UpdateTwo plans differ in ways to get Tronox out of bankruptcy

03 September 2010 17:11  [Source: ICIS news]

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HOUSTON (ICIS)--Tronox shareholders submitted a competing plan to get the titanium dioxide (TiO2) producer out of bankruptcy protection - a plan that places a higher value on the company.  

The group filed the plan on Thursday in the US bankruptcy court of the southern district of New York. Afterwards, Tronox shares reached 33 cents on Friday in over-the-counter trading, up 22%.

Key differences exist between the two plans.

The shareholders' plan values the company at $1.2bn-1.3bn (€936m-1.01bn), while the Tronox plan values the company at $975m-1.15bn.

Because of the higher valuation, the shareholders' plan gives the creditors a higher portion of the stock being issued in the reorganised company.

In fact, 62.5% of the stock would go to creditors who hold general unsecured claims. The Tronox plan calls for 16.9%.

Because the Tronox plan places a smaller valuation on the company, it needs to reserve a larger portion of the new stock to the bondholders who are backstopping the rights offering.

By backstopping the offering, the bondholders agreed to buy any unsold shares in the company.

While both plans would issue new stock in the reorganised company, the shareholder plan would allow some of the existing stockholders to participate in the rights offering. The Tronox plan allows no stockholders to participate in the rights offering.

Both plans preserve the settlements that Tronox reached to address claims connected to lawsuits and environmental regulators.

However, if any class of creditors opposes the size of the claims, then the company could likewise challenge the amounts of the claims, according to the shareholders' plan.

Also, the shareholders' plan would allow the company to borrow more money.

The next step for the shareholders is to have the court approve the disclosure statement. Creditors use the information from the disclosure statement to decide on whether they should approve or reject the reorganisation plan.

If creditors approve the plan, then the bankruptcy court would hold a hearing to confirm the plan. If confirmed, Tronox would emerge from bankruptcy protection.

Tronox had filed its reorganisation plan earlier this year. The company has since filed amendments to the plan.

The company filed for Chapter 11 bankruptcy protection in 2009.

($1 = €0.78)

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By: Al Greenwood
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