Moody’s might lift Tronox

Moody's Investors Service said it placed the B2 ratings of Tronox Ltd. on review for upgrade.

The review follows the company's announcement that it entered into a letter of intent to acquire the titanium dioxide business of Cristal, the Saudi-based titanium dioxide producer, for $1.67 billion in cash plus 38.75 million Tronox shares (or 24% of Tronox's equity, pre-deal announcement) and that it intends to divest its soda ash business, with the proceeds to be used towards acquiring Cristal.

The transaction is expected to close by year-end 2017 and might require additional borrowings to complete, the amount of which will largely depend on the divestiture price of the soda ash business, as well as the company's cash balance and high value inventory at the time of closing.

The outlook was changed to rating under review from negative.

"In terms of production scale, the acquisition of Cristal would put Tronox just ahead of the global leader, Chemours," Moody’s senior credit officer Joseph Princiotta said in a news release.

"Cristal would add roughly 858k metric tons per annum production capacity to Tronox's roughly 465k metric tons."

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