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Solutia files suit against Citi, Goldman Sachs & Deutsche Bank
07 Feb '08
3 min read
On October 25, 2007 , the banks executed a firm commitment to fund a $2 billion exit financing package for Solutia. These substantial, custom credit facilities and arrangements were specifically tailored to facilitate Solutia's prompt emergence from Chapter 11. On November 20, 2007, the bankruptcy court approved the exit financing package.
Nine days later, in reliance on the banks' firm lending commitment, the court found the plan of reorganization to be feasible and confirmed the plan. However, in late January - shortly before the anticipated closing of the exit facility and Solutia's long-awaited emergence from Chapter 11 - the banks notified Solutia that they were refusing to provide the funding, citing a so-called “market MAC ” provision in their commitment letter and asserting that there has been a change in the markets since entering into the commitment.
“It is a well-documented fact that the ongoing conditions in the credit markets began in the summer of 2007,” said Quinn. “Well before the banks committed to Solutia's exit financing, they stated in public filings and through professional advice to Solutia that the credit markets were in disarray, and that the credit crisis would continue for months to come.
Despite their concerns and negative outlook, the banks entered into a firm commitment to provide Solutia with this exit financing. The willingness of these banks to offer committed financing that was not subject to a successful syndication was a major factor in deciding to award them this business. ”
Quinn added, “Solutia is ready to emerge from Chapter 11. We have successfully repositioned our company, we have confirmed a plan of reorganization that brings significant value to our constituents, and our businesses are performing well. We now look to the banks to meet their commitment.”
Nine days later, in reliance on the banks' firm lending commitment, the court found the plan of reorganization to be feasible and confirmed the plan. However, in late January - shortly before the anticipated closing of the exit facility and Solutia's long-awaited emergence from Chapter 11 - the banks notified Solutia that they were refusing to provide the funding, citing a so-called “market MAC ” provision in their commitment letter and asserting that there has been a change in the markets since entering into the commitment.
“It is a well-documented fact that the ongoing conditions in the credit markets began in the summer of 2007,” said Quinn. “Well before the banks committed to Solutia's exit financing, they stated in public filings and through professional advice to Solutia that the credit markets were in disarray, and that the credit crisis would continue for months to come.
Despite their concerns and negative outlook, the banks entered into a firm commitment to provide Solutia with this exit financing. The willingness of these banks to offer committed financing that was not subject to a successful syndication was a major factor in deciding to award them this business. ”
Quinn added, “Solutia is ready to emerge from Chapter 11. We have successfully repositioned our company, we have confirmed a plan of reorganization that brings significant value to our constituents, and our businesses are performing well. We now look to the banks to meet their commitment.”
Solutia Inc
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