Tronox creditors committee echoes company spin off concerns in lawsuit

By Caroline Salls

Pittsburgh, July 27 - Tronox Inc.'s official committee of unsecured creditors filed a lawsuit Friday that "arises out of the same fraudulent scheme" that prompted the company to file a suit in May against Kerr-McGee Corp. and its successor Anadarko Petroleum Corp., according to a filing with the U.S. Bankruptcy Court for the Southern District of New York.

As previously reported, Tronox's lawsuit alleged that Kerr-McGee defrauded Tronox's creditors through its separation and spin-off of its former chemical subsidiary in 2006.

Tronox is seeking recovery for fraudulent transfers involving valuable oil and gas assets and massive actual and contingent environmental, tort, retiree and other liabilities.

The committee said its lawsuit centers around a $200 million secured debt facility that Tronox obtained in November 2005. The committee said the company did not keep any of the proceeds of the facility, but they were instead up-streamed to new Kerr-McGee or used to pay the fees and expenses of the borrowing.

Both suits said the alleged fraud left the company "doomed to fail."

The committee said the company was overburdened with legacy liabilities and the additional debt acquired in the spin off and was stripped of essential cash.

"Tronox was simply broke," the committee said in its lawsuit.

Tronox filed for Chapter 11 on Jan. 12, 2009, less than three years after the spin off.

Tronox is an Oklahoma City-based producer and marketer of titanium dioxide pigment. Its Chapter 11 case number is 09-10156.

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