US Tronox has doubts about being a going concern

10 November 2008 21:17  [Source: ICIS news]

HOUSTON (ICIS news)--Shares of US pigment producer Tronox continued to trade on Monday for pennies, after the company raised doubts about its ability to continue as a going concern.

If business conditions do not change, Tronox may file for bankruptcy protection under Chapter 11, the company said in its third-quarter filing. Tronox has hired the investment banker Rothschild to evaluate "strategic options", the company said.

For the third quarter, Tronox reported a net loss of $37.9m (€29.6m), nearly double its $19.1m net loss it reported for the same time last year. In all, Tronox's third-quarter sales were too small to offset its expenses.

Third-quarter net sales were $418.3m, Tronox said. Cost of sales and selling, general and administrative expenses (SGA) totalled $429.5m.

"As we continue to generate losses and negative cash flows, this raises substantial doubts about our ability to continue as a going concern," Tronox said.

On Monday, Tronox shares were trading over the counter at 13.5-14.5 cents.

To change course, the company's sales need to exceed their costs, Tronox said. Tronox also needs to restructure its capital structure, which would include refinancing its debt.

Moreover, Tronox needs to do all of this while juggling its environmental liabilities, which it inherited after being spun off from Kerr-McGee in 2005.

If Tronox fails to improve its finances, the company said it could spend the rest of its available funds and fail to meet upcoming obligations. Ultimately, Tronox said it could file for bankruptcy protection, which would allow it to restructure its capital structure and reorganise its business.

In other news, Tronox's lenders have agreed to waive the company's default on a credit agreement, the company said. The waiver is effective through 25 November.

Under the terms of the waiver, Tronox cannot borrow addition funds through 25 November. The company said it has enough money to continue operations through the waiver period.

However, Tronox did not rule out any future defaults during the next 12 months due to economic  uncertainty.

($1 = €0.78)

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By: Al Greenwood
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