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UPDATE 3-Tronox sues Kerr-McGee and Anadarko
May 13, 2009 / 12:54 AM / 9 years ago

UPDATE 3-Tronox sues Kerr-McGee and Anadarko

* Tronox says Kerr-McGee defrauded creditors

* Kerr-McGee owner Anadarko says not responsible (Adds Tronox comment from lawsuit)

NEW YORK, May 12 (Reuters) - Bankrupt chemicals maker Tronox Inc TRXAQ.PK sued former parent Kerr-McGee, now part of Anadarko Petroleum Corp (APC.N), on Tuesday, claiming that the way it was spun off doomed it to fail.

The U.S. operations of Tronox, which makes titanium dioxide pigment used in paint, plastics and paper, filed for Chapter 11 bankruptcy protection in January, less than three years after being spun off from Kerr-McGee. A few months after the spin-off, Kerr-McGee was acquired by Anadarko.

Tronox’s lawsuit says that Kerr-McGee defrauded its creditors through the spin-off.

When Tronox filed for bankruptcy in January it said in court filings that prior to the spin-off, Kerr-McGee had isolated most of its liabilities from its former discontinued operations into Tronox -- its chemical business -- regardless of their source.

As a result, Tronox has maintained that many legacy liabilities it has shouldered do not relate to its core titanium dioxide business.

“Overburdened with the legacy liabilities and debt, stripped of essential cash, and grossly undercapitalized, Tronox was doomed to fail,” the lawsuit says.

“Despite valiant efforts to survive, including significant personnel reductions, efforts to streamline its operations, and reductions in retiree benefit programs, Tronox was left with no choice but to file for bankruptcy protection,” it adds.

Anadarko is not responsible for Tronox’s financial condition, said spokesman John Christiansen, as evidenced by its initial public offering.

“The market demonstrates that Tronox was solvent and adequately capitalized at the time of its IPO, as Tronox was able to issue stock at approximately $14 per share, and it was also able to enter into a credit facility and issue unsecured bonds,” Christiansen said.

Tronox attributed its deteriorating financial condition to the downturn in the housing and construction markets as well as other economic and operating challenges, Christiansen added.

“These difficult market conditions are unfortunate, but are unrelated to Anadarko, Kerr-McGee and the IPO,” he said. “Tronox is not a unique case in these challenging economic times.”

A copy of Tronox’s lawsuit was not immediately available. (Reporting by Martinne Geller and Robert MacMillan; editing by Carol Bishopric, Gary Hill and Muralikumar Anantharaman)

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