Exhibit 2.2
UNITED STATES BANKRUPTCY COURT
SOUTHERN DISTRICT OF NEW YORK
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In re
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Chapter 11 |
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TRONOX INCORPORATED, et al.,1
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Case No. 09-10156 (ALG) |
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Debtors.
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Jointly Administered |
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DISCLOSURE STATEMENT REGARDING THE FIRST AMENDED JOINT
PLAN OF REORGANIZATION OF TRONOX INCORPORATED, ET AL.
PURSUANT TO CHAPTER 11 OF THE BANKRUPTCY CODE
KIRKLAND & ELLIS LLP
601 Lexington Avenue
New York, NY 10022
Telephone: (212) 446-4800
Facsimile: (212) 446-4900
Attorneys for the Debtors and Debtors in Possession
Dated: October 1, 2010
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The debtors in these cases include: Tronox
Luxembourg S.ar.l; Tronox Incorporated; Cimarron Corporation; Southwestern
Refining Company, Inc.; Transworld Drilling Company; Triangle Refineries, Inc.;
Triple S, Inc.; Triple S Environmental Management Corporation; Triple S
Minerals Resources Corporation; Triple S Refining Corporation; Tronox LLC;
Tronox Finance Corp.; Tronox Holdings, Inc.; Tronox Pigments (Savannah) Inc.;
and Tronox Worldwide LLC. |
IMPORTANT INFORMATION FOR YOU TO READ
THE DEADLINE TO VOTE ON THE PLAN IS NOVEMBER 5, 2010, AT 5:00 P.M. PACIFIC TIME.
FOR YOUR VOTE TO BE COUNTED, YOUR BALLOT MUST BE ACTUALLY RECEIVED BY THE
NOTICE AND CLAIMS AGENT BEFORE THE VOTING DEADLINE AS DESCRIBED HEREIN.
Tronox is providing the information in this Disclosure Statement for the Proposed First
Amended Joint Chapter 11 Plan of Tronox Incorporated, et al. to Holders of Claims and Equity
Interests entitled to vote on the Plan for the purpose of soliciting votes to accept the Plan.
Nothing in this Disclosure Statement may be relied upon or used by any entity for any other
purpose.
This Disclosure Statement may not be deemed as providing any legal, financial, securities, tax
or business advice. Tronox urges any Holder of a Claim or Equity Interest to consult with its own
advisors with respect to any such legal, financial, securities, tax or business advice in reviewing
this Disclosure Statement, the Plan and each of the proposed transactions contemplated thereby.
The Bankruptcy Courts approval of the adequacy of disclosure contained in this Disclosure
Statement does not constitute the Bankruptcy Courts approval of the merits of the Plan. Tronox
has not authorized any entity to give any information about or concerning the Plan other than that
which is contained in this Disclosure Statement. Tronox has not authorized any representations
concerning the value of its property other than as set forth in this Disclosure Statement.
Tronox urges every holder of a Claim or Equity Interest entitled to vote on the Plan to (1)
read the entire Disclosure Statement and Plan carefully, (2) consider all of the information in
this Disclosure Statement, including, importantly, the risk factors described in Section VII of
this Disclosure Statement and (3) consult with its own advisors with respect to reviewing this
Disclosure Statement, the Plan, all documents attached hereto or filed in connection herewith and
the proposed transactions contemplated under the Plan before deciding whether to vote to
accept or reject the Plan.
This Disclosure Statement contains summaries of the Plan, certain statutory provisions, events
in Tronoxs Chapter 11 Cases and certain documents related to the Plan. In the event of any
inconsistency or discrepancy between a description in this Disclosure Statement and the terms and
provisions of the Plan or other documents referenced herein, the Plan or such other documents will
govern for all purposes. Except where otherwise specifically noted, factual information contained
in this Disclosure Statement has been provided by Tronoxs management. Tronox does not represent
or warrant that the information contained herein or attached hereto is without any material
inaccuracy or omission.
Although Tronox has used its reasonable business judgment to ensure the accuracy of the
financial information contained in, or incorporated by reference into, this Disclosure Statement,
such financial information has not been audited. Tronox is generally making the statements and
providing the financial information contained in this Disclosure Statement as of the date hereof
where feasible, unless otherwise specifically noted. Although Tronox may subsequently update the
information in this Disclosure Statement, Tronox has no affirmative duty to do so, and parties
reviewing this Disclosure Statement should not infer that, at the time of their review, the facts
set forth herein have not changed since this Disclosure Statement was filed.
Neither this Disclosure Statement nor the Plan is or should be construed as an admission of
fact, liability, stipulation or waiver. Rather, Holders of Claims, Equity Interests and other
parties in interest should construe this Disclosure Statement as a statement made in settlement
negotiations related to the numerous contested matters, adversary proceedings and other pending or
threatened litigation or actions. No reliance should be placed on the fact that a particular
litigation Claim or projected objection to a particular Claim is, or is not, identified in this
Disclosure Statement. Tronox or Reorganized Tronox may seek to investigate, file and prosecute
Claims and may object to Claims after the Confirmation or Effective Date of the Plan irrespective
of whether this Disclosure Statement identifies any such Claims or objections to Claims.
SPECIAL NOTICE REGARDING FEDERAL AND STATE SECURITIES LAWS
Neither this Disclosure Statement nor the Plan has been filed with the United States
Securities and Exchange Commission (the SEC) or any state authority. The Plan has not
been approved or disapproved by the SEC or any state securities commission and neither the SEC nor
any state securities commission has passed upon the accuracy or adequacy of this Disclosure
Statement or the merits of the Plan. Any representation to the contrary is a criminal offense.
This Disclosure Statement has been prepared pursuant to section 1125 of the Bankruptcy Code
and Bankruptcy Rule 3016(b) and is not necessarily in accordance with federal or state securities
laws or other similar laws. The securities to be issued on or after the Effective Date will not
have been the subject of a registration statement filed with the SEC under the Securities Act of
1933, as amended (the Securities Act) or any securities regulatory authority of any state
under any state securities law (Blue Sky Law). Tronox is relying on section 4(2) of the
Securities Act and similar Blue Sky Law provisions, as well as, to the extent applicable, the
exemption from the Securities Act and equivalent state law registration requirements provided by
section 1145(a)(1) of the Bankruptcy Code, to exempt the issuance of new securities in connection
with the solicitation and the Plan from registration under the Securities Act and Blue Sky Law.
This Disclosure Statement contains forward looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995. Such statements consist of any statement other
than a recitation of historical fact and can be identified by the use of forward looking
terminology such as may, expect, anticipate, estimate or continue or the negative thereof
or other variations thereon or comparable terminology. You are cautioned that all forward looking
statements are necessarily speculative and there are certain risks and uncertainties that could
cause actual events or results to differ materially from those referred to in such forward looking
statements. The Liquidation Analysis set forth in Exhibit E, distribution projections and
other information contained herein and attached hereto are estimates only, and the timing and
amount of actual distributions to Holders of Allowed Claims may be affected by many factors that
cannot be predicted. Any analyses, estimates or recovery projections may or may not turn out to be
accurate.
Making investment decisions based on the information contained in this Disclosure
Statement and/or the Plan is therefore highly speculative. Tronox recommends that potential
recipients of any securities issued pursuant to the Plan consult their own legal counsel concerning
the securities laws governing the transferability of any such securities.
QUESTIONS AND ADDITIONAL INFORMATION
If you would like to obtain copies of this Disclosure Statement, the Plan or any of the
documents attached hereto or referenced herein, or have questions about the solicitation and voting
process or these Chapter 11 Cases generally, please contact Kurtzman Carson Consultants LLC by
(i) calling (866) 9670675, (ii) emailing tronoxinfo@kccllc.com or (iii) visiting
http://www.kccllc.net/tronox.
TABLE OF CONTENTS
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I. EXECUTIVE SUMMARY |
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A. Purpose and Effect of the Plan |
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B. Deemed Substantive Consolidation of the Tronox Debtors |
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C. Global Settlement & Key Constituent Support for the Plan |
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D. Restructuring Transactions under the Plan |
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E. Recovery Analysis |
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F. Treatment of Claims and Equity Interests under the Plan |
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G. Voting on the Plan |
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H. Additional Plan-Related Documents |
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I. Confirmation and Consummation of the Plan |
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II. TRONOXS BUSINESS AND HISTORY |
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A. Company Overview |
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B. Tronoxs Business Operations |
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C. Tronoxs Corporate History |
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D. Tronoxs Prepetition Capital Structure |
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E. Tronoxs Organizational Structure |
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F. Events that Led to the Chapter 11 Cases |
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III. TRONOXS CHAPTER 11 CASES & DEVELOPMENTS THEREIN |
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A. Initial Motions of the Chapter 11 Cases and Certain Related Relief |
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B. Appointment of Statutory Committees and Other Active Participants in
Tronoxs Chapter 11 Cases |
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C. The Claims Process |
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D. Executory Contracts and Unexpired Leases |
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E. The Anadarko Litigation and Related Matters |
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F. In re Tronox, Inc. Securities Litigation |
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G. Employee Benefit & Retiree Matters |
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H. Material Settlements and Resolutions |
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I. Tronoxs Early Standalone Reorganization Efforts; the December Plan
Support Agreement and the Equity Commitment Agreement |
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J. The Replacement DIP Facility |
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K. Significant Developments Following Execution of the December Plan Support Agreement |
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L. Exclusivity |
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IV. SUMMARY OF THE PLAN |
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A. Treatment of Unclassified Claims |
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B. Classification and Treatment of Claims and Equity Interests |
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C. Certain Special Provisions |
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D. Acceptance or Rejection of the Plan |
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E. Certain Means for Implementation of the Plan |
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F. Post-Effective Date Governance |
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G. Treatment of Executory Contracts, Unexpired Leases, Employee and
Retiree Benefits and Insurance Policies |
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H. Provisions Governing Distributions |
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I. Procedures for Resolving Contingent, Unliquidated and Disputed Claims |
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J. Settlement, Release, Injunction and Related Provisions |
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K. Conditions Precedent to Confirmation and the Effective Date of the Plan |
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L. Modification, Revocation or Withdrawal of the Plan |
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M. Retention of Jurisdiction |
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N. Miscellaneous Provisions |
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V. VALUATION ANALYSIS |
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VI. CONFIRMATION OF THE PLAN |
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A. The Confirmation Hearing |
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B. Requirements for Confirmation of the Plan |
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C. Best Interests of Creditors |
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D. Acceptance by Impaired Classes |
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E. Feasibility |
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F. Requirements of Section 1129(b) of the Bankruptcy Code |
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VII. RISK FACTORS |
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A. Risks Related to Confirmation of the Plan |
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B. Risks Related to Recoveries under the Plan |
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C. Risks Related to Tronoxs Business |
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VIII. IMPORTANT SECURITIES LAW DISCLOSURE |
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IX. CERTAIN U.S. FEDERAL INCOME TAX CONSEQUENCES OF THE PLAN |
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A. Certain U.S. Federal Income Tax Consequences to Reorganized Tronox |
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B. Consequences to Holders of Allowed Claims |
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C. Information Reporting and Backup Withholding |
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X. RECOMMENDATION OF TRONOX |
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EXHIBITS
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EXHIBIT A
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Plan of Reorganization |
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EXHIBIT B
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Solicitation Procedures Order |
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EXHIBIT C
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Reorganized Tronoxs Projections |
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EXHIBIT D
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Valuation Analysis |
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EXHIBIT E
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Liquidation Analysis |
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I. EXECUTIVE SUMMARY
Tronox Incorporated, a Delaware corporation based in Oklahoma City, Oklahoma and its
affiliated debtors and debtors in possession (collectively, Tronox or the Tronox
Debtors and, as reorganized pursuant to the Plan, Reorganized Tronox) each filed a
voluntary petition for relief under chapter 11 of the Bankruptcy Code in the United States
Bankruptcy Court for the Southern District of New York (the Bankruptcy Court) on January
12, 2009 (the Petition Date). Tronoxs chapter 11 cases are jointly administered for
procedural purposes only under lead case number 09-10156 (ALG).
Before soliciting acceptances of a proposed chapter 11 plan of reorganization, section 1125 of
the Bankruptcy Code requires a debtor to prepare a disclosure statement that contains information
of a kind, and in sufficient detail, to permit a hypothetical reasonable investor to make an
informed judgment regarding acceptance of the plan of reorganization.
Accordingly, Tronox submits this Disclosure Statement pursuant to section 1125 of the
Bankruptcy Code to holders of Claims against and Equity Interests in Tronox because Tronox is
asking Holders of Claims and Equity Interests to accept the First Amended Joint Chapter 11 Plan of
Tronox Incorporated, et al., dated October 1, 2010 (the Plan). A copy of the Plan is
attached hereto as Exhibit A. Capitalized terms used but not otherwise defined in this
Disclosure Statement have the meaning given to those terms in the Plan. Tronox is the proponent of
the Plan within the meaning of section 1129 of the Bankruptcy Code.
On September 30, 2010, the Bankruptcy Court entered an order [Dkt. No. 2187] (the
Solicitation Procedures Order) (a) approving the Disclosure Statement as containing
adequate information, (b) approving, among other things, the dates, procedures and forms applicable
to the process of soliciting votes on and providing notice of the Plan and certain vote tabulation
procedures, (c) establishing the deadline for filing objections to the Plan and (d) scheduling the
Confirmation Hearing. The Solicitation Procedures Order is attached hereto as Exhibit B.
A hearing to consider confirmation of the Plan is scheduled to be held before the Honorable
Allan L. Gropper at 11:00 a.m. Eastern Time on November 17, 2010 at the Bankruptcy Court, located
at One Bowling Green, New York, New York 10004-1408, Room 617. Additional information with respect
to Confirmation is provided in section VI of this Disclosure Statement, entitled Confirmation of
the Plan.
This Disclosure Statement contains, among other things, descriptions and summaries of certain
provisions of, and financial transactions contemplated by, the Plan. Certain provisions of the
Plan (and the descriptions and summaries contained herein) remain the subject of continuing
negotiations among Tronox and various parties, have not been finally agreed upon and may be
modified.
This Executive Summary is only a general overview of this Disclosure Statement and the
material terms of, and transactions proposed by, the Plan. The Executive Summary is qualified in
its entirety by reference to the more detailed discussions appearing elsewhere in this Disclosure
Statement and the exhibits attached to this Disclosure Statement, including the Plan and the Plan
Supplement, which will be filed no later than fourteen days before the Voting Deadline or such
later date as may be approved by the Bankruptcy Court. Tronox urges all parties to read the
Executive Summary in conjunction with the entire Disclosure Statement, the Plan and the Plan
Supplement.
A. Purpose and Effect of the Plan
Tronox is reorganizing under chapter 11 of the Bankruptcy Code, which is the principal
business reorganization chapter of the Bankruptcy Code. Under chapter 11 of the Bankruptcy Code, a
debtor may reorganize its business for the benefit of its stakeholders. The consummation of a plan
of reorganization is the principal objective of a chapter 11 case. A plan of reorganization sets
forth how a debtor will treat claims and equity interests.
A bankruptcy courts confirmation of a plan of reorganization binds the debtor, any entity or
person acquiring property under the plan, any creditor of or equity security holder in a debtor and
any other entities and
persons to the extent ordered by the bankruptcy court pursuant to the terms of the confirmed
plan, whether or not such entity or person is impaired pursuant to the plan, has voted to accept
the plan or receives or retains any property under the plan.
Among other things (subject to certain limited exceptions and except as otherwise provided in
the Plan or the Confirmation Order), the Confirmation Order will discharge Tronox from any debt
arising before the Effective Date, terminate all of the rights and interests of pre-bankruptcy
equity security holders and substitute the obligations set forth in the Plan for those
pre-bankruptcy Claims and Equity Interests. Under the Plan, Claims and Equity Interests are
divided into Classes according to their relative priority and other criteria.
The feasibility of the Plan is premised upon, among other things, Tronoxs assessment of its
ability to achieve the goals of its long-range business plan (the Business Plan), make
the distributions contemplated under the Plan and pay certain continuing obligations in the
ordinary course of Reorganized Tronoxs business. Tronoxs financial projections are set forth on
Exhibit C. Although Tronox believes the projections are reasonable and appropriate, they
include a number of assumptions and are subject to a number of risk factors and to significant
uncertainty. Actual results will differ from the projections and the differences may be material.
Importantly, the Business Plan and projections incorporate Tronoxs forecasts of the anticipated
operating performance of its foreign subsidiaries worldwide that are not subject to these Chapter
11 Cases.
B. Deemed Substantive Consolidation of the Tronox Debtors
The Plan contemplates the deemed substantive consolidation of the estates of each of the
Tronox Debtors for certain limited, administrative purposes related to the Plan, including voting,
Confirmation and Distribution. Given the number of separate legal entities that comprise the
Tronox Debtors, Tronox believes it would be inefficient to propose, vote on and make distributions
in respect of entity-specific claims. Accordingly, Holders of Allowed Claims against or Equity
Interests in each of the Tronox Debtors will receive the same recovery provided to other Holders of
Allowed Claims or Equity Interests in the applicable Class and will be entitled to their share of
consideration available for distribution to such Class. The filing of the Plan and this Disclosure
Statement shall constitute Tronoxs motion for and entry of the Confirmation Order shall constitute
the approval, pursuant to section 105(a) of the Bankruptcy Code, effective as of the Effective
Date, of the substantive consolidation of the Chapter 11 Cases for certain limited purposes related
to the Plan, including voting, Confirmation and Distribution. Tronox believes that no creditor
will receive a recovery inferior to that which it would receive if Tronox proposed a chapter 11
plan that was completely separate as to each entity and, therefore, Tronox does not believe that
any creditor will be materially adversely affected by not voting on and receiving distributions on
an entity-by-entity basis.
The deemed substantive consolidation of Tronoxs estates as set forth in the Plan is a
component of the consensual global settlement among Tronox and its creditor stakeholders, and is
intended to facilitate implementation of the Plan and the compromises reflected therein by
resolving a dispute as to the propriety of substantive consolidation without the expense or delay
associated with a litigated result. Notwithstanding the foregoing, Tronox and the other settling
parties reserve all of their rights to contest whether and to what extent deemed substantive
consolidation is appropriate if the Plan is not confirmed or the global settlement is altered or
materially modified.
C. Global Settlement & Key Constituent Support for the Plan
Tronox is very pleased that after extensive, good-faith negotiations, it has reached a
comprehensive settlement with its creditor constituencies that forms the basis for the Plan. As a
result of changes to the consideration being provided to certain classes of creditors under the
Plan (compared to Tronoxs original plan of reorganization filed on July 7, 2010), the Plan is
supported by2 (a) the United States, through the Department of
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References herein to the Government Environmental
Entities support of or agreement to support the Plan are conditioned on the
Government Environmental Entities obtaining all necessary approvals and
completing all required public notice and comment periods. |
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Justice, on behalf of other federal agencies and in consultation with state, local, tribal and
quasi-governmental authorities asserting Environmental Claims against Tronox; (b) the Nevada
Parties;3 (c) the Creditors Committee; (d) certain representatives for Holders of Tort
Claims; and (e) the Ad Hoc Noteholders Committee, including certain holders of Unsecured Notes
controlling more than 58% in principal amount of the Unsecured Notes (the Backstop Parties). To
memorialize the terms of the settlement, Tronox has entered into an Equity Commitment Agreement
with the Backstop Parties and a Plan Support Agreement with certain other parties, which agreements
were approved by the Bankruptcy Court on September 17, 2010 [Dkt. No. 2072].
The restructuring transactions contemplated by the settlement, which are embodied in the Plan,
accomplish the key objectives necessary for Tronoxs successful reorganization: (a) resolution of
Tronoxs liability for Environmental Claims and Tort Claims the significant legacy liabilities
Tronox incurred in connection with its spinoff from Kerr-McGee Corporation and which are the
subject of the pending Anadarko Litigation; (b) fair treatment for Tronoxs other unsecured
creditors; and (c) securing the appropriate level and forms of financing to support Tronoxs
emergence from chapter 11 and go-forward business needs.
Tronox and each of the settling parties including the government environmental claimants
(subject to obtaining all necessary approvals and completing a public notice and comment process)
believe the resulting Plan is fair and equitable, maximizes Tronoxs value, and allocates sources
of value fairly among Tronoxs stakeholders based upon the size and priorities of their claims.
Indeed, the settlement contemplated by the Plan resolves with finality several technical and
complex issues among Tronoxs creditors (particularly with respect to the significant Environmental
Claims) without the need for costly litigation. The compromise reached and the financial
restructurings and new money investment proposed under the Plan will facilitate a fresh start for
Reorganized Tronox, while simultaneously providing significant funding for the government agencies
responsible for ongoing environmental remediation at sites throughout the country.
All parties in interest reserve the right to object to the settlement on reasonableness or any
other grounds.
D. Restructuring Transactions under the Plan
The Plan is designed to accomplish, and is premised on, a resolution of Tronoxs legacy
environmental and tort liabilities and ensuring that Reorganized Tronox emerges from chapter 11
free of its massive legacy liabilities, sufficiently capitalized and poised for growth. With
respect to Environmental Claims, in exchange for an overall package of value (including the
majority of the proceeds from the Anadarko Litigation) that will be allocated to certain
environmental response trusts and environmental agencies in accordance with the terms of the
Environmental Claims Settlement Agreement4 which consideration constitutes a fair and
equitable settlement of the billions of dollars and varying priorities of the Environmental Claims
those entities will provide Tronox and Reorganized Tronox with a discharge and/or covenants not
to sue with respect to Tronoxs liability for the Environmental Claims after the Effective Date.
Similarly, the Plan provides for the creation and funding of a Tort Claims Trust, which will be the
sole source of distributions to Holders of Tort Claims, who will be paid in accordance with the
terms of such trusts governing documentation.
As a result of the transfer of liabilities achieved through allocating funds to the applicable
trusts and/or responsible agencies, the Plan preserves the going-concern value of Tronox, which
will reorganize around its existing operating businesses, including: (a) its headquarters facility
at Oklahoma City, Oklahoma; (b) the titanium
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The Nevada Parties are the Nevada Division of
Environmental Protection, the Southern Nevada Water Authority, the Central
Arizona Project/Central Arizona Water Conservation District and the
Metropolitan Water District of Southern California. |
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The terms of the anticipated environmental
settlement as described throughout this Disclosure Statement reflect a summary
description only and are qualified in all respects by reference to definitive
settlement documentation, the form of which (subject to public notice and
comment) is expected to be filed with the Bankruptcy Court on or about
September 30, 2010. |
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dioxide facilities at Hamilton, Mississippi and Botlek, Netherlands; (c) the electrolytic
chemical business at Henderson, Nevada (except that the real property and buildings associated with
such business will be transferred to an environmental response trust and Tronox will not be
responsible for environmental remediation related to historic contamination at such site); and
(d) its interest in the Tiwest joint venture in Australia.
To fund cash payments required by the Plan and meet the go-forward operating and working
capital needs of its business, Tronox will rely on a combination of debt financing and new money
equity investments from certain of its existing creditors. Specifically, the Plan contemplates the
following restructuring transactions:
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Tronox will emerge from bankruptcy with no more than approximately $470 million of
funded debt borrowed under (a) a $425 million senior secured term loan facility (either
under an amended Replacement DIP Facility having converted into exit financing according to
its terms, or under a new credit facility); and (b) an asset-based revolving credit
facility with commitments of $125 million (including $28 million face amount in issued
letters of credit). |
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$185 Million Rights Offering: The Plan provides for a $185 million new money
investment in Reorganized Tronox in the form of a Rights Offering open to all of Tronoxs
unsecured creditors who are Eligible Holders.5 Under the Plan, Eligible Holders
will be given Rights to purchase, on a Pro Rata basis, up to 45.5% of the New Common
Stock issued on the Effective Date, based on a 17.6% discount to the Plan total enterprise
value of Reorganized Tronox of $1,063 million. The Backstop Parties, a group of Holders of
Tronoxs Unsecured Notes, have committed to purchase any of the New Common Stock that is
not subscribed to in the Rights Offering, thereby assuring that Tronox will receive the
full $185 million. In return for this commitment, the Backstop Parties will receive
consideration equal to 8% of the $185 million equity commitment (payable as an additional
3.6% of the New Common Stock issued on the Effective Date). |
Eligible Holders will receive separate materials regarding the Rights Offering.
To participate in the Rights Offering, your Claim must be Allowed on or
before the Rights Expiration Date, which is November 10, 2010.
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Creation and Funding of Environmental Settlement and Tort Claim Trusts |
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Proceeds from the Exit Financing and the Rights Offering will be used to, among other things,
fund settlement payments under the Plan on account of Environmental and Tort Claims, as follows: |
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Environmental Claims will be settled in accordance with the terms of the Environmental
Claims Settlement Agreement, which will provide that certain Environmental Response Trusts
to be created on the Effective Date and/or certain Government Environmental Entities will
provide Tronox and Reorganized Tronox with a discharge and/or covenants not to sue with
respect to Tronoxs liabilities and/or assume responsibility for go-forward cleanup costs
associated with the Owned Sites (title to which will be transferred to the Environmental
Response Trusts) and certain Other Sites in exchange for the following package of
consideration: |
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Eligible Holder is defined under the Plan as any
Person or Entity who, as of the Record Date, is (a) a Holder of a General
Unsecured Claim (Class 3) against Tronox in excess of $250, and/or (b) a Holder
of an Indirect Environmental Claims (Class 6) against Tronox in excess of $500;
provided, in each case, that such Claim has been Allowed on or before
the Rights Expiration Date; and provided further, that for
Holders of Allowed Indirect Environmental Claims, their respective Allowed
Claim for purposes of participation in the Rights Offering shall be limited to
50% of the amount of such Allowed Indirect Environmental Claim. |
4
|
o |
|
the right to 88% of proceeds of the Anadarko Litigation; |
|
|
o |
|
$270 million in Cash in the form of the Funded Environmental Amount; |
|
|
o |
|
the Environmental Trust Assets; |
|
|
o |
|
the Nevada Assets; and |
|
|
o |
|
the Environmental Insurance Assets, which include financial assurance
assets worth at least $50 million. |
|
|
|
Tort Claims will be satisfied exclusively from the Tort Claims Trust to be established
on the Effective Date, which will be funded with the following consideration: |
|
o |
|
the right to 12% of proceeds of the Anadarko Litigation (together with
the benefit of any other arrangements to be negotiated in good faith by the United
States and representatives for holders of Tort Claims and to be set forth in the
Anadarko Litigation Trust Agreement); |
|
|
o |
|
$12.5 million in Cash in the form of the Funded Tort Claims Trust Amount; and |
|
|
o |
|
the Tort Claims Insurance Assets, which include proceeds from certain insurance settlements. |
4. |
|
Allocation of Equity in Reorganized Tronox Among Unsecured Creditors |
|
|
|
Holders of Allowed General Unsecured Claims against Tronox (which do not include
Environmental Claims, Tort Claims, or Convenience Claims and will only include Indirect
Environmental Claims to the extent described below) will receive: |
|
o |
|
their Pro Rata share of the GUC Pool, which consists of 50.9% of the
New Common Stock to be issued on the Effective Date, subject to dilution by shares
issued in connection with the Management Equity Plan and exercise of the New
Warrants;6 and |
|
|
o |
|
their Pro Rata share of Rights to purchase up to 45.5% of the New
Common Stock pursuant to the terms of the Rights Offering. |
|
|
|
Holders of Allowed Indirect Environmental Claims (primarily private party,
non-government environmental claims) will be separately classified so as to share
recoveries with Holders of General Unsecured Claims and Tort Claims as follows: |
|
o |
|
50% of the amount of each Allowed Indirect Environmental Claim will be
treated in accordance with the treatment provided to Class 3 General Unsecured
Claims, and will receive its Pro Rata share of (i) New Common Stock allocated to
the GUC Pool and (ii) Rights to participate in the Rights Offering; and |
|
|
o |
|
50% of the amount of each Allowed Indirect Environmental Claims will
receive its Pro Rata share of the Tort Claims Trust Distributable Amount designated
for such Claims. |
|
|
|
The Plan also establishes a convenience class for (a) Allowed General Unsecured Claims
in amounts equal to or below $250 and (b) 50% of Allowed Indirect Environmental Claims in
amounts equal to or less than $500 (i.e. - Claims that will not be eligible to participate
in the Rights Offering). Holders of these Claims will receive payment in cash equal to 89%
of the amount of such Claims, which payments will be funded by the Backstop Parties through
the purchase of the shares of New Common Stock to which the Holders of Convenience Claims
would have otherwise been entitled. If a Holder of an Allowed General Unsecured Claim or
Indirect Environmental Claim holds two or more Claims, one or more of which is in an amount |
|
|
|
6 |
|
As further described in Article VII.A(vi), Tronox
and other parties in interest are in ongoing discussions with the Equity
Committee regarding the treatment of Equity Interests under the Plan. As a
result of those negotiations, the value of the New Warrants offered to Class 8
Equity Interests may increase, which could dilute recoveries to holders of
Class 3 and Class 6 Claims under the Plan. |
5
|
|
|
less than $250 or $500 (as the case may be) but an aggregated total of its Claims would be
greater than $250 or $500 (as the case may be) such Holder may elect to aggregate such
claims for the purpose of participating in the Rights Offering. |
5. |
|
Cancellation of Old Equity Interests & Settlement Offer of New Warrants |
|
|
|
Equity Interests in Tronox Incorporated will be cancelled. For settlement purposes,
Holders of Equity Interests in Tronox Incorporated shall be entitled to vote on the Plan.
If the class of Equity Interests votes in favor of the Plan, Holders of Equity
Interests in Tronox Incorporated shall receive their Pro Rata share of the New Warrants to
be issued on the Effective Date pursuant to the terms of the New Warrant Agreement, the
form of which will be included in the Plan Supplement. The New Warrants will be
convertible into 5% of the New Common Stock to be issued on the Effective Date based on a
total enterprise value for Reorganized Tronox of $1.5 billion. If the class of Equity
Interests votes to reject the Plan, no distributions will be made on account of Equity
Interests in Tronox Incorporated. |
|
|
|
|
As described in further detail in Article VII.A(vi) hereof, the Official Committee of Equity
Security Holders disputes Tronoxs enterprise valuation and may contest confirmation of the
Plan. Tronox and other parties in interest are in ongoing discussions with the Equity
Committee regarding the treatment of Equity Interests under the Plan. As a result of those
negotiations, the value of the New Warrants offered to Class 8 Equity Interests may
increase, which could dilute recoveries to holders of Class 3 and Class 6 Claims under the
Plan. |
6. |
|
Certain Conditions Precedent |
|
|
|
The commitment of the Backstop Parties to fund the payments required by the Plan is
subject to the terms and conditions set forth in the Equity Commitment Agreement. Among
other things, the commitment will terminate if: |
|
o |
|
Tronox has not obtained committed exit financing or amended the
Replacement DIP Agreement to provide for additional debt financing prior to entry
of the Confirmation Order; |
|
|
o |
|
Any of the conditions set forth in section 8 of the Equity Commitment
Agreement are breached or otherwise become incapable of satisfaction, as the case
may be, including with respect to (a) certain minimum liquidity requirements,
(b) the occurrence of a material adverse effect, (c) obtaining necessary approvals
of the Environmental Claims Settlement Agreement and (d) caps on the amount of
financing fees, Administrative Claims, Cure Claims, General Unsecured Claims and
Indirect Environmental Claims; |
|
|
o |
|
The financial projections of Tronox are materially and adversely
different from those set forth in the disclosure statement filed on July 7, 2010; |
|
|
o |
|
Tronox supports an alternative plan of reorganization, or if the
Creditors Committee or the Government Environmental Entities no longer support the
Plan; or |
|
|
o |
|
The Effective Date of the Plan has not occurred on or prior to December
31, 2010. |
Through the above referenced restructuring transactions, the Plan provides for a comprehensive
resolution of Tronoxs legacy liabilities, preserves the going-concern value of Tronoxs
businesses, maximizes creditor recoveries, provides for an equitable distribution of value among
Tronoxs stakeholders and protects the jobs of approximately one thousand Tronox employees.
E. Recovery Analysis
In developing the Plan over the course of these chapter 11 cases, Tronox, together with
professional advisors and principal representatives of their primary economic stakeholders, gave
due consideration to various restructuring alternatives and engaged in extensive discussions and
hard-fought and protracted multi-party negotiations regarding the terms of the Plan and the
allocation of recoveries thereunder.
6
With the assistance of its professional advisors, Tronox also conducted careful reviews of its
current operations, prospects as an ongoing business, financial projections and the Business Plan
developed by management, and estimated recoveries in a liquidation scenario. Consistent with the
valuation and liquidation analyses prepared by Tronox with the assistance of its advisors (see
Exhibits D and E attached hereto), Tronox believes that its businesses and assets
have significant value that would not be realized in liquidation or through a forced sale, either
in whole or in substantial part.
Indeed, given the sheer magnitude of Claims against Tronox, after payment of the Replacement
DIP Facility and other Secured Claims (which are secured by valid and perfected liens and require
payment in full prior to any distributions to unsecured creditors), Tronoxs unencumbered assets
are insufficient to satisfy non-priority Claims of its unsecured creditors who would receive
minimal (if any) distributions in the absence of the settlement and consummation of the proposed
Plan. As set forth in the Liquidation Analysis, outside of the proposed Plan, Holders of
non-priority unsecured Claims would receive no distribution except from potential
litigation recoveries (including the Anadarko Litigation).
The recovery analysis is further impacted by the Environmental Claims asserted against Tronox
as a result of historical activities at chemical, wood treatment, refining, coal, nuclear, offshore
contract drilling, mining, waste disposal and other sites throughout the country. Federal, state,
local, tribal and quasi-governmental agencies have filed more than 120 proofs of claim against
Tronox asserting up to $10.5 billion in liabilities plus additional undetermined amounts. Although
Tronox believes these Claims are overstated, the Environmental Claims unquestionably comprise the
largest class of Claims in these chapter 11 cases and are too large for Tronox to achieve
confirmation of a plan of reorganization absent settlement or an extensive, complex and costly
estimation process. Specifically:
|
|
|
The Environmental Claims relate to several different categories of sites throughout the
country for which Tronox is asserted to have some form of liability, including (a) owned
sites (sites that are currently operated, were previously operated or never operated by
Tronox but previously operated by Old Kerr-McGee Corporation and/or New Kerr-McGee
Corporation and transferred to Tronox as part of the Spinoff transactions); (b) non-owned
sites (including sites never owned by Tronox but previously owned or operated by Old
Kerr-McGee Corporation and/or New Kerr-McGee Corporation) and (c) contaminated off-site
locations (never owned or operated by Tronox or Kerr-McGee entities but where contaminants
allegedly may have migrated to or been disposed of by Tronox or Kerr-McGee entities). The
range of potential liability varies based on facts specific to each site or type of site
and whether and to what extent a liability may be discharged in bankruptcy. |
|
|
|
|
As set forth below, Tronoxs present estimate of minimum future costs at the sites
subject to the government proofs of claims range, in the aggregate, from $1.4 - $5.2
billion placing their claims in excess of Tronoxs total enterprise value.7 |
|
|
|
|
In addition to massive general unsecured claims, the Government Environmental Entities
have asserted various priority and/or administrative expense claims against Tronox, which
the Bankruptcy Code requires to be paid in full in cash upon emergence. Tronox estimates
that, within the claim range set forth above, its potential administrative expense
exposure for clean-up and penalty costs at owned sites is in the range of $300 - 500
million. The government believes the amounts subject to priority or administrative expense
status are higher. In any case, absent a settlement, Tronox could not secure financing to
pay the administrative claims in full to emerge from bankruptcy. |
|
|
|
7 |
|
Tronox is providing its range of estimates of the
Environmental Claims asserted against these estates for plan settlement
purposes only pursuant to Federal Rule of Evidence 408 and state law
equivalents. This range reflects Tronoxs preliminary estimate based on its
evaluation to date of future clean-up costs from 2010 forward associated with
more than 2,800 sites that were transferred to Tronox through the Spinoff.
These estimates are subject to change. Nothing herein shall prejudice the
right of Tronox or any party in interest to assert any and all objections to,
or defenses with respect to, any Environmental Claims. |
7
|
|
|
Moreover, the Government Environmental Entities have rights to enforce clean-up and
other remediation obligations against Tronox that may not be dischargeable in bankruptcy at
all. As a result, if Tronox were unable to secure discharges of and/or releases from those
obligations (by providing a meaningful source of funds to the environmental trusts and/or
government agencies that will be responsible for those liabilities under the settlement),
Reorganized Tronox would continue to be burdened by those liabilities post-bankruptcy,
which would create an insurmountable obstacle to obtaining financing for the reorganized
business. |
The settlement embodied in the Plan is the result of exhaustive efforts by the Government
Environmental Parties and the parties to the Plan Support Agreement undertaken throughout the 19
months since Tronox filed for bankruptcy to work cooperatively and constructively towards a fair,
equitable and feasible plan of reorganization for Tronox, taking into account the massive Claims
against its estates, the limited sources of value available for distribution, the need for Tronox
to emerge from chapter 11 free of its legacy environmental, tort and other liabilities, and the
need to raise the right levels of debt and equity financing to effectuate a fresh start for its
businesses.
The following chart depicts the Claims and recoveries of Tronoxs creditors against the total
distributable assets:
Notes:
(1) Estimated excess cash (net of $30 million in minimum operating cash).
(2) Funded through increase in Exit Facility, Rights Offering proceeds and balance sheet cash.
(3) Prior to dilution for Management Equity Plan and exercise of New Warrants.
(4) Indirect Environmental Claims allocated 50/50 to Tort Claims recovery pool and General
Unsecured Claims pool.
8
Ultimately, with the cash payments and other consideration called for under the Plan, the
settling parties have agreed that protracted litigation related to claims estimation and
distributable value is not in the best interest of creditors. Instead, the Plan fairly
accommodates the needs of the environmental and tort claimants, maximizes recoveries to unsecured
creditors and distributes the risk and reward of swings in the sources of Tronoxs distributable
value fairly among its stakeholders, as follows:
|
|
|
Through the cash payments on account of the Environmental Claims and Tort
Claims, Tronoxs legacy creditors are able to realize their negotiated share of the
value of Reorganized Tronox right away, while assuming the risk or reward
associated with potential future recoveries (if any) from the Anadarko Litigation; |
|
|
|
|
Tronoxs unsecured creditors (except for holders of Tort Claims and Indirect
Environmental Claims) are waiving any right to participate in contingent recoveries
associated with the Anadarko Litigation (potentially one of the estates most
valuable assets) and will instead receive their recovery in the form of equity in
Reorganized Tronox, thereby assuming all of the risk and reward as to the ultimate
value of Reorganized Tronox; |
|
|
|
|
The Plan maximizes available recoveries for unsecured creditors by providing
all such unsecured creditors (except for holders of Tort Claims and
Convenience Claims) with valuable rights to purchase additional stock (based on a
17.6% discount to the Plan total enterprise value of Reorganized Tronox of $1,063
million) through participation in the Rights Offering. As such, the Plan is
structured to allow unsecured creditors to improve their recoveries to the extent
they contribute to a critical source of funding for the environmental and tort
settlements that are necessary to realize the equity value in Reorganized Tronox. |
|
|
|
|
At the same time, because the Backstop Parties have agreed (subject to the terms
of the Equity Commitment Agreement) to backstop the $185 million Rights Offering,
all parties can be certain that the cash needed to fund the settlement payments
will be raised and unsecured creditors will, under all circumstances, own equity in
Reorganized Tronox free of its substantial legacy liabilities (to the extent set
forth in the Plan and related settlement documents). |
As reflected above, each of Tronoxs creditor constituents has made significant concessions
and have agreed to support a Plan that does not provide any of them with a full recovery on
account of their Claims (regardless of priority). Based on the clear facts of this case,
therefore, Tronox and the settling parties do not believe there is any scenario in which current
Equity Interests in Tronox Incorporated are entitled to a recovery. Nevertheless, in the interest
of preserving the value associated with a swift emergence from chapter 11 and avoiding the cost of
unnecessary litigation with out-of-the money equity holders, the Plan is structured to encourage
Holders of Equity Interests in Tronox Incorporated to vote in favor of the Plan to receive the New
Warrants, which will allow them to share in the ownership of Reorganized Tronox to the extent
justified by movement in total enterprise value.
Tronox believes that any alternative to Confirmation, such as an attempt by another party to
file a competing plan, could result in significant delays, litigation and additional costs, and
could negatively affect value by causing unnecessary uncertainty with Tronoxs key customer and
supplier constituencies and employees, which could ultimately reduce the recoveries for all Holders
of Allowed Claims and, if applicable, Equity Interests.
FOR ALL OF THESE REASONS AND THE OTHER REASONS
DESCRIBED IN THIS DISCLOSURE STATEMENT, TRONOX URGES YOU
TO RETURN YOUR BALLOT ACCEPTING THE PLAN BY THE VOTING DEADLINE.
F. Treatment of Claims and Equity Interests under the Plan
The Plan organizes Tronoxs creditor and equity constituencies into groups called Classes.
For each Class, the Plan describes (a) the underlying Claim or Equity Interest, (b) the
recovery available to the Holders of
9
Claims or Equity Interests in that Class under the Plan, (c) whether the Class is Impaired
under the Plan, meaning that each Holder will receive less than full value on account of its Claim
or Equity Interest or that the rights of Holders under law will be altered in some way (such as
receiving stock instead of holding a Claim) and (d) the form of consideration (e.g., cash, stock or
a combination thereof), if any, that such Holders will receive on account of their respective
Claims or Equity Interests.
The table below provides a summary of the classification, treatment and estimated recoveries
of Claims and Equity Interests under the Plan. This information is provided in summary form below
for illustrative purposes only, is subject to material change based on contingencies related to the
claims reconciliation process, and is qualified in its entirety by reference to the provisions of
the Plan. For a more detailed description of the treatment of Claims and Interests under the Plan,
see section IV.B of this Disclosure Statement, entitled Classification and Treatment of Claims and
Equity Interests.
THE ESTIMATED PROJECTED RECOVERIES SET FORTH IN THE TABLE
BELOW ARE ESTIMATES ONLY AND ARE THEREFORE SUBJECT TO CHANGE.
