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Bankrupt Pigment Maker to Pay $270M+ for Cleanup

Wednesday, November 24, 2010

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Tronox Inc., the world’s third-largest producer of titanium dioxide, will pay $270 million in cash and 88% of its interest in pending litigation in a federal bankruptcy settlement that will resolve the company’s environmental liabilities.

A 506-page Consent Decree, finalized Nov. 22 in the U.S. Bankruptcy Court for the Southern District of New York, requires Tronox to reimburse the Environmental Protection Agency for past cleanup costs and fund future cleanups at contaminated sites across the country.

Tronox, a spinoff of the Kerr-McGee Corp., has been operating since Jan. 12, 2009, under Chapter 11 of the U.S. Bankruptcy Code.

Tronox and 14 of its affiliates and subsidiaries sought bankruptcy protection in the face of potential responsibility for past and future costs under the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA, commonly known as Superfund) and the Resource Conservation and Recovery Act (RCRA) relating to sites throughout the country, as well as for penalties under CERCLA, RCRA, the Clean Air Act, and the Clean Water Act.

Settlement Plan

Under the terms of the massive settlement, Tronox will pay $270 million in cash. The majority of the funding will be placed in five environmental response trusts for the cleanup of numerous sites, most of which have been contaminated with hazardous substances or waste.

Tronox will also provide non-cash assets, such as insurance and financial assurance assets worth at least $50 million, to the environmental response trusts. Those assets include property in Henderson, NV.

EPA-lead sites will receive, directly or indirectly, approximately $59 million and 45% (of the 88%) of any proceeds from current litigation involving Tronox’s parent company, Anadarko Petroleum Corp.

The Tronox EPA-funded sites and communities include 49 abandoned uranium mines in the Navajo Nation territory in the U.S. Southwest.

EPA Clean-up Claims

Tronox, based in Oklahoma City, OK, is a multinational chemical company that makes and sells titanium dioxide and other specialty chemicals used in coatings, paints, plastics, paper and inks. The company has 1,800 employees and operates in North America, Europe, and Australia.

The company was created in 2006 through a spin-off from the Kerr-McGee Corp. and produces about 12% of the world’s titanium dioxide. Months after the spin-off was completed, Anadarko Petroleum purchased Kerr-McGee for $18 billion.

On Aug. 11, 2009, the U.S. Justice Department filed proofs of claim on behalf of EPA to recover, among other things, past and future environmental response costs relating to 18 named sites in seven regions, including a claim for at least $335.5 million in connection with costs EPA incurred in cleaning up the Federal Creosote Superfund Site in Manville, NJ.

The U.S. also filed proofs of claim related to hundreds of other sites impacted by the spin-off. EPA’s claims included a claim for penalties stemming from inspections and reviews of a Tronox facility in Savannah, GA.

PSN_11.29_Tronox_Winlass

Photos / Tronox Inc.

Tronox will emerge from Chapter 11 “well-positioned to compete,” said chairman and CEO Dennis L. Wanlass.

Objections, Amendments

In August 2010, Kerr-McGee announced objections to Tronox’s bankruptcy exit plan, saying the company was not giving creditors enough information to evaluate how much money they could recover in the bankruptcy case.

On Sept. 30, the bankruptcy court approved Tronox’s amended disclosure statement. On Nov. 17, the court approved the plan.

Tronox said then that it expected to emerge from Chapter 11 “in the upcoming weeks, as soon as the plan conditions are satisfied.”

‘A Major Milestone’

“The Court’s confirmation of our restructuring plan is a major milestone for our company and represents the culmination of our restructuring efforts,” said Tronox chairman and CEO Dennis L. Wanlass.

“We will emerge from the Chapter 11 process well-positioned to compete in the titanium dioxide and specialty chemical industries, having eliminated our significant environmental and other legacy liabilities.”

Tronox is currently involved in litigation against Anadarko and Kerr-McGee over allegations that those companies imposed years’ worth of legacy liabilities, including environmental obligations, on Tronox, leaving Tronox insolvent and undercapitalized.

The trial is expected to begin in late 2011 or early 2012. As a result of that litigation, 88% of any settlement awarded to Tronox will be used to fund additional cleanup efforts.

Distribution Changes

In September, Tronox announced that it was reducing the number of distributors for TiO2 in the United States from seven to four.

PSN_11.29_Tronox_Margie
Tronox’s Hamilton, MS, facility is the world’s third-largest titanium dioxide pigment plant.

The company eliminated longtime distributors Majemac Enterprises, Mehaffey & Daigle Inc., and Commerce Industrial Chemicals. Remaining distributors are Hall Technologies, D.H. Litter Co., M.F. Cachat, and Dowd and Guild Inc.

Before being considered by the bankruptcy court for approval, the settlement will be lodged with the bankruptcy court for a period of 30 days to provide public notice and to afford members of the public the opportunity to comment on the settlement.
 
The bankruptcy filing did not include Tronox’s non-U.S. operations, which are based in Australia, Germany and the Netherlands.

   

Tagged categories: Business operations; EPA; Pigments; Titanium dioxide; Tronox

Comment from Doug Steitz, (12/14/2010, 5:57 PM)

do not see any comments ??


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