Moody’s downgrades Tronox to B1

Moody's Investors Service said it downgraded the corporate family rating of Tronox Ltd. to B1 from Ba3.

In addition, the agency downgraded the senior secured bank facility rating of Tronox Pigments (Netherlands) BV to Ba3 from Ba2 and the senior unsecured ratings of Tronox Finance LLC to B3 from B2.

The speculative grade liquidity rating was lowered to SGL-2 from SGL-1.

The outlook is stable.

Moody’s said these actions reflect the step up in leverage resulting from the pending acquisition of FMC's soda ash business and the view that the company's existing titanium dioxide (TiO2) pigment and ore businesses are unlikely to exhibit sufficient cyclical recovery in the near-term to facilitate adequate improvement in credit metrics to support the Ba3 ratings.

The economic incentives to make additional acquisitions, so as to use more of its substantial tax NOLs, also add a level of uncertainty to the company's future credit profile.

"The acquisition of FMC's soda ash business adds a stable and well positioned business to Tronox's profile. However, the acquisition stresses leverage and cash flow metrics and comes at a time when the TiO2 industry is experiencing trough conditions and the timing for recovery is currently unclear," Moody’s senior analyst Joseph Princiotta said in a news release.

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