SUMMARY OF TREATMENT OF CLAIMS AND EQUITY INTERESTS AND ESTIMATED RECOVERIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Estimated |
|
Estimated |
|
|
|
|
Aggregate |
|
Value/Percent Recovery |
Class |
|
Treatment of Claims and Interests |
|
Claims |
|
Plan |
|
Liquidation |
Class 1:
Priority Non-Tax
Claims
|
|
Each Holder of an Allowed Class
1 Claim shall be paid in full in
Cash on or as reasonably
practicable after (i) the
Effective Date, or (ii) the date
on which such Priority Non-Tax
Claim becomes Allowed.
|
|
$1 million
|
|
|
100 |
% |
|
|
100 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Class 2:
Secured Claims
|
|
At the option of Tronox or
Reorganized Tronox (with the
reasonable consent of the
Creditors Committee and
Required Backstop Parties), each
Holder of an Allowed Class 2
Claim shall receive one of the
following treatments:
(i) payment in full in Cash,
including the payment of any
interest required pursuant to
section 506(b) of the Bankruptcy
Code; (ii) delivery of the
collateral securing such Allowed
Class 2 Claim; or (iii) other
treatment that renders such
Allowed Class 2 Claim
Unimpaired. |
|
$1 million
|
|
|
100 |
% |
|
|
100 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Class 3:
General Unsecured
Claims (Including
the Unsecured Notes
Claim)
|
|
Holders of Allowed General
Unsecured Claims will receive
their Pro Rata Share of (i) the
GUC Pool, which consists of
50.9% of the New Common Stock in
Reorganized Tronox issued and
outstanding as of the Effective
Date (subject to dilution by
shares issued in connection with
the Management Equity Plan and
the New Warrants) and (ii)
Rights to purchase New Common
Stock pursuant to the terms of
the Rights Offering.
|
|
$445.68
|
|
78-100%9
|
|
|
0 |
% |
|
|
|
8 |
|
Reflects estimate of total General Unsecured Claims
after deducting 50% of estimated Indirect Environmental Claims (which amounts
will share in recoveries to General Unsecured Claims). |
|
9 |
|
Reflects recovery for General Unsecured Creditors
that participate in the Rights Offering. General Unsecured Creditors who do
not participate in the Rights Offering are expected to recover between 58-78%
of their claims. |
10
SUMMARY OF TREATMENT OF CLAIMS AND EQUITY INTERESTS AND ESTIMATED RECOVERIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Estimated |
|
Estimated |
|
|
|
|
Aggregate |
|
Value/Percent Recovery |
Class |
|
Treatment of Claims and Interests |
|
Claims |
|
Plan |
|
Liquidation |
Class 4:
Tort Claims
|
|
Each Holder of a Tort Claim will
receive a distribution from the
applicable Tort Claims Trust in
accordance with the Tort Claims
Trust Distribution Procedures.
The Tort Claims Trust will be
funded on the Effective Date
with (i) the right to 12% of the
proceeds of the Anadarko
Litigation, (ii) $12.5 million
in Cash (the Funded Tort Claims
Trust Amount) and (iii) the Tort
Claims Insurance Assets. The
sole recourse of Holders of Tort
Claims shall be to the Tort
Claims Trust and such Holders
shall have no right at any time
to assert Tort Claims against
Reorganized Tronox.
|
|
$500 million - $1
billion10
|
|
At least $16.5
million +
Unknown
|
|
|
0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Class 5:
Environmental Claims
|
|
Each Holder of an Environmental
Claim shall be entitled to
treatment of its Environmental
Claim and receive such
consideration as is provided in
the Environmental Claims
Settlement Agreement. On the
Effective Date, the
Environmental Response Trusts
(or any other trusts as
designated by the United States)
and/or certain Government
Environmental Entities will
receive the following
consideration: (i) the right to
88% of the proceeds of the
Anadarko Litigation; (ii) $270
million in Cash (the Funded
Environmental Amount); (iii) the
Environmental Trust Assets; (iv)
the Nevada Assets; and (v) the
Environmental Insurance Assets.
|
|
$1.4 -5.2
billion11
|
|
At least $320
million + Unknown
|
|
|
|
|
|
|
|
10 |
|
Tronox is providing this range of estimates of the
Tort Claims asserted against its estates for plan settlement purposes only
pursuant to Federal Rule of Evidence 408 and state law equivalents. This range
reflects Tronoxs preliminary estimate based on its evaluation of the Claims to
date and input from representatives for Holders of Tort Claims based on the
estimates used in the settlement negotiation process. These estimates are
subject to change. Nothing herein shall prejudice the right of Tronox or any
party in interest to assert any and all objections to, or defenses with respect
to, any Tort Claims. |
|
11 |
|
The aggregate estimates for the range of
Environmental Claims set forth herein include approximately $300 to 500 million
in Environmental Claims that Tronox believes would likely (a) be entitled to
administrative priority or (b) otherwise represent costs associated with
non-dischargeable obligations, together with an estimated $1.1 billion to $4.6
billion of general unsecured claims. Tronox is providing this range of
estimates of the Environmental Claims asserted against its estates for plan
settlement purposes only pursuant to Federal Rule of Evidence 408 and state law
equivalents. This range reflects Tronoxs preliminary estimate based on its
evaluation to date of future clean-up costs from 2010 forward associated with
more than 2,800 sites that were transferred to Tronox through the Spinoff.
These estimates are subject to change. Nothing herein shall prejudice Tronoxs
right to assert any and all objections to, or defenses with respect to, any
Environmental Claims. |
11
SUMMARY OF TREATMENT OF CLAIMS AND EQUITY INTERESTS AND ESTIMATED RECOVERIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Estimated |
|
Estimated |
|
|
|
|
Aggregate |
|
Value/Percent Recovery |
Class |
|
Treatment of Claims and Interests |
|
Claims |
|
Plan |
|
Liquidation |
Class 6: Indirect
Environmental
Claims
|
|
Holders of Allowed Indirect
Environmental Claims will have
their Allowed Claims split for
purposes of sharing in the
distributions to Holders of
General Unsecured Claims and
Holders of Tort Claims as
follows:
|
|
$50 million12
|
|
78-100% on 50%
of Claim + Unknown
|
|
|
0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
50% of the
amount of
each Allowed Indirect
Environmental Claim will be
treated in accordance with the
treatment provided to Class 3
General Unsecured Claims, and
will receive its Pro Rata share
of (i) New Common Stock
allocated to the GUC Pool and
(ii) Rights to participate in
the Rights Offering; and |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
50% of the
amount of
each Allowed Indirect
Environmental Claim will receive
its Pro Rata share of up to
6.25% of the Tort Claims Trust
Distributable Amount. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12 |
|
Estimated Claim amounts assume Tronox is successful
in disallowing the vast majority of the Indirect Environmental Claims pursuant
to section 502(e) of the Bankruptcy Code. |
12
SUMMARY OF TREATMENT OF CLAIMS AND EQUITY INTERESTS AND ESTIMATED RECOVERIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Estimated |
|
Estimated |
|
|
|
|
Aggregate |
|
Value/Percent Recovery |
Class |
|
Treatment of Claims and Interests |
|
Claims |
|
Plan |
|
Liquidation |
Class 7:
Convenience Claims
|
|
The Plan establishes a
convenience class for (i) each
Allowed General Unsecured Claim
in an amount less than $250 and
(ii) 50% of each Allowed
Indirect Environmental Claim in
an amount less than $500.
|
|
$ |
25,000 |
|
|
|
89 |
% |
|
|
0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
If a Holder of an Allowed
General Unsecured Claim or
Indirect Environmental Claim
holds two or more Claims, one or
more of which is in an amount
less than $250 or $500 (as the
case may be) but an aggregated
total of its Claims would be
greater than $250 or $500 (as
the case may be), such Holder
may elect to aggregate such
Claims for the purpose of
participating in the Rights
Offering. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
On the later of the Effective
Date and as soon as practicable
after such Convenience Claim
becomes Allowed, each Holder of
an Allowed Convenience Claim
shall receive payment in Cash of
89% of the amount of such
Allowed Convenience Claim. Such
payments shall be funded by the
Backstop Parties through the
purchase of the shares of New
Common Stock to which the
Holders of Convenience Claims
would otherwise have been
entitled, in lieu of receiving
their Pro Rata share of New
Common Stock. |
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Class 8:
Equity Interests in
Tronox Incorporated
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On the Effective Date, all
Equity Interests in Tronox
Incorporated will be cancelled
and of no further force or
effect.
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$1-4 million13
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0 |
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If Class 8 votes in favor of the
Plan, each Holder of an Equity
Interest in Tronox Incorporated
will receive its Pro Rata share
of New Warrants to be issued on
the Effective Date. |
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If Class 8 votes to reject the
Plan, Holders of Equity
Interests in Tronox Incorporated
shall receive no distribution. |
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Important Note Regarding Claim Estimates and Recoveries: The actual amount of Allowed
Claims could be materially different from the Estimated Aggregate Claims amounts set forth in the
table above, which could reduce the percentage recovery to each holder of an Allowed Claim. In
particular, the above estimates do not reflect any anticipated Allowed Claims for Anadarko
Petroleum Corporation and its affiliates and subsidiaries, including the entity now known as
Kerr-McGee Corporation, which was formed in May 2001 (collectively referred to as Anadarko),
which asserted claims are described in Article III.E of this Disclosure Statement. If Tronox is
unsuccessful in prosecuting objections to any disputed claims, including the Anadarko Claims, and
such disputed claims are determined to be Allowed Claims in Class 3 or Class 6 of the Plan, holders
of such claims may be entitled to receive New Common Stock and/or the right to subscribe for their
pro rata share of New Common Stock offered
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13 |
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Tronoxs estimate is based upon a Black-Scholes
methodology and assumes a 2-year term. |
13
in connection with the Rights Offering, which could
significantly dilute the anticipated recoveries to certain classes of creditors under the Plan.
With respect to Anadarko, determinations regarding the Allowed amount and/or classification of its
claims may be made after the Rights Expiration Date and even after the Effective Date and could,
therefore, dilute the percentage ownership of Reorganized Tronox received by certain holders of
Allowed Claims on the Effective Date. Please refer to Article III.E of this Disclosure Statement
for further information regarding Anadarkos asserted claims.
G. Voting on the Plan.14
THIS DISCUSSION OF THE SOLICITATION AND VOTING PROCESS IS
ONLY A SUMMARY. PLEASE REFER TO THE SOLICITATION PROCEDURES
ORDER ATTACHED AS EXHIBIT B HERETO FOR A MORE COMPREHENSIVE
DESCRIPTION OF THE SOLICITATION AND VOTING PROCESS.
(i) Holders of Claims and Equity Interests
Entitled to Vote on the Plan
Under the provisions of the Bankruptcy Code, not all holders of claims against and equity
interests in a debtor are entitled to vote on a chapter 11 plan. Tronox is soliciting votes to
accept or reject the Plan only from Holders of Claims in Classes 3, 4, 5, 6 and 7 and, for
settlement purposes only, Equity Interests in Class 8
(collectively, the Voting Classes). The Holders of Claims and Equity Interests in
the Voting Classes are Impaired under the Plan and may receive a distribution under the Plan.
Accordingly, Holders of Claims and Equity Interests in the Voting Classes have the right to vote to
accept or reject the Plan. Tronox is not soliciting votes from Holders of Unimpaired
Claims in Classes 1 and 2 because those Holders are conclusively presumed or are otherwise deemed
to have accepted the Plan.
If you believe that your Claim against Tronox has been placed in the wrong Class or
misclassified as a non-voting Claim, then you must file with the Bankruptcy Court and serve each of
counsel for Tronox and the Creditors Committee with a motion for an order, pursuant to Bankruptcy
Rule 3018(a), temporarily allowing your Claim in a different Class for purposes of voting to accept
or reject the Plan, on or before October 15, 2010 at 4:00 p.m. (ET). If you and Tronox are unable
to consensually resolve any such dispute, a hearing will be scheduled before the Bankruptcy Court
on such dispute.
(ii) Voting Record Date
The Record Date is 5:00 p.m. Pacific Time on September 22, 2010. The Record Date is
the date on which it will be determined which Holders of Claims and Equity Interests in the Voting
Classes are entitled to vote to accept or reject the Plan and whether Claims and Equity Interests
have been properly assigned or transferred under Bankruptcy Rule 3001(e) such that an assignee can
vote as the Holder of a Claim or Equity Interest.
(iii) Voting on the Plan
The Voting Deadline is 5:00 p.m. Pacific Time on November 5, 2010. To be counted as
votes to accept or reject the Plan, all Ballots must be properly executed, completed and delivered
(either by using the return envelope provided, by first class mail, overnight courier or personal
delivery) so that they are actually received on or before the Voting Deadline by
the Notice and Claims Agent as follows:
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Capitalized terms in section I.F of this Disclosure
Statement that are not otherwise defined shall have the meaning ascribed to
them in the Solicitation Procedures Order (and any exhibits thereto). |
14
DELIVERY OF BALLOTS
Ballots must be actually received by the Notice and Claims Agent by the Voting Deadline of 5:00 p.m. (Pacific
Time) on November 5, 2010 at the following address:
Kurtzman Carson Consultants LLC
Attn: Tronox Incorporated Balloting
2335 Alaska Avenue
El Segundo, CA 90245
If you received an envelope addressed to your nominee, please allow enough time
when you return your ballot for your nominee to cast your vote on a Ballot or
Master Ballot before the Voting Deadline.
If you have any questions on the procedure for voting on the Plan, please call
the Notice and Claims Agent at the following telephone number:
(866) 967-0675
(iv) Ballots Not Counted
No Ballot will be counted toward Confirmation if, among other things: (a) it is
illegible or contains insufficient information to permit the identification of the Holder of the
Claim or Equity Interest; (b) it was transmitted by facsimile or other electronic means; (c) it was
cast by an entity that is not entitled to vote on the Plan; (d) it was cast for a Claim listed in
the Schedules as contingent, unliquidated or disputed for which the applicable bar date has passed
and no Proof of Claim was timely filed; (e) it was cast for a Claim that is subject to an objection
pending as of the Record Date (unless temporarily allowed in accordance with the Solicitation
Procedures Order); (f) it was sent to the Tronox, Tronoxs agents or representatives (other than
the Notice and Claims Agent), an indenture trustee or Tronoxs financial or legal advisors instead
of to the Notice and Claims Agent; (g) it is unsigned; or (h) it is not marked to either accept or
reject the Plan or it is marked both to accept and reject the Plan.
Please refer to the Solicitation Procedures Order for additional requirements with respect to
voting to accept or reject the Plan.
IF YOU HAVE ANY QUESTIONS ABOUT THE SOLICITATION OR
VOTING PROCESS, PLEASE CONTACT THE NOTICE AND CLAIMS AGENT.
ANY BALLOT RECEIVED AFTER THE VOTING DEADLINE OR OTHERWISE NOT IN
COMPLIANCE WITH THE SOLICITATION PROCEDURES ORDER WILL NOT BE COUNTED.
H. Additional Plan-Related Documents
(i) The Plan Supplement
Tronox will file the Plan Supplement, in form reasonably satisfactory to the Creditors
Committee, the Required Backstop Parties (or, if applicable under the terms of the Equity
Commitment Agreement, the Backstop Parties) and the United States, with the Bankruptcy Court no
later than 14 days before the Voting Deadline (or such later date as may be approved by the
Bankruptcy Court). Tronox will file the Plan Supplement(s) with the Court and post a notice on its
case website (www.kccllc.net/tronox) that will (i) inform parties that the Plan Supplement was
filed, (ii) list the information included therein and (iii) explain how copies of the Plan
Supplement may be obtained. The Plan Supplement will include:
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the form (or execution version of) the Environmental Claims Settlement Agreement
and related exhibits, including the form of the Environmental Response Trust
Agreements; |
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the list of Owned Sites to be transferred to the Environmental Response Trusts
and the list of Other Sites covered by the Environmental Claims Settlement
Agreement; |
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the form of the Anadarko Litigation Trust Agreement; |
15
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the form of the Tort Claims Trust Agreement and Tort Claims Trust Distribution
Procedures; |
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the form of the Exit Credit Agreement; |
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the form of New Warrant Agreement; |
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the amended and restated organizational documents for Reorganized Tronox
Incorporated; |
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to the extent known, the identity of members of the New Board, as well as the
nature and amount of compensation for any member of the New Board who is an insider
under section 101(31) of the Bankruptcy Code; |
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the terms of the New Management Agreements, Management Equity Plan and
Management 2010 Bonus Plan; |
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the Registration Rights Agreement; and |
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the Assumed Executory Contract and Unexpired Lease List. |
(ii) The Assumed Executory Contract and Unexpired Lease List
On or before the Record Date, Tronox filed one or more notices designating certain Executory
Contracts and Unexpired Leases for assumption (and assignment, where applicable) in connection with
the Plan, together with proposed cure amounts for voting purposes only, if any, in connection
therewith. Tronox (or its assignee) will continue to perform on assumed contracts or leases from
and after the Effective Date. In addition, on or before the Record Date, Tronox filed one or more
motions requesting authority to reject Executory Contracts and/or Unexpired Leases that are not
necessary to Reorganized Tronoxs businesses. Counterparties to such contracts and leases shall
have 30 days from the rejection of such contract or lease to file a Proof of Claim with respect to
such rejection. As of the Effective Date, any Executory Contracts and Unexpired Leases not
identified for assumption in the Assumed Executory Contract and Unexpired Lease List will be deemed
rejected.
Tronox will file a comprehensive schedule with the Bankruptcy Court as part of the Plan
Supplement listing all of the Executory Contracts and Unexpired Leases Tronox intends to assume
pursuant to Article V of the Plan (the Assumed Executory Contract and Unexpired Lease
List), which will include all Executory Contracts previously designated for assumption. On
the date of filing of the Assumed Executory Contract and Unexpired Lease List or as soon as
practicable thereafter, with the assistance of the Notice and Claims Agent, Tronox will serve a
notice of filing upon each non-debtor counterparty to any listed Executory Contracts or Unexpired
Leases.
Any counterparty to an Executory Contract or Unexpired Lease who fails to timely file and
serve an objection to the proposed treatment of such Executory Contract or Unexpired Lease in
accordance with the notice received regarding Tronoxs intent to assume, or motion to reject, as
the case may be, will be deemed to have consented to the assumption, assignment or rejection of
that partys Executory Contract or Unexpired Lease by Tronox in accordance with Article V of the
Plan.
I. Confirmation and Consummation of the Plan
(i) Plan Objection Deadline
The Plan Objection Deadline is 4:00 p.m. Eastern Time on November 5, 2010. This means
that written objections to Confirmation, if any, that conform to the applicable provisions of the
Solicitation Procedures Order, the Bankruptcy Code, the Bankruptcy Rules and the Local Bankruptcy
Rules must be filed, together with a proof of service, with the Bankruptcy Court and served so as
to be actually received on or before the Plan Objection Deadline by the following
parties:
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Counsel to Tronox: Kirkland & Ellis LLP, Attn: Jonathan S. Henes, Esq.,
Patrick J. Nash, Jr., Esq., and Nicole L. Greenblatt, Esq., 601 Lexington Avenue,
New York, New York 10022; |
16
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Counsel to the Creditors Committee: Paul, Weiss, Rifkind, Wharton &
Garrison LLP, Attn: Brian S. Hermann, Esq. and Elizabeth McColm, Esq., 1285 Avenue
of the Americas, New York, New York, 10019; |
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United States: Office of the United States Attorney for the Southern
District of New York, Attn: Robert Yalen, Esq. and Tomoko Onozawa, Esq., 86
Chambers Street, 3rd Floor, New York, New York 10007; |
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Counsel to the Postpetition Secured Lenders: Latham & Watkins LLP, Attn:
Richard A. Levy, Esq., 233 South Wacker Drive, Suite 5800, Chicago, Illinois 60606; |
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Counsel to the Equity Committee: Pillsbury Winthrop Shaw Pittman LLP,
Attn: Craig A. Barbarosh, Esq., David A. Crichlow, Esq. and Karen B. Dine, Esq.,
1540 Broadway, New York, New York 10036; |
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Office of the United States Trustee: Attn: Susan D. Golden, Esq.; 33
Whitehall Street, 21st Floor, New York, New York 10004; and |
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Counsel to the Backstop Parties: Milbank, Tweed, Hadley & McCloy, LLP,
Attn: Thomas C. Janson, Esq. and Robert C. Shenfeld, Esq., One Chase Manhattan
Plaza, New York, New York 10005. |
(ii) Confirmation Hearing
The Confirmation Hearing will commence at 11:00 a.m. Eastern Time on November 17,
2010. The Confirmation Hearing will be held before the Honorable Allan L. Gropper in the
Bankruptcy Court, Room 617, One Bowling Green, New York, New York 10004-1408. At least 25 days
before the Plan Objection Deadline, Tronox will (a) serve the Confirmation Hearing Notice upon all
known creditors of Tronox and (b) publish the Confirmation Hearing Notice in The Oklahoman the
national edition of The Wall Street Journal, which will contain, among other things, details
regarding voting on and objecting to Confirmation, including the Voting Deadline and the Plan
Objection Deadline, and the date, time and location of the Confirmation Hearing. The
Confirmation Hearing Notice will also be posted on Tronoxs restructuring website
(http://www.kccllc.net/tronox). The Confirmation Hearing may be adjourned from time to time
without further notice except for an announcement of the adjourned date made before or at the
Confirmation Hearing or any adjournment thereof.
(iii) Effect of Confirmation and Consummation of
the Plan
Following Confirmation, subject to Article IX of the Plan, the Plan will be consummated on the
Effective Date. Among other things, on the Effective Date, certain release, injunction,
exculpation and discharge provisions set forth in Article VIII of the Plan will become effective.
As such, it is important to read the provisions contained in Article VIII of the Plan very
carefully so that you understand how Confirmation and Consummation of the Plan which effectuates
such provisions will affect you and any Claim you may hold against Tronox so that you cast your
vote accordingly. The releases described in Article VIII of the Plan provide that Holders of
Claims and Equity Interests are bound by the releases described therein, regardless of whether the
Holder of such Claim or Equity Interest votes to accept or reject the Plan. Further discussion of
the releases contemplated in the Plan is provided in section IV of this Disclosure Statement.
THE PLAN WILL BIND ALL HOLDERS OF CLAIMS AGAINST, AND EQUITY INTERESTS IN,
TRONOX TO THE FULLEST EXTENT AUTHORIZED OR PROVIDED UNDER THE BANKRUPTCY
CODE, INCLUDING SECTIONS 524 AND 1141 THEREOF, AND BY ALL OTHER APPLICABLE LAW
17
II. TRONOXS BUSINESS AND HISTORY
A. Company Overview
Tronox Incorporated (Tronox Inc.), a Delaware corporation based in Oklahoma City, Oklahoma,
was formed on May 17, 2005 and, upon an initial public offering, became a publicly traded company
in November 2005. Tronox is a multinational organization that manufactures and markets titanium
dioxide and electrolytic and other specialty chemicals. Tronox has approximately 1,100 customers
located in more than 90 countries. For the fiscal year ending 2009, Tronoxs net sales totaled
approximately $1.1 billion. Until September 30, 2008, Tronox Inc. was publicly traded on the New
York Stock Exchange under the symbols TRX and TRX.B. Since then, Tronox Inc. has traded on the
Pink Sheets and now trades under the symbols TRXAQ.PK and TRXBQ.PK. As of December 31, 2009,
Tronox Inc. had 18,487,348 outstanding shares of class A common stock and 22,889,431 outstanding
shares of class B common stock.
B. Tronoxs Business Operations15
Tronoxs business consists of two business lines, namely the pigments business line and
the electrolytic and specialty chemicals business line.
(i) Pigments
In 2009, Tronoxs pigments business line represented approximately 88% of Tronoxs net sales
globally. Tronoxs pigment business line consists primarily of its titanium dioxide business,
which includes heavy mineral production at Tronoxs Western Australian joint venture (the
Tiwest Joint Venture).
Tronoxs main product is titanium dioxide pigment, which creates whiteness, brightness and
opacity in consumer products such as paint, paper, plastic and certain specialty products. Tronox
believes that it is currently the worlds fifth-largest producer and marketer of titanium dioxide.
It has an approximate 9% share of the global titanium dioxide market with an annual global
production capacity of 425,000 metric tonnes. The global titanium dioxide market presently has
approximately $10 billion in industry-wide annual revenue and an annual capacity exceeding five
million metric tonnes. Tronox is one of five major titanium dioxide producers that collectively
accounted for approximately 60% of worldwide titanium dioxide production in 2008.16
(a) The Pigment End-Use Market
Titanium dioxide is used in three main types of consumer products: (a) coatings; (b)
plastics; and (c) paper and specialty products. The largest of these end-use markets is coatings,
which includes residential, commercial, automotive and traffic paints. Coatings accounts for
approximately 61% of worldwide titanium dioxide demand and comprised approximately 73% of Tronoxs
global sales volume in 2009.
The plastics market accounts for approximately 24% of titanium dioxide demand and comprised
approximately 22% of Tronoxs global sales volume in 2009. Products in this market include
polyvinyl chloride
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Data supplied in this section (a) excludes Tronoxs
Uerdingen, Germany facility, which is currently involved in German insolvency
proceedings under the control of the German insolvency administrator, and thus
control of which will not be retained by Reorganized Tronox (although Tronox
will retain the equity of the entity holding the Uerdingen facility); (b)
includes eight months of operations of Tronoxs Savannah, Georgia pigment
facility for 2009, which is no longer in operation and will not be retained by
Reorganized Tronox; and (c) includes 100% of the capacity of Tronoxs Kwinana
facility at the Tiwest Joint Venture, in which Tronox has an undivided 50%
interest. |
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The other major titanium dioxide producers include E.I.
duPont de Nemours and Company, National Titanium Dioxide Company Ltd.
(Cristal), Huntsman Corporation and Kronos Worldwide, Inc. |
18
products such as vinyl siding and fencing, plastic films used in food packaging, and
engineering plastics used in computer housings and cell phone cases.
The paper and specialty products markets account for approximately 15% of titanium dioxide
demand and comprised approximately 5% of Tronoxs global sales volume in 2009. Products in the
paper and specialty products market include beverage container packaging, wallboard, ink for
various food containers and sunscreen and other body care products.
In 2009, the global consumption level was approximately 4.5 million metric tonnes.
(b) Tronoxs Pigment Operations
Tronox operates titanium dioxide production facilities in North America, Europe and Australia.
In the U.S., Tronox operates one 225,000 metric tonne capacity facility in Hamilton, Mississippi.
Tronox also operates two facilities abroad: a 90,000 metric tonne capacity facility in Botlek, The
Netherlands and a 110,000 metric tonne capacity facility that is operated as a joint venture in
Western Australia. In the last three quarters of 2009, Tronox operated these facilities in excess
of 95% of total rated capacity.
The Tiwest Joint Venture includes a titanium dioxide plant in Kwinana, Western Australia, a
mining venture in Cooljarloo, Western Australia, and a mineral separation plant and a synthetic
rutile processing facility in Chandala, Western Australia. Tronox, through its subsidiary Tronox
Western Australia Pty. Ltd. (TWA), has a 50% undivided interest in the assets of the
Tiwest Joint Venture with Exxaro Australia Sands Pty Ltd., a subsidiary of Exxaro Resources
Limited. Under separate marketing agreements, Tronox has the right to market 100% of the titanium
dioxide produced at the Kwinana facility. Tronox currently is implementing an expansion project at
the Kwinana plant that will increase the plants capacity to 150,000 metric tonnes.
All of Tronoxs gross titanium dioxide production capacity utilizes a chloride manufacturing
process to produce pigment from titanium-bearing ores. This chloride process is superior to the
traditional sulfate process because it produces a higher quality pigment, particularly with regard
to whiteness, and has other desirable characteristics that many customers prefer for many end-use
applications. In addition, the chloride process generates less waste, uses less energy, requires
less labor and allows Tronox to recycle a major processing chemical (chlorine), all of which
results in lower overall production costs and can result in a lower carbon footprint for our
customers. Tronox is one of a limited number of titanium dioxide producers that holds proprietary
rights to a chloride manufacturing process.
(ii) Electrolytic and Specialty Chemicals
In addition to its pigments business line, Tronox has smaller operations that manufacture and
market three types of electrolytic and specialty chemical products: electrolytic manganese dioxide
for the manufacture of batteries and lithium manganese dioxide for rechargeable batteries; sodium
chlorate for pulp and paper manufacture; and specialty boron products serving the semi-conductor,
pharmaceutical and igniter industries. The electrolytic and specialty chemicals business lines
represented an aggregate total of approximately 12% of Tronoxs net sales in 2009.
(a) The Battery Market and Operations
Tronox is a leading manufacturer and supplier of electrolytic manganese dioxide
(EMD), which is the active cathode material used in non-rechargeable alkaline batteries.
The domestic non-rechargeable battery market, of which Tronox has an estimated 41% market share, is
dominated by alkaline battery technology. Tronox has the capacity to produce approximately 27,000
tonnes of EMD at the Henderson Business.
Tronox also is a leading manufacturer and supplier of lithium manganese dioxide
(LMO), which is one of the active cathode materials used in rechargeable lithium
batteries used in high-power applications such as power tools and hybrid electric vehicles. Tronox
has the capacity to manufacture approximately 720 metric tonnes of LMO.
19
(b) The Sodium Chlorate Market and Operations
Tronox also produces sodium chlorate for use in the pulp and paper industry as a bleaching
agent. Tronox produces sodium chlorate at a 150,000 metric tonne capacity facility in Hamilton,
Mississippi. This capacity represents an estimated 10% of the total North American sodium chlorate
capacity.
(c) The Boron Market and Operations
Tronox produces two types of boron specialty products: boron trichloride and elemental boron.
Boron trichloride is a specialty chemical gas that is used in a range of consumer products
including pharmaceuticals, semi-conductors, fibers, ceramics and epoxies. Elemental boron is a
specialty chemical that is used in igniter formulas. Tronox produces these boron compounds at an
approximately 525 metric tonne capacity facility in Henderson, Nevada. This capacity represents a
leading market share for both boron specialty products.
C. Tronoxs Corporate History17
On March 30, 2006, Tronoxs former parent, New Kerr-McGee (defined below), spun-off its
remaining interests in Tronox (the Spinoff). The entity originally known as Kerr-McGee
Corporation (Old Kerr-McGee) was founded in 1929 as an oil and gas exploration company.
In 1945, Old Kerr-McGee entered the oil refining business. Several years later, Old Kerr-McGee
began expanding into various other energy-related businesses. In 1952, Old Kerr-McGee entered the
uranium exploration, mining and milling industry. In the 1950s, Old Kerr-McGee also expanded into
service station operations and potash mining. During the early 1960s, Old Kerr-McGee entered the
forest products business. In 1967, Old Kerr-McGee began to manufacture and market a variety of
ammonium perchlorate chemicals such as fertilizers, potash, boron, titanium dioxide, sodium
chlorate and manganese. That same year, Old Kerr-McGee started construction of its first coal mine
shaft in Stigler, Oklahoma. In the 1970s, Old Kerr-McGee also became involved in additional
aspects of the nuclear industry.
By approximately 2000, Old Kerr-McGee had sold or discontinued many of these historic business
operations (collectively, the Legacy Businesses), leaving it with two core operating
businesses: oil and gas exploration and production (the Oil & Gas Business) and chemicals
(the Chemicals Business). Although the majority of the Legacy Businesses had been sold
or discontinued, Old Kerr-McGee remained responsible for various environmental, tort, workers
compensation and post-employment pension, medical and other benefit liabilities related to the
Legacy Businesses (the Legacy Liabilities).
In 2001, Old Kerr-McGee implemented a new holding company structure in connection with its
acquisition of HS Resources, Inc. (HS Resources), an oil and gas exploration and
production company. A new ultimate parent company was created that was named Kerr-McGee
Corporation (New Kerr-McGee) and Old Kerr-McGee was renamed Kerr-McGee Operating
Corporation (Kerr-McGee Operating).
In early 2002, New Kerr-McGee commenced an internal reorganization known as Project Focus.
Through a series of internal mergers, stock and asset transfers and other reorganizations, all of
New Kerr-McGees exploration and production businesses became subsidiaries of Kerr-McGee Oil & Gas
Corporation (KMG Oil & Gas) (an indirect subsidiary of New Kerr-McGee), while the
Chemicals Business (along with the Legacy Businesses and Legacy Liabilities) remained with
Kerr-McGee Operating (a separate indirect subsidiary of New
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Tronox and Anadarko have different views of the
facts concerning Tronoxs corporate history, which are being litigated in the
Anadarko Litigation. Tronox and Anadarko have agreed that the facts set forth
in this section are appropriate to include in this Disclosure Statement while
reserving their respective rights to challenge these facts or the significance
of these facts in connection with the Anadarko Litigation. Tronox and Anadarko
further agree that the inclusion of these agreed facts in the Disclosure
Statement shall not be deemed an admission by either party in connection with
the Anadarko Litigation. |
20
Kerr-McGee), which subsequently became known as Kerr-McGee Chemical Worldwide LLC (Chemical
Worldwide).
(i) The Spinoff of the Chemicals Business
In 2005, New Kerr-McGee commenced a dual-path process to either sell or spinoff Chemical
Worldwide. New Kerr-McGee conducted a sale process and engaged in extensive negotiations with one
potential purchaser of Chemical Worldwide: Apollo Management, L.P. (Apollo). New
Kerr-McGee and Apollo, however, were unable to reach a deal.
Consistent with the dual-track strategy, New Kerr-McGee also was preparing for a spinoff of
Chemical Worldwide. On May 17, 2005, New Kerr-McGee created NewCo Chemical. On September 12,
2005, New Kerr-McGee renamed this entity Tronox Incorporated. On October 5, 2005, New Kerr-McGees
Board of Directors elected to pursue only a spinoff of Chemical Worldwide. The Spinoff was to be
achieved in two steps. First, New Kerr-McGee would conduct an initial public offering
(IPO) of Tronoxs class A common stock, which constituted approximately 43% of New
Kerr-McGees ownership stake in Tronox. Second, New Kerr-McGee would distribute its remaining
approximately 57% ownership interest in Tronox (which consisted of shares that had been converted
to class B shares) to New Kerr-McGees shareholders.
The terms of the Spinoff were set out in the Master Separation Agreement (the MSA)
and a number of related agreements (collectively, the Spinoff Agreements), which governed
the Spinoff and the business relationships among the companies following the Spinoff. Among other
things, pursuant to the MSA, New Kerr-McGee received 22,889,431 of class B shares in Tronox Inc.,
and approximately $787.8 million from Tronox Inc., including the net proceeds from the IPO and debt
that Tronox incurred in connection with the Spinoff. In return, New Kerr-McGee, among other
things, caused 100% of its ownership interests in Chemical Worldwide (which became known as Tronox
Worldwide LLC) to be transferred, assigned and conveyed to Tronox Inc., and, as discussed below,
became obligated to reimburse Tronox for up to $100 million for certain environmental remediation
costs. Pursuant to the MSA, on November 28, 2005, New Kerr-McGee completed an IPO of approximately
17.5 million shares of Tronox Inc. class A common stock.
On March 8, 2006, New Kerr-McGees board of directors approved the distribution of its
remaining Tronox shares (which consisted of class B shares) to New Kerr-McGees shareholders. On
March 30, 2006, the shares were distributed to these shareholders.
(ii) Anadarko Acquired New Kerr-McGee
On August 10, 2006, New Kerr-McGees shareholders approved an offer by Anadarko Petroleum
Corporation (Anadarko) to acquire New Kerr-McGee for $16.4 billion in cash and the
assumption of $1.6 billion in debt. New Kerr-McGee became and remains a wholly-owned subsidiary of
Anadarko.
(iii) The Legacy Liabilities
The Legacy Liabilities include: (a) environmental remediation and cleanup at allegedly
contaminated sites (both owned and non-owned) of the Legacy Businesses; (b) defense of tort suits
brought by third parties arising from alleged hazardous releases and contamination related to the
Legacy Businesses; and (c) welfare, benefit and pension obligations.
(a) Environmental Legacy Liabilities
Tronox is responsible pursuant to the Spinoff Agreements for current and future environmental
monitoring, cleanup and remediation liabilities at more than 2,800 properties (both owned and
non-owned) related to the Legacy Businesses and located throughout the United States. These
include, among other things, liabilities related to creosote, agricultural chemical, mining, waste
disposal and service station sites. Under the MSA, New Kerr-McGee agreed to reimburse Tronox for
certain future environmental remediation costs related to these sites subject to certain
conditions. In general, New Kerr-McGee was obligated to reimburse Tronox for 50% of qualifying
21
remediation costs associated with sites for which no reserve had been established or for sites
where such costs exceeded the reserve established by New Kerr-McGee under the MSA. The
reimbursement obligation was limited to a maximum of $100 million for qualifying remediation costs
incurred within the seven-year period following the execution of the MSA. New Kerr-McGee has
reimbursed Tronox approximately $4 million under this provision. Since the IPO, Tronox has spent
approximately $188 million on environmental remediation costs. Over time, Tronox has been
reimbursed for approximately $80 million of these costs from various third parties.
(b) Tort Legacy Liabilities
Tronox is responsible pursuant to the Spinoff Agreements for third-party tort liability
related to the alleged release of hazardous materials by the Legacy Businesses. New Kerr-McGee has
no obligation to reimburse Tronox with respect to these tort liabilities. As of the Petition Date,
Tronox was defending over 240 tort suits filed by thousands of plaintiffs related to a variety of
hazardous materials that were allegedly released by the Legacy Businesses, including creosote,
benzene, low-level radioactive substances and asbestos. Tronox has spent approximately $25 million
(net of reimbursements) managing these lawsuits since the IPO.
(c) Retiree and Employee Benefit Legacy Liabilities
In conjunction with the Spinoff, Tronox assumed responsibility for retirement and other
employee benefit liabilities pursuant to the terms of an Employee Benefits Agreement (the
EBA), which provided approximately $450 million in qualified plan assets to Tronox.
Tronox Incorporated sponsored specific employee and retiree benefit plans for the employees and
retirees allocated to it during the Spinoff. These programs included defined benefit and retiree
medical and life insurance plans.
Under the EBA, Tronox was prohibited from modifying retiree health and life insurance plans
for the first three years following the Spinoff. On April 1, 2009, Tronox modified certain
retiree medical benefits in accordance with the documents governing such benefits, to provide that
covered retirees would pay a greater share of the policy premium for their health coverage. These
modifications have resulted in approximately $78,000 per month in savings and the elimination of an
estimated $100 million in future liability. On May 1, 2010, Tronox terminated its retiree life
insurance program in accordance with the documents governing such benefits. This change has saved
Tronox approximately $58,000 per month to date, for a projected annual savings of approximately
$700,000.
D. Tronoxs Prepetition Capital Structure
On the Petition Date, Tronoxs indebtedness included the following: (a) $450 million in senior
secured credit, comprised of a revolver and a term loan (as amended, the Prepetition
Facilities); and (b) $350 million in aggregate principal amount of senior unsecured notes (as
exchanged, the Unsecured Notes). In addition, certain of the Debtors were parties to a
$75 million accounts receivables securitization program (as amended, the Receivables
Securitization). The following chart summarizes Tronoxs prepetition indebtedness:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding |
|
|
|
|
|
|
|
|
|
|
Amount on the |
|
|
|
|
Financing |
|
Original Amount |
|
Petition Date |
|
Maturity Date |
|
Security |
Revolver |
|
$ |
250 |
million |
|
$ |
109.8 |
million |
|
Nov. 28, 2010 |
|
Secured |
|
Term Loan |
|
$ |
200 |
million |
|
$ |
103.0 |
million |
|
Nov. 28, 2011 |
|
Secured |
|
Receivables
Securitization |
|
$ |
75 |
million |
|
$ |
75 |
million |
|
N/A |
|
Secured |
|
Unsecured Notes |
|
$ |
350 |
million |
|
$ |
350.0 |
million |
|
Nov. 28, 2012 |
|
Unsecured |
22
(a) The Secured Debt Facility
Tronoxs Prepetition Facilities consisted of a $250 million five-year multicurrency revolver
(the Revolver) due November 28, 2010 and a $200 million six-year term loan (the Term
Loan) due November 28, 2011. As of the Petition Date, $212.8 million was outstanding under
the Prepetition Facilities. This balance included $109.8 million outstanding on the Revolver and
$103.0 million outstanding on the Term Loan. As of the Petition Date, Tronox also had outstanding
letters of credit in the face amount of approximately $80 million. As described below, all
outstanding amounts under the Prepetition Facilities were paid in full using the proceeds of the
Replacement DIP Facility.
(b) The Unsecured Notes
The 9.5% Unsecured Notes were issued by two wholly owned subsidiaries of Tronox Inc. in a
private offering at the time of the Spinoff. The Unsecured Notes are governed by that certain
Indenture, dated as of November 21, 2005, by and among Tronox Worldwide and Tronox Finance Corp. as
issuers, Tronox Inc. and certain domestic subsidiaries thereof as guarantors, and Citibank, N.A.,
as trustee18 (the Indenture). The stated maturity date of the Unsecured Notes
is December 1, 2012.
In the second quarter of 2006, Tronox registered the Unsecured Notes with the SEC and
subsequently completed an exchange of all Unsecured Notes and related guarantees for publicly
traded notes and guarantees having substantially identical terms on July 14, 2006. As exchanged,
the Unsecured Notes are guaranteed by the material direct and indirect wholly owned subsidiaries of
Tronox Worldwide and Tronox Finance Corp.
Under the Indenture, the issuers are required to make interest payments on June 1 and December
1 of each year during the term of the notes. As of the Petition Date, Tronox had been in default
under the Notes Indenture since December 31, 2008 on account of Tronoxs failure to make the
December 1, 2008 interest payment. No action was taken by the holders of the Unsecured Notes with
respect to this default prior to the filing of the Chapter 11 Cases.
As of the Petition Date, the outstanding principal amount plus accrued interest on the
Unsecured Notes was approximately $370.6 million.
(c) The Receivables Securitization
In the fall of 2007, certain Tronox subsidiaries entered into the Receivables Securitization
Facility with ABN AMRO Bank N.V. (ABN) to provide them with additional liquidity. The
Receivables Securitization was evidenced primarily by a sale agreement, dated as of September 26,
2007, among Tronox Funding LLC (Tronox Funding), as seller, Tronox Worldwide, as initial
collection agent, The Royal Bank of Scotland plc (RBS), the successor in interest to ABN,
as agent and committed purchaser and Amsterdam Funding Corporation (Amsterdam), as
conduit purchaser (as amended, the Receivables Sale Agreement). Pursuant to the
Receivables Sale Agreement and related documentation, receivables generated by two of Tronoxs
domestic debtor subsidiaries, Tronox Pigments (Savannah) Inc. and Tronox LLC, were continuously
sold to Tronox Funding, a special purpose, bankruptcy remote Tronox affiliate that is wholly owned
by Tronox Inc. Upon receipt of such receivables, Tronox Funding sold ownership interests in the
receivables to RBS. RBS funded its purchase by either providing new cash to Tronox Funding or
releasing collections to Tronox Funding from previously conveyed receivables. Tronox Incorporated
was a guarantor of the performance of certain obligations owed under the Receivables
Securitization. The outstanding amounts of the Receivables Securitization Facility were
repurchased in full using the proceeds of the Original DIP Facility.
|
|
|
18 |
|
Wilmington Trust Corporation has replaced Citibank,
N.A. as trustee under the Indenture. |
23
E. Tronoxs Organizational Structure
The chart on the following page generally depicts Tronoxs prepetition organizational and
capital structure. Except for Tronox Incorporated, Tronox Funding LLC and Tronox Finance Corp.
(each of which were formed at or after the Spinoff for the specific purposes described above), each
of the entities in Tronoxs current organizational structure are direct former Kerr-McGee entities.
24
Tronox Incorporated Corporate and Capital Structure Chart
25
F. Events that Led to the Chapter 11 Cases
As described above, since the Spinoff, Tronox has spent more than $188 million to satisfy
certain of the Legacy Liabilities. From Tronoxs inception, the Legacy Liabilities have consumed a
significant portion of the cash generated by Tronoxs ongoing business operations. In 2008, the
deteriorating global economy and rising raw material and energy costs, in addition to a decreasing
demand for consumer products, resulted in these Legacy Liability costs representing an even greater
proportion of Tronoxs overall cash flow. As a result, Tronoxs financial performance materially
declined.
Both before and after the Spinoff, Tronox aggressively sought to cut costs. In 2007 and 2008,
Tronox embarked on efforts to streamline its European operations and legal structure, implemented
both a domestic and foreign work force reduction program, and announced various changes to its
retiree medical, life insurance and pension plans. Moreover, in September 2007, Tronox executed a
$100 million Receivables Securitization Facility agreement that provided additional liquidity to
fund, among other things, the continued cash payments of the Legacy Liabilities. Tronox further
sought and obtained a number of amendments to the financial covenants in the Prepetition
Facilities. Unfortunately, these efforts were insufficient to remedy Tronoxs financial
constraints.
