Cleaning & Restoration Breaking News

Solutia Forced Into Bankruptcy

NEW YORK (Reuters) - Chemicals maker Solutia Inc. filed for bankruptcy protection on Wednesday, overwhelmed by legal liabilities inherited from its former parent, Monsanto Co.

Solutia, citing $100 million in annual "legacy" legal expenses and high raw material and energy costs, filed petitions for itself and 14 U.S. units for reorganization under Chapter 11 in Manhattan federal bankruptcy court.

The company said it received a commitment for up to $500 million in debtor-in-possession financing and that worldwide operations would continue uninterrupted. The St. Louis company, spun off by Monsanto in 1997, said vendors would be paid in full and requested court approval to continue paying its 6,700 employees without disruption.

Monsanto, maker of Roundup herbicide, separately on Wednesday said it could incur liabilities as a result of the Solutia bankruptcy filing, including retirement benefits, environmental clean up and legal costs.

Solutia has reported post-retirement benefits liabilities totaling $475 million, Monsanto said. Solutia also reported spending $60 million a year to provide these benefits.

Solutia spent $26 million on environmental clean-ups last year and sees spending $30 million to $40 million a year going forward.

Monsanto spokeswoman Lori Fisher said Solutia under the spin-off agreement is required to honor these commitments, but the bankruptcy court could rule otherwise. Monsanto has not yet made an independent assessment of Solutia liabilities.

When Solutia was spun off from Monsanto in 1997, it was assigned certain "legacy" liabilities, including responsibility for certain lawsuits and employee retirement expenses. Under the bankruptcy code, Solutia said, those liabilities will be discharged under a reorganization plan.

"We simply could not continue to sustain our operations burdened by Monsanto's legacy liabilities," Solutia Chairman and Chief Executive John Hunter said in a statement.

Solutia in October held talks with creditors about restructuring $1.25 billion of debts and hired advisers to discuss alternatives, including bankruptcy or a sale.

Monsanto and Solutia's long-running legal battles had nearly forced Solutia into bankruptcy before. In mid-August, Solutia warned it was on the verge of bankruptcy. But a favorable settlement of litigation with Monsanto temporarily dispelled a cloud hanging over the companies.

The $675 million settlement, of which Solutia was responsible for $50 million, ended the cases of 20,000 Alabama residents who alleged their health and homes were ruined by contamination caused by Monsanto.

Monsanto and Solutia trace their roots back to the conglomerate that operated a plant in Alabama that for 40 years manufactured polychlorinated biphenyls, or PCBs.

Monsanto stopped making the PCBs in the 1970s before they were found to be dangerous and were banned. Plaintiffs claimed severe property and health damage and said many children suffered health problems because of the PCBs.

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