Tronox gets $425 million new DIP loan, $125 million exit commitment

By Caroline Salls

Pittsburgh, Oct. 15 - Tronox Inc. requested court approval to obtain a $425 million replacement debtor-in-possession facility and repay its current DIP facility, according to a Thursday filing with the U.S. Bankruptcy Court for the District of Delaware.

On Friday, the company also sought court approval to enter into a commitment letter under which it could receive $125 million in exit financing from Wells Fargo Capital Finance, LLC.

Tronox recently received court approval to hire Goldman Sachs Lending Partners LLC to syndicate a replacement DIP and exit financing facility that will refinance its existing $425 million DIP and exit financing facility on improved terms, as well as to give Tronox the option to increase its exit financing if it does not obtain a separate revolving credit facility.

According to Friday's motion, the company's plan of reorganization calls for it to emerge from bankruptcy with $470 million in exit financing, including the $425 million term loan and a senior secured asset-based revolver with commitments of $125 million.

As previously reported, the company needs to increase its exit financing by $90 million to fund significant incremental cash payments to be made to legacy environmental and tort creditors under its most recent plan of reorganization.

Tronox said this prompted it to refinance both tranches of the existing facility to allow the entire $425 million facility to roll into exit financing, in addition to seeking the revolver.

By entering into the new DIP facility at this time, Tronox said it will obtain the additional financing necessary to support the plan, while taking advantage of improved market conditions that will result in significant savings.

Specifically, the company said the new facility carries an interest rate that is 200 basis points less than the non-default rate under the existing facility.

Also, by repaying the existing facility with the proceeds of the new loan, Tronox will eliminate its current obligation to pay 2% default interest on the existing facility on account of continuing defaults.

Together, the lower interest rate and the elimination of default interest will save Tronox about $1.45 million per month in interest expense.

In addition, to the extent the terms of Tronox's plan support and equity commitment agreements are similarly extended, the maturity date of the new facility before conversion into exit financing could be as late as Feb. 15, giving the company seven more weeks beyond the Dec. 24 maturity date of the existing facility to complete its plan.

Under the commitment letter, Wells Fargo has agreed to underwrite the entire $125 million revolving facility.

The commitment will remain open until Jan. 31.

New loan terms

Goldman Sachs is the administrative agent, collateral agent, syndication agent, sole lead arranger and bookrunner on the new facility.

On or before the conversion date, the company can request establishment of one new $90 million term loan commitment if it does not obtain a replacement revolver or alternate facility.

If the plan support and equity commitment agreements are not extended to Feb. 15, the new facility will mature on Dec. 31.

Interest on the new loan will be either Base rate plus 400 bps with a 3% floor or Eurodollar plus 500 bps with a 2% floor.

Tronox is required to pay a 1% closing fee and $10.63 million in arrangement and syndication fees.

Revolver commitment details

The proposed $125 million revolver would mature on the earlier of 60 days before maturity of the term loan exit facility and four years from the closing date.

Interest would range from either Base rate plus 200 bps to 250 bps or Libor plus 300 bps to 350 bps, depending on the average excess availability under the revolver in the preceding 90 days.

The commitment letter requires Tronox to pay a $2.18 million arrangement fee, a 0.50% ticking fee and a $7,500 per-month servicing fee.

The company has requested an Oct. 20 hearing on the term loan and an Oct. 26 hearing on the revolver commitment.

Tronox, an Oklahoma City-based producer and marketer of titanium dioxide pigment, filed for bankruptcy on Jan. 12, 2009. Its Chapter 11 case number is 09-10156.

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