With respect to the Legacy Liabilities, Tronox also attempted to alleviate the significant
burden of such liabilities through discussions with New Kerr-McGees owner, Anadarko. To date,
however, Anadarko has not assumed any of the Legacy Liabilities. In addition, Tronox pursued
various forms of financial assistance from third parties, including Anadarko, to address its
overall liquidity issues. These efforts also were unsuccessful.19
In January 2009, Tronox continued to be in default under the Prepetition Facilities, and
a waiver of such defaults expired on January 9, 2009. As a result, for all of the foregoing
reasons, Tronox concluded that it was in the best interests of its businesses, creditors and
stakeholders to commence the Chapter 11 Cases to, among other things, address Tronoxs Legacy
Liability obligations. As such, Tronox commenced the Chapter 11 Cases on January 12, 2009 (the
Petition Date).
III. TRONOXS CHAPTER 11 CASES & DEVELOPMENTS THEREIN
A. Initial Motions of the Chapter 11 Cases and Certain Related Relief
To minimize disruption to Tronoxs operations in connection with the filing of the Chapter 11
Cases, Tronox sought certain relief at the outset of the Chapter 11 Cases, including the relief
summarized below. This relief enabled Tronox to continue running its businesses with minimal
disruption and facilitated the smooth administration of the Chapter 11 Cases.
(i) Procedural Motions
To facilitate a smooth and efficient administration of the Chapter 11 Cases, the Bankruptcy
Court entered certain procedural orders, by which the Bankruptcy Court (a) approved the joint
administration of Tronoxs Chapter 11 Cases, (b) authorized Tronox to prepare a list of creditors
and file a consolidated list of their 30 largest unsecured creditors and (c) approved an extension
of time to file their Schedules.
(ii) Stabilizing Operations
Recognizing that any interruption of Tronoxs business, even for a brief period of time, would
negatively impact its operations, customer relationships, revenue and profits, and to facilitate a
stabilization of its businesses and effectuate a smooth transition into operating as debtors in
possession, Tronox sought and obtained orders authorizing it to:
|
|
|
19 |
|
As discussed further in Section III.E below, on May
12, 2009, Tronox filed suit against Anadarko in the Bankruptcy Court, Adv.
Proc. No. 09-01198 (ALG) (the Anadarko Litigation). |
26
|
|
|
maintain and administer customer programs and honor its obligations arising under or
relating to those customer programs; |
|
|
|
|
pay prepetition wages, salaries and other compensation, reimbursable employee
expenses and employee medical and similar benefits; |
|
|
|
|
determine adequate assurance for future utility service and establish procedures for
utility providers to object to such assurance;
|
|
|
|
|
continue insurance coverage and enter into new insurance policies, if necessary; |
|
|
|
|
maintain its existing cash management systems; and |
|
|
|
|
remit and pay certain taxes and fees. |
(iii) Employment and Compensation of Professional Advisors
With authorization from the Bankruptcy Court, Tronox retained the following professional
advisors to assist Tronox in carrying out its duties as a debtor in possession and to represent its
interests in the Chapter 11 Cases: (a) Kirkland & Ellis LLP, as restructuring counsel; (b)
Rothschild, Inc., as investment banker and financial advisor; (c) Alvarez & Marsal North America,
LLC, as restructuring advisor; (d) Togut, Segal & Segal LLP, as conflicts counsel; (e) Ernst &
Young LLP, as auditor and tax advisor;20 and (f) Kurtzman Carson Consultants LLC, as the
Notice and Claims Agent.
In connection with the retention of Alvarez & Marsal, Tronox engaged Gary Barton as Chief
Restructuring Officer. Mr. Barton has served as Chief Restructuring Officer since April 2009. Mr.
Barton is also a senior director at Alvarez and Marsal North America, LLC. Mr. Barton has worked as
a turnaround consultant and financial advisor for over 18 years. Mr. Barton has advised and served
as a senior executive for, among others, Enron Corp. and Tower Automotive. Further, Mr. Barton has
served in senior management positions and as a restructuring advisor for a number of companies in a
variety of industries, including the petrochemical, oil and gas and energy industries. For the
avoidance of doubt, Mr. Barton will not continue to serve in such capacity after the Effective
Date.
Tronox also sought and obtained orders approving and establishing procedures for the retention
and compensation of certain professionals utilized in the ordinary course of Tronoxs business and
the interim compensation and reimbursement of professionals retained under the Bankruptcy Code.
(iv) Initial Financing Orders
On February 9, 2009, the Bankruptcy Court entered a final order [Dkt. No. 151] (a) authorizing
Tronox to enter into the debtor in possession credit facility by and among Tronox, Tronox Worldwide
LLC, Credit Suisse, as Administrative Agent, JP Morgan Chase Bank, N.A., as Collateral Agent, and
the lenders that from time to time became party thereto (the Original DIP Facility), (b)
authorizing Tronox to use cash collateral pursuant to sections 361 and 363 of the Bankruptcy Code
and (c) approving the forms of adequate protection provided to Tronox prepetition secured lenders.
The Original DIP Facility provided for a first priority and priming secured revolving credit
commitment of $125 million. The proceeds of the Original DIP Facility, the use of cash collateral
and access to letters of credit allowed Tronox to, among other things, continue its businesses in
an orderly manner, maintain valuable relationships with vendors, suppliers, customers and
employees, pay certain interest, fees and expenses owed under the Original DIP Facility and support
working capital, general corporate and overall operational needsall of which were necessary to
preserve and maintain the going-concern value of Tronoxs business and, ultimately, help ensure a
successful reorganization.
|
|
|
20 |
|
Tronox has subsequently retained Grant Thornton as
new auditors in the Chapter 11 Cases [Dkt. No. 1741]. |
27
The Original DIP Facility required Tronox to commence a process to sell substantially all of
its assets within six months of its entry into the Original DIP Facility. Shortly thereafter,
however, Tronox fell out of compliance with certain of the covenants contained in the Original DIP
Facility. Specifically, (a) the March 13, 2009 insolvency filing of Tronoxs nondebtor German
subsidiaries Tronox GmbH and Tronox Pigments GmbH in the Insolvency Court in Krefeld, Germany and
(b) Tronoxs inability to deliver audited financial statements within 100 days of the close of the
2008 fiscal year caused Tronox to breach certain covenants in the Original DIP Facility.
Accordingly, Tronox obtained a waiver and amendment of the Original DIP Facility with respect to
these defaults, which the Bankruptcy Court approved on May 28, 2009 [Dkt. No. 465].
As amended, the Original DIP Facility required Tronox to enter into a stalking horse asset
purchase agreement for substantially all of its assets on or before August 31, 2009 and to hold an
auction for its assets in December 2009. As discussed further below, Tronox subsequently
determined to pursue a standalone reorganization to maximize value for stakeholders, and the
Original DIP Facility was refinanced during the course of the Chapter 11 Cases.21
B. Appointment of Statutory Committees and Other Active Participants in Tronoxs Chapter
11 Cases
(i) The Official Committee of Unsecured Creditors
On January 21, 2009, the United States Trustee for the Southern District of New York (the
U.S. Trustee) appointed an official committee of unsecured creditors (the Creditors
Committee), whose members consist of Wilmington Trust Corporation (as Indenture Trustee for
the Unsecured Notes), Pension Benefit Guaranty Corporation, Rio Algom Mining LLC (holder of an
Indirect Environmental Claim) and Michael E. Carroll (holder of a Tort Claim).
With authorization from the Bankruptcy Court, Tronox retained the following professional
advisors to assist the Creditors Committee in carrying out its duties and to represent the
interests of all unsecured creditors in the Chapter 11 Cases: Paul, Weiss, Rifkind, Wharton &
Garrison LLP, as counsel; Kasowitz, Benson, Torres & Friedman LLP, as conflicts counsel and
Jefferies & Co., Inc. as financial advisor.
Since the formation of the Creditors Committee, Tronox has worked cooperatively with the
Creditors Committee and its professionals, and the parties have engaged in meaningful exchanges
related to all aspects of these Chapter 11 Cases and the development of the Plan. The Creditors
Committee has been an active participant in extensive, good-faith negotiations and discussions
among Tronox and other constituents regarding valuation, distributable value available for all
unsecured creditors and allocation of recoveries under the Plan.
(ii) The Official Committee of Equity Security Holders
On March 13, 2009, the U.S. Trustee appointed an official committee of equity security holders
(the Equity Committee), whose members consist of Ahab Capital Management, Inc.; Charles
E. Cheever; RLR Capital Partners, LP; Mark D. Todd; Sandra Kay Grasso; Sam L. Decker and Myra A.
Decker and Douglas Graham.
With authorization from the Bankruptcy Court, Tronox retained the following professional
advisors to assist the Equity Committee in carrying out its duties and to represent the interests
of all holders of equity interests in Tronox Inc.: Pillsbury Winthrop Shaw Pittman LLP, as counsel
and Eureka Capital Partners LLC and Young & Partners LLC as financial advisors.
|
|
|
21 |
|
Tronox is currently authorized to use cash
collateral pursuant to the order approving the Replacement DIP Facility [Dkt.
No. 1115]. |
28
(iii) Government Environmental Claimants
On account of the substantial Environmental Claims asserted against Tronox in these Chapter 11
Cases (including the significant Legacy Liabilities that are environmental in nature), the United
States of America, acting through the United States Attorney for the Southern District of New York
(the United States), the Nevada Department of Environmental Protection and the Colorado
River Authorities, among other state, local and tribal governments and environmental authorities,
have been active participants in the Chapter 11 Cases.
(iv) Formation and Participation of the Ad Hoc Noteholders Committee
Certain holders of the Unsecured Notes organized into an ad hoc committee in October 2009 (the
Ad Hoc Noteholders Committee). The Ad Hoc Noteholders Committee represents that its
members currently hold collectively more than 58% of the Unsecured Notes. The Ad Hoc Noteholders
Committee retained Milbank, Tweed, Hadley & McCloy LLP as counsel and Gleacher & Co. as financial
advisor in connection with the Chapter 11 Cases.
At various critical points in these cases, certain members of the Ad Hoc Noteholders
Committee signed confidentiality agreements and received access to confidential information from
Tronox. The restricted group, together with their advisors, represented the interests of the Ad
Hoc Noteholders Committee in vigorous plan negotiations with the United States related to the
settlement of Environmental Claims and allocation of value under the Plan. In December 2009, these
negotiations resulted in certain of the Noteholders entering into a plan support agreement (the
December Plan Support Agreement) and agreeing to backstop an equity investment pursuant to an
equity commitment agreement (the December Equity Commitment Agreement) to fund cash consideration
payable to the Environmental Response Trusts, all as further described below. In or about March of
2010, certain of the Government Environmental Claimants articulated that the consideration to be
afforded them under the December Plan Support Agreement would not be sufficient to achieve a
settlement of the Environmental Claims. On two separate occasions, on or about June 8, 2010 and
again on or about July 19, 2010, a subset of the Ad Hoc Noteholders Committee along with certain
other holders of the Unsecured Notes again signed confidentiality agreements and became restricted
in an effort to reach consensus on the terms of a new plan of reorganization. Ultimately, those
negotiations resulted in the current agreement on the equity investments in Tronox that will fund a
portion of Tronoxs obligations under the Plan.
C. The Claims Process
(i) Filing of Statements of Financial Affairs and Schedules of Assets and Liabilities
On March 30, 2009, Tronox filed its statements of financial affairs and schedules of assets
and liabilities (collectively, the Schedules) pursuant to section 521 of the Bankruptcy
Code and Bankruptcy Rule 1007. The Schedules provide information concerning each Tronox Debtors
assets, liabilities (including accounts payable), Executory Contracts and other financial
information as of the Petition Date. Copies of the Schedules are available free of charge at
www.kccllc.net/tronox.
(ii) Establishment of the Claims Bar Date
On May 28, 2009, the Bankruptcy Court entered an order [Dkt. No. 466] (the Bar Date
Order) establishing August 12, 2009 (the Bar Date) as the deadline by which each
person or entity asserting a claim against any of the Tronox Debtors was required to file written
proof of such claim. In accordance with the Bar Date Order, Tronox provided written notice of the
Bar Date to each of the parties and entities identified as creditors in the Schedules and to all
known actual or potential creditors and equity security holders of the Tronox Debtors according to
the Tronox Debtors books and records at the time of mailing of the notice. For known creditors,
this notice was accompanied by a personalized proof of claim form approved by the Bankruptcy
Court. Additionally, in an effort to reach unknown creditors (including holders of Tort Claims or
Indirect Environmental Claims), Tronox published notice of the Bar Date in the national edition of
The Wall Street Journal, as well as site-specific notices in 38 newspapers throughout the country
related to Legacy Liability sites.
29
(iii) Claims Review and Objection Process
Over 14,000 Proofs of Claim were filed against Tronox, asserting over $9 billion in
liabilities. In addition, many Proofs of Claim were asserted in unliquidated amounts or contain
an unliquidated component. Since the Bar Date, Tronox and its advisors, in frequent consultation
with the Creditors Committee, have been actively engaged in reconciling the Proofs of Claim and
determining the appropriate basis to address them.
To address these numerous Claims in an expeditious and orderly fashion, Tronox sought and
obtained Bankruptcy Court approval of procedures by which Tronox could object to numerous claims on
an omnibus basis [Dkt. No. 799] (the Claims Objection Procedures Order). As of the date
hereof, pursuant to the Claims Objection Procedures Order, 29 omnibus claims objection motions have
been filed and ten omnibus claims objection orders have been entered, which orders disallowed,
expunged or recharacterized thousands of claims. In addition, numerous Claims have been allowed or
withdrawn by stipulation with the holder of the Claim. Tronox has made a concerted effort to
ensure that all claims objections will have been filed on or before the Record Date for purposes of
voting on the Plan and, to the extent applicable, participating in the Rights Offering.
The following chart sets forth the claims scheduled by and asserted against the Tronox Debtors
by category (and as of September 1, 2010), together with estimates of claim amounts resulting from
prior, pending and anticipated objections to claims:22
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Active Scheduled |
|
Estimated Claim |
Claims Classification |
|
Total Filed Claims |
|
Claims |
|
Amounts* |
|
|
Count |
|
Amount |
|
Count |
|
Amount |
|
|
General Unsecured Claims: |
|
|
|
|
|
|
|
|
|
|
(a) Accounts Payable Claims; |
|
|
|
|
|
|
|
|
|
|
(b) Employee/HR Claims; |
|
|
|
|
|
|
|
|
|
|
(c) Litigation Claims; |
|
|
|
|
|
|
|
|
|
|
(d) Insurance Claims; |
|
|
|
|
|
|
|
|
|
|
(e) Intercompany Claims |
|
1017 |
|
$211,956,000 |
|
578 |
|
$4,933,015 |
|
$50,000,000 |
Unsecured Notes Claims
|
|
12
|
|
1,117,326,132
|
|
|
|
|
|
$370,411,805.66
*includes interest
accrued through the
Petition Date |
Indirect Environmental
Claims
|
|
180
|
|
470,635,245
|
|
|
|
|
|
$50,000,000 |
Tort Claims
|
|
11,501
|
|
2,049,952,683 +
unliquidated
amounts**
|
|
|
|
|
|
Settled |
Environmental Claims
|
|
122
|
|
4,922,512,286 +
unliquidated
amounts**
|
|
|
|
|
|
Settled |
Pension Claims
|
|
413
|
|
653,313,118
|
|
|
|
|
|
N/A; Obligations
assumed under Plan |
Secured Debt/Letters of Credit
|
|
14
|
|
230,730,360
|
|
|
|
|
|
|
Secured Tax Claims
|
|
170
|
|
11,681,884
|
|
|
|
|
|
$3,500,000 |
Equity Claims
|
|
763
|
|
1,497,842
|
|
|
|
|
|
|
Anadarko Claims
|
|
30
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Grand Total
|
|
14,222
|
|
$9,669,605,551
|
|
578
|
|
$4,933,015
|
|
$473,500,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
22 |
|
The information set forth herein does not include
the amended claims asserted by Anadarko, which were filed on September 11,
2010. For further information on the Anadarko claims, see Article III.D(iii)
hereof. |
30
|
|
|
Notes: |
|
* Estimated Claim amounts do not reflect an additional estimated $5 million in administrative and priority claims. |
|
|
|
** Reflects asserted claim amounts after removing obvious duplicates. |
D. Executory Contracts and Unexpired Leases
As of the Petition Date, Tronox was party to numerous contracts and leases as part of the
ordinary course of its business operations. During the Chapter 11 Cases, Tronox conducted an
extensive review of its Executory Contracts and Unexpired Leases to identify for rejection certain
contracts and leases that did not provide a net benefit to Tronoxs estates. To date, the
Bankruptcy Court has entered several orders authorizing Tronox to reject certain Executory
Contracts and Unexpired Leases, including Tronoxs unexpired headquarters lease, an unexpired
warehouse lease for the Savannah pigment facility, unexpired equipment leases for the Savannah
pigment facility, burdensome supply contracts with Air Liquide Large Industries, LP and
MeadWestvaco Corporation and a number of prepetition transactional agreements to sell, transfer or
otherwise dispose of assets and/or property of Tronox (or its predecessors) which contracts were
substantially performed but for certain post-closing obligations.
On or before the Record Date, Tronox filed one or more notices designating certain Executory
Contracts and Unexpired Leases for assumption (and assignment, where applicable) in connection with
the Plan, together with proposed cure amounts for voting purposes only, if any, in connection
therewith. Tronox (or its assignee) will continue to perform on assumed contracts or leases from
and after the Effective Date. In addition, on or before the Record Date, Tronox filed one or more
motions requesting authority to reject Executory Contracts and/or Unexpired Leases that are not
necessary to Reorganized Tronoxs businesses. Counterparties to such contracts and leases shall
have 30 days from the rejection of such contract or lease to file a Proof of Claim with respect to
such rejection. As of the Effective Date, any Executory Contracts and Unexpired Leases not
identified for assumption in the Assumed Executory Contract and Unexpired Lease List will be deemed
rejected.
E. The Anadarko Litigation and Related Matters
(i) Fraudulent Transfer Proceeding
On May 12, 2009, Tronox filed an adversary complaint in the Chapter 11 Cases against
Kerr-McGee Corporation and Anadarko Petroleum Corporation (which acquired Kerr-McGee shortly after
the Spinoff) in the United States Bankruptcy Court for the Southern District of New York. The
complaint asserts, among other claims, that Kerr-McGee Corporation defrauded Tronox and its
creditors by transferring its valuable oil and gas assets to other Kerr-McGee entities, isolating
its Legacy Liabilities in its chemical business and then separating its chemical business and the
Legacy Liabilities through the Spinoff. The complaint seeks recovery for fraudulent transfers
involving the valuable oil and gas assets that were transferred through Project Focus out of
entities that would become part of Tronox and massive actual and contingent environmental, tort,
retiree and other liabilities that Tronox incurred through the Spinoff. The complaint alleges that
Tronox was destined to fail at the time of the Spinoff, having been grossly undercapitalized,
stripped of its most valuable assets and essential cash and overburdened with legacy environmental,
tort and retiree liabilities.
On May 21, 2009, the United States filed a complaint in intervention in Tronoxs adversary
proceeding against Anadarko and Kerr-McGee. The United States complaint asserts claims under the
Federal Debt Collections Procedures Act based on allegations that are similar to those in Tronoxs
complaint. The United States asserts that it has an exclusive right to recoveries under the
Federal Debt Collections Procedures Act.
On July 31, 2009, Anadarko and Kerr-McGee filed a motion to dismiss Tronoxs complaint. On
March 31, 2010, the Bankruptcy Court denied in part and granted in part the motion to dismiss. The
Bankruptcy Court denied the motion to dismiss with respect to Tronoxs fraudulent transfer claims
and allowed Tronox to replead claims for breach of fiduciary duty by Kerr-McGee, aiding and
abetting breach of fiduciary duty by Kerr-McGee and Anadarko, and civil conspiracy by Anadarko. On
April 28, 2010, Tronox filed an amended complaint. On May 19, 2010, Anadarko and Kerr-McGee filed
an answer denying the claims asserted in the amended complaint and on May 26, 2010, they moved to
dismiss Tronoxs amended counts. On June 29, 2010, Tronox responded to the motion to dismiss.
31
The parties to the litigation are engaged in extensive fact discovery, which is scheduled to
conclude on March 15, 2011. Expert discovery is scheduled to conclude on August 19, 2011. The
case is currently set for trial at the end of 2011.
The Anadarko Litigation lies at the heart of the Chapter 11 Cases and is a valuable, albeit
contingent, asset of Tronoxs estates. As such, the Plan contemplates that Tronoxs rights to the
litigation (both with respect to prosecution and recovery of any fraudulently transferred assets,
damages and other relief awarded in connection therewith) will be contributed to the Anadarko
Litigation Trust for the benefit of the Environmental Response Trusts and the Tort Claims Trust,
all in accordance with the Plan and the documentation governing such trusts. See Section IV
hereof for a further discussion of the Anadarko Litigation Trust.
(ii) Motion to Compel Assumption or Rejection of MSA
On June 30, 2010, Anadarko filed a motion in the Chapter 11 Cases seeking to compel Tronox to
assume or reject the MSA on or before August 10, 2010 [Dkt. No. 1676]. At a hearing held on July
21, 2010, Tronox, Anadarko and Kerr-McGee agreed to resolve and settle the motion to compel by
stipulating to the rejection of the MSA, effective July 22, 2010. Accordingly, on August 12, 2010
the Bankruptcy Court entered an order [Dkt. No. 1856] authorizing the rejection of the MSA.
(iii) Anadarkos Asserted Claims
On September 11, 2010, Anadarko filed proofs of claim against each of the Tronox Debtors
asserting, among other things, alleged damages arising from rejection of the MSA and Spinoff
Agreements, including $72.3 million in liquidated amounts plus unknown contingent and unliquidated
amounts (excluding the Anadarko Section 502(h) Claim, the Rejection Damages Claim). Tronox
believes the Rejection Damages Claim should be disallowed in whole or in part against these estates
because, among other things, (a) such claim includes contingent claims for indemnification
(primarily for tort and environmental legacy liabilities) arising under the MSA (which Tronox does
not believe represent valid obligations) and (b) Tronox is settling its liability for Environmental
and Tort Claims pursuant to the terms of the Plan. Accordingly, Tronox believes Anadarkos
Rejection Damages Claim should be barred under sections 502(e)(1)(B) of the Bankruptcy Code and/or
502(d) of the Bankruptcy Code.23 If for any reason Tronox is unsuccessful in disallowing
the Rejection Damages Claim asserted by Anadarko, such claim, to the extent allowed and not
otherwise subordinated, could have a material impact on the estimates of Class 3 General Unsecured
Claims and/or Class 6 Indirect Environmental Claims. It is a condition precedent to the
effectiveness of the Plan and the Backstop Parties funding obligations that those categories of
claims, in the aggregate, fall beneath a certain cap.
Anadarko objected to Tronoxs Rights Offering Procedures, asserting that Anadarko should be
entitled to participate in the Rights Offering to the extent of its claims regardless of whether
such claims are finally Allowed before or after the Rights Expiration Date. Anadarko asserts,
among other arguments, that it is impractical and unnecessary for its claims to be finally Allowed
for distribution purposes on or before the Rights Expiration Date.
Tronox believes the Rejection Damages Claim can be disallowed and/or estimated for
distribution or reserve purposes on or before the Effective Date and intends to promptly file its
objection to Anadarkos Rejection Damages Claim and/or a motion to estimate such claim for
distribution or reserve purposes. In connection with resolving Anadarkos objection to the Rights
Offering Procedures, Tronox has agreed that the terms of the Rights Offering Procedures (including
that participating claims must be finally Allowed by the Rights Expiration Date) will not be
binding on Anadarko. To the extent Anadarko has a finally Allowed Class 3 Claim as of the Effective
Date,
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23 |
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Nothing herein shall prejudice the right of Tronox
or any other party in interest to assert any and all grounds for objecting to,
or seeking estimation of, the Rejection Damages Claim filed by Anadarko, or to
assert any defenses related thereto. |
32
Anadarko will have the ability to participate in the Rights Offering to the extent of its
Allowed Claim, notwithstanding anything in the Rights Offering Procedures to the contrary. Tronox
has agreed that, to the extent Anadarkos claim is estimated or otherwise adjudicated or agreed to
be a Class 3 or Class 6 Claim for (a) distribution purposes on or after the Effective Date or (b)
reserve purposes before the Effective Date, Anadarko will be entitled to receive the economic
benefit on account of its Allowed Class 3 or Class 6 Claim (if any) as if it had participated in
the Rights Offering, notwithstanding anything in the Rights Offering Procedures to the contrary.
If the Bankruptcy Court determines that Anadarko has a large Allowed Claim in Class 3 or Class 6 of
the Plan, Tronox may not be able to satisfy the claims cap condition in the ECA and the Backstop
Parties may not agree to fund the backstop obligation. Similarly, to the extent the Bankruptcy
Court determines that Anadarkos claim should be estimated in a large amount for reserve purposes,
a significant percentage of the New Common Stock of Reorganized Tronox may need to be reserved,
which could have a negative impact on the liquidity of such stock post-Effective Date.
Anadarko, together with its affiliates and subsidiaries, including the entity now known as
Kerr Mc-Gee Corporation, which was formed in May 2001, as defendants in the pending Anadarko
Litigation, will assert a claim (or claims) in accordance with section 502(h) of the Bankruptcy
Code to the extent of any judgment against it in the Anadarko Litigation (such claim(s) defined in
the Plan as the Anadarko Section 502(h) Claim). Notwithstanding any contrary provision
contained in the Plan or in any documents executed in connection therewith (including the Anadarko
Litigation Trust Agreement), if the Anadarko Section 502(h) Claim is Allowed, Anadarko will be
entitled to discount and/or otherwise reduce any judgment in the Anadarko Litigation by the amount
of any Allowed Anadarko Section 502(h) Claim multiplied by the percentage recovery to Allowed Class
3 General Unsecured Claims (which percentage recovery may or may not be computed on a claims base
including such Allowed Anadarko Section 502(h) Claim) and Anadarko shall be obligated to pay only
the reduced amount of such judgment; provided, however, that the percentage by
which any such Allowed Anadarko Section 502(h) Claim may be multiplied shall be determined by the
Bankruptcy Court and the parties reserve their rights with respect to the extent of the dilutive
effect of the Allowed Anadarko Section 502(h) Claim on Anadarkos ability to reduce any judgment in
the Anadarko Litigation.24 Anadarko has agreed that the foregoing discount or reduction
in amount payable with respect to any judgment in the Anadarko Litigation shall be its sole and
exclusive remedy on account of any Allowed Anadarko Section 502(h) Claim and that it shall have no
recourse against Tronox or Reorganized Tronox on account of such Anadarko 502(h) Claim.
F. In re Tronox, Inc. Securities Litigation
On October 13, 2009, the United States District Court for the Southern District of New York
(the District Court) entered an order consolidating three previously filed putative class
actions under the caption In re Tronox, Inc. Securities Litigation, Case No. 09-cv-6220
(SAS), and directed LaGrange Capital Partners, LP and LaGrange Capital Partners Offshore Fund,
Ltd., the newly-appointed lead plaintiffs (collectively, Lead Plaintiffs), to file an
amended class action complaint within forty-five (45) days.
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24 |
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Nothing in the Plan or in any documents executed in
connection therewith (including the Anadarko Litigation Trust Agreement) shall
prejudice the rights of Tronox, the Anadarko Litigation Trustee or Anadarko,
and the parties expressly reserve all rights and defenses with respect to the
Anadarko Litigation, the Anadarko Section 502(h) Claim and any and all
matters not expressly addressed herein, including Tronoxs or the
Litigation Trustees ability to seek to subordinate or disallow the Anadarko
Section 502(h) Claim. The provisions of the Plan summarized in this paragraph
shall not be deemed to be consent by Anadarko to any treatment for purposes of
section 1123(a)(4) of the Bankruptcy Code other than with respect to the source
of recovery for any Allowed Anadarko Section 502(h) Claim. Further,
notwithstanding any contrary provision herein, in the Plan or in any documents
executed in connection therewith (including the Anadarko Litigation Trust
Agreement) relating to Tronoxs and Anadarkos setoff and recoupment rights,
including Art. III.D, Art. VI.I and Art. VIII.E. of the Plan, such provisions
shall not apply to the Anadarko Section 502(h) Claim and Anadarko reserves its
rights with respect to setoff and recoupment of any of its other claims. |
33
On November 24, 2009, Lead Plaintiffs timely filed a Consolidated Class Action Complaint in
the District Court against various non-debtors, including Anadarko, Kerr-McGee, Ernst & Young LLP
and certain current and former officers and directors of Tronox and Kerr-McGee, on behalf of all
persons (the Class), who purchased publicly traded debt and/or equity securities of
Tronox Incorporated between November 21, 2005 and January 12, 2009, inclusive, alleging damages for
violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, and Rule 10b-5
promulgated thereunder. The allegations in Lead Plaintiffs complaint largely mirror Tronoxs
allegations in the Anadarko Litigation.
On June 28, 2010, the District Court entered its Memorandum Opinion granting in part and
denying in part Defendants motions to dismiss. On July 30, 2010, Lead Plaintiffs filed a First
Amended Consolidated Class Action Complaint.
On January 5, 2010, Lead Plaintiffs filed the Motion for Leave to File Proof of Claim Out of
Time (the Proof of Claim Motion). Tronox and the Creditors Committee objected to the
Proof of Claim Motion and the Bankruptcy Court held a hearing on the Proof of Claim Motion on April
28, 2010. On May 7, 2010, the Bankruptcy Court issued an order denying the Proof of Claim Motion
[Dkt. No. 1536]. On May 19, 2010, Lead Plaintiffs timely filed a Notice of Appeal (the
Appeal). The Appeal is fully briefed and is pending before the Honorable John G. Koeltl,
United States District Judge, in the District Court.
If Lead Plaintiffs are ultimately successful in the Appeal and are permitted to file the Class
Claim, and if the Class Claim is Allowed, recoveries for Holders of Class 8 Equity Interests in
Tronox Incorporated will be negatively impacted.
G. Employee Benefit & Retiree Matters
(i) Non-Insider Severance Programs and Key Employee Incentive Plan
On June 9, 2009, the Bankruptcy Court approved the Tronox Incorporated 2009 Involuntary
Termination Plan, a non-insider severance program [Dkt. No. 491]. Tronox implemented the program
to maintain the morale, focus and loyalty of certain of Tronoxs employees at a point in the
Chapter 11 Cases where Tronoxs prospect for reorganization was unclear. Until the implementation
of the program, Tronox did not have a uniform severance policy that was consistently applied
throughout the organization, which, against the backdrop of the Chapter 11 Cases and the
requirement under the Original DIP Facility that Tronox sell substantially all of its assets,
contributed to a perception of job insecurity among Tronoxs employees. The program covered 323
salaried, non-union employees identified by Tronoxs senior management as those whose performance
was most likely to suffer as a result of the distractions and uncertainties of the Chapter 11
Cases. To date, Tronox has made a total of approximately $112,000 in payments under the program.
On October 29, 2009, the Bankruptcy Court approved Tronoxs motion to implement a non-insider
severance plan for union employees in connection with the idling of Tronoxs Savannah, Georgia
pigment plan [Dkt. No. 814]. Tronox implemented the program to motivate approximately 44 union
employees at the Savannah pigment facility to shutter that facility in a safe and environmentally
responsible manner. As these employees were losing their jobs in connection with the closing of
the pigment plant, a severance program was a proper and necessary component of the shutdown. These
employees received a lump-sum payment at termination in exchange for executing a general release of
Tronox and forfeiting their recall rights. The program cost Tronox approximately $549,000 and was
integral to the safe and timely idling of the Savannah pigment facility. Tronox continues to
produce sulfuric acid at the Savannah facility.
On June 9, 2009, the Bankruptcy Court approved Tronoxs 2009 Key Employee Incentive Program
[Dkt. No. 492] (the 2009 KEIP), with no objection from Tronoxs stakeholders or the U.S.
Trustee (an objection of the U.S. Trustee was withdrawn following supplemental disclosure by
Tronox). The 2009 KEIP was implemented to motivate essential management personnel to maximize
value for Tronoxs stakeholders under either an asset sale or a standalone reorganization.
Developed with the Creditors Committee, the 2009 KEIP set forth specific performance goals related
to both profitability and asset sale targets. Tronoxs officers and certain other senior managers
were participants in the 2009 KEIP. Tronox exceeded the EBITDAR targets set forth in the 2009 KEIP
and has paid a total of approximately $3,250,000 to date to 20 officers, senior managers and other
key employees.
34
The 2009 KEIP required as a second trigger for payments due thereunder that a plan of
reorganization be confirmed, which was initially expected to occur by the end of 2009 or early
2010. Accordingly, when the Plan is confirmed, an additional approximately $3,250,000 will be due
to the participants in the 2009 KEIP on account of 2009 performance.
The Plan provides for the adoption of the Management 2010 Bonus Plan, the form of which will
be included in the Plan Supplement.
H. Material Settlements and Resolutions
(i) Prepetition Lender Settlement
On February 23, 2010, the Bankruptcy Court approved a settlement among Tronox, Credit Suisse
AG (as agent under the Prepetition Facilities) and the Creditors Committee regarding a lawsuit
filed by the Creditors Committee against the lenders under the Prepetition Facilities, styled
Official Committee of Unsecured Creditors of Tronox Incorporated v. Credit Suisse, et al., Adv.
Proc. No. 09-01388 (ALG) (the Committee Litigation) [Dkt. No. 1232]. In the Committee
Litigation, the Creditors Committee asserted fraudulent transfer and other claims against the
lenders under the Prepetition Facilities. Tronox had waived these claims against the lenders in
connection with entering into the Original DIP Facility, but these claims were preserved for the
Creditors Committee until July 24, 2009 (see Dkt. No. 568). Negotiated in connection with the
December Plan Support Agreement and the repayment of the Prepetition Facilities (each as described
further below), the settlement provided for dismissal of the Committee Litigation and mutual
releases by and among Tronox, the Creditors Committee and Credit Suisse (on behalf of the lenders
under the Prepetition Facilities), and a payment of $5 million by such lenders to Tronox (comprised
of a waiver of accrued but unpaid default interest in the amount of $2,044,745.80 and a reduction
of principal in the amount of $2,955,254.20).
(ii) Insurance Settlements
On March 26, 2010, the Bankruptcy Court approved a settlement between Tronox and Century
Indemnity Co. (Century) that resolved an insurance coverage dispute related to certain defense
and indemnity obligations for bodily injury claims owed by Century under certain insurance policies
issued to Tronox. Under the settlement, Tronox sold the policies to Century free and clear of all
liens, claims, interests and encumbrances pursuant to section 363 of the Bankruptcy Code for gross
consideration of $4,725,000 (before deduction of the contingency fee payment to Tronoxs insurance
counsel, Branisa & Zomcik, P.C.). Tronox also released Century from its obligations under the
policies, which obligations Century had contested, and obtained an injunction barring claims
against Century under the policies.
The net proceeds (after deduction of the contingency fee payment) from the sale of the Century
policies and from any similar insurance settlements are included in the Tort Claims Insurance
Assets and will be contributed to the Tort Claims Trust.
(iii) Kress Creek Settlement
On May 20, 2010, the Bankruptcy Court approved Tronoxs entry into a settlement with the
United States regarding (a) the scope of environmental remediation work at certain sites in and
around West Chicago, Illinois, including Kress Creek, and (b) a dispute over Tronoxs right to
reimbursement from the Department of Energy for past remediation expenditures at the West Chicago
sites [Dkt. No. 1573]. The settlement provided for the release by the United States of over $25
million in past due reimbursement for remediation costs incurred by Tronox at the West Chicago
sites prior to 2009, which funds had been subject to an administrative hold by the Department of
Energy pending resolution of a dispute between Tronox and the United States as to whether and to
what extent the United States could setoff the reimbursement against its prepetition claims against
Tronox. The release of these funds has allowed Tronox to fund ongoing remediation work at the West
Chicago sites, which Tronox was already required to perform. On the Effective Date, the applicable
Environmental Response Trust will assume liability for the remediation activities at the West
Chicago Sites and will receive all future Department of Energy reimbursement funds in connection
therewith.
35
|
I. |
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Tronoxs Early Standalone Reorganization Efforts;
the December Plan Support Agreement and the Equity Commitment Agreement |
(i) The Huntsman Sale Process
Throughout its Chapter 11 Cases, Tronox stated that it would pursue any and all alternatives
to maximize value for stakeholders. During the first half of 2009, Tronox was engaged in a sale
process of all or substantially all of its operating assets, influenced by both market conditions
and the requirements of the Original DIP Facility. In this regard, on August 28, 2009, Tronox
entered into an asset and equity purchase agreement (the AEPA) with affiliates of
Huntsman Corporation (Huntsman). To ensure that entry into the AEPA with Huntsman did
not foreclose the possibility of a standalone reorganization, however, Tronox specifically
negotiated the right under the AEPA to work with its stakeholders to pursue a standalone
reorganization.
Accordingly, Tronox and its advisors, as instructed by its Board of Directors, pursued a dual
path process that involved marketing Tronoxs assets to ensure a robust and competitive auction,
while also working with the Creditors Committee, the United States and various third parties,
including the Ad Hoc Noteholders Committee, to explore the viability of a standalone
reorganization. Throughout this process, Tronox maintained that it would not abandon the sale
process unless it was confident that a viable standalone reorganization could be achieved. This
goal was predicated on, among other things, (a) Tronox and certain of its key stakeholders reaching
a settlement with the federal, state and tribal governments regarding Tronoxs legacy environmental
liabilities and (b) Tronox obtaining committed exit financing.
(ii) Development of December Plan Support Agreement & Equity Commitment Agreement
Starting in mid-September 2009, Tronox focused its efforts on the threshold issue for
achieving a standalone reorganization reaching a settlement with the United States concerning
the future treatment of Tronoxs environmental liabilities. Tronox has maintained throughout the
Chapter 11 Cases that without such an agreement, Tronox would not be able to emerge from Chapter 11
as a reorganized entity free from those liabilities. Following Tronoxs circulation of a plan term
sheet to the United States and other stakeholders that included a proposed framework for an
environmental settlement, Tronox, the United States and the Creditors Committee, together with
their respective legal and financial advisors, met in person on multiple occasions regarding
Tronoxs proposal. In connection with those negotiations, Tronox provided significant due
diligence regarding all aspects of its businesses and its estates.
As early negotiations among the parties progressed simultaneously with Tronoxs efforts to
obtain debt financing, it was apparent in September and October of 2009, based in part on Tronoxs
September 2009 forecast, that debt financing alone would not be sufficient to fund both the working
capital and liquidity needs of Reorganized Tronox and an environmental settlement with the
government. Among others, Tronox approached the holders of its Unsecured Notes as a potential
source of equity financing that, in tandem with exit debt financing, would be sufficient to fund
obligations under a plan of reorganization and provide the necessary liquidity for the company
post-emergence. To that end, Tronox held two public meetings in mid-October 2009, at which Tronox
provided the noteholders with a status update regarding the Chapter 11 Cases and explained the need
for equity financing. Interested noteholders organized into the Ad Hoc Noteholders Committee,
which provided Tronox with an initial proposal for a back-stopped rights offering and a plan of
reorganization on November 4, 2009.
In the ensuing weeks, numerous meetings occurred among Tronoxs management and advisors, the
Ad Hoc Noteholders Committee, the Creditors Committee and the United States regarding both the
terms of an equity investment in Reorganized Tronox and how that investment would impact a
potential settlement of Tronoxs legacy environmental liabilities. These meetings involved the
negotiation of both chapter 11 plan and equity commitment term sheets. In addition, Tronoxs
management team provided extensive due diligence to the Ad Hoc Noteholders Committee, meeting in
person with their representatives on numerous occasions.
By December 2, 2009, the Ad Hoc Noteholders Committee, the Creditors Committee and the
United States presented Tronox with the terms of a proposed agreement regarding the terms of a plan
of reorganization that included a settlement and resolution of Tronoxs environmental liabilities
and incorporated certain debt and equity financing arrangements still under negotiation by the
parties. After careful consideration and analysis of the
36
agreement in principle, and following a meeting of the board of directors of Tronox Incorporated
and a status conference with the Bankruptcy Court regarding the latest developments in the dual
path process, on the evening of December 3, 2009, Tronox determined that providing its stakeholder
parties with additional time to reach definitive documentation reflecting the agreement in
principle was in the best interests of its estates.
Accordingly, on December 4, 2009, after notifying Huntsman and other qualified bidders of its
decision, Tronox, with the support of the agent under the Original DIP Facility, the Creditors
Committee, the Equity Committee, the United States and the Ad Hoc Noteholders Committee, requested
that the Bankruptcy Court adjourn the auction (previously scheduled for December 8, 2009) and sale
hearing (previously scheduled for December 10, 2009) to December 21, 2009 and December 22, 2009,
respectively. The Bankruptcy Court granted that request on December 4, 2009.
To document the parties intentions with respect to a standalone reorganization, the parties
spent the next month intensely negotiating the terms of the December Plan Support Agreement and
Equity Commitment Agreement. Following a series of all-day, all-hands meetings in mid-December
2009, including in-person meetings on December 15 and 16, 2009, which meetings were attended by
advisors for each of Tronoxs management and advisors, the Creditors Committee, the agent for the
Original DIP Facility, GS Lending Partners, the Ad Hoc Noteholders Committee and the United States
and further negotiations continuing nearly nonstop from December 17, 2009 up to and including
December 20, 2009 on December 20, 2009, the parties executed the December Plan Support Agreement
and Equity Commitment Agreement. The terms of the proposed reorganization provided for therein
were as follows:
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Tronox would reorganize around its existing operating businesses, including its
facilities at Oklahoma City, Oklahoma; Hamilton, Mississippi; Henderson, Nevada; Botlek,
Netherlands and Kwinana, Australia; |
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Government claims related to Tronoxs legacy environmental sites (both owned and
nonowned) would be settled with the United States, the Navajo Nation and certain state
governments through the creation of custodial trusts and a litigation trust, to which
Tronox would contribute $115 million in cash, 88% of its interest in the Anadarko
Litigation and certain other consideration; |
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Tort Claimants, holders of claims related to potential asbestos, benzene, creosote and
other liabilities, collectively would receive $7 million in cash, 12% of Tronoxs interest
in the Anadarko Litigation and proceeds from applicable insurance policies (the Tort
Claims Pool); |
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Tronoxs existing secured lenders would be repaid in full in cash immediately upon
approval of the Replacement DIP Facility (described further below), with the exception of
certain amounts withheld pending resolution of the Creditors Committees litigation
against Tronoxs prepetition secured lenders (the Prepetition Lenders); |
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70% of the equity in reorganized Tronox would be distributed to certain eligible holders
of general unsecured claims that participate in a $105 million rights offering, backstopped
by holders of approximately two-thirds of the Unsecured Notes; |
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30% of the equity in reorganized Tronox would be distributed to certain holders of
general unsecured claims on account of such claims (the GUC Pool); and |
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Claims of private parties under CERCLA and similar state statutes would be divided
equally between participation in the GUC Pool and the Tort Claims Pool. |
On December 23, 2009, the Bankruptcy Court approved Tronoxs entry into the December Plan
Support Agreement and the December Equity Commitment Agreement [Dkt. No. 1030].
