Gordian Group served as financial advisor to JPMorgan, the Indenture Trustee to certain bond issuances, in connection with Solutia’s reorganization.
Case Study
Solutia
CLIENT: Counsel for the Indenture Trustee to $450 million of public notes of Solutia Inc.
Business Profiles
Situation
Gordian Group was retained by counsel on behalf of the Indenture Trustee to $450 million of public notes during Solutia’s bankruptcy proceedings. Although initially unsecured obligations of Solutia, the underlying Indentures provided for the granting of security interests to the Trustee and the Noteholders pursuant to an equal and ratable clause. On the eve of filing for bankruptcy, the Debtor entered into certain transactions in an effort to eliminate liens that had been granted to the Trustee and Noteholders. The Trustee filed an adversary proceeding in bankruptcy court in an effort to obtain a judgment as to the validity of the Notes’ prior liens.
Engagement
Gordian Group, together with counsel, developed credible and defensible arguments with respect to the validity and efficacy—or lack thereof—of the "lien stripping." Critical work performed by Gordian Group in furtherance of the Trustee’s efforts included: detailed valuation and solvency analyses of the Debtor and its businesses; a review and analysis of the Indentures, including with respect to triggers and covenants in the equal and ratable clause; analysis of the collateral basket available to the Notes that would have prevented the elimination of liens; providing litigation support services to counsel in discovery; and negotiations with the Debtor and its advisors.
Outcome
Through these efforts, the Trustee was able to enter into fruitful discussions with the Debtor with respect to a settlement; while the Debtor’s initial Plan of Reorganization contemplated an approximate 50% recovery for unsecured creditors, including the Noteholders, the Trustee and its advisors were able to negotiate for a significantly greater recovery on behalf of the Noteholders (which would have been an even greater recovery to the trading price of the Notes at the time of the filing of 40%). However, once the efforts of the Trustee and its advisors became known, the Noteholders moved to organize and act on their own behalf, and settlement discussions between the Debtor and the Trustee ended.