UpdateUS Tronox ratings fall due to bankruptcy filing

12 January 2009 22:10  [Source: ICIS news]

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HOUSTON (ICIS news)--Two firms lowered on Monday their ratings for Tronox after the US pigment producer filed for bankruptcy protection.

Moody's Investors Service lowered the company's ratings to "Ca" from "Caa3". It lowered Tronox's probability of default rating to a "D" from a "Ca".

Fitch Ratings lowered the issuer default rating of Tronox to a "D" from a "C".

In its bankruptcy filing, Tronox said it had assets of $1.56bn (€1.15bn) and debts of $1.22bn.

The filing was expected, as Tronox started warning its investors of possible bankruptcy during the summer.

In its filing, Tronox said it struggled with legacy costs since it was spun off from Kerr-McGee in March 2006.

As part of the spin off, Tronox became responsible for environmental clean-up liabilities, worker compensation and other legacy expenses.

At the same time, Tronox contended with a deteriorating global economy; rising costs for energy and raw materials; and falling demand for consumer products, the company said.

As early as July, Tronox's financial advisor started soliciting proposals for debtor-in-possession (DIP) financing, the company said.

However, negotiations ended after the world's credit markets froze up in the fall. In fact, one of Tronox's possible DIP lenders was Lehman Brothers, which itself went bankrupt in September.

Ultimately, Tronox found lenders that agreed to extend up to $125m in DIP financing, which will fund day-to-day expenses while the company reorganises its finances.

The company said the bankruptcy filing does not include its operations in Australia, Germany and the Netherlands.

Tronox bankruptcy does not change market conditions significantly, said a buyer of titanium dioxide (TiO2). Demand is so bad, Tronox is just trying to maintain existing prices.

"They keep pushing back their price hike announcement, and you would think prices would start rolling back with the way demand is," the buyer said. "It’s anybody’s guess what will happen with Tronox."

(Additional reporting by David Barry)

($1 = €0.74)

Paul Hodges studies key influencers shaping the chemical industry in Chemicals and the Economy
For more on TiO2 visit ICIS chemical intelligence

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