37
(iii) Cancellation of Auction and Termination of AEPA
The signatories to the December Plan Support Agreement requested, as a condition of moving
forward with the standalone reorganization, that Tronox cancel the auction which was scheduled for
December 21, 2009. As such, Tronox provided for the cancellation of the auction in the order
approving the December Plan Support Agreement and Equity Commitment Agreement. In addition, upon
Bankruptcy Court approval of and the funding of the Replacement DIP Facility (as described further
below), Tronox terminated the AEPA with Huntsman pursuant to the terms thereof.
J. The Replacement DIP Facility
In connection with Tronoxs entry into the December Plan Support Agreement and the Equity
Commitment Agreement in December 2009, on December 24, 2009, Tronox also completed the refinancing
of its Original DIP Facility and the Prepetition Facilities with the Replacement DIP Facility
pursuant to the terms of that certain credit agreement, dated as of December 24, 2009, by and among
Tronox Worldwide LLC, Tronox Incorporated and certain subsidiaries of Tronox Incorporated that are
debtors in the Chapter 11 Cases, as Guarantors, the Lenders party thereto from time to time and GS
Lending Partners, as sole lead arranger and sole bookrunner, Syndication Agent, Administrative
Agent and Collateral Agent.
(i) Efforts to Obtain Exit Financing
Consistent with its dual-path strategy, simultaneously with its early plan negotiations, and
as Tronox began to see improvements in the capital markets, Tronox explored opportunities for debt
financing that could fund its exit from Chapter 11 as a reorganized entity. In September 2009,
Tronox developed a forecast for a reorganized company (published in a Form 8-K, dated October 7,
2009) and a request for proposal (RFP) for exit financing. Upon soliciting input from
the Creditors Committee and the Equity Committee concerning which parties should receive the RFP,
Tronox ultimately provided the RFP and forecast to 96 potential financing parties. Thereafter,
Tronox executed confidentiality agreements with 11 new parties (in addition to the numerous parties
who had executed confidentiality agreements at earlier stages of the Chapter 11 Cases), conducted
management meetings with potential financing parties and facilitated significant due diligence. As
a result of these efforts, in October 2009, Tronox received 10 non-binding financing proposals from
potential lenders. It was clear to Tronox from its canvassing of the credit markets generally and
from these proposals specifically that Tronox would not be able to obtain an exit financing
commitment for a sufficient duration to remain in place through the indeterminate point in time
when Tronox would be in position to consummate a plan of reorganization. Thus, Tronox determined
to focus on securing DIP financing that would convert into exit financing.
After evaluating those exit financing proposals, with approval from its Board of Directors,
Tronox entered into letter agreements with each of General Electric Capital Corporation
(GE) and Goldman Sachs Lending Partners LLC (GS Lending Partners) regarding
their efforts to provide a replacement DIP facility that would convert into exit financing. In
connection with those agreements, and with the consent of the Creditors Committee, Tronox paid
work fees to both GE and GS Lending Partners to facilitate their continued due diligence and
syndication efforts. Negotiations with GE and GS Lending Partners continued in December 2009.
While Tronox ultimately was unable to agree on terms with GE, Tronox reached agreement with GS
Lending Partners regarding the terms of the Replacement DIP Facility, a result of more than three
weeks of nearly nonstop good faith and arms length negotiations among principals and advisors for
each of Tronox, GS Lending Partners, the Creditors Committee, the United States and the Ad Hoc
Noteholders Committee.
(a) The Replacement DIP Facility
Tronoxs Replacement DIP Facility consists of (a) a $335 million senior secured super-priority
tranche B-1 term loan and (b) a $90 million senior secured super-priority tranche B term loan
(which was required to be drawn in full at closing), each with an original maturity date of June
24, 2010 (subject to two, three-month extension options to September 24, 2010 and December 24,
2010, respectively, under certain conditions). As of the date of this Disclosure Statement, $425
million is outstanding under the Replacement DIP Facility. This balance includes $335 million
outstanding on the Tranche B-1 Facility and $90 million outstanding on the Tranche B-2 Facility.
38
The Replacement DIP Facility is secured by substantially all of Tronoxs operating assets and
a first priority security interest in, among other assets, accounts receivable, inventory, cash,
deposit accounts, personal property and real property. The interest expense associated with the
Replacement DIP Facility is $38,250,000 per year.
The Replacement DIP Facility is and was used (a) for costs, fees and expenses related to the
transaction, (b) to repay in full (i) the approximately $10 million that was outstanding under the
Original DIP Facility and (ii) the approximately $212.8 million that was outstanding under the
Prepetition Facilities, (c) to cash collateralize all of the letters of credit under the
Prepetition Facilities and the Original DIP Facility, (d) for general corporate and working capital
purposes, and (e) to fund an environmental settlement escrow account to be utilized to fund in part
one or more environmental or litigation trusts under the Plan.
The Replacement DIP Facility has several key features important to Tronoxs standalone
restructuring efforts. As noted above, the Replacement DIP Facility provides for a flexible
maturity date. Initially contemplated to occur as early as six months after the closing (i.e.,
June 24, 2010), the maturity could be extended during the pendency of the Chapter 11 Cases for an
additional six months through and including December 24, 2010. Upon consummation of Tronoxs
plan of reorganization and satisfaction of certain other conditions precedent, the Replacement DIP
Facility converts to an exit facility with a final scheduled maturity of the third anniversary of
the effective date of such plan of reorganization. To take advantage of the extension options
(each referred to as a Facility Extension Option), however, Tronox, among other things,
must have complied with certain restructuring milestones within the originally contemplated initial
maturity date of June 24, 2010, as follows:
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As a condition precedent to the exercise of the first three-month extension under the
Facility Extension Option, the Bankruptcy Court must have entered an order approving
Tronoxs disclosure statement on or before June 24, 2010; |
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As a condition precedent to the exercise of the second three-month extension under the
Facility Extension Option, the Bankruptcy Court must have entered an order confirming
Tronoxs plan of reorganization on or before August 31, 2010; and |
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As a condition precedent to the exercise of each extension under the Facility Extension
Option, Tronox must demonstrate the absence of any events of default, and as a result,
Tronox must have complied with all covenants in the Replacement DIP Agreement, including
its covenant in section 5.15(b)(ii) requiring that on or prior to June 30, 2010, definitive
environmental settlement documentation must be binding on and enforceable against
Government Environmental Claimants, subject only to entry of the confirmation order. |
On April 26, 2010, as required by section 3.3(a) of the Replacement DIP Agreement, Tronox gave
notice to the Agent of its intention to exercise the first three-month extension under the Facility
Extension Option, which extended the deadline for approval of Tronoxs disclosure statement from
April 30, 2010 to June 24, 2010. As that deadline approached, however, it became apparent that
Tronox would be unable to satisfy the conditions precedent to exercising the Facility Extension
Option and would require a waiver and amendment with respect to those milestones.
(b) Amendment to Replacement DIP Facility
To facilitate additional time for negotiations concerning the Plan, Tronox sought and on July
1, 2010, the Bankruptcy Court entered an order authorizing Tronox to enter into an amendment of the
Replacement DIP Facility [Dkt. No. 1683]. Under the Amendment and in exchange for the payment of
an amendment fee, GS Lending Partners and the lenders under the Replacement DIP Facility agreed to
extend certain restructuring milestones related to, among other things, (a) approval of a
disclosure statement and (b) binding and enforceable settlement documentation with Government
Environmental Entities, which permitted Tronox to extend the maturity date under the Replacement
DIP Facility from June 24, 2010 to September 24, 2010. The amendment also (a) allowed Tronox to
engage in certain currency hedging activities that had previously been restricted and (b) modified
restrictions on Tronoxs ability to make certain capital expenditures that will fund an expansion
of its Australian joint venture.
39
As of June 30, 2010, Tronox was and remains in technical default under the Replacement DIP
Agreement on account of the June 30, 2010 expiration of the December Plan Support and Equity
Commitment Agreements. Accordingly, Tronox sought and on September 23, 2010, the Bankruptcy Court
entered an order [Dkt. No. 2156] authorizing Tronox to enter into a forbearance and amendment with
respect to the Replacement DIP Agreement. Under this forbearance and amendment, which did not
require payment of any new fees, GS Lending Partners and the lenders under the Replacement DIP
Facility agreed to (a) forbear from exercising certain rights and remedies with respect to the
existing default under the Replacement DIP Agreement during a forbearance period, which expires no
later than October 29, 2010, and (b) extend certain restructuring milestones related to entry of an
order approving the disclosure statement and entering into binding and enforceable settlement
documentation with the Government Environmental Entities. Entry into the forbearance and amendment
permitted Tronox to extend the maturity date under the Replacement DIP Facility from September 24,
2010 to December 24, 2010.
K. Significant Developments Following Execution of the December Plan Support Agreement
Based on the circumstances at the time, negotiating and entering into the December Plan
Support Agreement and obtaining committed debt and equity financing was a significant achievement
for Tronox, which was intended to enable Tronox to emerge from Chapter 11. The proposed resolution
of Tronoxs Environmental Claims set forth in the December Plan Support Agreement, however,
required further agreement not only of the United States (the only Government Environmental
Claimant signatory to the December Plan Support Agreement), but also of certain key states and
other governmental entities. Indeed, the relevant reorganization agreements (the December Plan
Support Agreement, the December Equity Commitment Agreement and the Replacement DIP Agreement) all
specifically required Tronox to obtain necessary approvals and consents from applicable
governmental entities (and contained associated milestones related thereto). The United States
obligations to support a Plan based on the terms of the December Plan Support Agreement was also
expressly conditioned on the United States obtaining such approvals and successfully passing all
required public notice and comment periods.
Following the execution of the reorganization agreements described above, both the United
States and Tronox have actively engaged in efforts to finalize settlement documentation and obtain
consensus among all of the Government Environmental Claimants on the terms of such settlement.
Tronox met with the environmental regulators from several states to discuss the plan framework and
how those states will benefit under the Plan. Tronox also engaged in discussions with the Equity
Committee in an effort to incorporate holders of Equity Interests into the plan framework.
As those discussions were underway through the first half of 2010, Tronoxs operating
performance continued to improve, and it appeared that Tronox was likely to materially outperform
its 2010 full-year EBITDAR projections of $130 million as reported in its last publicly available
forecast in October 2009 and which had formed the basis for expectations of value at the time
the December Plan Support Agreement was negotiated. In addition, the capital markets opened up
and, as a result, Tronox (as well as other companies) had access to financing that was not
available in 2009.
In or around March of 2010, certain of the Government Environmental Claimants first
articulated to Tronox that the consideration to be afforded to them under the December Plan Support
Agreement would not be sufficient to achieve a settlement of the Environmental Claims.25
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25 |
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By letter dated February 22, 2010, the state of
Nevada (on behalf of the Nevada Division of Environmental Protection) expressed
its dissatisfaction with the terms of the proposed plan of reorganization as
set forth in the Plan Support Agreement. Similarly, on March 18, 2010, the
Southern Nevada Water Authority, the Central Arizona Water Conservation
District and the Metropolitan Water District of Los Angeles (collectively, the
Colorado River Authorities) and the state of Nevada filed a statement [Dkt.
No. 1333] in response to Tronoxs fourth exclusivity extension motion [Dkt. No.
1261], wherein the Colorado River Authorities and the state of Nevada expressed
their dissatisfaction with the state of negotiations regarding the plan. On
April 28, |
(Continued...)
40
Thereafter, over a period of several months, Tronox engaged in ongoing discussions with
the United States in an effort to understand the size and nature of the additional consideration
that would be required to achieve a settlement of the Environmental Claims, and whether and to what
extent the original framework could still serve as the basis for such settlement. Throughout this
period, Tronox kept all of its constituents apprised of developments on a confidential basis.
The following is a summary of the various proposals exchanged in the weeks and months leading
up to the filing of the original proposed plan of reorganization on July 7, 2010:
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On or about May 21, 2010, the United States provided Tronox with guidance regarding the
increased compensation required by the United States to settle Tronoxs liability for the
Environmental Claims, which outlined the following contributions to or for the benefit of
the Environmental Response Trusts on the Effective Date: (a) $275 million in Cash (compared
to $115 million in Cash as provided in the December Plan Support Agreement); (b) the
Henderson Facility, which Tronox would continue to operate under a long-term lease for $3
million per year and provide financial assurance in connection therewith; and (c) the
Nevada Assets.26 The United States proposal continued to provide that Tronox
would contribute to the Environmental Response Trusts the right to 88% of the proceeds of
the Anadarko Litigation and the Environmental Insurance Assets. Notably, this proposal did
not have the support of the state of Nevada or the Colorado River Authorities. |
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On or around May 28, 2010, following initial feedback from Tronox regarding, among other
things, its unwillingness to lease the Henderson Facility and its inability to raise the
Cash requested, the United States provided Tronox with further feedback regarding an
alternative, lower cash proposal, pursuant to which Tronox could contribute a minimum of
$215 million in Cash and fund the Cash shortfall with preferred stock with a liquidation
preference equal to 150% of the Cash shortfall. The settlement also contemplated, at
Tronoxs request, that instead of leasing the Henderson Facility for $3 million per year,
Tronox could make a one-time payment of $20 million in Cash, which increased the target
Cash required for the Environmental Response Trusts to $295 million. |
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On or about June 9, 2010, Tronox advised the United States that (a) it could not
contribute more than $145 million in Cash to the Funded Environmental Amount (such amount
reflecting the maximum amount of Cash Tronox could and would prudently obtain in the debt
markets) and (b) in Tronoxs view, any preferred securities used to bridge the Cash
shortfall should not reflect a premium to the Cash shortfall. Notably, Tronox is focused
on ensuring that it emerges from chapter 11 with an appropriate capital structure. |
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In the meantime, on June 8, 2010, a subset of the Ad Hoc Noteholders Committee and
certain other holders of Unsecured Notes signed a confidentiality agreement and became
restricted in an effort to reach consensus on the terms of a new plan of reorganization. |
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On or about June 18, 2010, the Creditors Committee and the Ad Hoc Noteholders
Committee delivered a joint proposal to the United States, which proposal provided for the
following contributions on account of Environmental Claims: (a) $180 million in Cash,
funded through a $90 million rights offering and $90 |
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2010, this Court extended Tronoxs exclusive periods to July 12, 2010
and September 13, 2010, respectively, the maximum periods permitted by the
Bankruptcy Code [Dkt. No. 1505]. |
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26 |
|
As defined in the Plan, the Nevada Assets consist
of (a) Tronoxs interest in Basic Management, Inc. (BMI), (b) Tronoxs
interest in the Landwell Company, LP (Landwell) and (c) the Nevada Property
(which consists of real property owned by Tronox, comprised of several parcels
located in Clark County, Nevada). BMI and Landwell own approximately 2,100
acres of residential and commercial development land in Southern Nevada, and
also own certain water and power purchase rights, which have historically
reduced Tronoxs operating costs at the Henderson Business. |
41
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million in additional debt financing; (b) future lease payments for the Henderson Facility
of $1.6 million per year for 25 years, with three 25-year renewal options at the same lease
price; (iii) $20 million in preferred stock; (d) the right to 88% of the Anadarko
Litigation; and (e) the Environmental Insurance Assets. The proposal did not include the
Nevada Assets in the consideration to be contributed to the Environmental Response Trusts. |
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The United States rejected the June 18th proposal from the Ad Hoc Noteholders Committee
and the Creditors Committee as being materially inadequate and did not provide a
counterproposal. |
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On or about June 21, 2010, in an effort to bridge the gap between the different
positions in enterprise value implied by the competing proposals, Tronox circulated a straw
man proposal to the United States, the Creditors Committee and the Ad Hoc Noteholders
Committee, which provided for contributions to the Environmental Response Trusts
substantially similar to that set forth in Tronoxs original proposed Plan filed on July 7,
2010 [Dkt. No. 1706]. Tronox believed such a plan structure had certain important elements
that would foster consensus among its constituents. |
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On June 28, 2010, Tronox arranged a meeting with the United States and the Equity
Committee to discuss potential ways to reach a consensual arrangement among the
Environmental Claimants, the Equity Committee and Tronox. The parties discussed a variety
of ideas and, on July 1, 2010, the Equity Committee provided a proposed term sheet to
Tronox and the United States. |
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On July 5, 2010, the United States responded to Tronoxs June 21 proposal, requesting
the following consideration: (i) $165 million in Cash; (ii) $130 million in 15% perpetual
preferred stock convertible at an equity value 10% greater than plan value; (iii) 7-year
warrants convertible into 16.7% of the fully-diluted equity of Reorganized Tronox at an
implied total enterprise value of $1.05 billion; (iv) the right to 88% of the proceeds of
the Anadarko Litigation; (v) the Environmental Insurance Assets and (vi) the Nevada Assets.
This proposal still did not have the support of the state of Nevada or the Colorado River
Authorities. |
Despite several in person meetings among Tronox, the United States (together with
representatives of certain other non-consenting Government Environmental Claimants), the Creditors
Committee, the Ad Hoc Noteholders Committee (including restricted principals) and, in certain
instances, the Equity Committee throughout this time period, the parties could not reach an
agreement on the terms of a consensual plan.
On June 30, 2010, the December Plan Support Agreement and December Equity Commitment Agreement
terminated by their terms. Under the terms of the confidentiality agreements entered into by the
members of the Ad Hoc Noteholders Committee, Tronox had also agreed that the restrictions on
trading would be lifted through the public release of all material non-public information on or
before July 8, 2010. Accordingly, on July 7, 2010, prior to the expiration of Tronoxs Exclusive
Filing Period (as defined below), Tronox filed its original plan of reorganization and related
disclosure statement to cleanse the restricted Noteholders and put forth a proposed framework for
emergence. The July 7 plan did not have the support of Tronoxs stakeholders. The United States
still demanded more Cash and richer securities to make up for the perceived lack of value in
Tronoxs June 21 straw man proposal. Tronoxs Noteholders (the obvious source of financing for the
governments cash demands) were unwilling to invest equity capital behind government-held
securities with a substantial liquidation preference and without certainty that all Governmental
Environmental Entities (such as the Nevada Parties) would be supportive of the proposal.
Following the filing of the Plan, the parties continued negotiations and conducted substantial
additional diligence, culminating in a meeting on July 19, 2010 where the Nevada Parties and the
United States articulated for the first time to Tronox, the Creditors Committee and the restricted
Noteholders the level of consideration that would be required for such government parties to
collectively support a global settlement. In the weeks that followed, the parties engaged in
substantial additional diligence, telephone conferences and in-person meetings, eventually reaching
agreement on the structure of the Plan and the funding thereof on or about August 3, 2010. On
August 27, 2010, Tronox entered into the new Plan Support and Equity Commitment Agreements, which
set forth the terms of the current proposed Plan.
42
L. Exclusivity
Throughout the Plan negotiation and development process, Tronox has remained mindful of the
limits on its exclusive right to file a Plan. Under the Bankruptcy Code, a debtor has the
exclusive right to file a plan of reorganization for an initial period of up to 120 days from the
date on which the debtor filed for bankruptcy (the Exclusive Filing Period). If a debtor
files a plan during the Exclusive Filing Period, then the debtor has the exclusive right for 180
days from the commencement of the case to solicit acceptances of its proposed plan of
reorganization (the Exclusive Solicitation Period and together with the Exclusive Filing
Period, the Exclusive Periods). During the Exclusive Periods, no other party in interest
may file a competing plan of reorganization. A court may extend these initial Exclusive Periods
for cause upon the request of a party in interest, but, as a result of recent amendments to the
Bankruptcy Code, the Exclusive Filing Period may not be extended beyond 18 months after the
Petition Date and the Exclusive Solicitation Period may not be extended beyond 20 months following
the Petition Date. July 12, 2010 was the 18-month anniversary of the Petition Date and the date on
which Tronoxs Exclusive Filing Period expired. The Exclusive Solicitation Period expires on
September 13, 2010. Tronox believes that it is best positioned to file a proposed plan that is
fair, equitable and maximizes recoveries to its constituents, and that any attempt by another party
in interest to file a competing plan could result in significant delays, litigation and additional
costs that could negatively affect value and creditor recoveries.
IV. SUMMARY OF THE PLAN
A. Treatment of Unclassified Claims
(i) General Administrative Claims.
As specified in Article II of the Plan, unless otherwise agreed to by the Holder of a General
Administrative Claim (which do not include Environmental Claims) and Tronox or Reorganized Tronox,
as applicable (with the consent of the Creditors Committee and the Required Backstop Parties),
each Holder of an Allowed General Administrative Claim will receive, in full satisfaction of its
General Administrative Claim, Cash equal to the amount of such Allowed General Administrative Claim
either: (a) on the Effective Date; (b) if the General Administrative Claim is not Allowed as of
the Effective Date, 30 days after the date on which an order allowing such General Administrative
Claim becomes a Final Order, or as soon thereafter as reasonably practicable; or (c) if the Allowed
General Administrative Claim is based on a liability incurred by Tronox in the ordinary course of
their business during the Postpetition Period, pursuant to the terms and conditions of the
particular transaction giving rise to such Allowed General Administrative Claims, without any
further action by the Holder of such Allowed General Administrative Claim.
(a) Administrative Claims Bar Date
Except as otherwise provided in Article II of the Plan, requests for payment of Administrative
Claims must be filed and served on Reorganized Tronox pursuant to the procedures specified in the
Confirmation Order (and the notice of entry of the Confirmation Order) no later than the
Administrative Claims Bar Date, which shall be the 45th day after the Effective Date. Holders of
Administrative Claims that are required to, but do not, file and serve a request for payment of
such Administrative Claims by such date shall be forever barred, estopped and enjoined from
asserting such Administrative Claims against Tronox or Reorganized Tronox or their property and
such Administrative Claims shall be deemed discharged as of the Effective Date. Objections to such
requests, if any, must be filed and served on Reorganized Tronox and the requesting party no later
than 75 days after the Effective Date. Notwithstanding the foregoing, no request for payment of an
Administrative Claim need be filed with respect to an Administrative Claim previously Allowed by
Final Order, including all Administrative Claims expressly Allowed under this Plan.
43
(ii) Professional Compensation.
(a) Final Fee Applications.
All final requests for payment of Professional Fee Claims, including the Holdback Amount and
Professional Fee Claims incurred during the period from Petition Date through the Confirmation
Date, must be filed with the Bankruptcy Court and served on Tronox and counsel to the Creditors
Committee no later than 60 days after the Confirmation Date. After notice and a hearing in
accordance with the procedures established by the Bankruptcy Code and prior orders of the
Bankruptcy Court in the Chapter 11 Cases, the allowed amounts of such Professional Fee Claims as
determined by Final Order of the Bankruptcy Court shall be paid by Reorganized Tronox in full in
Cash.
(b) Payment of Interim Amounts.
Subject to the Holdback Amount, on the Effective Date, Tronox shall pay all amounts owing to
Professionals for all outstanding amounts payable relating to prior periods through the
Confirmation Date. To receive payment, on or before Effective Date, each Professional shall submit
a detailed invoice covering such period in the manner and providing the detail as set forth in the
Professional Fee Order.
(c) Post-Confirmation Date Fees and Expenses.
Except as otherwise specifically provided in the Plan, from and after the Confirmation Date,
Tronox or Reorganized Tronox, as the case may be, shall, in the ordinary course of business and
without any further notice to or action, order, or approval of the Bankruptcy Court, pay in Cash
the reasonable legal, professional or other fees and expenses related to implementation and
Consummation of the Plan incurred by Tronox or Reorganized Tronox. Except as otherwise
specifically provided in the Plan, upon the Confirmation Date, any requirement that Professionals
comply with sections 327 through 331 and 1103 of the Bankruptcy Code in seeking retention or
compensation for services rendered after such date shall terminate, and Tronox or Reorganized
Tronox, as the case may be, may employ and pay any Professional in the ordinary course of business
without any further notice to or action, order or approval of the Bankruptcy Court.
(iii) Replacement DIP Facility Claims
The Replacement DIP Facility Claims shall be Allowed in full, including (i) all Claims for
unpaid principal, interest and other charges outstanding on the Effective Date and (ii) all Claims
for fees and expenses and other charges provided for under the Replacement DIP Documents. On the
Effective Date, either (i) (x) the Allowed Replacement DIP Facility Claims shall convert into the
Exit Financing in accordance with the terms of the Replacement DIP Documents, (y) Reorganized
Tronox shall be bound by the Replacement DIP Documents (which shall thereupon constitute the Exit
Facility Credit Documents), and (z) Reorganized Tronox shall assume the Allowed Replacement DIP
Facility Claims in accordance with the terms of the Exit Credit Documents, or (ii) (w) the Allowed
Replacement DIP Facility Claims shall be paid in full in Cash on the Effective Date, (x) all
Existing Letters of Credit shall be terminated without liability to the issuer thereof or any agent
or lender under the Replacement DIP Facility or such Existing Letters of Credit shall be cash
collateralized in accordance with the terms of the applicable Exit Credit Documents, (y)
Reorganized Tronox shall assume all contingent Claims under the Replacement DIP Documents that
expressly survive the termination thereof, and (z) all financing commitments under the Replacement
DIP Documents shall terminate in full.
(iv) Priority Tax Claims
Except to the extent that a Holder of an Allowed Priority Tax Claim agrees to a less favorable
treatment, in full and final satisfaction, settlement, release and discharge of and in exchange for
each Allowed Priority Tax Claim, each Holder of such Allowed Priority Tax Claim shall be paid in
full in cash on the Effective Date, or as soon thereafter as is practicable, provided,
however, that Tronox or Reorganized Tronox shall be authorized, at its option, and in lieu
of payment in full in Cash of an Allowed Priority Tax Claim, to make deferred Cash payments on
account thereof in the manner and to the extent permitted under section 1129(a)(9)(C) of the
Bankruptcy Code. To
44
the extent any Allowed Priority Tax Claim is not due and owing on or before the Effective
Date, such Claim shall be paid in full in Cash in accordance with the terms of any agreement
between Tronox and such Holder, or as may be due and payable under applicable non-bankruptcy law or
in the ordinary course of business.
(v) United States Trustee Statutory Fees
Tronox shall pay all United States Trustee quarterly fees under 28 U.S.C § 1930(a)(6), plus
any interest due and payable under 31 U.S.C. § 3717 on all disbursements, including Plan payments
and disbursements in and outside the ordinary course of Tronoxs businesses, for each quarter
(including any fraction thereof) until the Chapter 11 Cases are converted, dismissed or closed,
whichever occurs first.
B. Classification and Treatment of Claims and Equity Interests
In accordance with section 1122 of the Bankruptcy Code, the Plan places Claims and Equity
Interests into one of the eight Classes listed in the table below, together with the respective
status and voting rights of each Class:
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Class |
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Claims and Equity Interests |
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Status |
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Voting Rights |
Class 1
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Priority Non-Tax Claims
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Unimpaired
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Not Entitled to
Vote (Deemed to
Accept) |
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Class 2
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Secured Claims
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Unimpaired
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Not Entitled to
Vote (Deemed to
Accept) |
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Class 3
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General Unsecured Claims
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Impaired
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Entitled to Vote |
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Class 4
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Tort Claims
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Impaired
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Entitled to Vote |
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Class 5
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Environmental Claims
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Impaired
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Entitled to Vote |
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Class 6
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Indirect Environmental Claims
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Impaired
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Entitled to Vote |
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Class 7
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Convenience Claims
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Impaired
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Entitled to Vote |
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Class 8
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Equity Interests in Tronox Incorporated
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Impaired
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Entitled to Vote |
(i) Class 1 Priority Non-Tax Claims.
The Plan defines Priority Non-Tax Claims as any Claim, other than an Administrative Claim or a
Priority Tax Claim, entitled to priority in right of payment under section 507(a) of the Bankruptcy
Code.
The Plan provides that except to the extent that a Holder of an Allowed Priority-Non Tax Claim
agrees to a less favorable treatment, in full and final satisfaction, settlement, release and
discharge of and in exchange for each Allowed Priority Non-Tax Claim, each Holder of such Allowed
Priority Non-Tax Claim shall be paid in full in Cash on or as soon as reasonably practicable after
(a) the Effective Date or (b) the date on which such Priority Non-Tax Claim becomes Allowed.
Class 1 is Unimpaired by the Plan. Each Holder of a Priority Non-Tax Claim is conclusively
presumed to have accepted the Plan pursuant to section 1126(f) of the Bankruptcy Code. Therefore,
Holders of Priority Non-Tax Claims are not entitled to vote to accept or reject the Plan.
(ii) Class 2 Secured Claims.
The Plan defines Secured Claims as any Claim that is Secured (but excluding any Claims under
the Replacement DIP Facility).
The Plan provides that except to the extent that a Holder of an Allowed Secured Claim agrees
to a less favorable treatment, in full and final satisfaction, settlement, release and discharge of
and in exchange for each Allowed Secured Claim, Holders of Allowed Secured Claims shall receive one
of the following treatments, at the discretion of Tronox (with the reasonable consent of the
Creditors Committee and Required Backstop Parties):
45
(a) Tronox or Reorganized Tronox shall pay such Allowed Secured Claim in full in Cash including the
payment of any interest required to be paid under section 506(b) of the Bankruptcy Code; (b) Tronox
or Reorganized Tronox shall deliver the collateral securing any such Allowed Secured Claim; or (c)
Tronox or Reorganized Tronox shall otherwise treat any Allowed Secured Claim in any other manner
such that the Claim shall be rendered Unimpaired.
Class 2 is Unimpaired by the Plan. Each Holder of a Secured Claim is conclusively presumed to
have accepted the Plan pursuant to section 1126(f) of the Bankruptcy Code. Therefore, Holders of
Secured Claims are not entitled to vote to accept or reject the Plan.
(iii) Class 3 General Unsecured Claims.
The Plan defines General Unsecured Claims as any Unsecured Claim that is not an Intercompany
Claim, an Environmental Claim, a Tort Claim, an Indirect Environmental Claim or a Convenience
Claim. Class 3 expressly includes the Unsecured Notes Claim.
The Plan provides that on the Effective Date, in full and final satisfaction, settlement,
release and discharge of and in exchange for each Allowed General Unsecured Claim, each Holder of
an Allowed General Unsecured Claim will receive on account of such Allowed General Unsecured Claim
its Pro Rata share of (a) the GUC Pool and (b) Rights to purchase New Common Stock pursuant to the
terms of the Rights Offering.
The GUC Pool is comprised of 50.9% of the New Common Stock to be issued and outstanding as of
the Effective Date, subject to dilution by shares issued in connection with the Management Equity
Plan and the New Warrants.
The Rights referred to above refer to the rights to purchase shares of New Common Stock that
will be given to all Eligible Holders of General Unsecured Claims and Indirect Environmental Claims
on a Pro Rata basis based on their respective Allowed Claims (subject to rounding). The aggregate
purchase price for the shares of New Common Stock issuable upon exercise of the Rights shall be
$185 million. The Rights will only be transferable in connection with a transfer of the Claim
against Tronox to which such Rights relate. Rights will only be granted to any person or entity
who, as of the Rights Expiration Date, is (a) a Holder of an Allowed Class 3 General Unsecured
Claim against Tronox, or (b) a Holder of an Allowed Class 6 Indirect Environmental Claim against
Tronox; provided, however, that for Holders of Allowed Class 6 Indirect
Environmental Claims, their respective Allowed Claim for purposes of participation in the Rights
Offering shall be limited to 50% of the amount of such Allowed Claim. The materials for
participating in the Rights Offering will be provided separately and Eligible Holders must comply
with the instructions in such materials to subscribe for Rights.
To participate in the Rights Offering, your claim must be
Allowed on or before the Rights Expiration Date, which is November 10, 2010.
As set forth in Article IX.B of the Plan, it is a condition precedent to the Effective Date
that the aggregate amount of (a) Allowed General Unsecured Claims (excluding the Unsecured Notes
Claim) and (b) Allowed Indirect Environmental Claims shall not exceed $160 million.
Class 3 is Impaired by the Plan. Holders of General Unsecured Claims are entitled to vote to
accept or reject the Plan.
(iv) Class 4 Tort Claims.
The Plan defines Tort Claims as non-governmental Claims against Tronox, whether such Claims
are known or unknown, whether by contract, tort or statute, whether existing or hereinafter
arising, for death, bodily injury, sickness, disease, medical monitoring or other personal physical
injuries or damage to property to the extent caused or allegedly caused directly or indirectly by
the presence of or exposure to any product or toxin manufactured or disposed of, or other property
owned, operated or used for disposal by, Tronox or any Entity for whose products or operations
Tronox allegedly has liability, including all such Claims relating to the Owned Sites, the Other
Sites, the Environmental Trust Assets, the Nevada Assets or the Retained Assets to the extent
owned, operated or used for
46
disposal by, Tronox prior to the Effective Date and not by Reorganized Tronox, including
Non-Asbestos Toxic Exposure Claims (i.e. benzene and creosote claims), Property Damage Claims
(including NORM claims), Asbestos Claims and Claims of Future Tort Claimants. For the avoidance of
doubt, Tort Claims do not include any workers compensation claims brought directly by a past or
present employee of Tronox under an applicable workers compensation statute, which claims are
unimpaired under the Plan and will continue to be administered by Reorganized Tronox in the
ordinary course.
The Plan provides that in full and final satisfaction, settlement, release and discharge of
and in exchange for each Tort Claim, Holders of Allowed Tort Claims will receive on account of such
Allowed Tort Claims a Distribution from the Tort Claims Trust in accordance with the Tort Claims
Distribution Procedures. Pursuant to Article IV.C of the Plan, on the Effective Date, Tronox will
establish the Tort Claims Trust (to be administered by the Tort Claims Trustee pursuant to the Tort
Claims Trust Agreement) and transfer to the Tort Claims Trust the following consideration:
|
a) |
|
the right to 12% of the proceeds of the Anadarko Litigation
(together with any other fee sharing or other arrangements to be agreed upon in
good faith by the United States and holders of Tort Claims, which agreement
will be set forth in the Anadarko Litigation Trust Agreement); |
|
|
b) |
|
the Funded Tort Claims Trust Amount (which consists of $12.5
million in Cash); and |
|
|
c) |
|
the Tort Claims Insurance Assets. |
Pursuant to Article IV of the Plan, the Tort Claims Trust Distributable Amount will be
distributed in accordance with the Tort Claims Trust Agreement along the following parameters:
|
a) |
|
6.25% to Holders of Allowed Indirect Environmental Claims if
the aggregate amount of Allowed Indirect Environmental Claims is equal to or
greater than $80 million, such that the aggregate amount of Allowed Indirect
Environmental Claims to be paid out of the Tort Claims Trust Distributable
Amount is equal to or greater than $40 million; provided that if the
aggregate amount of Allowed Indirect Environmental Claims to be paid out of the
Tort Claims Trust is less than $40 million, then the percentage shall be
proportionally reduced (for example, if the aggregate amount of Allowed
Indirect Environmental Claims is $20 million, then Holders of Allowed Indirect
Environmental Claims shall receive 50% of the above allocated percentage of
the Tort Claims Trust Distributable Amount, or 3.125%); |
|
|
b) |
|
6.25% to Holders of Asbestos Claims and Future Tort Claimants; |
|
|
c) |
|
6.25% to Holders of Property Damage Claims if the aggregate
amount of Allowed Property Damage Claims is equal to or greater than $50
million; provided that if the aggregate amount of Allowed Property Damage
Claims is less than $50 million, then the 6.25% shall be proportionally reduced
(for example, if the aggregate amount of Allowed Property Damage Claims is $25
million, then Holders of Property Damage Claims shall receive 50% of 6.25%, or
3.125%, of the Tort Claims Trust Distributable Amount).; and |
|
|
d) |
|
the remaining Tort Claims Trust Distributable Amount shall be
distributed to Holders of Non-Asbestos Toxic Exposure Claims. |
The sole recourse of Holders of Tort Claims shall be the Tort Claims Trust, and such Holders shall
have no right an any time to assert Tort Claims against Reorganized Tronox. Final determinations
with respect to the allowance or disallowance of Tort Claims for distribution purposes will be made
in accordance with the Tort Claims Trust Distribution Procedures.
47
Class 4 is Impaired by the Plan. Holders of any Tort Claim that is not subject to an
objection filed by Tronox or any other party in interest as of the date that is thirty (30) days
before the Voting Deadline shall be entitled to vote to accept or reject the Plan.
(v) Class 5 Environmental Claims.
The Plan defines Environmental Claims as all civil claims asserted by any Government
Environmental Entity against, and other civil responsibilities, obligations or liabilities of,
Tronox with respect to the Owned Sites and Other Sites, relating to or arising under CERCLA, RCRA
or any other Environmental Law, including claims for restoration, corrective action or remediation
of environmental or natural resource conditions, the treatment of which Environmental Claims is set
forth in the Environmental Claims Settlement Agreement.
Each Holder of an Environmental Claim shall be entitled to treatment of its Environmental
Claim and receive such consideration as is provided in the Environmental Claims Settlement
Agreement, all as more fully described in Article IV of the Plan. The sole recourse of Holders of
Environmental Claims shall be in accordance with the rights of such Holders set forth in the
Environmental Claims Settlement Agreement. On the Effective Date, Tronox will establish the
Environmental Response Trusts and transfer to or for the benefit of such Environmental Response
Trusts and/or certain of the Government Environmental Entities the following consideration (to be
allocated in accordance with the Environmental Claims Settlement Agreement): (a) the right to 88%
of the proceeds of the Anadarko Litigation; (b) the Funded Environmental Amount (which consists of
$270 million in Cash); (c) the Environmental Trust Assets; (d) the Nevada Assets; and (e) the
Environmental Insurance Assets.
As described in the Executive Summary in section I of this Disclosure Statement, the
Environmental Response Trusts and/or the Government Environmental Entities provide Tronox and
Reorganized Tronox with a discharge and/or covenants not to sue with respect to Tronoxs liability
for go-forward cleanup costs associated with the Owned Sites (title to which will be transferred to
the Environmental Response Trusts) and certain Other Sites in exchange for the package of
consideration listed in the previous paragraph. For a further discussion of the Environmental
Settlement Agreement and establishment of the Environmental Response Trusts, see Article IV.E(iii).
Class 5 is Impaired by the Plan. Holders of Environmental Claims are entitled to vote to
accept or reject the Plan.
(vi) Class 6 Indirect Environmental Claims
The Plan defines Indirect Environmental Claims as any Claim held by a private party for breach
of contract, indemnification, contribution, reimbursement or cost recovery related to environmental
monitoring or remediation, including Claims for contribution or direct costs under any
Environmental Law.
The Plan provides that in full and final satisfaction, settlement, release and discharge of
and in exchange for each Allowed Indirect Environmental Claim, Holders of Allowed Indirect
Environmental Claims will have their Allowed Claims split for purposes of sharing in the
Distributions to Holders of Allowed General Unsecured Claims and Allowed Tort Claims, as follows:
|
a) |
|
50% of the amount of each Allowed Indirect Environmental Claim
will be treated in accordance with the treatment provided to Class 3 General
Unsecured Claims, and will receive its Pro Rata share of (a) the GUC Pool and
(b) Rights to participate in the Rights Offering; provided,
however, that if the Indirect Environmental Claim is Allowed in an
amount equal to or less than $500, the first 50% of the Allowed Indirect
Environmental Claim will be a Convenience Claim and receive the treatment set
forth in Class 7; and |
|
|
b) |
|
50% of the amount of each Allowed Indirect Environmental Claim
will receive its Pro Rata share of the Tort Claims Trust Distributable Amount
allocated to Allowed Indirect Environmental Claims. |
48
The Rights referred to above refer to the rights to purchase shares of New Common Stock that
will be given to all Eligible Holders of General Unsecured Claims and Indirect Environmental Claims
on a Pro Rata basis based on their respective Allowed Claims (subject to rounding). The aggregate
purchase price for the shares of New Common Stock issuable upon exercise of the Rights shall be
$185 million. The Rights will only be transferable in connection with a transfer of the Claim
against Tronox to which such Rights relate. Rights will only be granted to any person or entity
who, as of the Rights Expiration Date, is (a) a Holder of an Allowed Class 3 General Unsecured
Claim against Tronox, or (b) a Holder of an Allowed Class 6 Indirect Environmental Claim against
Tronox; provided, however, that for Holders of Allowed Class 6 Indirect
Environmental Claims, their respective Allowed Claim for purposes of participation in the Rights
Offering shall be limited to 50% of the amount of such Allowed Claim. The materials for
participating in the Rights Offering will be provided separately and Eligible Holders must comply
with the instructions in such materials to subscribe for Rights.
To participate in the Rights Offering, your claim must be
Allowed on or before the Rights Expiration Date, which is November 10, 2010.
As set forth in Article IX.B of the Plan, it is a condition precedent to the Effective Date
that the aggregate amount of (a) Allowed General Unsecured Claims (excluding the Unsecured Notes
Claim) and (b) Allowed Indirect Environmental Claims shall not exceed $160 million.
Class 6 is Impaired by the Plan. Holders of Indirect Environmental Claims are entitled to
vote to accept or reject the Plan.
(vii) Class 7 Convenience Claims.
The Plan defines Class 7 Convenience Claims as any (a) Allowed General Unsecured Claim in an
amount equal to or less than $250 and (b) 50% of an Allowed Indirect Environmental Claim in an
amount equal to or less than $500.
The Plan provides that on the later of the Effective Date and as soon as practicable after
such Convenience Claim becomes Allowed, in full and final satisfaction, settlement, release and
discharge of and in exchange for each Allowed Convenience Claim, each Holder of an Allowed
Convenience Claim shall receive payment in Cash of 89% of the amount of such Allowed Convenience
Claim, which payments shall be funded by the Backstop Parties through the purchase of the shares of
New Common Stock to which the Holders of such Claims would otherwise have been entitled, in lieu of
receiving a distribution of New Common Stock.
If a holder of an Allowed General Unsecured Claim holds two or more Claims, one of which is in
an amount less than $250 or $500 (as the case may be) but an aggregated total of its Claims would
be greater than $250 or $500 (as the case may be) such holder may elect to aggregate such claims
for the purpose of participating in the Rights Offering.
Class 7 is Impaired by the Plan. Holders of Convenience Claims are entitled to vote to accept
or reject the Plan.
(viii) Class 8 Equity Interests in Tronox Incorporated.
The Plan provides that on and after the Effective Date, all Equity Interests shall be
cancelled and shall be of no further force and effect, whether surrendered for cancellation or
otherwise. For settlement purposes only, the Plan provides that Class 8 may vote to accept or
reject the Plan.
If Class 8 votes in favor of the Plan, on the Effective Date, each Holder of an Equity
Interest in Tronox Incorporated shall receive its Pro Rata share of the New Warrants.
If Class 8 votes to reject the Plan, Holders of Equity Interests in Tronox
Incorporated shall receive no Distribution.
49
Pursuant to section 1129(b)(2) of the Bankruptcy Code, to the extent all other Voting Classes
do not vote to accept the Plan and Tronox pursues non-consensual confirmation, Class 8 may not be
entitled to any recovery, regardless of whether Class 8 votes in favor of or against the Plan.
