In general, the bankruptcy proceedings are progressing at a deliberate pace. When Solutia filed for bankruptcy it cited “legacy liabilities” from the original Monsanto as significant impediments to profitability. These liabilities were lawsuits, environmental cleanup costs and retiree health benefits.
Most court activity to date has been on items other than retiree health benefits. A substantial number of lawsuits have been transferred from Solutia to Monsanto II because Monsanto II could have to pay any judgements against Solutia due to the indemnification agreements in place among Solutia, Monsanto II and Pharmacia. Recently a deal was struck between Solutia and Monsanto II regarding payment of ongoing environmental cleanup costs. To date (October 14, 2004) there is no formal proposal before the bankruptcy court for changing retiree health benefits.
In August, Solutia announced a new Custom Choice Plan to replace its 2004 employee medical benefits coverage. The Custom Choice Plan would modify benefits and require participants to make a selection from three choices; each choice has trade-offs related to premiums, co-pays and deductibles. The notice conveying this information stated that the Custom Choice Plan would apply if you are under age 65.
One of the provisions of the Pensacola settlement (which resulted in the 2002 Medical Plan) was that those retirees, included in the plan and under age 65, would receive the same health benefits as Solutia employees under the active plan. So when Solutia announced a drastically different plan for 2005, the Custom Choice Plan, the Retirees Bankruptcy Committee recognized its impact on pre-65 retirees included in the Pensacola settlement. An additional provision of the Pensacola settlement also prohibits any modifications that will materially and adversely affect benefits or costs or would be unfair to the plan participants. The committee believes that the Custom Choice Plan violates this provision.
Of additional concern was the committee’s opinion that Solutia was attempting to modify health benefits without authorization from the bankruptcy court. Our position is that, having filed for bankruptcy, Solutia is obligated to adhere to the Bankruptcy Code. Section 1114 of that code states that the debtor, Solutia, cannot make any modifications to retiree health benefits until such time that they are brought before the bankruptcy court and authorized by same.
Lawyers for the Retirees Bankruptcy Committee filed a motion to address this situation and the court orally ruled in favor of our motion. This favorable ruling has caused Solutia to delay enrollment for 2005 until such time that it determines how to proceed in accordance with the court order when issued. The lawyers have prepared an informational memorandum summarizing this item and related matters of interest. A copy has been sent to all retirees and beneficiaries represented by the committee.
The bankruptcy court recently issued another court order setting a final date for entering claims against Solutia. This is known as the Bar Date and it has been set as November 30, 2004. This order is directed at those parties who have not as yet filed a legitimate claim and it will bring this activity to a close. Parties which have previously asserted claims are excluded, this includes retirees’ and our health benefits. If you receive a copy of the court order, or a notice for filing a claim, please note the item which refers to the exclusions.
Additional information will follow as it becomes available.