US Tronox returns to NYSE as Kerr-McGee suit remains pending

18 June 2012 14:45  [Source: ICIS news]

US Tronox debuts on NYSEHOUSTON (ICIS)--US-based pigment producer Tronox was listed on the New York Stock Exchange (NYSE) on Monday, while a lawsuit against its former corporate parent, Kerr-McGee, remains pending.

Tronox is the last of the three high-profile chemical companies to debut to the NYSE after filing for bankruptcy protection during the recession.

Dutch producer LyondellBasell debuted on 14 October 2010 on the NYSE. It marked the company's first public listing, and it followed its Chapter 11 filing in January 2009.

US-based specialty chemicals producer Chemtura returned to the NYSE on 11 November 2010 after its March 2009 filing and subsequent delisting.

Chemtura and LyondellBasell as well as Tronox have since emerged from bankruptcy protection.

Tronox filed in January 2009 after it was delisted in 2008. Tronox sought protection, in part, because of the drop in demand caused by the recession.

But another reason for the filing is still being litigated. Tronox alleged that its former corporate parent, Kerr-McGee, saddled it with massive environmental liabilities during its spin off on 31 March 2006.

Tronox alleged that the 2006 spin-off was part of a strategy, in which Kerr-McGee used Tronox as a way to get rid of decades worth of environmental liabilities.

By shedding the liabilities, Kerr-McGee would make itself an attractive target for an acquisition, Tronox alleged.

Within three months of the spin off, Anadarko offered to acquire Kerr-McGee for $18bn, Tronox said. The deal closed on 10 August 2006.

Tronox alleged that the liabilities overwhelmed the company, dooming it to fail.

Tronox sued Kerr-McGee and Anadarko while it was still operating under bankruptcy protection.

The US has since taken over the lawsuit as part of a deal it struck with Tronox.

Under the deal, Tronox paid environmental regulators $270m (€213m) in cash to help pay for the clean-up for about 2,800 polluted sites, according to the agreement.

In return, the regulators would receive 88% of any reward it would win against Kerr-McGee, the agreement said. The remaining 12% would compensate others who filed claims alleging damage from the sites.

In other words, Tronox would receive nothing if the judge rules in favour of the plaintiffs. Likewise, it would owe no additional clean-up costs if the judge rules in favour of the defendants.

Anadarko did not immediately respond to a request for comment. However, in the past, Anadarko has repeatedly said that it was not responsible for the financial state of Tronox.

"Tronox’s bankruptcy is directly linked the collapse of the housing, construction and automobile industries, which are the primary purchasers of its white pigment," Anadarko said in a statement. "These difficult market conditions are unfortunate, but are unrelated to our company, Kerr-McGee or the IPO [initial public offering]."

Anadarko added, "The market demonstrates that Tronox was solvent and adequately capitalised at the time of its IPO, as Tronox was able to issue stock at approximately $14/share, and it was also able to enter into a credit facility and issue unsecured bonds."

The claims in the lawsuit lack merit, Anadarko said.

The case is being tried in the US bankruptcy court, New York southern district.

Tronox makes titanium dioxide (TiO2).

($1 = €0.79)

By: Al Greenwood
+1 713 525 2645

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