C. Certain Special Provisions
(i) Intercompany Claims
Notwithstanding anything in the Plan to the contrary, on the Effective Date or as soon
thereafter as is reasonably practicable, at the option of Tronox or Reorganized Tronox (with the
consent of the Creditors Committee and the Required Backstop Parties), all Intercompany Claims
will be: (a) preserved and reinstated, in full or in part; (b) cancelled and discharged, in full or
in part, in which case such discharged and satisfied portion shall be eliminated and the Holders
thereof shall not be entitled to, and shall not receive or retain, any property or interest in
property on account of such portion under the Plan; (c) eliminated or waived based on accounting
entries in Tronoxs or Reorganized Tronoxs books and records and other corporate activities by
Tronox or Reorganized Tronox in their discretion; or (d) contributed to the capital of the
obligation entity.
(ii) Special Provision Governing Unimpaired Claims
Except as otherwise provided in the Plan, nothing under the Plan shall affect Tronoxs rights
in respect of any Unimpaired Claims, including, all rights in respect of legal and equitable
defenses to or setoffs or recoupments against any such Unimpaired Claims.
(iii) Subordinated Claims
The allowance, classification, and treatment of all Allowed Claims and the respective
Distributions and treatments under the Plan take into account and conform to the relative priority
and rights of the Claims in each Class in connection with any contractual, legal, and equitable
subordination rights relating thereto, whether arising under general principles of equitable
subordination, section 510(b) of the Bankruptcy Code, or otherwise. Pursuant to section 510 of the
Bankruptcy Code, Tronox reserves the right to re-classify any Allowed Claim or Equity Interest in
accordance with any contractual, legal or equitable subordination rights relating thereto.
D. Acceptance or Rejection of the Plan
(i) Voting Classes.
Classes 3, 4, 5, 6, 7 and 8 are Impaired under the Plan and are entitled to vote to accept or
reject the Plan.
(ii) Presumed Acceptance of the Plan.
Classes 1 and 2 are Unimpaired under the Plan. The Holders of Claims in such Classes are
deemed to have accepted the Plan and are not entitled to vote to accept or reject the Plan.
(iii) Confirmation Pursuant to Sections 1129(a)(10) and 1129(b) of the Bankruptcy Code
Section 1129(a)(10) of the Bankruptcy Code shall be satisfied for purposes of Confirmation by
acceptance of the Plan by any one of Classes 3, 4, 5, 6, 7 and 8. Tronox shall seek Confirmation
of the Plan pursuant to section 1129(b) of the Bankruptcy Code with respect to any rejecting Class
of Claims.
E. Certain Means for Implementation of the Plan
(i) General Settlement of Claims
As discussed in detail in herein and as provided in the Plan, pursuant to section 1123 of the
Bankruptcy Code and Bankruptcy Rule 9019, and in consideration for the classification,
Distributions, releases, and other
50
benefits provided under the Plan, upon the Effective Date, the provisions of the Plan shall
constitute a good faith compromise and settlement of all Claims and Equity Interests and
controversies resolved pursuant to the Plan. Subject to Article VI of the Plan, all Distributions
made to Holders of Allowed Claims or Equity Interests in any Class are intended to and shall be
final.
(ii) Deemed Substantive Consolidation
The Plan shall serve as a motion by Tronox seeking entry of a Bankruptcy Court order deeming
the substantive consolidation of all of the Estates into a single consolidated Estate for certain
limited purposes related to the Plan, including voting, Confirmation and Distribution.
If the deemed substantive consolidation of all of the Estates is ordered, then on and after
the Effective Date, all assets and liabilities of the Tronox Debtors shall be treated as though
they were merged into the Estate of Tronox Incorporated for all purposes associated with voting,
Confirmation and Distribution, and, subject to Article II of the Plan, all guarantees by any Tronox
Debtor of the obligations of any other Tronox Debtor shall be eliminated so that any Claim and any
guarantee thereof by any other Tronox Debtor, as well as any joint and several liability of any
Tronox Debtor with respect to any other Tronox Debtor shall be treated as one collective obligation
of the Tronox Debtors. Deemed substantive consolidation shall not affect the legal and
organizational structure of Reorganized Tronox or its separate corporate existence or that of its
subsidiaries and affiliates or any prepetition or postpetition guarantees, Liens, or security
interests that are required to be maintained under the Bankruptcy Code, the Plan, the Exit Credit
Documents, any contract, instrument or other agreement or document pursuant to the Plan, or, in
connection with contracts or leases that were assumed or entered into during the Chapter 11 Cases.
Any alleged defaults under any applicable agreement with the Tronox Debtors, Reorganized Tronox or
their Affiliates arising from deemed substantive consolidation under the Plan shall be deemed cured
as of the Effective Date.
The deemed substantive consolidation of Tronoxs estates as set forth in the Plan is a
component of the consensual global settlement among Tronox and its creditor stakeholders, and is
intended to facilitate implementation of the Plan and the compromises reflected therein by
resolving a dispute as to the propriety of substantive consolidation without the expense or delay
associated with a litigated result. The foregoing notwithstanding, Tronox and the other settling
parties reserve all of their rights to contest whether and to what extent deemed substantive
consolidation is appropriate if the Plan is not confirmed or the aforementioned global settlement
is altered or materially modified.
Notwithstanding the deemed substantive consolidation provided for herein, nothing shall affect
the obligation of each and every Tronox Debtor to pay Quarterly Fees to the Office of the United
States Trustee Pursuant to 28 U.S.C. §1930 until such time as a particular case is closed,
dismissed or converted.
(iii) Environmental & Tort Claims Settlements
(a) Environmental Claims Settlement Agreement
In connection with the Plan, Tronox, the United States and the applicable Government
Environmental Entities will enter into the Environmental Claims Settlement Agreement regarding the
Environmental Claims, the Owned Sites and the Other Sites. The Environmental Claims Settlement
Agreement will be included in the Plan Supplement.
The Environmental Claims Settlement Agreement will govern the operation of the Environmental
Response Trusts and the role of the United States and the relevant Government Environmental
Entities in approving funding of environmental activities, including response or remedial actions,
corrective action, closure, post-closure care and restoration for the duration of the Environmental
Response Trusts. Tronox and Reorganized Tronox shall have no responsibility or involvement with
respect to the Environmental Response Trusts once they are established and funded in accordance
with the Plan, provided that to the extent not completed on or before the Effective Date,
Reorganized Tronox will use commercially reasonable efforts to provide the Environmental Response
Trusts access to all files and information related to the Owned Sites and the Other Sites. The
Environmental Claims Settlement
51
Agreement shall be submitted for public notice and comment as required under federal
environmental law and, where applicable, state environmental law of the state in which the
applicable property is located.
The Environmental Claims Settlement Agreement shall (a) contain covenants not to sue (or, for
certain states, to the extent allowable under applicable state and federal law, releases of any
Environmental Claims) Tronox, Reorganized Tronox and any successors in interest (including any
Claims and actions pursuant to sections 106 and 107 of CERCLA); and (b) provide that Tronox,
Reorganized Tronox and any successors in interest shall have protection from contribution actions
or Claims with respect to the Owned Sites and the Other Sites (including pursuant to section 113 of
CERCLA).
The relevant Governmental Environmental Entity and Tronox or Reorganized Tronox, as the case
may be, shall file any necessary pleading with the applicable district court seeking to modify
applicable consent decrees or related documents, if any, regarding the Owned Sites and the Other
Sites, to conform to the Environmental Claims Settlement Agreement and remove any Tronox Debtor as
a party to such consent decree after the Effective Date.
Notwithstanding anything to the contrary herein, in the Plan or in the Confirmation Order,
nothing shall release, nullify, or preclude any liability of Reorganized Tronox as the owner or
operator of a property of Reorganized Tronox with respect to any properties owned or operated after
the Effective Date (other than with respect to Henderson, Nevada as set forth below in the section
entitled Lease Relating to Henderson Facility) and the Confirmation Order shall so provide.
(b) Creation and Funding of Environmental Response Trusts
On the Effective Date, Tronox will establish the Environmental Response Trusts, to which
Tronox will transfer the Owned Sites free and clear of all Liens, Claims and Encumbrances other
than any liability to governmental entities expressly provided for in the Environmental Response
Trust Agreement and the Environmental Claim Settlement Agreement, which agreements shall be
included in the Plan Supplement. The Environmental Response Trusts will be administered by the
Environmental Response Trustees. Pursuant to the Environmental Response Trust Agreements, the
Environmental Response Trusts shall conduct and fund environmental activities, including response
or remedial actions, removal actions, corrective action, closure, post-closure care and restoration
of or related to the Owned Sites and certain of the Other Sites. As set forth in the Environmental
Response Trust Agreements, any property placed into a Environmental Response Trust may be sold or
transferred with the approval of the United States and the Government Environmental Entity or
Entities of the state in which the property is located, and the proceeds shall be retained by such
Environmental Response Trust to be used as provided in the Environmental Response Trust Agreements
(a) for costs of administration, (b) to conduct or fund any remaining environmental activities
relating to such property, or (c) to reimburse any entity performing such environmental activities.
The Environmental Response Trusts and/or certain Government Environmental Entities will
receive on the Effective Date (a) a portion (which may be all) of the Funded Environmental Amount
as set forth in the Environmental Claims Settlement Agreement; (b) the right to 88% of the Proceeds
of the Anadarko Litigation; (c) the Environmental Trust Assets; (d) the Nevada Assets; and (e) the
Environmental Insurance Assets.
In accordance with the Environmental Response Trust Agreements, upon completion of
environmental activities and reimbursement of any costs therefor required for an Owned Site or
certain of the Other Sites, any funds held for that site by the Environmental Response Trust shall
be transferred (a) first, in accordance with instructions provided by the United States and the
appropriate state, to the account for any other Owned Sites in that state with remaining
environmental activities to be performed related to such sites and a need for additional trust
funding; (b) second, in accordance with instructions provided by the United States after
consultation with the states, to accounts for Owned Sites in other States with remaining
environmental activities to be performed related to the sites and a need for additional trust
funding; (c) to certain of the Other Sites; and (d) fourth, to the Superfund established under
CERCLA.
Except as otherwise provided in the Plan or the Plan Supplement, on the Effective Date, the
Environmental Response Trusts will assume responsibility for, and, to the extent applicable, shall
reimburse Reorganized Tronox for (a) the payment of any and all utility services, fees and property
or other taxes related to such Owned Site that
52
arise, accrue or relate to any period on or after the Effective Date and (b) the Pro Rata
share of any payments owed to Assessment Technologies, Ltd. (ATL), pursuant to the Bankruptcy
Courts order [Dkt. No. 490] approving Tronoxs retention of ATL, that relate to Tax Savings (as
defined in Exhibit 1 to Dkt. No. 490) related to such Owned Site for any tax period or portion
thereof that occurs on or after the Effective Date, provided, however, that any increased tax
liability that is assessed during the protest period relating to tax liability related to any tax
period or portion thereof that occurs prior to the Effective Date shall remain the responsibility
of Tronox. On the Effective Date, any utility or other deposit held by a utility provider or other
entity shall be returned to Tronox, after application of any outstanding balance owed to such
utility provider or other entity.
(c) Lease Relating to Henderson Facility
Reorganized Tronox and the applicable Environmental Response Trust shall have entered into a
lease agreement relating to the Henderson Facility, on terms satisfactory to the Required Backstop
Parties, the Creditors Committee and the relevant government agencies, including the Nevada
Parties, the terms of which lease shall specify that Reorganized Tronox is not responsible for
costs of any environmental remedial action or restoration associated with the presence or releases
of hazardous substances from or at any portion of the Henderson Facility prior to the Effective
Date and all areas affected by natural migration of such substances therefrom whether prior to or
after the Effective Date, except to the extent exacerbated by any act or omission of Reorganized
Tronox after the Effective Date. Notwithstanding the rent for which Reorganized Tronox will be
responsible under the lease, the rent for the Henderson Facility will be set at up to $10.5 million
for the first term, provided that such amount shall then be deducted from the Funded Environmental
Amount and allocated and paid on account of the lease on the Effective Date.
Reorganized Tronox shall exercise commercially reasonable due care at the Henderson Facility
with respect to existing contamination and shall comply in all material respects with all
applicable local, state and federal laws and regulations. Nothing in the previous sentence shall
require Reorganized Tronox to clean up existing contamination in or under the ground except to the
extent materially exacerbated by any act or omission of Reorganized Tronox after the Effective
Date.
Reorganized Tronox recognizes that the implementation of response actions at the Henderson
Facility may interfere with Reorganized Tronoxs use of the property, and may require commercially
reasonable accommodation from Reorganized Tronox. Reorganized Tronox agrees to cooperate fully
with the EPA, the Nevada Division of Environmental Protection (the NDEP) and other relevant state
agencies in the implementation of response actions at the Henderson Facility. The EPA and the
NDEP, consistent with their responsibilities under applicable law, will use reasonable efforts to
minimize any interference with Reorganized Tronoxs operations by such entry and response at the
Henderson Facility.
The lease shall contain customary provisions relating to indemnity by a tenant with respect to
the operation of the tenant at the leased property following the Effective Date. For the avoidance
of doubt, Reorganized Tronox shall have liability as an operator of the Henderson Facility, and
shall be responsible for related response action, if any, to the extent such liability or
responsibility relates to releases of hazardous substances from any portion of the Henderson
Facility due to any act or omission of Reorganized Tronox after the Effective Date.
Notwithstanding anything to the contrary herein or in the Plan, the terms of the lease
relating to the Henderson Facility remain subject to final agreement and documentation reasonably
acceptable to Tronox, the Creditors Committee, the Backstop Parties, the United States and the
Nevada Parties.
(d) Creation of Tort Claims Trust
On the Effective Date, Tronox will establish the Tort Claims Trust. The Tort Claims Trust
will be governed by the Tort Claims Trust Agreement, the form of which will be included in the Plan
Supplement, and administered by the Tort Claims Trustee.
The Tort Claims Trust shall be funded with the following: (a) the right to 12% of the proceeds
of the Anadarko Litigation (together with the benefit of any other arrangements to be negotiated in
good faith by the
53
United States and representatives for holders of Tort Claims), in accordance with the Anadarko
Litigation Trust Agreement, (b) the Funded Tort Claims Trust Amount and (c) the Tort Claims
Insurance Assets. The sole recourse of Holders of Tort Claims shall be the Tort Claims Trust, and
such Holders shall have no right at any time to assert Tort Claims against Reorganized Tronox or
any of its assets.
Holders of Allowed Tort Claims will receive on account of such Allowed Tort Claims a
Distribution from the Tort Claims Trust in accordance with the Tort Claims Trust Distribution
Procedures. The Tort Claims Trust will provide for the allocations set forth in section IV.B.iv
above.
Tronox and Reorganized Tronox shall not be required to pay any fee or expense for, or assume
any liabilities related to, the operation or administration of the Tort Claims Trust or any other
arrangement established with respect to the determination, satisfaction or resolution of any issues
related to the Tort Claims (which fees and expenses shall be covered by funds contributed to the
Tort Claims Trust).
(e) Creation of the Anadarko Litigation Trust
On the Effective Date, Tronox will establish the Anadarko Litigation Trust, to which it will
contribute its rights to the Anadarko Litigation. The Anadarko Litigation Trust will be governed
by the Anadarko Litigation Trust Agreement, which is included in the Plan Supplement.
The United States and Tronox, in consultation with certain representatives of Holders of Tort
Claims (and certain other Government Environmental Entities, including the Nevada Parties, shall
jointly appoint the Anadarko Litigation Trustee to administer the Anadarko Litigation Trust. The
United States shall have the right to approve the Anadarko Litigation Trustee. The Anadarko
Litigation Trust will be funded on the Effective Date by a portion of the Funded Environmental
Amount, as set forth in the Environmental Claims Settlement Agreement (which, for the avoidance of
doubt, may be $0). Representatives of the United States, certain other Governmental Environmental
Entities, and certain representatives of the holders of Tort Claims will have certain agreed rights
concerning the pursuit of the Anadarko Litigation. The Anadarko Litigation Trust Agreement provides
that Reorganized Tronox shall have no responsibility, obligation or liability with respect to the
Anadarko Litigation, other than to retain or transfer to the Anadarko Litigation Trustee books,
records and documents relevant to the Anadarko Litigation and to use commercially reasonable
efforts to cooperate with the Anadarko Litigation Trustee, and provides that the Anadarko
Litigation Trust will reimburse Reorganized Tronox for its reasonable and documented expenses
incurred in cooperating with the Anadarko Litigation Trustee. The Anadarko Litigation Trust
Agreement also will provide for Reorganized Tronox to have access to the expert liability report
being prepared in connection with the Anadarko Litigation, as well as to the expert drafting such
report.
Fees, costs and expenses incurred in connection with the administration of the Anadarko
Litigation Trust and the prosecution of the Anadarko Litigation after the Effective Date, including
fees and expenses incurred by professionals retained by the Anadarko Litigation Trustee, shall be
borne by the Anadarko Litigation Trust and Reorganized Tronox shall have no responsibility,
obligation or liability with respect thereto. Professional fees and expenses may be paid in
accordance with the terms of a special fee arrangement with the Anadarko Litigation Trust, which
the United States shall negotiate in good faith with certain other Government Environmental
Entities and certain representatives of Holders of Tort Claims. Kirkland & Ellis LLP may represent
the Anadarko Litigation Trust on a special fee arrangement basis in the prosecution of the Anadarko
Litigation. For the avoidance of doubt, the Anadarko Litigation Trust shall not be liable for any
fees, costs or expenses incurred in connection with the prosecution of the Anadarko Litigation
prior to the Effective Date.
The Anadarko Litigation Trustee shall (a) pursue the Anadarko Litigation and (b) distribute
any recovery as a result thereof in accordance with the Anadarko Litigation Trust Agreement as
follows: (i) 88% to the Government Environmental Entities in accordance with the Environmental
Claims Settlement Agreement and the Environmental Response Trust Agreements and (ii) 12% to the
Holders of Tort Claims by delivery to the Tort Claims Trust. Pursuant to the Anadarko Litigation
Trust Agreement, the United States has the right to approve or reject any proposed settlement of
the Anadarko Litigation, after consultation with certain other Government Environmental Entities
and certain representatives of holders of Tort Claims, all in accordance with the terms of the
Anadarko Litigation Trust Agreement.
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In addition, the United States, separate from its participation in the Anadarko Litigation
Trust, shall continue to enjoy the rights to participate in the Anadarko Litigation provided to it
under the Order Approving Revised Stipulation and Order with Respect to Federal Debt Collection
Procedures Act, signed August 20, 2009 [Adv. Proc. No. 09-01198, Dkt. No. 52].
(iv) Exit Debt and Equity Financing
(a) Exit Financing
If all or any portion of the Replacement DIP Facility is converted into all or any portion of
the Exit Financing in accordance with the terms of the Replacement DIP Agreement, then on the
Effective Date and without further notice to or order or other approval of the Court, act or action
under applicable law, regulation, order or rule or the vote, consent, authorization or approval of
any person or entity (including the boards of directors of the Tronox Debtors) except for the
Confirmation Order and as otherwise required by the Replacement DIP Documents: (a) Reorganized
Tronox shall assume the Replacement DIP Agreement and the other Replacement DIP Documents, and
without limiting the foregoing, Reorganized Tronox shall assume the Replacement DIP Facility Claims
on the terms and conditions set forth in the Replacement DIP Documents, which from and after the
Effective Date shall constitute Exit Credit Documents; (b) all Replacement DIP Documents, as Exit
Financing Credit Documents, shall remain in full force and effect on and after the Effective Date,
and all Liens, rights, interests, duties and obligations thereunder shall be shall survive the
Effective Date and shall continue to secure all Replacement DIP Facility Claims assumed by
Reorganized Tronox and all other obligations under the Exit Credit Documents. Without limiting the
generality of the foregoing, all Liens and security interests granted pursuant to the Replacement
DIP Documents to the Replacement DIP Agent and/or the lenders under the Replacement DIP Documents
and all other Liens and security interests granted pursuant to the Exit Credit Documents shall be
(i) valid, binding, perfected and enforceable Liens and security interests in the personal and real
property described in such documents, with the priorities established in respect thereof under
applicable non-bankruptcy law and (ii) not subject to avoidance, recharacterization or
subordination under any applicable law; and (c) Reorganized Tronox shall, and is authorized to,
enter into and perform and to execute and deliver an Accession and Novation Agreement (as defined
in the Replacement DIP Agreement) and such other agreements, instruments or documents reasonably
requested by the Replacement DIP Agent (in form and substance acceptable to the Replacement DIP
Agent) to evidence or effectuate the conversion of the Replacement DIP Facility to all or part of
the Exit Financing in accordance with the terms of the Replacement DIP Documents. Without limiting
the foregoing, Reorganized Tronox shall pay, as and when due, all fees and expenses and other
amounts provided under the Exit Credit Documents.
To the extent Reorganized Tronox obtains Exit Financing in lieu of, or in addition to, the
conversion of all or any portion of the Replacement DIP Facility into the Exit Financing, then, on
the Effective Date and without further notice to or order or other approval of the Court, act or
action under applicable law, regulation, order or rule or the vote, consent, authorization or
approval of any person or entity (including the boards of directors of the Tronox Debtors), except
for the Confirmation Order and as otherwise required by the applicable Exit Credit Documents,
Reorganized Tronox shall, and is authorized to, enter into and perform and to execute and deliver
one or more Exit Credit Agreements and other Exit Credit Documents with respect to such Exit
Financing and shall complete such Exit Financing (on terms and conditions reasonably satisfactory
to the Creditors Committee and the Required Backstop Parties) to fund the repayment of all
Replacement DIP Facility Claims that are not converted into Exit Financing in accordance with the
terms of the Replacement DIP Documents, the distributions under the Plan, ongoing business
operations and working capital needs. Without limiting the foregoing, Reorganized Tronox shall
pay, as and when due, all fees and expenses and other amounts provided under the Exit Credit
Documents relating to such Exit Financing.
Confirmation of the Plan shall be deemed (a) approval of the Exit Financing (and if,
applicable, approval of the conversion of the Replacement DIP Facility into all or a portion of the
Exit Financing), and all transactions contemplated thereby, and all actions to be taken,
undertakings to be made, and obligations to be incurred by Reorganized Tronox in connection
therewith, including the payment of all fees, indemnities and expenses provided for by the Exit
Credit Documents (including, if applicable, all Replacement DIP Documents comprising the Exit
Credit Documents), and (b) authorization to enter into and perform under the Exit Credit Documents.
The Exit Credit Documents shall constitute legal, valid, binding and authorized obligations of
Reorganized Tronox, enforceable in accordance with their terms. The financial accommodations to be
extended pursuant to the Exit
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Credit Documents are being extended, and shall be deemed to have been extended, in good faith, for
legitimate business purposes, are reasonable, shall not be subject to avoidance, recharacterization
or subordination (including equitable subordination) for any purposes whatsoever, and shall not
constitute preferential transfers, fraudulent conveyances or other voidable transfers under the
Bankruptcy Code or any other applicable non-bankruptcy law. On the Effective Date, all of the
Liens and security interests to be granted in accordance with the Exit Credit Documents (w) shall
be deemed to be approved, (x) shall be legal, binding and enforceable Liens on, and security
interests in, the collateral granted thereunder in accordance with the terms of the Exit Credit
Documents, (y) shall be deemed perfected on the Effective Date, subject only to such Liens and
security interests as may be permitted under the Exit Credit Documents, and (z) shall not be
subject to avoidance, recharacterization, or subordination (including equitable subordination) for
any purposes whatsoever and shall not constitute preferential transfers, fraudulent conveyances or
other voidable transfers under the Bankruptcy Code or any applicable non-bankruptcy law.
Reorganized Tronox and the persons and entities granted such Liens and security interests are
authorized to make all filings and recordings, and to obtain all governmental approvals and
consents necessary to establish and perfect such liens and security interests under the provisions
of the applicable state, provincial, federal or other law (whether domestic or foreign) that would
be applicable in the absence of the Plan and the Confirmation Order (it being understood that
perfection shall occur automatically by virtue of the entry of the Confirmation Order, or in the
case of Liens and security interests granted pursuant to the Replacement DIP Documents, by virtue
of the interim and final orders of the Court approving same, and any such filings, recordings,
approvals and consents shall not be required), and will thereafter cooperate to make all other
filings and recordings that otherwise would be necessary under applicable law to give notice of
such Liens and security interests to third parties. To the extent that any Holder of a Secured
Claim that has been satisfied or discharged in full pursuant to the Plan, or any agent for such
Holder, has filed or recorded publicly any Liens and/or security interests to secure such Holders
Secured Claim, then as soon as practicable on or after the Effective Date, such Holder (or the
agent for such Holder) shall take any and all steps requested by Tronox, Reorganized Tronox or any
administrative agent under the Exit Credit Documents that are necessary to cancel and/or extinguish
such publicly-filed Liens and/or security interests, in each case all costs and expenses in
connection therewith to be paid by Tronox or Reorganized Tronox.
On the Effective Date, all Existing Letters of Credit shall be terminated, cash
collateralized, replaced or reinstated in accordance with their terms and the terms of the
Replacement DIP Agreement and any other applicable Exit Credit Documents.
Notwithstanding anything to the contrary in this Plan, the Court shall have no jurisdiction
over any matters first arising under the Exit Credit Documents after the Effective Date.
(b) The Rights Offering
Tronox shall conduct the Rights Offering in accordance with the Rights Offering Procedures
attached to the Plan as Exhibit 1. The Rights Offering consists of an offering of New
Common Stock for $185 million in Cash, which shall be open to all Eligible Holders. Eligible
Holders will be given Rights to purchase shares of New Common Stock on a Pro Rata basis, based on
a 17.6% discount to the Plan total enterprise value of Reorganized Tronox of $1,063 million, in
exchange for an aggregate of up to 45.5% of the New Common Stock issued on the Effective Date,
subject to dilution by shares issued in connection with the Management Equity Plan and exercise of
the New Warrants. Eligible Holders will receive separate documentation for the purposes of being
able to exercise the Rights and must comply with the instruction materials to subscribe for Rights.
The Backstop Parties have agreed to backstop the Rights Offering for consideration of 8% of
the $185 million equity commitment, payable in the form of additional equity to the Backstop
Parties (approximately 3.6% of the New Common Stock issued on the Effective Date, subject to
dilution by shares issued in connection with the Management Equity Plan and exercise of the New
Warrants). In the event the Equity Commitment Agreement is terminated, the Backstop Parties are
entitled to Cash consideration as set forth in the Equity Commitment Agreement.
(v) Cash Consideration to Fund Plan Distributions
Tronox shall fund Distributions under the Plan in part with Cash on hand, including Cash from
operations, the proceeds of the Exit Financing and the Rights Offering. Payments to Holders of
Convenience Claims shall be
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funded by the Backstop Parties through the purchase of the shares of New Common Stock to which
the Holders of Convenience Claims would otherwise have been entitled, in lieu of receiving their
Pro Rata share of the GUC Pool.
Tronox and Reorganized Tronox will be entitled to transfer funds between and among themselves
as they determine to be necessary or appropriate to enable Reorganized Tronox to satisfy its
obligations under the Plan. Except as set forth herein, any changes in intercompany account
balances resulting from such transfers will be accounted for and settled in accordance with
Tronoxs historical intercompany account settlement practices and will not violate the terms of the
Plan.
From and after the Effective Date, Reorganized Tronox, subject to any applicable limitations
set forth in any post-Effective Date financing arrangement, shall have the right and authority
without further order of the Bankruptcy Court to raise additional or replacement capital and obtain
additional or replacement financing as the boards of directors of the applicable Reorganized Tronox
Debtors deem appropriate.
(vi) Issuance of New Common Stock
The Plan authorizes the issuance of the New Common Stock by Reorganized Tronox Incorporated,
including pursuant to the Rights Offering options, restricted stock or other equity awards reserved
for the Management Equity Plan, without the need for any further corporate action or without any
further action by the Holders of Claims. On the Effective Date, 6,819,857 shares of New Common
Stock shall be issued pursuant to the Rights Offering and 7,634,554 shares of New Common Stock
shall be issued to the GUC Pool for Distribution as described in Article III.B.3 of the Plan.
All of the shares of New Common Stock issued pursuant to the Plan shall be duly authorized,
validly issued, fully paid and non-assessable. Each Distribution and issuance referred to in
Article VI of the Plan shall be governed by the terms and conditions set forth in the Plan
applicable to such Distribution or issuance and by the terms and conditions of the instruments
evidencing or relating to such Distribution or issuance, which terms and conditions shall bind each
Entity receiving such Distribution or issuance.
Tronox will use commercially reasonable efforts to list the shares of New Common Stock on the
New York Stock Exchange or the NASDAQ Stock Market as soon as reasonably practical after the
Effective Date. It is anticipated that if and when listed on the New York Stock Exchange or the
NASDAQ Stock Market, the shares of New Common Stock will be freely tradable by the holders thereof.
(vii) Issuance of New Warrants
If Class 8 votes to accept the Plan, on the Effective Date, Reorganized Tronox Incorporated
will issue the New Warrants Pro Rata to Holders of Equity Interests in Tronox Incorporated. The
form of agreement governing the New Warrants will be included in the Plan Supplement.
(viii) Registration Rights Agreements
The Backstop Parties shall be entitled to registration rights pursuant to the Registration
Rights Agreement, which shall be in substantially the form attached as Exhibit F to the Equity
Commitment Agreement, which form of agreement will also be filed with the Bankruptcy Court as part
of the Plan Supplement. On the Effective Date, Reorganized Tronox and the Backstop Parties will
execute the final form of Registration Rights Agreement (which shall be reasonably acceptable to
Tronox, the Required Backstop Parties and the Creditors Committee).
(ix) Exemption from Registration
The issuance of the New Common Stock (including pursuant to the Rights Offering) and the New
Warrants distributed pursuant to the Plan to Holders of Claims or Equity Interests shall be exempt
from registration under the Securities Act under section 1145 of the Bankruptcy Code as of the
Effective Date without further act or action by any person, unless required by provision of
applicable law, regulation, order or rule.
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The securities issued to the Backstop Parties pursuant to the Equity Commitment Agreement will
be issued without registration in reliance upon the exemption set forth in Section 4(2) of the
Securities Act and will be restricted securities.
Section 1145(a)(1) of the Bankruptcy Code exempts the offer and sale of securities under a
plan of reorganization from registration under Section 5 of the Securities Act and state laws when
such securities are to be exchanged for Claims or principally in exchange for Claims and partly for
cash. In general, securities issued under section 1145 may be resold without registration unless
the recipient is an underwriter with respect to those securities. Section 1145(b)(1) of the
Bankruptcy Code defines an underwriter as any person who:
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purchases a claim against, an interest in, or a claim for an administrative expense
against the debtor, if that purchase is with a view to distributing any security received
in exchange for such a claim or interest; |
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offers to sell securities offered under a plan of reorganization for the holders of
those securities; |
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offers to buy those securities from the holders of the securities, if the offer to buy
is (i) with a view to distributing those securities; and (ii) under an agreement made in
connection with the plan of reorganization, the completion of the plan of reorganization,
or with the offer or sale of securities under the plan of reorganization; or |
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is an issuer with respect to the securities, as the term issuer is defined in Section
2(a)(11) of the Securities Act. |
To the extent that persons who receive New Common Stock or New Warrants are deemed to be
underwriters, resales by those persons would not be exempted from registration under the
Securities Act or other applicable law by section 1145 of the Bankruptcy Code. Those persons would,
however, be permitted to sell New Common Stock or other securities without registration if they are
able to comply with the provisions of Rule 144 under the Securities Act, as described further
below.
Please refer to Article VIII hereof for a further discussion regarding applicable securities
laws. You should confer with your own legal advisors to help determine whether or not you are an
underwriter.
(x) Cancellation of Existing Agreements, Unsecured Notes and Equity Interests
On the Effective Date, except as otherwise specifically provided for in the Plan: (1) the
obligations of the Tronox Debtors under the Indenture, and any other Certificate, Equity Security,
share, note, bond, indenture, purchase right, option, warrant or other instrument or document
directly or indirectly evidencing or creating any indebtedness or obligation of or ownership
interest in the Tronox Debtors or giving rise to any Claim or Equity Interest (except such
Certificates, notes or other instruments or documents evidencing indebtedness or obligation of or
ownership interest in the Tronox Debtors that are Reinstated pursuant to the Plan), shall be
cancelled solely as to the Tronox Debtors and their affiliates, and Reorganized Tronox shall not
have any continuing obligations thereunder, except that, to the extent all or any portion of the
Replacement DIP Facility is converted into all or any portion of the Exit Financing in accordance
with the terms of the Replacement DIP Documents, the converted Replacement DIP Facility Claims, and
the guarantees of and the Liens securing such Replacement DIP Facility Claims shall not be
cancelled, released or discharged, and such guarantees and Liens shall continue to guarantee or
secure, as the case may be, such Replacement DIP Facility Claims in accordance with the terms of
the applicable Exit Credit Documents; and (2) the obligations of the Tronox Debtors and their
affiliates pursuant, relating or pertaining to any agreements, indentures, certificates of
designation, bylaws or certificate or articles of incorporation or similar documents governing the
shares, Certificates, notes, bonds, indentures, purchase rights, options, warrants or other
instruments or documents evidencing or creating any indebtedness or obligation of or ownership
interest in the Tronox Debtors (except such agreements, Certificates, notes, or other instruments
evidencing indebtedness or obligation of or ownership interest in the Tronox Debtors that are
specifically Reinstated pursuant to the Plan) shall be released and discharged, except that, to the
extent all or any portion of the Replacement DIP Facility is converted into all or any portion of
the Exit Financing in accordance with the terms of the Replacement DIP Documents, the converted
Replacement DIP Facility Claims, and the guarantees of and the Liens securing such Replacement DIP
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Facility Claims shall not be cancelled, released or discharged, and such guarantees and Liens
shall continue to guarantee or secure, as the case may be, such Replacement DIP Facility Claims in
accordance with the terms of the applicable Exit Credit Documents; provided, however, that
notwithstanding Confirmation or Consummation, any such indenture or agreement that governs the
rights of the Holder of a Claim, including the Indenture, shall continue in effect solely for
purposes of allowing Holders to receive Distributions under the Plan; and, to the extent that the
Indenture Trustee Fee Claim is not paid in full by Reorganized Tronox, of allowing the Indenture
Trustee to exercise its Indenture Charging Lien, provided, further, however, that the preceding
provision shall not affect the discharge of Claims or Equity Interests pursuant to the Bankruptcy
Code, the Confirmation Order, or the Plan, or result in any expense or liability to Reorganized
Tronox; provided, further, however, that the foregoing shall not effect the cancellation of shares
issued pursuant to the Plan nor any other shares held by one Tronox Debtor in the capital of
another Tronox Debtor; and provided, further, however, that to the extent provided in the Exit
Credit Agreement, the guarantees of and Liens securing obligations under the Replacement DIP
Agreement shall not be cancelled and shall guarantee or secure obligations under the Exit Credit
Agreement, as applicable, and only such obligations.
(xi) Restructuring Transactions
On the Effective Date or as soon as reasonably practicable thereafter, Reorganized Tronox
intends to simplify and rationalize its corporate structure by eliminating certain entities that
are deemed no longer essential to Reorganized Tronox and may take all actions as may be necessary
or appropriate to effect such transactions, including any transaction described in, approved by,
contemplated by or necessary to effectuate the Plan, including: (1) the execution and delivery of
appropriate agreements or other documents of merger, consolidation, restructuring, conversion,
disposition, transfer, dissolution or liquidation containing terms that are consistent with the
terms of the Plan and that satisfy the applicable requirements of applicable law and any other
terms to which the applicable Entities may agree; (2) the execution and delivery of appropriate
instruments of transfer, assignment, assumption or delegation of any asset, property, right,
liability, debt or obligation on terms consistent with the terms of the Plan and having other terms
for which the applicable parties agree; (3) the filing of appropriate certificates or articles of
incorporation, reincorporation, merger, consolidation, conversion or dissolution pursuant to
applicable state law; and (4) all other actions that the applicable Entities determine to be
necessary or appropriate, including making filings or recordings that may be required by applicable
law. To the extent deemed helpful or appropriate to Reorganized Tronox, the elimination of certain
of these entities may be effected pursuant to Sections 368 and 381 of the Internal Revenue Code of
1986, as amended (the IRC), to preserve for Reorganized Tronox the tax attributes of such
entities. Prior to the Effective Date, Tronox will consult with the Creditors Committee with
respect to the restructuring transactions.
(xii) Corporate Existence
Subject to any restructuring transactions permitted under Article IV of the Plan or as
otherwise expressly provided in the Plan or in the Plan Supplement, each of the Tronox Debtors, as
Reorganized, shall continue to exist after the Effective Date as a separate corporate entity,
limited liability company, partnership or other form, as the case may be, with all the powers of a
corporation, limited liability company, partnership or other form, as the case may be, pursuant to
applicable law in the jurisdiction in which each applicable Tronox Debtor is incorporated or
formed.
Notwithstanding anything to the contrary herein, none of the entities comprising Reorganized
Tronox (i) shall be deemed to be a legal successor, alter ego or continuation of, or have merged
with, Tronox, Kerr-McGee Corporation, Anadarko Petroleum Corporation or any of their respective
affiliates, subsidiaries and predecessors, and (ii) shall have any liability whatsoever based on
any theory of successor or vicarious liability of any kind or character, or based upon any theory
or legal principle under or relating to antitrust, environmental, tort, successor or transferee
liability law.
(xiii) Vesting of the Retained Assets in Reorganized Tronox
Except as otherwise provided herein or in any agreement, instrument or other document relating
thereto, on or after the Effective Date, the Retained Assets and all Causes of Action (excluding
the Anadarko Litigation and any claim or cause of action of Tronox related thereto) shall vest in
Reorganized Tronox, free and clear of all liens, Claims, charges, or other encumbrances or
interests (except for Liens securing the Exit Financing, including the
59
Liens securing any portion of the Replacement DIP Facility that is converted into the Exit
Financing in accordance with the terms of the Replacement DIP Documents). On and after the
Effective Date, except as otherwise provided in the Plan, Reorganized Tronox may operate its
business and may use, acquire or dispose of property and compromise or settle any Claims or Causes
of Action without supervision or approval by the Bankruptcy Court and free of any restrictions of
the Bankruptcy Code or Bankruptcy Rules.
(xiv) Organizational Documents
The certificates of incorporation and bylaws (or other formation documents relating to limited
liability companies) of the Tronox Debtors shall be amended as may be required to be consistent
with the provisions of the Plan and the Bankruptcy Code, in a form reasonably acceptable to the
Creditors Committee and the Required Backstop Parties.
On or as soon as reasonably practicable after the Effective Date, any of the Tronox Debtors
that is Reorganized shall file new certificates of incorporation with the secretary of state (or
equivalent state officer or entity) of the state under which each such Tronox Debtor is or is to be
incorporated, which, as required by section 1123(a)(6) of the Bankruptcy Code, shall prohibit the
issuance of non-voting securities. The Certificate of Incorporation of Reorganized Tronox
Incorporated shall include appropriate super-majority provisions with respect to certain material
actions (subject to customary carve-outs and limitations), such as issuance and redemption of
equity securities and options, amendments to the charter documents, changes to the number of
directors, sales or transfers of all or substantially all assets of Reorganized Tronox,
recapitalizations and reorganizations, and affiliate transactions. Such super-majority provisions
shall cease to be effective on the date Reorganized Tronox Incorporated becomes a public reporting
company. After the Effective Date, each such Tronox Debtor may file a new, or amend and restate
its existing, certificate of incorporation, charter and other constituent documents as permitted by
the relevant state corporate law.
To protect Reorganized Tronoxs ability to continue to utilize its NOLs (and any built-in
losses) in the future, Reorganized Tronox Incorporated intends to include in its Certificate of
Incorporation certain provisions designed to permit the New Board to adopt trading restrictions
with respect to the New Common Stock. The terms of such restrictions would generally provide that
the New Board could adopt such restrictions in the future only if events had occurred that placed
the Reorganized Tronoxs ability to utilize its NOLs at risk because of a possible ownership change
with respect to such stock. The terms of the provisions to be included in the Certificate of
Incorporation remain subject to negotiation with the Creditors Committee and the Required Backstop
Parties, as well as court approval.
As of the Effective Date, each Tronox Debtors bylaws shall provide for the indemnification,
defense, reimbursement, exculpation and/or limitation of liability of, and advancement of fees and
expenses to, directors, officers, employees or agents who were directors, officers, employees or
agents of such Tronox Debtor as of July 7, 2010, at least to the same extent as the bylaws of each
of the respective Tronox Debtors on the Petition Date, against any claims or Causes of Action
whether direct or derivative, liquidated or unliquidated, fixed or contingent, disputed or
undisputed, matured or unmatured, known or unknown, foreseen or unforeseen, asserted or unasserted,
and none of Reorganized Tronox shall amend and/or restate its certificate of incorporation or
bylaws before or after the Effective Date to terminate or materially adversely affect any of
Reorganized Tronoxs obligations or such directors, officers, employees or agents rights;
provided, however, that for the avoidance of doubt, nothing in the Plan, the Plan
Supplement or any document related thereto shall in any way indemnify or release any individuals
who were former directors or officers of the Tronox Debtors or their subsidiaries and also were or
currently are directors or officers of Kerr-McGee Corporation and/or Anadarko Petroleum
Corporation.
(xv) Effectuating Documents; Further Transactions
On and after the Effective Date, Reorganized Tronox, and any officers, members or directors
thereof, are authorized to and may issue, execute, deliver, file or record such contracts,
Securities, instruments, releases and other agreements or documents and take such actions as may be
necessary or appropriate to effectuate, implement, and further evidence the terms and conditions of
the Plan and the Securities issued pursuant to the Plan in the name of and on behalf of Reorganized
Tronox, without the need for any approvals, authorization or consents except for those expressly
required pursuant to the Plan.
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(xvi) Section 1146 Exemption from Certain Transfer Taxes and Recording Fees
Pursuant to, and to the fullest extent permitted by, section 1146(a) of the Bankruptcy Code,
any transfers (whether from Tronox to Reorganized Tronox or to any other Person) pursuant to, in
contemplation of, or in connection with the Plan or pursuant to: (i) the issuance, distribution,
transfer, or exchange of any debt, equity security, or other interest in Tronox or Reorganized
Tronox; (ii) the creation, modification, consolidation, assumption, termination, refinancing and/or
recording of any mortgage, deed of trust or other security interest, or the securing of additional
indebtedness by such or other means; (iii) the making, assignment or recording of any lease or
sublease; (iv) the grant of collateral as security for any or all of the Exit Financing; or (v) the
making, delivery or recording of any deed or other instrument of transfer under, in furtherance of,
or in connection with, the Plan, including any deeds, bills of sale, assignments or other
instrument of transfer executed in connection with any transaction arising out of, contemplated by,
or in any way related to the Plan, shall not be subject to any document recording tax, stamp tax,
conveyance fee, intangibles or similar tax, mortgage tax, real estate transfer tax, mortgage
recording tax, Uniform Commercial Code filing or recording fee, regulatory filing or recording fee,
or other similar tax or governmental assessment, and the appropriate state or local government
officials or agents shall, and shall be directed to, forgo the collection of any such tax,
recordation fee or governmental assessment and to accept for filing and recordation any of the
foregoing instruments or other documents without the payment of any such tax, recordation fee or
government assessment. The Bankruptcy Court shall retain specific jurisdiction with respect to
these matters.
