UpdateUS Tronox stock falls sharply after return to NYSE

18 June 2012 21:46  [Source: ICIS news]

US Tronox debuts on NYSE(adds paragraphs 1-5)

HOUSTON (ICIS)--Stock of US-based pigment producer Tronox closed at $145.50 (€114.95), down 6.13%, on its first day of resumed trading on the New York Stock Exchange (NYSE).

Tronox's stock, listed as TROX, fell $9.50.

Its performance was worse than the general market or the overall chemical industry. The Dow Jones Industrial Average fell by less than 1%, while the Dow Jones US Chemicals Index rose slightly.

Stock in Kronos, another producer of titanium dioxide (TiO2) rose by more than 1%.

Tronox's stock was delisted in 2008, before the company filed for bankruptcy protection in January 2009.

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 (€14bn), 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 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 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.

($1 = €0.79)

By: Al Greenwood
+1 713 525 2645

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