityfor costs associated with the PCB plant that Monsanto operated in Anniston until 1971. However, if Solutia is unable to pay, Monsanto and Pharmaciawhich bought the old Monsanto two years agowould be on the hook to pay PCB-related costs.
Now, the planned spin-off of Monsanto to shareholders on Aug. 13 and Pfizers pending acquisition of Pharmacia complicate matters. Pfizer is reluctant to admit that it could take on Pharmacias PCB liabilities if Monsanto were unable to pay. The new Monsanto has indemnified Pharmacia for any PCB-related costs should Solutia be unable to pay. But because Pharmacia bought the old Monsanto, legally, Pharmacia is Monsanto, Clausen says. And should Pfizer succeed in buying Pharmacia, all liabilities go to the new Pfizer.
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Copyright © 2002 American Chemical Society |
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