(xvii) Preservation of Causes of Action
In accordance with section 1123(b) of the Bankruptcy Code, but subject to Article VIII of the
Plan and the terms of the Environmental Claims Settlement Agreement, Reorganized Tronox shall
retain and may enforce all rights to commence and pursue, as appropriate, any and all Causes of
Action, whether arising before or after the Petition Date, including any actions specifically
enumerated in the Plan Supplement (but excluding the Anadarko Litigation, which will be transferred
to the Anadarko Litigation Trust), and Reorganized Tronoxs rights to commence, prosecute or settle
such Causes of Action shall be preserved notwithstanding the occurrence of the Effective Date.
Reorganized Tronox may pursue such Causes of Action, as appropriate, in accordance with the best
interests of Reorganized Tronox. No Entity may rely on the absence of a specific reference in the
Plan, the Plan Supplement or the Disclosure Statement to any Cause of Action against them as any
indication that Reorganized Tronox will not pursue any and all available Causes of Action against
them. Reorganized Tronox expressly reserves all rights to prosecute any and all Causes of Action
against any Entity, except as otherwise expressly provided in the Plan. Unless any Causes of
Action against an Entity are expressly waived, relinquished, exculpated, released, compromised or
settled in the Plan or a Bankruptcy Court order, Reorganized Tronox expressly reserves all Causes
of Action, for later adjudication, and, therefore, no preclusion doctrine, including the doctrines
of res judicata, collateral estoppel, issue preclusion, claim preclusion, estoppel (judicial,
equitable or otherwise) or laches shall apply to such Causes of Action upon, after or as a
consequence of the Confirmation or Consummation.
Reorganized Tronox reserves and shall retain the Causes of Action (except for the Anadarko
Litigation) notwithstanding the rejection or repudiation of any Executory Contract or Unexpired
Lease during the Chapter 11 Cases or pursuant to the Plan. In accordance with section 1123(b)(3)
of the Bankruptcy Code, any Causes of Action that a Tronox Debtor may hold against any Entity shall
vest in Reorganized Tronox. Reorganized Tronox, through its authorized agents or representatives,
shall retain and may exclusively any and all such Causes of Action. Reorganized Tronox shall have
the exclusive right, authority and discretion to determine and to initiate, file, prosecute,
enforce, abandon, settle, compromise, release, withdraw or litigation to judgment any such Causes
of Action and to decline to do any of the foregoing without the consent or approval of any third
party or further notice to or action, order or approval of the Bankruptcy Code.
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F. Post-Effective Date Governance
(i) Directors and Officers of Reorganized Tronox
(a) The New Board
On the Effective Date, the term of the current members of the board of directors of Tronox
Incorporated shall expire. The New Board shall consist of seven (7) directors and shall include
(a) the Chief Executive Officer of Reorganized Tronox Incorporated and (b) six other directors who
each shall be an independent director within the meaning of the rules of the New York Stock
Exchange. The members of the New Board shall be selected by the Backstop Parties in consultation
with Tronox and the Creditors Committee, and subject to background checks reasonably satisfactory
to Tronox and the Creditors Committee; provided that the Creditors Committee shall have
unconditional veto rights with respect to the selection of two of the directors.
To the extent known, the identity of the members of the New Board of Reorganized Tronox
Incorporated and the nature and compensation for any member of the New Board who is an insider
under section 101(31) of the Bankruptcy Code will be identified in the Plan Supplement but, in any
event, shall be disclosed at or before the Confirmation Hearing.
(b) Executive Officers
On and after the Effective Date, the existing officers of Tronox shall remain in place in
their current capacities as officers of Reorganized Tronox, subject to the ordinary rights and
powers of the board of directors to remove or replace them in accordance with Tronoxs
organizational documents and the terms of the New Management Agreements.
Biographical information for continuing Tronox executives Mr. Dennis L. Wanlass, Mr. Michael
J. Foster, Mr. Robert C. Gibney, and Mr. John D. Romano is set forth below:
Mr. Wanlass has served as Interim Chairman and Chief Executive Officer and as a Director since
August 2008. He served as Executive Vice President of Special Projects from July 2008 to August
2008. Prior to joining Tronox, Mr. Wanlass was a consultant for start-up ventures from February
2008 to July 2008; Senior Vice President of Special Metals Corporation (acquired by Precision
Castparts Corporation in May 2006) from May 2006 to February 2008; and transitioned through various
roles, including Chief Financial Officer, Chief Operating Officer and Chief Executive Officer of
Special Metals Corporation from 2001 to 2006. From 1988 to 2001, Mr. Wanlass held executive
positions of increasing responsibility with Geneva Steel LLC, including Vice President, Chief
Financial Officer and Treasurer. Mr. Wanlass professional experience also includes 13 years with
Eastman Christensen and five years with KPMG.
Mr. Foster has served as Vice President, General Counsel and Secretary since January 2008;
Managing Counsel from 2006 to January 2008; Staff Attorney from 2005 to 2006; and Staff Attorney
for Kerr-McGee Shared Services LLC from 2003 to 2005. Prior to joining Tronox, Mr. Foster was
Corporate Counsel for CMS Field Services from 2001 to 2003 and Counsel for Enogex, Inc. from 1998
to 2001. Mr. Fosters professional experience also includes more than five years practicing law in
the public and private sectors.
Mr. Gibney has served as Vice President, Corporate Affairs since March 2008, responsible for
Human Resources, Global Procurement, Botlek Operations, Government Affairs and Corporate
Communications; Vice President, Investor Relations and External Affairs from 2005 to March 2008;
and Vice President and General Manager, Paper and Specialties for Tronox LLC from January 2005 to
November 2005. Mr. Gibney was also Chief Marketing Officer for Kerr-McGees joint venture, Avestor
LLC, from 2002 to 2005; Vice President, Global Pigment Marketing for Kerr-McGee LLC from 1999 to
2002; and Director, Pigment Sales and Marketing from 1997 to 1999. Mr. Gibney joined Tronox (as its
predecessor) in 1991.
Mr. Romano has served as Vice President, Sales and Marketing since January 2008; Vice
President, Sales from 2005 to January 2008; Vice President, Global Pigment Sales for Tronox LLC
from January 2005 to November
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2005; Vice President, Global Pigment Marketing from 2002 to 2005; and Regional Marketing
Manager from 1998 to 2002. Mr. Romano joined Tronox (as its predecessor) in 1988.
(ii) Management Equity Plan
On the Effective Date, Reorganized Tronox shall adopt the Management Equity Plan. The terms
of the Management Equity Plan shall be reasonably acceptable to the Creditors Committee and the
Required Backstop Parties and shall be set forth in the Plan Supplement.
(iii) New Management Agreements
On the Effective Date, Reorganized Tronox shall enter into the New Management Agreements with
those persons to be identified in the Plan Supplement substantially in the form to be included in
the Plan Supplement, which agreements shall be deemed authorized without any further approval of
the New Board or Reorganized Tronox and automatically shall become effective on the Effective Date.
G. Treatment of Executory Contracts, Unexpired Leases, Employee and Retiree Benefits and
Insurance Policies
(i) Assumption and Rejection of Executory Contracts and Unexpired Leases
On the Effective Date, except as otherwise provided in the Plan, all Executory Contracts or
Unexpired Leases not previously assumed or rejected pursuant to an order of the Bankruptcy Court
will be deemed rejected, in accordance with the provisions and requirements of sections 365 and
1123 of the Bankruptcy Code, other than those Executory Contracts or Unexpired Leases that (1) are
identified on the Assumed Executory Contract and Unexpired Lease List to be assumed pursuant to
this Plan or (2) are the subject of a motion to reject Executory Contracts or Unexpired Leases that
is pending on the Effective Date. Entry of the Confirmation Order by the Bankruptcy Court shall
constitute approval of such rejections and the assumption, to the extent not previously assumed, of
the Executory Contracts or Unexpired Leases listed on the Assumed Executory Contract and Unexpired
Lease List pursuant to sections 365(a) and 1123 of the Bankruptcy Code. Any motions to assume
Executory Contracts or Unexpired Leases pending on the Effective Date shall be subject to approval
by the Bankruptcy Court on or after the Effective Date by a Final Order. Each Executory Contract
and Unexpired Lease assumed pursuant to Article V of the Plan or by any order of the Bankruptcy
Court, which has not been assigned to a third party on or prior to the Effective Date, shall vest
in and be fully enforceable by Reorganized Tronox in accordance with its terms, except as such
terms are modified by the provisions of the Plan or any order of the Bankruptcy Court authorizing
and providing for its assumption under applicable federal law.
(ii) Claims Based on Rejection of Executory Contracts or Unexpired Leases
All proofs of Claim with respect to Claims arising from the rejection of Executory Contracts
or Unexpired Leases pursuant to the Plan or the Confirmation Order, if any, must be filed with the
Bankruptcy Court within 30 days after the date of entry of an order of the Bankruptcy Court
(including the Confirmation Order) approving such rejection. Any Claims arising from the rejection
of an Executory Contract or Unexpired Lease not filed with the Bankruptcy Court within such time
will be automatically disallowed, forever barred from assertion and shall not be enforceable
against Tronox, Reorganized Tronox or the property of any of them, without the need for any
objection by Reorganized Tronox or further notice to, or action, order or approval of the
Bankruptcy Court. All Allowed Claims arising from the rejection of Tronoxs Executory Contracts or
Unexpired Leases shall be classified as General Unsecured Claims and shall be treated in accordance
with Article III.B of the Plan.
(iii) Cure of Defaults for Assumed Executory Contracts and Unexpired Leases
Any monetary defaults under each Executory Contract and Unexpired Lease to be assumed pursuant
to the Plan shall be satisfied, pursuant to section 365(b)(1) of the Bankruptcy Code, by payment of
the default amount in Cash on the Effective Date, subject to the limitation described below, or on
such other terms as the parties to such Executory Contracts or Unexpired Leases may otherwise
agree. In the event of a dispute regarding (1) the amount
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of any payments to cure such a default, (2) the ability of Reorganized Tronox or any assignee
to provide adequate assurance of future performance (within the meaning of section 365 of the
Bankruptcy Code) under the Executory Contract or Unexpired Lease to be assumed, or (3) any other
matter pertaining to assumption, the cure payments required by section 365(b)(1) of the Bankruptcy
Code shall be made following the entry of a Final Order or orders resolving the dispute and
approving the assumption. At least 14 days prior to the Voting Deadline, to the extent not
previously filed with the Bankruptcy Court and served on affected counterparties, Tronox shall
provide for notices of proposed assumption and proposed cure amounts to be sent to applicable
contract and lease counterparties, together with procedures for objecting thereto and resolution of
disputes by the Bankruptcy Court. Any objection by a contract or lease counterparty to a proposed
assumption or related cure amount must be filed, served and actually received by Tronox prior to
the Confirmation Hearing (or such other date as may be provided in the applicable assumption
notice). Any counterparty to an Executory Contract or Unexpired Lease that fails to object timely
to the proposed assumption or cure amount will be deemed to have assented to such assumption or
cure amount.
Assumption of any Executory Contract or Unexpired Lease pursuant to the Plan or otherwise
shall result in the full release and satisfaction of any Claims or defaults, whether monetary or
nonmonetary, including defaults of provisions restricting the change in control or ownership
interest composition or other bankruptcy-related defaults, arising under any assumed Executory
Contract or Unexpired Lease at any time prior to the effective date of assumption. Any Proofs of
Claim filed with respect to an Executory Contract or Unexpired Lease that has been assumed shall be
deemed allowed and expunged without further notice to or action, order or approval of the
Bankruptcy Court.
(iv) Modifications, Amendments, Supplements, Restatements, or Other Agreements
Unless otherwise provided in the Plan, each Executory Contract or Unexpired Lease that is
assumed or rejected shall include all modifications, amendments, supplements, restatements or other
agreements that in any manner affect such Executory Contract or Unexpired Lease, and all Executory
Contracts and Unexpired Leases related thereto, if any, including all easements, licenses, permits,
rights, privileges, immunities, options, rights of first refusal and any other interests, unless
any of the foregoing agreements has been previously rejected or repudiated or is rejected or
repudiated under the Plan.
Modifications, amendments, supplements and restatements to prepetition Executory Contracts and
Unexpired Leases that have been executed by Tronox during the Chapter 11 Cases shall not be deemed
to alter the prepetition nature of the Executory Contract or Unexpired Lease or the validity,
priority or amount of any Claims that may arise in connection therewith.
(v) Reservation of Rights
Neither the exclusion nor inclusion of any Executory Contract or Unexpired Lease on the
Assumed Executory Contract and Unexpired Lease List, nor anything contained in the Plan, shall
constitute an admission by Tronox that any such contract or lease is in fact an Executory Contract
or Unexpired Lease or that Reorganized Tronox has any liability thereunder. If there is a dispute
regarding whether a contract or lease is or was executory or unexpired at the time of assumption or
rejection, Tronox or Reorganized Tronox, as applicable, shall have 30 days following entry of a
Final Order resolving such dispute to alter their treatment of such contract or lease.
(vi) Nonoccurrence of Effective Date
In the event that the Effective Date does not occur, the Bankruptcy Court shall retain
jurisdiction with respect to any request to extend the deadline for assuming or rejecting Unexpired
Leases pursuant to section 365(d)(4) of the Bankruptcy Code.
(vii) Contracts and Leases Entered into after the Petition Date
Contracts and leases entered into after the Petition Date by any Tronox Debtor, including any
Executory Contracts and Unexpired Leases assumed by such Tronox Debtor, will be performed by the
Tronox Debtor liable
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thereunder in the ordinary course of its business. Accordingly, such contracts and leases
(including any assumed Executory Contracts and Unexpired Leases) will survive and remain unaffected
by entry of the Confirmation Order.
(viii) Assumption of Indemnification Provisions
Tronox shall assume all of the Indemnification Provisions in place on and before the Effective
Date for Indemnified Parties for Claims related to or in connection with any actions, omissions or
transactions occurring before the Effective Date; provided, however, that nothing
in the Plan, the Plan Supplement or any document related thereto shall in any way release or
provide indemnification for any claim against or liability of the following parties, who are not
Indemnified Parties: Lehman Brothers Holdings, Inc., Ernst & Young LLP, Kerr-McGee Corporation and
Anadarko Petroleum Corporation and their officers, directors, employees, advisors, attorneys,
professionals, accountants, investment bankers, consultants, agents, and other representatives
(including their respective officers, directors, employees, members, and professionals), whether
such claims or liabilities be direct or indirect, fixed or contingent, including the claims
asserted in the Anadarko Litigation; provided further, however, that for the
avoidance of doubt, nothing in the Plan, the Plan Supplement or any document related thereto shall
in any way release or indemnify any individuals who were former directors or officers of the Tronox
Debtors or their subsidiaries and also were or currently are directors or officers of Kerr-McGee
Corporation and/or Anadarko Petroleum Corporation.
(ix) Employee and Retiree Benefits
(a) Continuation of Retiree Benefits and Pension Plan
Pursuant to section 1129(a)(13) of the Bankruptcy Code, on and after the Effective Date, all
retiree benefits (as that term is defined in section 1114 of the Bankruptcy Code), including
retiree health and welfare plans for eligible retirees, shall continue to be paid in accordance
with the terms of the Plan, the underlying employee benefit plan documents (as may be amended or
terminated at the discretion of Reorganized Tronox) and applicable law.
Pursuant to the Plan, Tronox shall assume the Pension Plan. The Pension Plan shall be
continued in accordance with its terms, and Reorganized Tronox shall satisfy the minimum funding
standards pursuant to 26 U.S.C. §§ 412 and 430 and 29 U.S.C. §§ 1082 and 1083, be liable for the
payment of PBGC premiums in accordance with Title IV of ERISA, subject to any and all applicable
rights and defenses of the Tronox Debtors, and administer the Pension Plan in accordance with the
provisions of ERISA and the Internal Revenue Code. Notwithstanding any provision of the Plan or
the Confirmation Order to the contrary, the Pension Plan shall be continued and administered in
accordance with ERISA and the Internal Revenue Code.
Effective June 1, 2009, all future benefit accruals were eliminated for nonbargaining
participants in the Pension Plan. On that date, the Pension Plan was also closed to new
participants. It is Tronoxs intention to deliver retirement benefits prospectively under a 401(k)
arrangement. As of the most recent actuarial valuation (i.e., January 1, 2009), the Pension Plans
Adjusted Funding Target Attainment Percentage (or AFTAP) was 106.68%. The AFTAP for the 2010 plan
year will be completed by September 30, 2010. Depending on the elections Tronox makes under the
Pensions Protection Act of 2006, the 2010 AFTAP is expected to range from 85% to 95%.
Pursuant to the Plan, Tronox shall continue to provide employees with a defined contribution
(401(k)) Savings Investment Plan (SIP) into which employees contributions and matching company
contributions are paid. Tronox matches 75% of the first 6% of employees contributed compensation
(as defined in the SIP). As part of its ongoing efforts to reduce costs, Tronox suspended its SIP
matching contribution effective July 1, 2008. Following Bankruptcy Court approval (and subsequent
consent of the Creditors Committee), Tronox reinstated the company match effective April 1, 2010.
It is Tronoxs intention to provide the current match and augment it with an additional
contribution of approximately 4.5% to make up for the difference in the loss of a defined benefit
(pension) plan for employee retirement.
Notwithstanding the foregoing, Tronox will terminate the Tronox Incorporated Defined Benefit
Restoration Plan and associated trust prior to the Effective Date. The Tronox Incorporated Defined
Contribution Savings Restoration Plan will continue in effect.
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Reorganized Tronox reserves the right to amend or terminate any of its employee benefit plans
at any time and for any reason.
(b) Workers Compensation Program
As of the Effective Date, except as set forth in the Plan or in the Plan Supplement, Tronox
and Reorganized Tronox shall continue to honor their obligations under: (i) all applicable federal
and state workers compensation laws; and (ii) Tronoxs written contracts, agreements, agreements
of indemnity, self-insurer workers compensation bonds, policies, programs and plans for workers
compensation and workers compensation insurance.
All Proofs of Claims on account of workers compensation claims shall be deemed withdrawn
automatically and without any further notice to or action, order or approval of the Bankruptcy
Court; provided, however, that nothing in the Plan shall limit, diminish, or
otherwise alter the Tronoxs or Reorganized Tronoxs defenses, Causes of Action or other rights
under applicable non-bankruptcy law with respect to any such contracts, agreements, policies,
programs and plans; provided, further, that nothing herein shall be deemed to
impose any obligations on Tronox in addition to what is provided for under applicable state law.
(c) Management 2010 Bonus Plan
Subject only to the occurrence of the Effective Date, the Management 2010 Bonus Plan, in the
form to be included in the Plan Supplement, shall become effective without any further action by
Reorganized Tronox. The Management 2010 Bonus Plan is an executive level cash incentive plan based
on achieving a target EBITDAR of $190 million for 2010. Each Executives target bonus opportunity
is set forth on Exhibit A to the Management 2010 Bonus Plan. The program for 2010 includes a
feature for payment of 50% of an Executives 2010 Bonus/Target Bonus upon achievement of 90% of
target EBITDAR and 200% of an Executives 2010 Bonus/Target Bonus upon achievement of 110% of
target EBITDAR (it being understood that $190 million of EBITDAR is target for 2010) with
proportionate payment for performance within the applicable range. The 2010 Bonus will be paid no
later than January 31, 2011. The Management 2010 Bonus Plan is expected to cost less than $3
million at maximum payout levels.
(d) Employee Benefits Generally
Except as otherwise provided in the Plan, on and after the Effective Date, the Reorganized
Debtors may honor, in the ordinary course of business, any prepetition contracts, agreements,
policies, programs and plans for, among other things, compensation (other than prepetition equity
based compensation), health care benefits, disability benefits, deferred compensation benefits,
travel benefits, vacation benefits, savings plans, severance benefits, retirement benefits, welfare
benefits, pension benefits, life insurance and accidental death and dismemberment insurance for the
directors, officers and employees of any of the Tronox Debtors who served in such capacity at any
time; provided, however, that Tronoxs or Reorganized Tronoxs performance under
any employment agreement will not entitle any person to any benefit or alleged entitlement under
any contract, agreement, policy, program or plan that has expired or been terminated before the
Effective Date, or restore, reinstate or revive any such benefit or alleged entitlement under any
such contract, agreement, policy, program or plan. Nothing herein shall limit, diminish or
otherwise alter Reorganized Tronoxs defenses, claims, Causes of Action or other rights with
respect to any such contracts, agreements, policies, programs and plans, including Reorganized
Tronoxs rights to modify unvested benefits pursuant to their terms.
Notwithstanding anything to the contrary in the Plan, Tronox shall not assume any employment
agreements for employees or officers of the Tronox Debtors employed in the United States.
(x) Insurance Policies
(a) Insurance Policies Generally
Tronox does not believe that the Insurance Policies constitute Executory Contracts. To the
extent the Insurance Policies are considered to be Executory Contracts, then, notwithstanding
anything to the contrary in the
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Plan, on the Effective Date, Tronox shall be deemed to have assumed the Insurance Policies
(including the D&O Liability Policies) and any agreements, documents and instruments relating
thereto pursuant to sections 365 and 1123 of the Bankruptcy Code; provided,
however, that (1) the Tort Claims Insurance Assets shall be assigned to the Tort Claims
Trust and the Tort Claims Trust shall be substituted for the applicable Tronox Debtor as the
insured thereunder with respect to all benefits and obligations related thereto and (2) the
Environmental Insurance Assets shall be assigned to the Environmental Response Trusts and the
Environmental Response Trusts shall assume any liabilities thereunder. For the avoidance of doubt,
any payments made by Chartis under the Chartis Policy on account of reimbursement claims made by
Tronox for expenditures prior to the Effective Date shall be excluded from the Environmental
Insurance Assets and shall remain property of Reorganized Tronox.
Nothing contained herein, in the Plan, the Plan Supplement, the Confirmation Order or
otherwise shall in any way operate to, or have the effect of, altering or impairing in any respect
the legal, equitable or contractual rights and defenses of the insureds or insurers under any
policy of insurance and related agreements. The rights and obligations of the parties and others
under any policy of insurance and related agreements shall be determined under such policies and
related agreements, including the terms, conditions, limitations, exclusions and endorsements
thereof, which shall remain in full force and effect, and under any applicable non-bankruptcy law.
Nothing contained in the Plan shall constitute or be deemed a waiver of any Cause of Action
that Tronox may hold against any Entity, including the insurer, under any of Tronoxs insurance
policies.
On the Effective Date, any and all unliquidated or contingent Claims arising from or related
to an Insurance Policy that is assumed by Tronox in connection with the Plan shall be deemed
expunged.
(b) Director and Officer Insurance Policies
Notwithstanding anything to the contrary contained in the Plan, confirmation of the Plan shall
not discharge, impair or otherwise modify any indemnity obligations assumed by the assumption of
the D&O Liability Insurance Policies, and each such indemnity obligation will be deemed and treated
as an Executory Contract that has been assumed by Tronox under the Plan as to which no Proof of
Claim need be filed.
In addition, on or before the Effective Date, Reorganized Tronox shall obtain reasonably
sufficient tail coverage (i.e., D&O insurance coverage that extends beyond the end of the policy
period) under a directors and officers liability insurance policy for the current (as of July 7,
2010) directors, officers and managers for a period of five years, and placed with such insurers,
the terms of which shall be set forth in the Plan Supplement. After the Effective Date,
Reorganized Tronox shall not terminate or otherwise reduce the coverage under any D&O Liability
Policies (including any tail policy) in effect on the Petition Date, with respect to conduct
occurring prior thereto, and all directors and officers of Tronox who served in such capacity at
any time prior to the Effective Date shall be entitled to the full benefits of any such policy for
the full term of such policy regardless of whether such directors and officers remain in such
positions after the Effective Date; provided, however, that for the avoidance of
doubt, nothing in the Plan, the Plan Supplement or any document related thereto shall in any way be
construed to benefit, indemnify or release any individuals who were former directors or officers of
the Tronox Debtors or their subsidiaries and also were or currently are directors or officers of
Kerr-McGee Corporation and/or Anadarko Petroleum Corporation.
H. Provisions Governing Distributions
(i) Timing and Calculations of Amounts to be Distributed
Unless otherwise provided in the Plan, on the Effective Date (or if a Claim or Equity Interest
is not Allowed on the Effective Date, on the date that such Claim or Equity Interest becomes
Allowed, or as soon as reasonably practicable thereafter), each Holder of an Allowed Claim or
Equity Interest against Tronox, or the Tort Claims Trust, as the case may be, shall receive the
full amount of the Distributions that the Plan provides for Allowed Claims and Equity Interests in
the applicable Class. In the event that any payment or act under the Plan is required to be made
or performed on a date that is not a Business Day, then the making of such payment or the
performance of such act may be completed on the next succeeding Business Day, but shall be deemed
to have been
67
completed as of the required date. If and to the extent that there are Disputed Claims or
Equity Interests, Distributions on account of any such Disputed Claims or Equity Interests shall be
made pursuant to the provisions set forth in Article VII of the Plan. In the event there are
Disputed Claims or Equity Interests requiring adjudication and resolution after the Effective Date,
Reorganized Tronox shall establish appropriate reserves for potential Distributions on account of
such Disputed Claims or Equity Interests in the event that such Disputed Claims or Equity Interests
become Allowed.
Except as otherwise provided in the Plan, Holders of Claims shall not be entitled to interest,
dividends or accruals on the Distributions provided for in the Plan, regardless of whether such
Distributions are delivered on or at any time after the Effective Date.
(ii) Disbursing Agent
All Distributions under the Plan shall be made by the Disbursing Agent on or as soon as is
practicable after the Effective Date. Tronox shall not be required to give any bond or surety or
other security for the performance of its duties as Disbursing Agent unless otherwise ordered by
the Bankruptcy Court. Additionally, in the event that the Disbursing Agent is so otherwise
ordered, all costs and expenses of procuring any such bond or surety shall be borne by Reorganized
Tronox.
I. Procedures for Resolving Contingent, Unliquidated and Disputed Claims
(i) Allowance of Claims.
After the Effective Date, Reorganized Tronox shall have and retain any and all rights and
defenses Tronox had with respect to any Claim or Interest immediately prior to the Effective Date,
except with respect to any Claim deemed Allowed under the Plan. Except as expressly provided in
the Plan or in any order entered in the Chapter 11 Cases prior to the Effective Date (including the
Confirmation Order), no Claim shall become an Allowed Claim unless and until such Claim is deemed
Allowed under the Plan or the Bankruptcy Code or the Bankruptcy Court has entered a Final Order
(including the Confirmation Order) in the Chapter 11 Cases allowing such Claim. All settled Claims
approved prior to the Effective Date pursuant to a Final Order of the Bankruptcy Court pursuant to
Bankruptcy Rule 9019 or otherwise shall be binding on all parties.
(ii) Disputed Reserve.
On the Effective Date (or as soon thereafter as is reasonably practicable), Reorganized Tronox
shall deposit in the Disputed Reserve the amount of Cash and/or New Common Stock that would have
been distributed to the Holders of all Disputed Claims or Equity Interests as if such Disputed
Claims or Equity Interests had been Allowed on the Effective Date, with the amount of such Allowed
Claims or Equity Interests to be determined, solely for the purposes of establishing reserves and
for maximum distribution purposes, to be the lesser of (a) the asserted amount of the Disputed
Claim filed with the Bankruptcy Court, or (if no proof of such Claim was filed) listed by Tronox in
the Schedules, (b) the amount, if any, estimated by the Bankruptcy Court pursuant to section 502(c)
of the Bankruptcy Code pursuant or (c) the amount otherwise agreed to by Tronox, the Creditors
Committee, and the Holder of such Disputed Claim or Equity Interest for reserve purposes.
(iii) Claims Administration Responsibilities.
Except as otherwise specifically provided in the Plan, after the Effective Date, Reorganized
Tronox shall have the sole authority: (1) to file, withdraw or litigate to judgment any objections
to Claims or Equity Interests; (2) to settle or compromise any Disputed Claim or Equity Interest
without any further notice to or action, order or approval by the Bankruptcy Court; and (3) to
administer and adjust the Claims Register to reflect any such settlements or compromises without
any further notice to or action, order or approval by the Bankruptcy Court.
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(iv) Estimation of Claim and Equity Interests.
Before or after the Effective Date, Tronox or Reorganized Tronox, as applicable, may (but is
not required to) at any time request that the Bankruptcy Court estimate any Disputed Claim or
Equity Interest that is contingent or unliquidated pursuant to section 502(c) of the Bankruptcy
Code for any reason, regardless of whether any party previously has objected to such Claim or
Interest or whether the Bankruptcy Court has ruled on any such objection, and the Bankruptcy Court
shall retain jurisdiction to estimate any such Claim or Equity Interest, including during the
litigation of any objection to any Claim or Equity Interest or during the appeal relating to such
objection. Notwithstanding any provision otherwise in the Plan, a Claim or Equity Interest that
has been expunged from the Claims Register, but that either is subject to appeal or has not been
the subject of a Final Order, shall be deemed to be estimated at zero dollars unless otherwise
ordered by the Bankruptcy Court. In the event that the Bankruptcy Court estimates any contingent
or unliquidated Claim or Equity Interest, that estimated amount shall constitute a maximum
limitation on such Claim or Equity Interest for all purposes under the Plan (including for purposes
of Distributions), and Reorganized Tronox may elect to pursue any supplemental proceedings to
object to any ultimate Distribution on such Claim or Equity Interest.
(v) Adjustment to Claims without Objection.
Any Claim or Equity Interest that has been paid or satisfied, or any Claim or Equity Interest
that has been amended or superseded, may be adjusted or expunged on the Claims Register by
Reorganized Tronox without a Claims objection having to be filed and without any further notice to
or action, order or approval of the Bankruptcy Court.
(vi) Time to File Objections to Claims.
Any objections to Claims shall be filed on or before the Claims Objection Bar Date.
(vii) Disallowance of Claims or Equity Interests.
Any Claims held by Entities from which property is recoverable under section 542, 543, 550 or
553 of the Bankruptcy Code, or that is a transferee of a transfer avoidable under section 522(f),
522(h), 544, 545, 547, 548, 549 or 724(a) of the Bankruptcy Code, shall be deemed disallowed
pursuant to section 502(d) of the Bankruptcy Code, and Holders of such Claims may not receive any
Distributions on account of such Claims until such time as such Causes of Action against that
Entity have been settled or a Bankruptcy Court order with respect thereto has been entered and all
sums due, if any, to Tronox by that Entity have been turned over or paid to Reorganized Tronox (or
if such sums due are proceeds from the Anadarko Litigation, then to the Anadarko Litigation Trust).
All Claims filed on account of an indemnification obligation to a director, officer or employee
shall be deemed satisfied and expunged from the Claims Register as of the Effective Date to the
extent such indemnification obligation is assumed (or honored or reaffirmed, as the case may be)
pursuant to the Plan, without any further notice to or action, order or approval of the Bankruptcy
Court. All Claims filed on account of an employee benefit shall be deemed satisfied and expunged
from the Claims Register as of the Effective Date to the extent Reorganized Tronox elects to honor
such employee benefit, without any further notice to or action, order or approval of the Bankruptcy
Court.
EXCEPT AS PROVIDED IN THE PLAN, IN AN ORDER OF THE BANKRUPTCY COURT OR OTHERWISE AGREED, ANY
AND ALL PROOFS OF CLAIM FILED AFTER THE CLAIMS BAR DATE SHALL BE DEEMED DISALLOWED AND EXPUNGED AS
OF THE EFFECTIVE DATE WITHOUT ANY FURTHER NOTICE TO OR ACTION, ORDER OR APPROVAL OF THE BANKRUPTCY
COURT, AND HOLDERS OF SUCH CLAIMS MAY NOT RECEIVE ANY DISTRIBUTIONS ON ACCOUNT OF SUCH CLAIMS,
UNLESS AT OR PRIOR TO THE CONFIRMATION HEARING SUCH LATE CLAIM HAS BEEN DEEMED TIMELY FILED BY A
FINAL ORDER.
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(viii) Amendments to Claims.
On or after the Effective Date, a Claim may not be filed or amended without the prior
authorization of the Bankruptcy Court or Reorganized Tronox, and any such new or amended Claim
filed without such prior authorization shall be deemed disallowed in full and expunged without any
further action.
(ix) No Distributions Pending Allowance.
If an objection to a Claim or portion thereof is filed as set forth in Article VII of the
Plan, no payment or Distribution provided under the Plan shall be made on account of such Claim or
portion thereof unless and until such Disputed Claim becomes an Allowed Claim.
(x) Distributions after Allowance.
To the extent that a Disputed Claim ultimately becomes an Allowed Claim, Distributions (if
any) shall be made to the Holder of such Allowed Claim in accordance with the provisions of the
Plan. As soon as practicable after the date that the order or judgment of the Bankruptcy Court
allowing any Disputed Claim becomes a Final Order, the Disbursing Agent shall provide to the Holder
of such Claim the Distribution (if any) to which such Holder is entitled under the Plan as of the
Effective Date, without any interest to be paid on account of such Claim unless required under
applicable bankruptcy law.
J. Settlement, Release, Injunction and Related Provisions
(i) Discharge of Claims and Termination of Equity Interests.
Pursuant to and to the fullest extent permitted by section 1141(d) of the Bankruptcy Code, and
except as otherwise specifically provided in the Plan, in the Exit Credit Documents or in any
contract, instrument or other agreement or document created pursuant to the Plan, the
Distributions, rights and treatment that are provided in the Plan shall be in complete
satisfaction, discharge and release, effective as of the Effective Date, of Claims (including any
Intercompany Claims resolved or compromised after the Effective Date by Reorganized Tronox), Equity
Interests and causes of action of any nature whatsoever, including any interest accrued on Claims
or Equity Interests from and after the Petition Date, whether known or unknown, against,
liabilities of, Liens on, obligations of, rights against, and Equity Interests in, the Tronox
Debtors, Reorganized Tronox or any of their assets or properties, regardless of whether any
property shall have been distributed or retained pursuant to the Plan on account of such Claims and
Equity Interests, including demands, liabilities and causes of action that arose before the
Effective Date, any liability (including withdrawal liability) to the extent such Claims or Equity
Interests relate to services performed by employees of Tronox prior to the Effective Date and that
arise from a termination of employment, any contingent or non-contingent liability on account of
representations or warranties issued on or before the Effective Date and all debts of the kind
specified in sections 502(g), 502(h) or 502(i) of the Bankruptcy Code, in each case whether or not:
(1) a Proof of Claim or Equity Interest based upon such debt, right or Equity Interest is filed or
deemed filed pursuant to section 501 of the Bankruptcy Code; (2) a Claim or Equity Interest based
upon such debt, right or Equity Interest is Allowed pursuant to section 502 of the Bankruptcy Code;
or (3) the Holder of such a Claim or Equity Interest has accepted the Plan. Any default by Tronox
or its Affiliates with respect to any Claim or Equity Interest that existed immediately prior to or
on account of the filing of the Chapter 11 Cases shall be deemed cured on the Effective Date. The
Confirmation Order shall be a judicial determination of the discharge of all Claims and Equity
Interests subject to the Effective Date occurring.
Notwithstanding anything to the contrary in the Plan, all Replacement DIP Facility Claims that
are converted into the Exit Financing in accordance with the terms of the Replacement DIP Documents
shall be governed exclusively by the applicable Exit Credit Documents, and shall not be discharged,
released or otherwise terminated pursuant to the Plan, section 1141(d) of the Bankruptcy Code or
otherwise.
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(ii) Release of Liens.
Except as otherwise provided in the Plan, in the Exit Credit Documents or in any contract,
instrument, release or other agreement or document created pursuant to the Plan, on the Effective
Date and concurrently with the applicable Distributions made pursuant to the Plan and, in the case
of a Secured Claim, satisfaction in full of the portion of the Secured Claim that is Allowed as of
the Effective Date, all mortgages, deeds of trust, Liens, pledges or other security interests
against any property of the Estates shall be fully released and discharged, and all of the right,
title and interest of any Holder of such mortgages, deeds of trust, Liens, pledges or other
security interests shall revert to Reorganized Tronox and its successors and assigns.
(iii) Released Parties
Under the Plan, the Released Parties are: (a) Tronox and Reorganized Tronox (b) the current
directors and officers of the Tronox Debtors in place as of July 7, 2010; (c) all current and
former members of the Creditors Committee; (d) the Backstop Parties; (e) and the parties to that
certain Equity Commitment Agreement dated December 20, 2009, filed with the Bankruptcy Court on
December 20, 2009 [see Dkt. No. 1003] and approved by orders entered on December 23, 2009
and January 15, 2010 [Dkt. Nos. 1031 and 1115]; (f) the agents and lenders under each of the
Prepetition Facilities, the Original DIP Facility and the Replacement DIP Facility solely in
connection with such facilities; (g) the Environmental Response Trustees; (h) if Class 8 votes to
accept the Plan, all current and former members of the Equity Committee; (i) with respect to each
of the foregoing Entities in clauses (a) through (h), such Entities subsidiaries, Affiliates,
members, officers, directors, managing directors, managers, controlling persons, agents, financial
advisors, accountants, investment bankers, consultants, attorneys, employees, partners and
representatives, in each case, only in their capacity as such and subject to the limitations set
forth herein; (j) the Nevada Parties and any other Government Environmental Entity that is party to
the Environmental Claims Settlement Agreement; (k) the United States and its agents, attorneys and
financial advisors; provided, however, that (x) nothing in the Plan, the Plan
Supplement or any document related thereto shall in any way release any claim against or liability
of the following parties (or their Affiliates), who are not Released Parties: Lehman Brothers
Holdings Inc., Ernst & Young LLP, Kerr-McGee Corporation and Anadarko Petroleum Corporation and
their officers, directors, employees, advisors, attorneys, professionals, accountants, investment
bankers, consultants, agents and other representatives (including their respective officers,
directors, employees, members and professionals) in their capacity as such, whether such claims or
liabilities be direct or indirect, fixed or contingent, including the claims asserted in the
Anadarko Litigation; (y) for the avoidance of doubt, nothing in the Plan, the Plan Supplement or
any document related thereto shall in any way release any individuals who were former directors or
officers of the Tronox Debtors or their subsidiaries and also were or currently are directors or
officers of Kerr-McGee Corporation and/or Anadarko Petroleum Corporation; and (z) nothing in the
Plan or Confirmation Order shall discharge, release or preclude (i) any liability to the Securities
and Exchange Commission that is not a Claim and (ii) any liability to the SEC on the part of any
Person or Entity that is not a Tronox Debtor or a Reorganized Tronox Debtor.
(iv) Releases by Tronox.
Pursuant to section 1123(b) of the Bankruptcy Code, and except as otherwise specifically
provided in the Plan, for good and valuable consideration, including the service of the Released
Parties to facilitate the expeditious reorganization of Tronox and the implementation of the
restructuring contemplated by the Plan, on and after the Effective Date, the Released Parties are
deemed released and discharged by Tronox, Reorganized Tronox and the Estates from any and all
Claims, obligations, rights, suits, damages, causes of action, remedies and liabilities whatsoever,
including any derivative Claims asserted or assertable on behalf of the Tronox Debtors, whether
known or unknown, foreseen or unforeseen, existing or hereinafter arising, in law, equity or
otherwise, that Tronox, Reorganized Tronox, the Estates or their Affiliates would have been legally
entitled to assert in their own right (whether individually or collectively) or on behalf of the
Holder of any Claim or Equity Interest or other Entity, based on or relating to, or in any manner
arising from, in whole or in part, Tronox, the Chapter 11 Cases, Tronoxs restructuring, the
purchase, sale or rescission of the purchase or sale of any Security of Tronox or Reorganized
Tronox, the subject matter of, or the transactions or events giving rise to, any Claim or Equity
Interest that is treated in the Plan, the business or contractual arrangements between Tronox and
any Released Party, the restructuring of Claims and Equity Interests prior to or in the Chapter 11
Cases, the negotiation, formulation or preparation of the Plan, the Plan
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Supplement, the Disclosure Statement, the Replacement DIP Documents, the Exit Credit Documents
or related agreements, instruments or other documents, upon any other act or omission, transaction,
agreement, event or other occurrence taking place on or before the Confirmation Date, other than
Claims or liabilities arising out of or relating to any act or omission of a Released Party that
constitutes willful misconduct, gross negligence, breach of fiduciary duty or a criminal act to the
extent such act or omission is determined by a Final Order to have constituted willful misconduct,
gross negligence, breach of fiduciary duty or a criminal act.
The foregoing release shall not apply to any express contractual or financial obligations or
any right or obligations arising under or that is part of the Plan or any agreements entered into
pursuant to, in connection with or contemplated by the Plan.
(v) Releases by Holders of Claims and Equity Interests.
As of the Effective Date, to the fullest extent permitted by applicable law, each Holder of a
Claim or an Equity Interest (including, for the avoidance of doubt, all shareholders of Tronox
Incorporated) shall be deemed to have conclusively, absolutely, unconditionally, irrevocably and
forever released and discharged Tronox, Reorganized Tronox and the Released Parties from any and
all Claims, Equity Interests, obligations, rights, suits, damages, causes of action, remedies and
liabilities whatsoever, including any derivative Claims asserted on behalf of a debtor, whether
known or unknown, foreseen or unforeseen, existing or hereafter arising, in law, equity or
otherwise, that such entity would have been legally entitled to assert (whether individually or
collectively), based on or relating to, or in any manner arising from, in whole or in part, Tronox,
Tronoxs restructuring, the Chapter 11 Cases, the purchase, sale or rescission of the purchase or
sale of any Security of Tronox or Reorganized Tronox, the subject matter of, or the transactions or
events giving rise to, any Claim or Equity Interest that is treated in the Plan, the business or
contractual arrangements between Tronox and any Released Party, the restructuring of Claims and
Equity Interests prior to or during the Chapter 11 Cases, the negotiation, formulation or
preparation of the Plan, the Disclosure Statement, the Plan Supplement, the Replacement DIP
Documents, the Exit Credit Documents or related agreements, instruments or other documents, upon
any other act or omission, transaction, agreement, event or other occurrence taking place on or
before the Confirmation Date, other than Claims or liabilities arising out of or relating to any
act or omission of a Released Party that constitutes willful misconduct, gross negligence, breach
of fiduciary duty or a criminal act to the extent such act or omission is determined by a Final
Order to have constituted willful misconduct, gross negligence, breach of fiduciary duty or a
criminal act.
Notwithstanding anything to the contrary in the foregoing, the release set forth above does
not release any post-Effective Date obligations of any party under the Plan or any document,
instrument or agreement (including those set forth in the Plan Supplement) executed to implement
the Plan. No Person shall be discharged, released or relieved from any liability with respect to
the Pension Plan as a result of the Chapter 11 Cases or the Plan, nor shall the PBGC, the Pension
Plan or any other Person be enjoined or precluded from enforcing any liability with respect to the
Pension Plan as a result of the Chapter 11 Cases, the Plans provisions or the Plans Confirmation.
Notwithstanding anything to the contrary in the foregoing, the release set forth above does not
release the personal liability of any of the aforementioned Released Parties in Article VIII of the
Plan for any statutory violation of applicable tax laws or bar any right of action asserted by a
governmental taxing authority against the aforementioned Released Parties for any statutory
violation of applicable tax laws.
(vi) Injunction.
