US Anadarko expects to prevail in Tronox lawsuit

09 August 2012 18:47  [Source: ICIS news]

HOUSTON (ICIS)--The US Attorney's Office had no comment on Thursday regarding Anadarko's expectations that it will prevail in a lawsuit connected to the spin-off of pigment producer Tronox.

Anadarko and US regulators are disputing who should pay for the clean-up costs that Tronox inherited when it was spun off from Kerr-McGee, which is now part of Anadarko.

Initially, Anadarko had set aside $525m (€425m) to pay for a possible settlement, the company said in a regulatory filing.

However, the settlement talks fell through, and Anadarko now expects to win the lawsuit. As a result, it is no longer setting aside the $525m.

At worst, Anadarko could pay $1.4bn, it said. That is based on the amount Kerr-McGee received at the time of the Tronox spin-off, a sum that includes $985m and interest.

At the other extreme, Anadarko would pay nothing, "based on the company's current belief that it will more likely than not prevail in defending against the claims", it said.

The trial began in May, and Anadarko expects that it will last through September, the company said. The damages being claimed exceed $18.9bn, in addition to litigation costs and fees.

The litigation had initially started with Tronox, which sued Kerr-McGee, its former corporate parent, and Anadarko, which acquired Kerr-McGee.

Tronox alleged that Kerr-McGee saddled it with massive environmental liabilities during its spin off on 31 March, 2006.

Tronox alleged that the 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.

The company filed for bankruptcy protection under Chapter 11 in January 2009.

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 remaining 12% would compensate others who filed claims alleging damage from the sites.

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.

Tronox has since emerged from bankruptcy protection, and its stock is now listed on the New York Stock Exchange (NYSE).

The company makes titanium dioxide (TiO2).

($1 = €0.81)

By: Al Greenwood
+1 713 525 2645

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