08 July 2010 22:12 [Source: ICIS news]
The plan involves setting up trusts to handle the substantial environmental claims against the company, which are estimated at $1.4bn-$5.2bn (€1.1bn-4.1bn). Unsecured creditors would recoup 80-100% of their $470.6m in claims.
The reorganisation plan would enable Tronox to “emerge from Chapter 11 free of its legacy liabilities, well capitalised and better positioned to compete effectively in the chemical industry and explore opportunities for growth for the benefit of its new stakeholders,” according to the filing.
The new stakeholders would include the unsecured creditors, who would receive new common and preferred stock as well as warrants to buy additional shares in the company.
Tronox would exit bankruptcy with total debt of no more than $510m-$517m, it said in the filing.
The environmental trusts would have assets of $115m-$145m in cash, new convertible preferred stock with a liquidation preference of at least $50m and warrants to buy common stock. The trusts would also have the land assets of Tronox in Nevada and environmental insurance assets.
Lastly, the trusts would have the right to 88% of the proceeds from the litigation against Anadarko Petroleum. Tronox’s former parent company Kerr-McGee was sold to Anadarko in 2006 after Tronox was spun off in March 2006.
Tronox is suing Anadarko to pay for its environmental liabilities.
While Tronox has not yet secured support for its reorganisation plan from its key constituents, including the US government which has substantial environmental claims against the company, Tronox said its plan “contains the principal elements required for a settlement with the government environmental claimants”.
Tronox also said it has “structured the plan to avoid the need for protracted litigation related to valuation and claims estimations”.
Under the plan, common shareholders of Tronox would recover just $3m-$6m in value from warrants to buy new common stock if they vote to accept the plan, but would receive nothing if they reject it.
The deadline for voting on the plan is 30 September.
Tronox shares fell nearly 30% in over-the-counter trading, closing at $0.274.
Tronox is the world’s fifth-largest producer of titanium dioxide with around 9% of global market share, according to the company. It has annual global production capacity of 425,000 tonnes. In 2009, sales totaled around $1.1bn.
($1 = €0.79)
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