Except as otherwise expressly provided in the Plan or the Exit Credit Documents or for
obligations issued pursuant to the Plan, all Entities who have held, hold or may hold Claims or
Equity Interests that have been released pursuant to Article VIII.C or Article VIII.D of the Plan,
discharged pursuant to Article VIII.A of the Plan or exculpated pursuant to Article VIII.F of the
Plan, are permanently enjoined, from and after the Effective Date, from taking any of the following
actions against, as applicable, Tronox, Reorganized Tronox or the Released Parties: (1) commencing
or continuing in any manner any action or other proceeding of any kind on account of, in connection
with or with respect to any such Claims or Equity Interests; (2) enforcing, attaching, collecting
or recovering by any manner or means any judgment, award, decree or
72
order against Tronox, Reorganized Tronox or the Released Parties on account of or in connection with
or with respect to any such Claims or Equity Interests; (3) creating, perfecting or enforcing any
encumbrance of any kind against Tronox, Reorganized Tronox or the Released Parties or the property
or estates of Tronox, Reorganized Tronox or the Released Parties on account of or in connection
with or with respect to any such Claims or Equity Interests; (4) asserting any right of setoff,
subrogation or recoupment of any kind against any obligation due from Tronox, Reorganized Tronox or
the Released Parties or against the property or Estates of Tronox, Reorganized Tronox or the
Released Parties on account of or in connection with or with respect to any such Claims or Equity
Interests unless such Holder has filed a motion requesting the right to perform such setoff on or
before the Confirmation Date, and notwithstanding an indication in a Proof of Claim or Equity
Interest or otherwise that such Holder asserts, has or intends to preserve any right of setoff
pursuant to section 553 of the Bankruptcy Code or otherwise; and (5) commencing or continuing in
any manner any action or other proceeding of any kind on account of, in connection with or with
respect to any such Claims or Equity Interests released or settled pursuant to the Plan.
(vii) Exculpation.
Upon and effective as of the Effective Date, Tronox and its directors, officers, employees,
attorneys, investment bankers, financial advisors, restructuring consultants and other professional
advisors and agents together with the Exculpated Parties will all be deemed to have solicited
acceptances of the Plan in good faith and in compliance with the applicable provisions of the
Bankruptcy Code, including section 1125(e) of the Bankruptcy Code.
Except with respect to any acts or omissions expressly set forth in and preserved by the Plan,
the Plan Supplement or related documents, the Exculpated Parties shall neither have nor incur any
liability to any Entity for any prepetition or postpetition act taken or omitted to be taken in
connection with, or arising from or relating in any way to, the Chapter 11 Cases, including the
operation of Tronoxs businesses during the pendency of the Chapter 11 Cases; formulating,
negotiating, preparing, disseminating, implementing and/or effecting the Plan Support Agreement,
the Equity Commitment Agreement, the Replacement DIP Documents, the Exit Credit Documents, the
Rights Offering, the Rights Offering Procedures, the Disclosure Statement and the Plan (including
the Plan Supplement and any related contract, instrument, release or other agreement or document
created or entered into in connection therewith); the solicitation of votes for the Plan and the
pursuit of Confirmation and Consummation of the Plan; the administration of the Plan and/or the
property to be distributed under the Plan; the offer and issuance of any securities under the Plan;
and any other prepetition or postpetition act taken or omitted to be taken in connection with or in
contemplation of the restructuring of Tronox. In all respects, each Exculpated Party shall be
entitled to rely upon the advice of counsel concerning his, her or its respective duties under,
pursuant to or in connection with the Plan
Notwithstanding anything herein to the contrary, nothing in the foregoing Exculpation shall
(1) exculpate any Person or Entity from any liability resulting from any act or omission
constituting fraud, willful misconduct, gross negligence, criminal conduct, malpractice, misuse of
confidential information that causes damages or ultra vires act as determined by a Final Order or
(2) limit the liability of the professionals of the Exculpated Parties to their respective clients
pursuant to N.Y. Comp. Codes R. & Regs. tit. 22 § 1200.8 Rule 1.8(h)(1) (2009).
(viii) Liabilities to, and Right of, Governmental Units and Nevada Parties.
Notwithstanding anything to the contrary herein or in the Plan, except insofar as any release
or discharge is expressly provided in the Environmental Claims Settlement Agreement, the Plan does
not release or discharge (i) any criminal liability, (ii) any liability to any Governmental Unit
that is not a claim within the meaning of section 101(5) of the Bankruptcy Code, (iii) any claim of
any Governmental Unit or the Nevada Parties that arises after the Effective Date, (iv) any
liability of a non-debtor to any Governmental Unit or the Nevada Parties, or (v) any liabilities to
which Reorganized Tronox may be subject under applicable laws to a Governmental Unit or the Nevada
Parties as the owner or operator of the Retained Assets after the Effective Date.
73
(ix) Standards Applicable to Non-Debtor Releases.
Articles VIII.C and VIII.D of the Plan provide for the release of certain claims against
non-debtors in consideration of services provided to the Estates and the settlements, compromises
and/or investments made by the non-debtor Released Parties. The Released Parties under the Plan
are (a) Tronox and Reorganized Tronox (b) the current directors and officers of the Tronox Debtors
as of July 7, 2010; (c) all current and former members of the Creditors Committee; (d) the
Backstop Parties and the parties to the Equity Commitment Agreement dated December 20, 2010
(attached to Dkt. No. 1003); (e) the agents and lenders under each of the Prepetition Facilities,
the Original DIP Facility and the Replacement DIP Facility solely in connection with such
facilities; (f) the Environmental Response Trustees; (g) if Class 8 votes to accept the Plan, all
current and former members of the Equity Committee; (h) with respect to each of the foregoing
Entities in clauses (a) through (g), such Entities subsidiaries, affiliates, members, officers,
directors, managing directors, managers, controlling persons, agents, financial advisors,
accountants, investment bankers, consultants, attorneys, employees, partners, affiliates and
representatives, in each case, only in their capacity as such; and (i) the Nevada Parties; and (j)
the United States and its agents, attorneys and financial advisors. The releases are given by (x)
Tronox; (y) all Holders of Claims and Equity Interests against Tronox who vote to accept the Plan
(or who are deemed to have accepted the Plan); and (z) to the greatest extent permitted under
applicable law, a Holder of a Claim or Equity Interest against Tronox who does not vote to accept
the Plan. The released claims are any and all claims or causes of action, including those in
connection with, related to or arising out of the Chapter 11 Cases.
The United States Court of Appeals for the Second Circuit has determined that releases of
non-debtors may be approved as part of a chapter 11 plan of reorganization if there are unusual
circumstances that render the release terms important to the success of the plan. Deutsche
Bank AG v. Metromedia Fiber Network Inc. (In re Metromedia Fiber Network, Inc.), 416 F.3d 136,
143 (2d Cir. 2005). Courts have approved releases of non-debtors when, for example, (a) the estate
received substantial consideration; (b) the enjoined claims were channeled to a settlement fund
rather than extinguished; (c) the enjoined claims would indirectly impact the reorganization by way
of indemnity or contribution; (d) the plan otherwise provided for the full payment of the enjoined
claims; and (e) the affected creditors consented to the release. Id. at 142.
Before a determination can be made as to whether releases are appropriate as warranted by
unusual circumstances, the United States Court of Appeals for the Second Circuit has concluded
that there is a threshold jurisdictional inquiry as to whether the Bankruptcy Court has subject
matter jurisdiction to grant such releases. In re Johns-Manville Corp., 517 F.3d 52, 65
(2d Cir. 2008); see also In re Dreier LLP, 429 B.R. 112, 132 (Bankr. S.D.N.Y. 2010)
(finding no jurisdiction to approve releases of claims that did not affect the estate); In re
Metcalf & Mansfield Alternative Investments, 421 B.R. 685, 695 (Bankr. S.D.N.Y. 2010)
(discussing and approving releases in a case under chapter 15 of the Bankruptcy Code). Courts have
jurisdiction over a third party cause of action or claim if it will directly and adversely impact
the reorganization. Dreier, 429 B.R. at 132. Conversely, the court may lack jurisdiction
if the releases claim is one that would not affect the property of the estate or the
administration of the estate. Id. at 133. Here, all of the released claims would
directly and adversely impact the reorganization of Tronoxs estates. Each of the entities and
individuals granted a release under the Plan would have a potential claim for indemnification
and/or contribution against Tronox for any liabilities incurred on such claims, as well as any
expenses incurred to defend against such claims. Satisfying such claims would reduce the equity
value of Reorganized Tronox and thus would reduce recoveries for Holders of Claims and Equity
Interests. Tronoxs estates therefore would be directly and adversely impacted if the released
claims were pursued, and the Bankruptcy Court has jurisdiction to approve them as part of the Plan.
Tronox believes that the releases set forth in the Plan are appropriate because, among other
things, the circumstances of Tronoxs chapter 11 cases are unique and satisfy the
Metromedia requirements. Tronoxs Chapter 11 Cases are notable for their complexity and
for the number of stakeholders with divergent interests involved. In addition, the Plan includes
one of the largest environmental settlements in history. In short, the standalone reorganization
embodied by the Plan is a result far better than predicted or anticipated when Tronox commenced the
Chapter 11 Cases. Each of the non-debtor Released Parties afforded value Tronox and aided in the
reorganization process. Tronox believes that the non-debtor Released Parties played an integral
role in the formulation of the Plan and have expended significant time and resources analyzing and
negotiating the issues presented by Tronoxs legacy liabilities. As such, the non-debtors
receiving the releases have provided substantial consideration to the Estates and the inclusion of
the non-debtor releases in the Plan is an important element of the consideration provided by these
74
parties. The recipients of the releases would have potential claims for indemnification and/or
contribution against Tronox. Because the Plan provides a substantial recovery for Holders of
Claims and a potential recovery for Holders of Equity Interests, the releases are appropriate under
the Metromedia decision and other case law.
Certain parties in interest have filed objections to the non-debtor releases described above,
which objections dispute Tronoxs position regarding the propriety of the non-debtor releases.
(x) Rights of Internal Revenue Service.
Notwithstanding any provision to the contrary in the Plan, the Confirmation Order or the
implementing Plan documents: (1) the rights of the Internal Revenue Service to setoff and
recoupment shall be preserved; and (2) nothing in Article VIII of the Plan shall constitute a
release of the Internal Revenue Services claims, if any, against the Released Parties and nothing
shall affect the ability of the Internal Revenue Service to pursue, to the extent allowed by
non-bankruptcy law, any non-debtors for any liabilities that may be related to any federal tax
liabilities owed by Tronox or Reorganized Tronox.
K. Conditions Precedent to Confirmation and the Effective Date of the Plan
It shall be a condition to Confirmation of the Plan that the following conditions shall have
been satisfied or waived pursuant to the provisions of Article IX.C of the Plan:
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the Bankruptcy Court shall have entered the Confirmation Order in form and substance
reasonably acceptable to Tronox, the Replacement DIP Agent, the Creditors Committee, the
Required Backstop Parties and the United States (upon consultation with the Nevada
Parties); |
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the Confirmation Order shall, among other things: |
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authorize Tronox and Reorganized Tronox to take all actions necessary
or appropriate to enter into, implement and consummate the contracts, instruments,
releases, leases, indentures and other agreements or documents created in
connection with the Plan; |
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decree that the provisions of the Confirmation Order and the Plan are
nonseverable and mutually dependent; |
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authorize Reorganized Tronox to (a) issue the New Common Stock and the
New Warrants, as applicable, pursuant to the exemption from registration under the
Securities Act provided by section 1145 of the Bankruptcy Code or other exemption
from such registration as applicable and (b) enter into the agreements contained in
the Plan Supplement; |
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decree that the Confirmation Order shall supersede any Bankruptcy Court
orders issued prior to the Confirmation Date that may be inconsistent with the
Confirmation Order; |
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authorize the implementation of the Plan in accordance with its terms;
and |
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provide that, pursuant to section 1146 of the Bankruptcy Code, the
assignment or surrender of any lease or sublease, and the delivery of any deed or
other instrument or transfer order, in furtherance of or in connection with the
plan of reorganization, including any deeds, bills of sale or assignments executed
in connection with any disposition or transfer of assets contemplated by the plan,
shall not be subject to any stamp, real estate transfer, mortgage recording or
other similar tax (including any mortgages or security interest filing to be
recorded or filed in connection with the Exit Financing); and |
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the Plan, the Environmental Claims Settlement Agreement, the Environmental Response
Trust Agreements and the Anadarko Litigation Trust Agreement shall be in form and substance
reasonably acceptable to Tronox, the Replacement DIP Agent, the United States, the Backstop
Parties and the Creditors Committee. |
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It shall be a condition to the Effective Date of the Plan that the following conditions shall
have been satisfied or waived pursuant to the provisions of Article IX.C of the Plan:
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the Confirmation Order shall (a) have been entered in a form and substance reasonably
satisfactory to Tronox, the Replacement DIP Agent, the Creditors Committee, the Required
Backstop Parties and the United States (in consultation with the Nevada Parties) and (b)
shall have become a Final Order; |
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the final version of the Plan Supplement and all of the schedules, documents and
exhibits contained therein shall have been filed in form and substance reasonably
acceptable to Tronox, the Replacement DIP Agent, the Creditors Committee, the Required
Backstop Parties and the United States (in consultation with the Nevada Parties); |
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all actions, documents, certificates and agreements necessary to implement the Plan,
including documents contained in the Plan Supplement, shall have been effected or executed
and delivered, as the case may be, to the required parties and, to the extent required,
filed with the applicable Governmental Units in accordance with applicable laws;
provided, however, that each document, instrument and agreement must be
reasonably acceptable to Tronox, the Required Backstop Parties (or, if applicable under the
terms of the Equity Commitment Agreement, the Backstop Parties) and the Creditors
Committee; |
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(a) On the Effective Date, immediately prior to giving effect to the transactions
contemplated hereby (including the payment in full of all Allowed Administrative Claims and
Allowed Priority Claims), Tronox shall have Available Cash equal to or greater than the
amounts set forth on Schedule 8(b)(viii) to the Equity Commitment Agreement as the Cash
Balance, as applicable to the Effective Date, or such other lower amount as shall be
agreed to by the Required Backstop Parties. To the extent the Effective Date occurs after
December 31, 2010, Tronox shall provide an updated schedule setting forth the projected
Cash Balance reasonably acceptable to the Required Backstop Parties; (b) on the Effective
Date, the amount of capital expenditures made by Tronox for the Kwinana Investment (as
defined in the Credit Agreement) shall not exceed amounts set forth on Schedule 8(b)(viii)
to the Equity Commitment Agreement; (c) Financing Fees, Allowed Administrative Claims,
Priority Claims and Cure Claims paid on the Effective Date shall not exceed $32,500,000; it
being agreed that Financing Fees shall include fees payable to potential lenders in
conjunction with the Exit Financing.; and (d) Settlement Escrow Account and Cash
Collateralized Letters of Credit released prior to or on the Effective Date shall in the
aggregate equal or exceed $58,000,000; |
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The aggregate amount of (a) Allowed General Unsecured Claims (excluding the Unsecured
Notes Claim) and (b) Allowed Indirect Environmental Claims shall not exceed $160 million; |
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the terms of the Management Equity Plan and the New Management Agreements shall be
reasonably acceptable to Tronox, the Creditors Committee and the Required Backstop
Parties; |
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all authorizations, consents, regulatory approvals, rulings or documents that are
necessary to implement and effectuate the Plan shall have been received, waived or
otherwise resolved; |
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Reorganized Tronox and any non-debtor parties thereto shall have entered into the Exit
Credit Documents, and all conditions precedent to the consummation or effectiveness of the
Exit Financing shall have been waived or satisfied in accordance with the terms thereof,
and any funding contemplated to be made on the Effective Date shall have been made in
accordance with the applicable Exit Credit Documents; and |
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the New Board shall have been appointed. |
The conditions to Confirmation of the Plan and to Consummation of the Plan set forth in
Article IX of the Plan may be waived only by consent of Tronox, the Replacement DIP Agent, the
Creditors Committee, the Required Backstop Parties, and, to the extent applicable, the United
States and the Nevada Parties, without notice, leave or order of the Bankruptcy Court or any formal
action other than proceeding to confirm or consummate the Plan.
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If the Consummation of the Plan does not occur, the Plan shall be null and void in all
respects and nothing contained in the Plan or the Disclosure Statement shall: (1) constitute a
waiver or release of any claims by Tronox or the Holders of any Claims or Equity Interests; (2)
prejudice in any manner the rights of Tronox, any Holders or any other Entity; or (3) constitute an
admission, acknowledgment, offer or undertaking by Tronox, any Holders or any other Entity in any
respect.
L. Modification, Revocation or Withdrawal of the Plan
Except as otherwise specifically provided in the Plan, Tronox, with the reasonable consent of
the Replacement DIP Agent, the Creditors Committee, the Required Backstop Parties and the United
States (in consultation with the Nevada Parties), reserves the right to modify the Plan, whether
such modification is material or immaterial, and seek Confirmation consistent with the Bankruptcy
Code. Subject to certain restrictions and requirements set forth in section 1127 of the Bankruptcy
Code and Bankruptcy Rule 3019 and those restrictions on modifications set forth in the Plan, each
of the Tronox Debtors expressly reserves its respective rights to revoke or withdraw, or, with the
reasonable consent of the Replacement DIP Agent, the Creditors Committee, the Required Backstop
Parties and the United States, to alter, amend or modify the Plan with respect to such Debtor, one
or more times, after Confirmation, and, to the extent necessary may initiate proceedings in the
Bankruptcy Court to so alter, amend or modify the Plan, or remedy any defect or omission, or
reconcile any inconsistencies in the Plan, the Disclosure Statement or the Confirmation Order, in
such matters as may be necessary to carry out the purposes and intent of the Plan. Any such
modification or supplement shall be considered a modification of the Plan and shall be made in
accordance with Article X of the Plan.
Entry of the Confirmation Order shall mean that all modifications or amendments to the Plan
since the solicitation of votes on the Plan and prior to entry of the Confirmation Order are
approved pursuant to section 1127(a) of the Bankruptcy Code and do not require additional
disclosure or resolicitation under Bankruptcy Rule 3019.
Tronox reserves the right to revoke or withdraw the Plan prior to the Confirmation Date and to
file subsequent plans of reorganization. If Tronox revokes or withdraws the Plan, or if
Confirmation or Consummation does not occur, then: (1) the Plan shall be null and void in all
respects; (2) any settlement or compromise embodied in the Plan (including the fixing or limiting
to an amount certain of any Claim or Equity Interest or Class of Claims or Equity Interests),
assumption or rejection of Executory Contracts or Unexpired Leases effected by the Plan and any
document or agreement executed pursuant to the Plan, shall be deemed null and void; and (3) nothing
contained in the Plan shall: (a) constitute a waiver or release of any Claims or Equity Interests;
(b) prejudice in any manner the rights of any Tronox Debtor or any other Entity; or (c) constitute
an admission, acknowledgement, offer or undertaking of any sort by any Tronox Debtor or any other
Entity.
M. Retention of Jurisdiction
Notwithstanding the entry of the Confirmation Order and the occurrence of the Effective Date,
on and after the Effective Date, the Bankruptcy Court shall retain exclusive jurisdiction over all
matters arising out of or related to the Chapter 11 Cases and the Plan pursuant to sections 105(a)
and 1142 of the Bankruptcy Code, including jurisdiction to:
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allow, disallow, determine, liquidate, classify, estimate or establish the priority,
Secured or unsecured status or amount of any Claim or Equity Interest, including the
resolution of any request for payment of any Administrative Claim and the resolution of any
and all objections to the Secured or unsecured status, priority, amount or allowance of
Claims or Equity Interests; |
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decide and resolve all matters related to the granting and denying, in whole or in part,
any applications for allowance of compensation or reimbursement of expenses to
Professionals authorized to be paid by the Tronox Debtors estates pursuant to the
Bankruptcy Code or the Plan; |
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resolve any matters related to: (a) the assumption, assignment or rejection of any
Executory Contract or Unexpired Lease to which a Tronox Debtor is party or with respect to
which a Tronox Debtor may be liable |
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and to hear, determine and, if necessary, liquidate, any Claims arising therefrom, including
Cure Claims pursuant to section 365 of the Bankruptcy Code; (b) any potential contractual
obligation under any Executory Contract or Unexpired Lease that is assumed; (c) Reorganized
Tronox amending, modifying or supplementing after the Effective Date, pursuant to Article V
of the Plan, the Assumed Executory Contract and Unexpired Lease List; and (d) any dispute
regarding whether a contract or lease is or was executory or expired; |
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ensure that Distributions to Holders of Allowed Claims and Equity Interests are
accomplished pursuant to the provisions of the Plan; |
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adjudicate, decide or resolve any motions, adversary proceedings (including the Anadarko
Litigation), contested or litigated matters, Causes of Action and any other matters, and
grant or deny any applications involving a Tronox Debtor that may be pending on the
Effective Date; |
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adjudicate, decide or resolve any and all matters related to section 1141 of the
Bankruptcy Code; |
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enter and implement such orders as may be necessary or appropriate to execute, implement
or consummate the provisions of the Plan and all contracts, instruments, releases,
indentures and other agreements or documents created in connection with the Plan or the
Disclosure Statement; |
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enter and enforce any order for the sale of property pursuant to sections 363, 1123 or
1146(a) of the Bankruptcy Code; |
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resolve any cases, controversies, suits, disputes or Causes of Action that may arise in
connection with the Consummation, interpretation or enforcement of the Plan or any Entitys
obligations incurred in connection with the Plan; |
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issue injunctions, enter and implement other orders, or take such other actions as may
be necessary or appropriate to restrain interference by any Entity with Consummation or
enforcement of the Plan; |
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resolve any cases, controversies, suits, disputes or Causes of Action with respect to
the releases, injunctions and other provisions contained in Article VIII of the Plan and
enter such orders as may be necessary or appropriate to implement such releases,
injunctions, and other provisions; |
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resolve any cases, controversies, suits, disputes or causes of action with respect to
the repayment or return of Distributions and the recovery of additional amounts owed by the
Holder of a Claim or Equity Interest for amounts not timely repaid pursuant to Article
VI.J.1 of the Plan; |
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enter and implement such orders as are necessary or appropriate if the Confirmation
Order is for any reason modified, stayed, reversed, revoked or vacated; |
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determine any other matters that may arise in connection with or relate to the Plan, the
Disclosure Statement, the Confirmation Order or any contract, instrument, release,
indenture or other agreement or document created in connection with the Plan or the
Disclosure Statement; |
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enter an order or Final Decree concluding or closing the Chapter 11 Cases; |
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adjudicate any and all disputes arising from or relating to Distributions under the
Plan; |
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consider any modifications of the Plan, to cure any defect or omission or to reconcile
any inconsistency in any Bankruptcy Court order, including the Confirmation Order; |
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determine requests for the payment of Claims and Equity Interests entitled to priority
pursuant to section 507 of the Bankruptcy Code; |
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hear and determine disputes arising in connection with the interpretation,
implementation or enforcement of the Plan or the Confirmation Order, including disputes
arising under agreements, documents or instruments executed in connection with the Plan; |
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hear and determine matters concerning state, local and federal taxes in accordance with
sections 346, 505 and 1146 of the Bankruptcy Code; |
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hear and determine all disputes involving the existence, nature, scope, or enforcement
of any exculpations, discharges, injunctions and releases granted in the Plan, including
under Article VIII of the Plan, regardless of whether such termination occurred prior to or
after the Effective Date; |
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enforce all orders previously entered by the Bankruptcy Court; and |
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hear any other matter not inconsistent with the Bankruptcy Code. |
N. Miscellaneous Provisions
(i) Immediate Binding Effect.
Subject to Article IX.B of the Plan and notwithstanding Bankruptcy Rules 3020(e), 6004(h) and
7062 or otherwise, upon the occurrence of the Effective Date, the terms of the Plan and the Plan
Supplement shall be immediately effective and enforceable and deemed binding upon Tronox,
Reorganized Tronox and any and all Holders of Claims or Equity Interests (irrespective of whether
such Claims or Equity Interests are deemed to have accepted the Plan), all Entities that are
parties to or are subject to the settlements, compromises, releases, discharges and injunctions
described in the Plan, each Entity acquiring property under the Plan and any and all non-debtor
parties to Executory Contracts and Unexpired Leases with the Tronox Debtors.
(ii) Additional Documents.
On or before the Effective Date, Tronox may file with the Bankruptcy Court such agreements and
other documents as may be necessary or appropriate to effectuate and further evidence the terms and
conditions of the Plan. Tronox or Reorganized Tronox, as applicable, and all Holders of Claims or
Equity Interests receiving Distributions pursuant to the Plan and all other parties in interest
shall, from time to time, prepare, execute and deliver any agreements or documents and take any
other actions as may be necessary or advisable to effectuate the provisions and intent of the Plan.
(iii) Statutory Committees and Cessation of Fee and Expense Payment.
On the Effective Date, any statutory committee appointed in the Chapter 11 Cases shall
dissolve and members thereof shall be released and discharged from all rights and duties from or
related to the Chapter 11 Cases. Tronox shall not be responsible for paying any fees or expenses
incurred by the members of or advisors to the Creditors Committee or the Equity Committee after
the Effective Date, except with respect to pending fee applications and appeals of the Confirmation
Order.
(iv) Payment of Certain Fees and Expenses for Government Environmental Entities.
On the Effective Date, Tronox shall pay the Government Environmental Entities $3,000,000 as an
Allowed Administrative Claim. Such amount shall be deemed to satisfy all fees and expenses
incurred, directly or indirectly, in connection with the Plan or the Chapter 11 Cases, including,
without limitation, (a) all fees and expenses of any legal or financial advisors to the Government
Environmental Entities and any consultants or other persons retained or engaged by or on behalf of
the Governmental Environmental Entities and (b) any other out of pocket costs and expenses incurred
by the Governmental Environmental Entities. No Government Environmental Entity shall attempt to
recover additional fees or expenses from Tronox or Reorganized Tronox, including through any
requests for compensation or expense reimbursement for making a substantial contribution in the
Chapter 11 Cases pursuant to sections 503(b)(3), (4), and (5) of the Bankruptcy Code.
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(v) Payment of Certain Fees and Expenses.
Tronox shall pay the fees and expenses of the legal counsel and financial advisors to the
Backstop Parties as set forth in the Equity Commitment Agreement. Tronox and the Backstop Parties
agree that the transactions contemplated hereby comprise an Alternative Transaction under the
Gleacher engagement letter.
Tronox recognizes that the efforts of Creditors Committee member Michael E. Carroll
contributed substantially to this case in connection with the support of the restructuring
contemplated by the Plan by Holders of Tort Claims. Accordingly, Tronox agrees that, on the
Effective Date, subject to supporting documentation being provided to counsel to each of Tronox,
the Backstop Parties and the Creditors Committee, Tronox shall pay all reasonable fees and
expenses of Mr. Carrolls counsel, Montgomery, McCracken, Walker & Rhoads, LLP, for services
rendered and to be rendered in connection therewith up to a maximum of $200,000.
(vi) Payment of Indenture Trustee Fees Claim.
Notwithstanding anything to the contrary herein, on the Effective Date, Tronox shall pay, as
an Allowed Administrative Claim, the reasonable and documented fees and expenses of the Indenture
Trustee, in full, in Cash, in an amount not to exceed $550,000.
Subject to payment in full of the Indenture Trustee Fees Claim in an amount not to exceed
$550,000 and the payment of all other fees and expenses (including fees and expenses of counsel)
incurred by the Indenture Trustee in administering Distributions to Holders of Unsecured Notes
Claims, to the extent payment of the foregoing fees and expenses is permitted by the Indenture, the
Indenture Charging Lien of the Indenture Trustee shall be forever released and discharged. Once
the Indenture Trustee has completed performance of all of its duties set forth in the Plan or in
connection with any Distributions to be made under the Plan, the Indenture Trustee, and its
successors and assigns, shall be relieved of all obligations as Indenture Trustee effective as of
the Effective Date.
(vii) Reservation of Rights.
Except as expressly set forth in the Plan, the Plan shall have no force or effect unless the
Bankruptcy Court shall enter the Confirmation Order, and the Confirmation Order shall have no force
or effect if the Effective Date does not occur. None of the Filing of the Plan, any statement or
provision contained in the Plan or the taking of any action by any Tronox Debtor with respect to
the Plan, the Disclosure Statement or the Plan Supplement shall be or shall be deemed to be an
admission or waiver of any rights of any Tronox Debtor with respect to the Holders of Claims or
Equity Interests prior to the Effective Date.
(viii) Successors and Assigns.
The rights, benefits and obligations of any Entity named or referred to in the Plan shall be
binding on and shall inure to the benefit of any heir, executor, administrator, successor or
assign, affiliate, officer, director, agent, representative, attorney, beneficiaries or guardian,
if any, of each Entity.
(ix) Notices.
All notices, requests and demands to or upon Tronox to be effective shall be in writing
(including by facsimile transmission) and, unless otherwise expressly provided herein, shall be
deemed to have been duly given or made when actually delivered or, in the case of notice by
facsimile transmission, when received and telephonically confirmed, addressed as follows:
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(a) if to Tronox, to:
Tronox LLC
3301 NW 150th Street
Oklahoma City, Oklahoma 73134
Facsimile: (405) 775-5012
Attention: Michael J. Foster, Esq.
E-mail address: michael.foster@tronox.com
with copies to:
Kirkland & Ellis LLP
601 Lexington Avenue
New York, New York 10022
Facsimile: (212) 446-4900
Attention: Jonathan S. Henes, Esq., Patrick J. Nash, Jr., Esq. and Nicole L.
Greenblatt, Esq.
E-mail
addresses: jonathan.henes@kirkland.com, patrick.nash@kirkland.com and
nicole.greenblatt@kirkland.com
(b) if to the Replacement DIP Agent, to:
Latham & Watkins LLP
233 South Wacker Drive, Suite 5800
Chicago, Illinois 60606
Attention: Richard A. Levy, Esq.
E-mail address: richard.levy@lw.com
(c) if to the Creditors Committee, to:
Paul, Weiss, Rifkind, Wharton & Garrison LLP
1285 Avenue of the Americas
New York, New York 10019
Attention: Brian S. Hermann, Esq. and Elizabeth McColm, Esq.
E-mail addresses: bhermann@paulweiss.com and emccolm@paulweiss.com
(d) if to the United States to:
Office of the United States Attorney, Southern District of New York
86 Chambers Street, 3rd Floor
New York, New York 10007
Attention: Robert Yalen Esq. and Tomoko Onozawa, Esq.
Email address: robert.yalen@usdoj.gov and tomoko.onozawa@usdoj.gov
(e) if to the Backstop Parties, to:
Milbank, Tweed, Hadley & McCloy LLP
1 Chase Manhattan Plaza
New York, New York 10005
Attention: Thomas C. Janson, Esq. and Robert C. Shenfeld, Esq.
Email address: tjanson@milbank.com and rshenfeld@milbank.com
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(f) if to the Equity Committee, to:
Pillsbury Winthrop Shaw Pittman LLP
1540 Broadway
New York, New York 10036
Attn: Craig A. Barbarosh, Esq., David A. Crichlow, Esq. and Karen B. Dine, Esq.
Email addresses: craig.barbarosh@pillsburylaw.com, david.crichlow@pillsburylaw.com
and karen.dine@pillsburylaw.com
(g) if to U.S. Trustee, to:
Office of the United States Trustee for the Southern District of New York
33 Whitehall Street, 21st Floor
New York, New York 10004
Attn: Susan D. Golden, Esq.
Email addresses: susan.golden@usdoj.gov
After the Effective Date, Tronox has authority to send a notice to Entities providing that to
continue to receive documents pursuant to Bankruptcy Rule 2002, such Entity must file a renewed
request to receive documents pursuant to Bankruptcy Rule 2002. After the Effective Date, Tronox is
authorized to limit the list of Entities receiving documents pursuant to Bankruptcy Rule 2002 to
those Entities who have filed such renewed requests.
(x) Term of Injunctions or Stays.
Unless otherwise provided in the Plan or in the Confirmation Order, all injunctions or stays
in effect in the Chapter 11 Cases pursuant to sections 105 or 362 of the Bankruptcy Code or any
order of the Bankruptcy Court, and extant on the Confirmation Date (excluding any injunctions or
stays contained in the Plan or the Confirmation Order), shall remain in full force and effect until
the Effective Date. All injunctions or stays contained in the Plan or the Confirmation Order shall
remain in full force and effect in accordance with their terms.
(xi) Entire Agreement.
Except as otherwise indicated, the Plan, the Plan Supplement and all exhibits thereto
supersede all previous and contemporaneous negotiations, promises, covenants, agreements,
understandings and representations on such subjects, all of which have become merged and integrated
into the Plan and the Plan Supplement.
(xii) Exhibits.
All exhibits and documents included in the Plan Supplement are incorporated into and are a
part of the Plan as if set forth in full in the Plan. After the exhibits and documents are filed,
copies of such exhibits and documents shall be available upon written request to Tronoxs counsel
at the address above or by downloading such exhibits and documents from the website of Tronoxs
notice and claims agent at http://www.kccllc.net/tronox or the Bankruptcy Courts website at
www.nysb.uscourts.gov. To the extent any exhibit or document is inconsistent with the terms of the
Plan, unless otherwise ordered by the Bankruptcy Court, the non-exhibit or non-document portion of the Plan shall control.
(xiii) Nonseverability of Plan Provisions.
If, prior to Confirmation, any term or provision of the Plan is held by the Bankruptcy Court
to be invalid, void or unenforceable, the Bankruptcy Court shall have the power to alter and
interpret such term or provision to make it valid or enforceable to the maximum extent practicable,
consistent with the original purpose of the term or provision held to be invalid, void or
unenforceable, and such term or provision shall then be applicable as altered or interpreted.
Notwithstanding any such holding, alteration or interpretation, the remainder of the terms and
provisions of the Plan will remain in full force and effect and will in no way be affected,
impaired, or invalidated by such holding, alteration, or interpretation. The Confirmation Order
shall constitute a judicial determination and shall
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provide that each term and provision of the Plan, as it may have been altered or interpreted
in accordance with the foregoing, is: (1) valid and enforceable pursuant to its terms; (2) integral
to the Plan and may not be deleted or modified without Tronoxs and the Creditors Committees
consent; and (3) nonseverable and mutually dependent.
(xiv) Votes Solicited in Good Faith.
Upon entry of the Confirmation Order, Tronox will be deemed to have solicited votes on the
Plan in good faith and in compliance with the Bankruptcy Code, and pursuant to section 1125(e) of
the Bankruptcy Code, Tronox and each of its Affiliates, agents, representatives, members,
principals, shareholders, officers, directors, employees, advisors and attorneys will be deemed to
have participated in good faith and in compliance with the Bankruptcy Code in the offer and
issuance of Securities Distributed under the Plan and any previous plan, and, therefore, such
parties, individuals and Reorganized Tronox will not have any liability for the violation of any
applicable law, rule or regulation governing the solicitation of votes on the Plan or the offer and
issuance of the Securities offered and Distributed under the Plan and any previous plan.
(xv) Closing of Chapter 11 Cases.
Tronox shall, promptly after the full administration of the Chapter 11 Cases, file with the
Bankruptcy Court all documents required by Bankruptcy Rule 3022 and any applicable order of the
Bankruptcy Court to close the Chapter 11 Cases.
(xvi) Waiver or Estoppel.
The Plan provides that each Holder of a Claim or an Equity Interest shall be deemed to have
waived any right to assert any argument, including the right to argue that its Claim or Equity
Interest should be Allowed in a certain amount, in a certain priority, Secured or not subordinated
by virtue of an agreement made with Tronox, its counsel or any other Entity, if such agreement was
not disclosed in the Plan, the Disclosure Statement or papers filed with the Bankruptcy Court prior
to the Confirmation Date. For the avoidance of doubt, this provision in the Plan is not
intended to limit a creditors ability to enter into a consensual post-confirmation resolution of
its Claim.
(xvii) Conflicts.
Except as set forth in the Plan, to the extent that any provision of the Disclosure Statement,
the Plan Supplement or any other order (other than the Confirmation Order) referenced in the Plan
(or any exhibits, schedules, appendices, supplements or amendments to any of the foregoing),
conflict with or are in any way inconsistent with any provision of the Plan, the Plan shall govern
and control.
V. VALUATION ANALYSIS
In conjunction with formulating the Plan, the Tronox Debtors determined that it was necessary
to estimate the post-Confirmation going-concern of Reorganized Tronox (the Valuation
Analysis). The Valuation Analysis is set forth on the exhibit attached hereto as Exhibit
D.
VI. CONFIRMATION OF THE PLAN
A. The Confirmation Hearing
The Bankruptcy Court has scheduled the Confirmation Hearing for 11:00 a.m. on November 17,
2010 (Eastern Time), before the Honorable Allan L. Gropper, United States Bankruptcy Judge, in the
United States Bankruptcy Court for the Southern District of New York, located at One Bowling Green,
Courtroom 617, New York, New York 10004-1408. The Confirmation Hearing may be adjourned from time
to time without further notice except for an announcement of the adjourned date made at the
Confirmation Hearing or any adjournment thereof.
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B. Requirements for Confirmation of the Plan
Among the requirements for the Confirmation of the Plan are that the Plan (1) is accepted by
all impaired Classes of Claims and Equity Interests, or if rejected by an impaired Class, that the
Plan does not discriminate unfairly and is fair and equitable as to such Class, (2) is
feasible, and (3) is in the best interests of Holders of Claims and Equity Interests that are
impaired under the Plan.
The following requirements must be satisfied pursuant to section 1129(a) of the Bankruptcy
Code before the Bankruptcy Court may confirm a plan of reorganization:
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The plan complies with the applicable provisions of the Bankruptcy Code. |
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The proponents of the plan comply with the applicable provisions of the Bankruptcy
Code. |
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The plan has been proposed in good faith and not by any means forbidden by law. |
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Any payment made or to be made by the proponent, by the debtor or by a person
issuing securities or acquiring property under a plan, for services or for costs and
expenses in or in connection with the case, in connection with the plan and incident to
the case, has been approved by, or is subject to the approval of, the Bankruptcy Court
as reasonable. |
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The proponent of the plan has disclosed the identity and affiliations of any
individual proposed to serve, after confirmation of the plan, as a director, officer or
voting trustee of the debtor, an affiliate of the debtor participating in a joint plan
with the debtor or a successor to the debtor under the plan, and the appointment to, or
continuance in, such office of such individual, is consistent with the interests of
creditors and equity security holders and with public policies. |
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The proponent of the plan has disclosed the identity of any insider (as defined in
section 101(31) of the Bankruptcy Code) that will be employed or retained by
Reorganized Tronox and the nature of any compensation for such insider. |
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With respect to each holder within an impaired class of claims or equity interests,
each such holder (a) has accepted the plan or (b) will receive or retain under the plan
on account of such claim or interest property of a value, as of the effective date of
the plan, that is not less than the amount that such holder would so receive or retain
if the debtor were liquidated under chapter 7 of the Bankruptcy Code on such date. |
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With respect to each class of claims or equity interests, such class (a) has
accepted the plan or (b) is not impaired under the plan (subject to the cramdown
provisions discussed below). |
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Except to the extent that the holder of a particular claim has agreed to a different
treatment of such claim, the plan provides that: |
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with respect to a claim of a kind specified in sections
507(a)(1) or 507(a)(2) of the Bankruptcy Code, on the effective date of the
plan, the holder of the claim will receive on account of such claim cash equal
to the allowed amount of such claim, unless otherwise agreed; |
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with respect to a class of claims of the kind specified in
sections 507(a)(3), 507(a)(4), 507(a)(5), 507(a)(6) or 507(3)(7) of the
Bankruptcy Code, each holder of a claim of such class will receive (a) if such
class has accepted the plan, deferred cash payments of a value, on the
effective date of the plan, equal to the allowed amount of such claim; or (b)
if such class has not accepted the plan, cash on the effective date of the plan
equal to the allowed amount of such claim; and |
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with respect to a priority tax claim of a kind specified in
section 507(a)(8) of the Bankruptcy Code, the holder of such claim will receive
on account of such claim deferred cash payments, over a period not exceeding
six years after the date of assessment of such claim, of a value, as of the
effective date of the plan, equal to the allowed amount of such claim. |
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If a class of claims is impaired under the plan, at least one class of claims that
is impaired under the plan has accepted the plan, determined without including any
acceptance of the plan by any insider, as defined in section 101(31) of the
Bankruptcy Code. |
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Confirmation of the plan is not likely to be followed by the liquidation, or the
need for further financial reorganization, of the debtor or any successor to the debtor
under the plan, unless such liquidation or reorganization is proposed in the plan. |
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All fees payable under 28 U.S.C. §1930, as determined by the Bankruptcy Court at the
hearing on confirmation of the plan, have been paid or the plan provides for the
payment of all such fees on the effective date of the plan. |
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The plan provides for the continuation after its effective date of payment of all
retiree benefits, as that term is defined in section 1114 of the Bankruptcy Code, at
the level established pursuant to subsection (e)(i)(B) or (g) of section 1114 of the
Bankruptcy Code, at any time prior to confirmation of the plan, for the duration of the
period the debtor has obligated itself to provide such benefits. |
C. Best Interests of Creditors
Often called the best interests test, section 1129(a)(7) of the Bankruptcy Code requires
that a bankruptcy court find, as a condition to confirmation, that a chapter 11 plan provides, with
respect to each class, that each holder of a claim or an interest in such class either (i) has
accepted the plan or (ii) will receive or retain under the plan property of a value, as of the
effective date of the plan, that is not less than the amount that such holder would receive or
retain if the debtors liquidated under chapter 7 of the Bankruptcy Code. To make these findings, a
bankruptcy court must: (i) estimate the cash liquidation proceeds that a chapter 7 trustee would
generate if each of the debtors chapter 11 cases were converted to a chapter 7 case and the assets
of such debtors estate were liquidated; (ii) determine the liquidation distribution that each
non-accepting holder of a claim or an interest would receive from such liquidation proceeds under
the priority scheme dictated in chapter 7; and (iii) compare the holders liquidation distribution
to the distribution under the plan that the holder would receive if the plan were confirmed and
consummated.
To satisfy the requirements of section 1129(a)(7) of the Bankruptcy Code, Tronox, together
with its retained advisors, prepared the liquidation analysis attached hereto as Exhibit E
to this Disclosure Statement (the Liquidation Analysis). Based upon on the Liquidation
Analysis, Tronox believes that holders of Claims and Interests will receive equal or greater value
as of the Effective Date than such holders would receive in a chapter 7 liquidation and that the
Plan will therefore meet the best interests test provided in section 1129(a)(7) of the Bankruptcy
Code.
D. Acceptance by Impaired Classes
Section 1126(c) of the Bankruptcy Code provides that a class of claims has accepted a plan of
reorganization if such plan has been accepted by creditors that hold at least two-thirds in amount
and more than one-half in number of the allowed claims of such class.
E. Feasibility
Section 1129(a)(11) of the Bankruptcy Code requires that confirmation of the plan of
reorganization is not likely to be followed by the liquidation, or the need for further financial
reorganization of the debtors, or any successor to the debtors (unless such liquidation or
reorganization is proposed in the plan of reorganization).
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To determine whether the Plan meets this feasibility requirement, Tronox has analyzed its
ability to meet its obligations under the Plan. As part of this analysis, Tronox has prepared the
financial projections, as set forth on Exhibit C attached hereto. Based upon the financial
projections, Tronox believes that Reorganized Tronox will be a viable operation following the
Chapter 11 Cases, and that the Plan will meet the feasibility requirements of the Bankruptcy Code.
F. Requirements of Section 1129(b) of the Bankruptcy Code
The Bankruptcy Code permits confirmation of a plan of reorganization even if it is not
accepted by each impaired class so long as (a) the plan of reorganization otherwise satisfies the
requirements for confirmation, (b) at least one impaired class of claims has accepted the plan of
reorganization without taking into consideration the votes of any insiders in such class and (c)
the plan of reorganization is fair and equitable and does not discriminate unfairly as to any
impaired class that has not accepted such plan. These so-called cramdown provisions are set
forth in section 1129(b) of the Bankruptcy Code.
(i) Fair and Equitable
The Bankruptcy Code establishes different cramdown tests for determining whether a plan is
fair and equitable to dissenting impaired classes unsecured creditors and equity interest holders
as follows:
(a) Unsecured Creditors
A plan of reorganization is fair and equitable as to an impaired class of unsecured claims
that rejects the plan if the plan provides that: (i) each holder of a claim included in the
rejecting class receives or retains under the plan property of a value, as of the effective date of
the plan of reorganization, equal to the amount of its allowed claim; or (ii) the holders of claims
and equity interests that are junior to the claims of the rejecting class will not receive or
retain any property under the plan of reorganization on account of such junior claims or interests.
(b) Holders of Equity Interests in Tronox Incorporated
A plan of reorganization is fair and equitable as to an impaired class of equity interests
that rejects the plan if the plan provides that: (i) each holder of an equity interest included in
the rejecting class receives or retains under the plan property of a value, as of the effective
date of the plan of reorganization, equal to the greatest of the allowed amount of (A) any fixed
liquidation preference to which such holder is entitled, (B) the fixed redemption price to which
such holder is entitled, or (C) the value of the equity interest; or (ii) the holder of any equity
interest that is junior to the equity interests of the rejecting class will not receive or retain
any property under the plan of reorganization on account of such junior interest.
Tronox believes the Plan is fair and equitable as to Holders of Claims in Classes that vote to
reject the Plan because the Plan provides that their Allowed Claims or Equity Interests will be
either Unimpaired, or they will receive their absolute priority entitlements under the Bankruptcy
Code. Tronox believes the Plan is fair and equitable as to Holders of General Unsecured Claims and
Equity Interests because Holders of Equity Interests will not receive or retain any property under
the Plan unless Holders of General Unsecured Claims receive full payment on account of their
Claims.
(ii) No Unfair Discrimination
This test applies to classes of claims or interests that are of equal priority and are
receiving different treatment under a proposed plan. The test does not require that the treatment
be the same or equivalent, but that the treatment be fair. In general, bankruptcy courts
consider whether a plan discriminates unfairly in its treatment of classes of claims of equal rank
(e.g., classes of the same legal character). Bankruptcy courts will take into account a number of
factors in determining whether a plan discriminates unfairly. A proposed plan could treat two
classes of unsecured creditors differently without unfairly discriminating against either class.
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A plan of reorganization does not discriminate unfairly if a dissenting class is treated
substantially equally to other classes similarly situated and no such class receives more than it
is legally entitled to receive for its claims or equity interests.
Tronox does not believe that the Plan discriminates unfairly against any impaired Class of
Claims or Equity Interests. Tronox believes that the Plan and the treatment of all Classes of
Claims and Equity Interests under the Plan satisfy the foregoing requirements for nonconsensual
Confirmation of the Plan.
VII. RISK FACTORS
Holders of Claims and Equity Interests should read and consider carefully the risk factors set
forth below, as well as the other information set forth in this Disclosure Statement and the
documents delivered together herewith, referred to or incorporated by reference herein, prior to
voting to accept or reject the Plan. Although these risk factors are many, these factors should
not be regarded as constituting the only risks present in connection with Tronoxs businesses or
the Plan and its implementation.
A. Risks Related to Confirmation of the Plan
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(i) |
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Classes 3, 4, 5, 6, 7 and 8 may vote to reject the Plan. |
Pursuant to section 1126(c) of the Bankruptcy Code, section 1129(a)(7)(A)(i) of the Bankruptcy
Code will be satisfied with respect to Classes 3, 4, 5, 6, 7 and 8 if at least two-thirds in amount
and more than one-half in number of the Allowed Claims or Equity Interests that vote in such Class,
vote to accept the Plan. There is no guarantee that Tronox will receive the necessary acceptances
from Holders of Claims or Equity Interests in Classes 3, 4, 5, 6, 7 or 8. If all of Classes 3, 4,
5, 6, 7 and 8 vote to reject the Plan, Tronox may elect to amend the Plan with the reasonable
consent of the Replacement DIP Agent, the Creditors Committee, the Backstop Parties and the United
States, propose an alternate plan or proceed with liquidation.
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(ii) |
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The conditions precedent to the Confirmation and
Consummation of the Plan may not occur. |
As more fully set forth in Article IX of the Plan, the occurrence of Confirmation of the Plan
and the Effective Date are each subject to a number of conditions precedent, including, among other
things, finalizing and obtaining necessary approvals and consents with respect to the Environmental
Claims Settlement. If the conditions precedent to Confirmation are not satisfied or waived, then
the Plan will not be confirmed; and if the conditions precedent to the Effective Date are not
satisfied or waived, the Effective Date will not take place. In the event that the Plan is not
confirmed or is not consummated, Tronox may amend the Plan and seek confirmation of the amended
Plan.
However, if Tronox does not secure sufficient working capital to continue its operations,
obtain the necessary approvals and consents with respect to the Environmental Claims Settlement
Agreement or if the revised Plan is not otherwise confirmed, Tronox may be forced to go out of
business and proceed with a liquidation of its assets. While the Liquidation Analysis indicates
that some Holders of Claims would receive a full or partial recovery, it also demonstrates that
other Holders of Claims and Equity Interests would receive no recovery in a hypothetical chapter 7
liquidation. For a more detailed description of the consequences of a liquidation scenario, see
the Liquidation Analysis attached hereto at Exhibit E.
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(iii) |
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The aggregate amount of Allowed General Unsecured Claims
(excluding the Unsecured Notes Claim) and Allowed Indirect Environmental
Claims could exceed certain limits. |
It is a condition precedent to the Effective Date that the aggregate amount of (a) Allowed
General Unsecured Claims (excluding the Unsecured Notes Claim) and (b) Allowed Indirect
Environmental Claims shall not exceed $160 million.
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Tronox is in the process of objecting to certain asserted General Unsecured Claims and
Indirect Environmental Claims, including claims asserted by Anadarko, but there can be no assurance
that Tronoxs objections will be successful and that the aggregate amount of such Claims will be
less than $160 million. To the extent the aggregate amount of such Claims exceeds $160 million,
the consummation of the Plan may be delayed or not occur. For further information on the Anadarko
Claims in particular, see Article III.E hereof.
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(iv) |
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Tronox may be unable to meet certain minimum liquidity
requirements. |
It is a condition precedent to the Effective Date that the minimum liquidity requirements set
forth in the Equity Commitment Agreement shall have been met. To the extent that confirmation of
the Plan is delayed or Tronox is unable to secure the financing contemplated under the Exit
Financing, Tronox may be unable to meet this condition precedent, and the consummation of the Plan
also may be delayed or not occur.
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(v) |
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Tronox may be unable to transfer certain of the Nevada
Assets. |
Tronoxs interests in Basic Management, Inc. (BMI) and its affiliate, The Landwell Company,
L.P. (Landwell) are included in the Nevada Assets which are to be transferred to the
Environmental Response Trusts pursuant to the Environmental Claims Settlement Agreement. Pursuant
to the governing documentation for BMI and Landwell, each of BMI, Landwell and their respective
shareholders (in the case of BMI) and partners (in the case of Landwell) hold a consent right and
right of first refusal with respect to certain transfers of Tronoxs interests in BMI and/or
Landwell. Tronox does not believe that the consummation of the transactions pursuant to the Plan
will trigger such consent rights, rights of first refusal or any other similar right; however, BMI,
Landwell and their respective shareholders or partners have indicated that they will not consent to
any transfer and intend to enforce their rights of first refusal. If Tronox is unable to resolve
this dispute and effectuate a transfer of its interests in BMI and Landwell (or the proceeds
thereof) to the Environmental Response Trusts, or such transfer is delayed, the consummation of the
Plan may be delayed or not occur.
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(vi) |
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The Equity Committee objects to the Plan and may seek
to solicit votes on a competing plan of reorganization |
On September 2, 2010, the Official Committee of Equity Security Holders submitted an
alternative plan of reorganization [Dkt. No. 1962] (as amended from time to time, including by Dkt.
No. 2142, the Equity Committee Plan) and related disclosure statement [Dkt. No. 1963] (as
amended from time to time, including by Dkt. No. 2143, the Equity Committee Disclosure
Statement). The Equity Committee Plan is premised on an enterprise valuation of Tronox of
approximately $1.25 billion and provides for a $185 million rights offering open to certain
eligible holders of Claims and Equity Interests. On September 29, 2010, the Equity Committee filed
a notice of withdrawal [Dkt. No. 2180] regarding the Equity Committee Plan and Disclosure
Statement, without prejudice to re-file.
Despite the withdrawal thereof, the existence of the Equity Committee Plan raises certain
risks with respect to this Plan, as follows:
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First, because the Equity Committee disputes Tronoxs enterprise value, litigation
between the Equity Committee and the proponents of this Plan may occur. In the event that
the Equity Committees enterprise valuation is accepted, this Plan may need to be amended
and confirmation could be delayed. |
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Second, the Equity Committee may contest the reasonableness of the settlements embodied
in the Plan. All settlements described in the Plan are subject to review for
reasonableness by the Bankruptcy Court and objection by any party in interest. If any
settlement is rejected as unreasonable, recoveries to holders of Claims or Equity Interests
could be impacted, and confirmation of the Plan may be delayed or not occur. |
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Third, the Equity Committee has indicated that it is concerned that conditioning
distribution to Class 8 Equity Interests in Tronox Incorporated on acceptance of the Plan
is improperly coercive, and the Equity Committee may object to the Plan on that basis. To
the extent the Equity Committee is successful in prosecuting its objection, the Plan may
have to be amended and confirmation could be delayed. |
88
Tronox and other parties in interest are in ongoing discussions with the Equity Committee
regarding the treatment of Equity Interests under the Plan. As a result of those negotiations, the
value of the New Warrants offered to Class 8 Equity Interests may increase, which could dilute
recoveries to holders of Class 3 and Class 6 Claims under the Plan.
(vii) Tronox may seek to accomplish an alternative chapter 11 plan.
If votes are received in number and amount sufficient to enable the Bankruptcy Court to
confirm the Plan, Tronox intends to seek, as promptly as practicable thereafter, confirmation of
the Plan. In the event that sufficient votes are not received, Tronox may seek to accomplish an
alternative chapter 11 plan. There can be no assurance that the terms of any such alternative
chapter 11 plan would be similar or as favorable to the Holders of Allowed Claims or Equity
Interests as those proposed in the Plan.
(viii) Nonconsensual confirmation of the Plan may be necessary.
In the event that any impaired class of claims or equity interests does not accept a chapter
11 plan, a bankruptcy court may nevertheless confirm such a plan at the proponents request if at
least one impaired class has accepted the plan (with such acceptance being determined without
including the vote of any insider in such class), and, as to each impaired class that has not
accepted the plan, the bankruptcy court determines that the plan does not discriminate unfairly
and is fair and equitable with respect to the dissenting impaired classes. Tronox believes that
the Plan satisfies these requirements, and Tronox may request such nonconsensual confirmation in
accordance with subsection 1129(b) of the Bankruptcy Code. Nevertheless, there can be no assurance
that the Bankruptcy Court will reach this conclusion.
(ix) Tronox may object to the amount or classification of a Claim.
Except as otherwise provided in the Plan, Tronox reserves the right to object to the amount or
classification of any Claim under the Plan. The estimates set forth in this Disclosure Statement
cannot be relied on by any Holder of a Claim where such Claim is subject to an objection. Any
Holder of a Claim that is subject to an objection thus may not receive its expected share of the
estimated distributions described in this Disclosure Statement.
B. Risks Related to Recoveries under the Plan
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(i) |
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Tronox may not be able to achieve its projected financial results. |
The financial projections set forth on Exhibit C to this Disclosure Statement
represent Tronox managements best estimate of Tronoxs future financial performance based on
currently known facts and assumptions about Tronoxs future operations as well as the United States
and world economies in general and the industry segments in which Tronox operates in particular.
Tronoxs actual financial results may differ significantly from the projections. If Tronox does
not achieve its projected financial results, then the value of the New Common Stock may be
negatively affected and Tronox may lack sufficient liquidity to continue operating as planned after
the Effective Date.
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(ii) |
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A liquid trading market for the New Common Stock is unlikely to develop
immediately. |
A liquid trading market for the New Common Stock is unlikely to develop immediately. As of
the Effective Date, the New Common Stock will not be listed for trading on any stock exchange or
trading system. Consequently, the trading liquidity of the New Common Stock will be limited. The
future liquidity of the trading market for the New Common Stock will depend, among other things,
upon the number of Holders of New Common Stock, and whether the stock is listed for trading on an
exchange. The ability of Reorganized Tronox Incorporated to list the New Common Stock on an
exchange will depend on its ability to prepare historical financial statements. On May 5, 2009,
Tronox filed a statement of Non-Reliance on Previously Issued Financial Statements or Related Audit
Report or Completed Interim Review on Form 8-K indicating that Tronoxs previously filed financial
reports should no longer be relied upon because Tronox failed to establish adequate reserves as
required by applicable accounting pronouncements. In the report, Tronox indicated that it has not
yet completed its review of contingency reserves and other related liabilities. Therefore, the
amount of any increase to its reserves that may need to be taken
89
is not known at this time. However, the adjustments will be material. Tronox continues to
review its environmental and other contingent liability reserves. There is no assurance of when
this process will be completed. Accordingly, Tronoxs ability to list shares of New Common Stock
for trading on an exchange may be delayed depending on whether Tronox is required to restate its
historical contingency liability reserves and the timing of such restatement, if necessary.
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(iii) |
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No distributions may be made from the Anadarko Litigation
Trust if Tronox is not successful in the Anadarko Litigation |
The Anadarko Litigation may not be successful and there is no guarantee that the Anadarko
Litigation Trust will ever make distributions to its beneficiaries. Because interests in the
Anadarko Litigation Trust are an important part of the consideration being distributed to Holders
of Class 4, 5 and 6 Claims, there is a possibility that Holders of Class 4, 5 and 6 Claims will not
receive any recovery from the Anadarko Litigation Trust. As a result, a material portion of the
recovery of Holders of Class 4, 5 and 6 Claims is at risk if Tronox is not successful in the
Anadarko Litigation.
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(iv) |
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If Lead Plaintiffs Successfully Pursue their Appeal,
and their Claim is Allowed, Recoveries for Class 8 Will Be Impacted. |
Tronox believes that the Lead Plaintiffs appeal lacks merit. If Lead Plaintiffs, however,
are ultimately successful in their appeal and are permitted to file the Class Claim, and if the
Class Claim is Allowed, recoveries for Holders of Class 8 Equity Interests in Tronox Incorporated
will be negatively impacted. The Plan does not currently provide for a class of subordinated
Claims pursuant to section 510 of the Bankruptcy Code. If the Class Claim is Allowed, a class of
subordinated Claims will need to be created to account for the Class Claim, and holders of Class 8
Equity Interests likely would be precluded from receiving the New Warrants on account of such
equity interests pursuant to section 1129(b)(2)(B)(ii) of the Bankruptcy Code.
The Lead Plaintiffs have asserted the right to pursue claims against Tronox solely to the
extent that insurance proceeds are available to satisfy such claims. Tronox has not yet taken a
position with respect to this matter and the Lead Plaintiffs reserve their right to raise this
issue in connection with confirmation of the Plan.
C. Risks Related to Tronoxs Business
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(i) |
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The labor and employment laws in many jurisdictions in which we
operate are more restrictive than in the United States. Our relationship
with our employees could deteriorate, which could adversely affect our
operations. |
Approximately 30% of our employees are employed outside the United States. In certain of those
countries, such as Australia and the member states of the European Union, labor and employment laws
are more restrictive than in the United States and, in many cases, grant significant job protection
to employees, including rights on termination of employment. For example, in The Netherlands, by
law some of our employees are represented by a works council, which subjects us to employment
arrangements very similar to collective bargaining agreements.
We are required to consult with and seek the consent or advice of the unions or works
councils that represent our employees for certain of our activities. This requirement could have a
significant impact on our flexibility in managing costs and responding to market changes.
Furthermore, there can be no assurance that we will be able to negotiate labor agreements with our
unionized employees in the future on satisfactory terms. If those employees were to engage in a
strike, work stoppage or other slowdown, or if any of our other employees were to become unionized,
we could experience a significant disruption of our operations or higher ongoing labor costs, which
could adversely affect our financial condition and results of operations.
90
|
(ii) |
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Interruptions of operations at our facilities may
result in liabilities or lower operating results. |
Due to the nature of our business, we are exposed to the hazards associated with chemical
manufacturing and the related storage and transportation of raw materials, products and wastes.
These hazards could lead to an interruption or suspension of operations and due to the
interdependence of these facilities, could have an adverse effect on the productivity and
profitability of a particular manufacturing facility or on us as a whole. Potential hazards include
the following:
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Piping and storage tank leaks and ruptures; |
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Mechanical failure; |
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Severe weather and natural disasters; |
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Employee exposure to hazardous substances; and |
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Chemical spills and other discharges or releases of toxic or hazardous substances or
gases. |
There is also a risk that one or more of our key raw materials or one or more of our products
may be found to have currently unrecognized toxicological or health-related impact on the
environment or on our customers or employees. Such hazards may cause personal injury and loss of
life, damage to property and contamination of the environment, which could lead to government fines
or work stoppage injunctions and lawsuits by injured persons. If such actions are determined to be
adverse to us, we may have inadequate insurance to cover such claims, or we may have insufficient
cash flow to pay for such claims. Such outcomes could adversely affect our financial condition and
results of operations.
We maintain property, business interruption, casualty and terrorism insurance that we believe
is in accordance with customary industry practices, but we are not fully insured against all
potential hazards incident to our businesses, including losses resulting from natural disasters or
terrorist acts. Changes in insurance market conditions have in the past caused, and may in the
future cause, premiums and deductibles for certain insurance policies to increase substantially
and, in some instances, for certain insurance to become unavailable or available only for reduced
amounts of coverage. If we were to incur a significant liability for which we were not fully
insured, we might not be able to finance the amount of the uninsured liability on terms acceptable
to us or at all, and might be obligated to divert a significant portion of our cash flow from
normal business operations.
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(iii) |
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Violations or noncompliance with the extensive environmental,
health and safety laws and regulations to which we are subject could result
in unanticipated loss or liability. |
Our operations and production facilities are subject to extensive environmental and health and
safety laws and regulations at national, international and local levels in numerous jurisdictions
relating to pollution, protection of the environment, transporting and storing raw materials and
finished products and storing and disposing of hazardous wastes. We may incur substantial costs,
including fines, damages, criminal or civil sanctions and remediation costs, or experience
interruptions in our operations, for violations arising under these laws and regulations. In the
event of a catastrophic incident involving any of the raw materials we use or chemicals we produce,
we could incur material costs as a result of addressing the consequences of such event.
We are party to a number of legal and administrative proceedings involving environmental and
other matters pending in various courts and before various agencies. These include proceedings
associated with facilities currently or previously owned, operated or used by us or our
predecessors, and include claims for personal injuries, property damages and injury to the
environment, including natural resource damages and non-compliance with permits. Any determination
that one or more of our key raw materials or products, or the materials or products associated with
facilities previously owned, operated or used by us or our predecessors, has, or is characterized
as having, a toxicological or health-related impact on our environment, customers or employees
could subject us to additional legal claims. These proceedings and any such additional claims may
be costly and may require a
91
substantial amount of management attention, which may have an adverse affect on our financial
condition and results of operations.
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(iv) |
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We may need additional capital in the future and
may not be able to obtain it on favorable terms, if at all. |
Our industry is highly capital intensive and our success depends to a significant degree on
our ability to develop and market innovative products and to update our facilities and process
technology. We may require additional capital in the future to finance our future growth and
development, implement further marketing and sales activities, fund our ongoing research and
development activities and meet our general working capital needs. Our capital requirements will
depend on many factors, including acceptance of and demand for our products, the extent to which we
invest in new technology and research and development projects and the status and timing of
competitive developments. Additional financing may not be available when needed on terms favorable
to us or at all. Further, the terms of the Replacement DIP Facility may limit our ability to incur
additional indebtedness or issue additional shares of our common stock. If we are unable to obtain
adequate funds on acceptable terms, we may be unable to develop or enhance our products, take
advantage of future opportunities or respond to competitive pressures, which could harm our
business.
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(v) |
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Market conditions and cyclical factors that adversely affect
the demand for the
end-use products that contain our titanium dioxide could adversely
affect our results. |
Historically, regional and world events that negatively affect discretionary spending or
economic conditions generally, such as terrorist attacks, the incidence or spread of contagious
diseases or other economic, political or public health or safety conditions, have adversely
affected demand for the finished products that contain TiO2 and from which we derive a
substantial portion of our revenue. Events such as these are likely to contribute to a general
reluctance by the public to purchase quality of life products, which could cause a decrease in
demand for our chemicals and, as a result, may have an adverse effect on our results of operations
and financial condition.
Additionally, the demand for TiO2 during a given year is subject to seasonal
fluctuations. TiO2 sales are generally higher in the second and third quarters of the
year than in the other quarters due in part to the increase in paint production in the spring to
meet demand resulting from the spring and summer painting season in North America and Europe. We
may be adversely affected by existing or future cyclical changes, and such conditions may be
sustained or further aggravated by anticipated or unanticipated changes in regional weather
conditions. For example, poor weather conditions in a region can lead to an abbreviated painting
season, which can depress consumer sales of paint products that use TiO2.
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(vi) |
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Our business, financial condition and results of operations
could be adversely
affected by global and regional economic downturns and other
conditions. |
We have significant production, sales and marketing operations throughout the United States,
Europe and the Asia-Pacific region, with approximately 1,100 customers in approximately 90
countries. We also purchase many of the raw materials used in the production of our products in
foreign jurisdictions. In 2009, approximately 43% of our total revenues were generated from
production outside of the United States. Due to these factors, our performance, particularly the
performance of our pigment business line, is cyclical and tied closely to general economic
conditions, including global GDP. As a result, our business, financial condition and results of
operations are vulnerable to political and economic conditions affecting global gross domestic
product and the countries in which we operate. For example, from 2000 through 2003, our business
was affected when the TiO2 industry experienced a period of unusually weak business
conditions as a result of a variety of factors, including the global economic recession,
exceptionally rainy weather conditions in Europe and the Americas and the outbreak of SARS in Asia.
Based on these factors, global and regional economic downturns and other conditions may have an
adverse effect on our financial condition and results of operations.
92
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(vii) |
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Our results of operations may be adversely
affected by fluctuations in currency exchange rates. |
The financial condition and results of operations of our operating entities in The Netherlands
and Australia, among other jurisdictions, are reported in various foreign currencies and then
translated into United States dollars at the applicable exchange rate for inclusion in the
financial statements. As a result, any volatility of the United States dollar against these foreign
currencies creates uncertainty for and may have a negative impact on our reported sales and
operating margin. In addition, our operating entities often need to convert currencies they receive
for our products into currencies in which they purchase raw materials or pay for services, which
could result in a gain or loss depending on fluctuations in exchange rates. Because we have
significant operations in Europe and Australia, we are exposed primarily to fluctuations in the
euro and the Australian dollar.
In the past, we have sought to minimize our foreign currency risk by engaging in hedging
transactions. We may be unable to effectively manage our foreign currency risk, and any volatility
in foreign currency exchange rates may have an adverse effect on our financial condition or results
of operations.
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(viii) |
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Our industry and the end-use markets in which we compete are highly
competitive. This competition may adversely affect our results of
operations and operating cash flows. |
Each of the markets in which we compete is highly competitive. Competition is based on a
number of factors such as price, product quality and service. We face significant competition from
major international TiO2 producers, including the four other major producers, as well as
smaller regional competitors. Our most significant competitors include major chemical and materials
manufacturers and diversified companies, a number of which have substantially larger financial
resources, staffs and facilities than we do. The additional resources and larger staffs and
facilities of such competitors may give them a competitive advantage when responding to market
conditions and capitalizing on operating efficiencies. Increased competition could result in
reduced sales, which could adversely affect our profitability and operating cash flows.
In addition, within the end-use markets in which we compete, competition between products is
intense. We face substantial risk that certain events, such as new product development by our
competitors, changing customer needs, production advances for competing products or price changes
in raw materials, could cause our customers to switch to our competitors products. If we are
unable to develop and produce or market our products to compete effectively against our competitors
following such events, our results of operations and operating cash flows may suffer.
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(ix) |
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Fluctuations in costs of our raw materials and process
chemicals
or our access to supplies of our raw materials or process chemical
could have an adverse effect on our results of operations. |
In 2009, raw materials used in the production of TiO2 constituted approximately 27%
of our operating expenses. Costs of many of the raw materials we use may fluctuate widely for a
variety of reasons, including changes in availability, major capacity additions or reductions or
significant facility operating problems. These fluctuations could negatively affect our operating
margins and our profitability. As these costs rise, our operating expenses likely will increase and
could adversely affect our business, especially if we are unable to pass price increases in raw
materials through to our customers.
Should our vendors not be able to meet their contractual obligations or should we be otherwise
unable to obtain necessary raw materials, we may incur higher costs for raw materials or may be
required to reduce production levels, which may have an adverse effect on our financial position,
results of operations or liquidity.
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(x) |
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Third parties may develop new intellectual property rights for new
processes and/or products that we would want to use, but would be unable to
do so; or, third parties may claim that the products we make or the
processes we use infringe their intellectual property rights, which may
cause us to pay unexpected litigation costs or damages or prevent us from
making,
using or selling the products we make or require us to alter the
processes we use. |
Although currently there are no pending or unknown threatened proceedings or claims relating
to alleged infringement, misappropriation or violation of the intellectual property rights of
others, we may be subject to legal proceedings and claims in the future in which third parties
allege that their patents or other intellectual property rights are infringed, misappropriated or
otherwise violated by us or by our products or processes. In the event that any such infringement,
misappropriation or violation of the intellectual property rights of others is found, we may need
to obtain licenses from those parties or substantially re-engineer our products or processes to
avoid such infringement, misappropriation or violation. We might not be able to obtain the
necessary licenses on acceptable terms or be able to re-engineer our products or processes
successfully. Moreover, if we are found by a court of law to infringe, misappropriate or otherwise
violate the intellectual property rights of others, we could be required to pay substantial damages
or be enjoined from making, using or selling the infringing products or technology. We also could
be enjoined from making, using or selling the allegedly infringing products or technology pending
the final outcome of the suit. Any of the foregoing could adversely affect our financial condition
and results of operations.
Results of our operations may also be negatively impacted if a competitor develops or has the
right to use intellectual property rights for new processes or products and we cannot obtain
similar rights on favorable terms and are unable to independently develop non-infringing
competitive alternatives.
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(xi) |
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If we are not able to continue our technological innovation and
successful
commercial introduction of new products, our profitability could be
adversely affected. |
Our industries and the end-use markets into which we sell our products experience periodic
technological change and product improvement. Our future growth will depend on our ability to gauge
the direction of commercial and technological progress in key end-use markets and on our ability to
fund and successfully develop, manufacture and market products in such changing end-use markets. We
must continue to identify, develop and market innovative products or enhance existing products on a
timely basis to maintain our profit margins and our competitive position. We may not be able to
develop new products or technology, either alone or with third parties, or license intellectual
property rights from third parties on a commercially competitive basis. If we fail to keep pace
with the evolving technological innovations in our end-use markets on a competitive basis, our
financial condition and results of operations could be adversely affected.
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(xii) |
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If our intellectual property were compromised or copied by
competitors,
or if competitors were to develop similar intellectual property
independently, our results of operations could be negatively
affected. |
Our success depends to a significant degree upon our ability to protect and preserve our
intellectual property rights. Although we own and have applied for numerous patents and trademarks
throughout the world, we may have to rely on judicial enforcement of our patents and other
proprietary rights. Our patents and other intellectual property rights may be challenged,
invalidated, circumvented, rendered unenforceable or otherwise compromised. A failure to protect,
defend or enforce our intellectual property could have an adverse effect on our financial condition
and results of operations.
We also rely upon unpatented proprietary technology, know-how and other trade secrets to
maintain our competitive position. While it is our policy to enter into confidentiality agreements
with our employees and third parties to protect our proprietary expertise and other trade secrets,
these agreements may not be enforceable or, even if legally enforceable, we may not have adequate
remedies for breaches of such agreements. We also may not be able to readily detect breaches of
such agreements. The failure of our patents or confidentiality agreements to protect our
proprietary technology, know-how or trade secrets could result in significantly lower revenues,
reduced profit margins or loss of market share.
94
We may be unable to determine when third parties are using our intellectual property rights
without our authorization. We also have licensed certain of our intellectual property rights to
third parties, and we cannot be certain that our licensees are using our intellectual property only
as authorized by the applicable license agreement. The undetected or unremedied unauthorized use of
our intellectual property rights or the legitimate development or acquisition of intellectual
property related to our industry by third parties could reduce or eliminate any competitive
advantage we have as a result of our intellectual property, adversely affecting our financial
condition and results of operations. If we must take legal action to protect, defend or enforce our
intellectual property rights, any suits or proceedings could result in significant costs and
diversion of our resources and our managements attention, and we may not prevail in any such suits
or proceedings. A failure to protect, defend or enforce our intellectual property rights could have
an adverse effect on our financial condition and results of operations.
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(xiii) |
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Shared control of our joint venture may delay
decisions or actions important for operations. |
A portion of our operations currently are conducted through a joint venture (the Tiwest
Joint Venture). We share control of the Tiwest Joint Venture with Exxaro.
Our forecasts and plans with respect to the Tiwest Joint Venture assume that our joint venture
partner will observe its joint venture obligations. In the event that our joint venture partner
does not comply with its joint venture obligations, it is possible that the joint venture would not
be able to operate in accordance with its business plans or that we would be required to increase
our level of commitment to give effect to such plans.
As with any joint venture arrangement, differences in views among the joint venture
participants may result in delayed decisions or in failures to agree on major matters, potentially
adversely affecting the business and operations of the Tiwest Joint Venture and in turn our
business and operations.
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(xiv) |
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Exxaro may assert a right of first refusal over the assets
owned by Tronox
in the joint venture or otherwise contest certain features of the
Plan. |
The agreements governing the Tiwest Joint Venture contain a right of first refusal for Exxaro
(pursuant to which Exxaro would have certain rights to purchase the assets owned by Tronox in the
Tiwest Joint Venture) that is triggered by certain events. Tronox does not believe that the
consummation of the transactions pursuant to the Plan triggers such right of first refusal or any
other similar right; however, Exxaro disagrees with Tronox and believes the vesting of the Retained
Assets in Reorganized Tronox, the post-confirmation restructuring transactions permitted by the
Plan and the distributions of New Common Stock under the Plan may trigger Exxaros rights. In the
event Exxaro asserts such rights, Tronox may litigate with Exxaro regarding Exxaros ability to
assert such rights. To the extent Exxaro were to prevail in such litigation, Tronox could be
required to sell its interest in the Tiwest Joint Venture for fair value as determined by an
appraisal process set forth in the joint venture agreements.
Exxaro further disputes that debtor Tronox LLCs ownership interest in nondebtor Tronox
Western Australia (TWA) or other Retained Assets can vest in, or be transferred to, Reorganized
Tronox free and clear of any liens, claims, interest or encumbrances (including Exxaros preemptive
right). The Exxaro parties further contend that their consent is required for Tronox to grant a
Lien on Tronox LLCs shares in TWA that secure the Exit Financing. Tronox intends to maintain the
status quo with respect to all of its existing agreements with Exxaro, and Reorganized Tronox will
assume all such obligations in accordance with and subject to each of the parties rights and
obligations thereunder. For the avoidance of doubt, the deemed substantive consolidation of Tronox
for Plan purposes will not alter the separate corporate structure of the Tronox Debtors and all
Retained Assets of each respective legal entity will vest in the same such entity, as reorganized.
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(xv) |
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If we do not invest in our joint venture,
certain negative implications may result. |
Under the agreements governing the management of the Tiwest Joint Venture, we have an
opportunity to invest a certain amount of capital to fund expansions in connection with the Tiwest
Joint Venture. If we do not invest such capital by the time periods specified under such
agreements, we may lose certain economic benefits
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associated with the exclusive ownership and marketing rights related to the pigment produced by the
Tiwest Joint Venture.
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Our business will suffer if certain key officers or
employees discontinue employment with us. |
The success of our business is materially dependent upon the skills, experience and efforts of
certain of our key officers and employees. The loss of key personnel could have a material adverse
effect on our business, operating results or financial condition. We may not succeed in attracting
and retaining the personnel we need to generate sales and to expand our operations successfully,
and, in such event, our business could be materially and adversely affected. The loss of the
services of any key personnel, or our inability to hire new personnel with the requisite skills,
could impair our ability to develop new products or enhance existing products, sell products to our
customers or manage our business effectively.
VIII. IMPORTANT SECURITIES LAW DISCLOSURE
Under the Plan, shares of New Common Stock will be distributed to Holders of Class 3 and Class
6 Claims, and, if Class 8 votes to accept the Plan, the New Warrants (collectively with the New
Common Stock, the Plan Securities) will be issued to the Holders of Class 8 Equity
Interests.
Reorganized Tronox and Tronox will rely on section 1145 of the Bankruptcy Code to exempt from
the registration requirements of the Securities Act the offer and distribution of the Plan
Securities and any New Common Stock issued pursuant to the terms thereof, other than the New Common
Stock issued pursuant to the Equity Commitment Agreement. Section 1145(a)(1) of the Bankruptcy
Code exempts the offer and sale of securities under a plan of reorganization from registration
under Section 5 of the Securities Act and state laws when such securities are to be exchanged for
claims or principally in exchange for claims and partly for cash.
Tronox has analyzed the Rights Offering and believes that any shares issued thereunder are
exempt under section 1145 of the Bankruptcy Code. In general, securities issued under section 1145
of the Bankruptcy Code may be resold without registration unless the recipient is an underwriter
with respect to those securities. Section 1145(b)(1) of the Bankruptcy Code defines an
underwriter as any person who:
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purchases a claim against, an interest in or a claim for an administrative expense
against the debtor, if that purchase is with a view to distributing any security
received in exchange for such a claim or interest; |
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offers to sell securities offered under a plan of reorganization for the holders of
those securities; |
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offers to buy those securities from the holders of the securities, if the offer to
buy is (i) with a view to distributing those securities; and (ii) under an agreement
made in connection with the plan of reorganization, the completion of the plan of
reorganization or with the offer or sale of securities under the plan of
reorganization; or |
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is an issuer with respect to the securities, as the term issuer is defined in
Section 2(a)(11) of the Securities Act. |
To the extent that persons who receive the Plan Securities are deemed to be underwriters,
resales by those persons would not be exempted from registration under the Securities Act or other
applicable law by section 1145 of the Bankruptcy Code. Those persons would, however, be permitted
to sell New Common Stock or other securities without registration if they are able to comply with
the provisions of Rule 144 under the Securities Act, as described further below.
You should confer with your own legal advisors to help determine whether or not you are an
underwriter.
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Under certain circumstances, Holders of New Common Stock deemed to be underwriters may be
entitled to resell their securities pursuant to the limited safe harbor resale provisions of Rule
144 of the Securities Act, to the extent available and in compliance with applicable state
securities laws. Generally, Rule 144 of the Securities Act provides that persons who are
affiliates of an issuer who resell securities will not be deemed to be underwriters if certain
conditions are met. These conditions include the requirement that current public information with
respect to the issuer be available, a limitation as to the amount of securities that may be sold,
the requirement that the securities be sold in a brokers transaction or in a transaction
directly with a market maker and that notice of the resale be filed with the SEC.
Recipients of Plan Securities issued pursuant to Section 4(2) of the Securities Act of 1933,
as amended, may be able to resell their securities freely within six months from the issuance
thereof.
IX. CERTAIN U.S. FEDERAL INCOME TAX CONSEQUENCES OF THE PLAN
The following discussion summarizes certain federal income tax consequences of the Plan to
Tronox, the Tort Claims Trust, the Anadarko Litigation Trust, and the Holders of Claims and Equity
Interests, based upon the Internal Revenue Code of 1986, as amended (the IRC), Treasury
regulations promulgated thereunder, judicial authorities and current administrative rulings and
practices now in effect, all of which are subject to change at any time by legislative, judicial or
administrative action. Any such change could be retroactively applied in a manner that could
adversely affect Tronox, the Tort Claims Trust, the Anadarko Litigation Trust, and Holders of
Claims and Equity Interests. In particular, some of the consequences discussed herein are based on
Treasury regulations or IRS Notices that have been proposed but not finalized, which regulations
are particularly susceptible to change at any time.
The tax consequences of certain aspects of the Plan are uncertain due to the lack of
applicable legal authority and may be subject to administrative or judicial interpretations that
differ from the discussion below. Tronox has not requested, nor does it intend to request, a tax
ruling from the Internal Revenue Service (the IRS). Consequently, there can be no
assurance that the treatment set forth in the following discussion will be accepted by the IRS.
Further, the federal income tax consequences to Tronox, the Tort Claims Trust, the Anadarko
Litigation Trust, and Holders of Claims and Equity Interests is uncertain and may be affected by
matters not discussed below. For example, the following discussion does not address state, local
or foreign tax considerations that may be applicable and the discussion does not address the tax
consequences of the Plan to certain types of Holders of Claims, creditors and stockholders
(including foreign persons, financial institutions, life insurance companies, tax-exempt
organizations and taxpayers who may be subject to the alternative minimum tax) who may be subject
to special rules not addressed herein.
THE DISCUSSION SET FORTH BELOW IS INCLUDED FOR GENERAL INFORMATION ONLY. THE PLAN PROPONENTS
AND THEIR COUNSEL AND FINANCIAL ADVISORS ARE NOT MAKING ANY REPRESENTATIONS REGARDING THE
PARTICULAR TAX CONSEQUENCES OF CONFIRMATION AND CONSUMMATION OF THE PLAN, NOR ARE THEY RENDERING
ANY FORM OF LEGAL OPINION OR TAX ADVICE ON SUCH TAX CONSEQUENCES. THE TAX LAWS APPLICABLE TO
CORPORATIONS IN BANKRUPTCY ARE EXTREMELY COMPLEX, AND THE FOLLOWING SUMMARY IS NOT EXHAUSTIVE.
HOLDERS OF CLAIMS ARE STRONGLY URGED TO CONSULT THEIR TAX ADVISORS REGARDING TAX CONSEQUENCES OF
THE PLAN, INCLUDING U.S. FEDERAL, STATE AND LOCAL AND FOREIGN TAX CONSEQUENCES.
INTERNAL REVENUE SERVICE CIRCULAR 230 DISCLOSURE: TO ENSURE COMPLIANCE WITH
REQUIREMENTS IMPOSED BY THE INTERNAL REVENUE SERVICE, ANY TAX ADVICE CONTAINED IN THIS DISCLOSURE
STATEMENT (INCLUDING ANY ATTACHMENTS) IS NOT INTENDED OR WRITTEN TO BE USED, AND CANNOT BE USED, BY
ANY TAXPAYER FOR THE PURPOSE OF AVOIDING TAX-RELATED PENALTIES UNDER THE INTERNAL REVENUE CODE.
TAX ADVICE CONTAINED IN THIS DISCLOSURE STATEMENT (INCLUDING ANY ATTACHMENTS) IS WRITTEN TO SUPPORT
THE PROMOTION AND MARKETING OF THE TRANSACTIONS OR MATTERS ADDRESSED BY THIS DISCLOSURE STATEMENT.
EACH TAXPAYER SHOULD SEEK ADVICE BASED ON THE TAXPAYERS PARTICULAR CIRCUMSTANCES FROM AN
INDEPENDENT TAX ADVISOR.
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A. Certain U.S. Federal Income Tax Consequences to Reorganized Tronox
(i) General Discussion
In general, Tronox does not expect to incur any substantial tax liability as a result of
implementation of the Plan. However, the Company may realize cancellation of indebtedness income
upon implementation of the Plan, which income could result in the reduction of the Companys tax
attributes, including its net operating losses (NOLs) and the tax basis in its assets.
The implementation of the Plan should constitute a reorganization described in section
368(a)(1)(E) of the IRC (an E Reorganization), provided certain requirements are
satisfied. Tronox should recognize no gain or loss with respect to the Plan. Whether and to what
extent Holders of Claims recognize gain or loss will depend on a number of factors discussed below,
including whether such Holders receive New Common Stock or other property, whether their Claims
constitute securities, and whether payments received constitute damages received on account of
personal injuries.
(ii) Deduction of Amounts Transferred to Satisfy Tort and
Environmental Claims
The tax treatment of transfers of property by Tronox to the Environmental Response Trusts, the
Tort Claims Trust and the Anadarko Litigation Trust will vary depending on the characterization of
the trusts, e.g., as grantor trusts as defined by section 671 et seq. of the IRC, or as
qualified settlement funds (QSFs) as defined by Treasury Regulation section 1.468B-1 et
seq. Tronox currently expects that the Environmental Response Trusts, the Tort Claims Trust and
the Anadarko Litigation Trust could be eligible to be treated as QSFs for federal income tax
purposes, meaning that Tronox would be entitled to an immediate deduction for the fair market value
of any property contributed by Tronox to such trusts. However, it may be beneficial for Tronox to
elect to treat one or more of the Environmental Response Trusts, Tort Claims Trust or the Anadarko
Litigation Trust as a grantor trust, in which case Tronox would be treated for tax purposes as if
it continued to own such trusts assets until such trust made distributions to its beneficiaries.
In that case, Tronox would not be entitled to a deduction when property is contributed to the
trusts; instead, Tronox would realize a deduction when payments are made from the trusts to the
beneficiaries of such trusts.
(iii) Cancellation of Debt Income
Under the IRC, a taxpayer generally recognizes gross income to the extent that indebtedness of
the taxpayer is cancelled for less than the amount owed by the taxpayer, subject to certain
judicial or statutory exceptions. The most significant of these exceptions with respect to Tronox
is that taxpayers who are operating under the jurisdiction of a federal bankruptcy court are not
required to recognize such income. In that case, however, the taxpayer must reduce its tax
attributes, such as its NOLs, general business credits, capital loss carryforwards, and tax basis
in assets, by the amount of the cancellation of indebtedness income (CODI) avoided. The
amount of CODI will depend on various factors, principally the value of the New Common Stock
distributed to unsecured creditors under the Plan. It is therefore uncertain whether and how much
CODI will be realized.
(iv) Limitation on NOLs and Built-in Losses
Under section 382 of the IRC, any corporation that undergoes an ownership change within the
meaning of section 382 becomes subject to an annual limitation on its ability to utilize its NOLs
and built-in losses in its assets. A corporation has a built-in loss in its assets to the extent
that the corporations tax basis in its assets is greater than the value of such assets. Tronox
expects to have NOLs remaining after implementation of the Plan; it is unclear whether Tronox will
have a built-in loss in its assets.
The restructuring should cause an ownership change for purposes of section 382. If and to the
extent that Tronox has NOLs remaining after implementation of the Plan, then Tronoxs ability to
use those NOLs would be subject to an annual limitation. The amount of such annual limitation
would be approximately equal to the amount determined by multiplying the long-term tax exempt bond
rate (currently approximately 4%) by Tronoxs equity value immediately after emergence from
bankruptcy (but not including any value attributable to New Common
98
Stock acquired in the Rights Offering in excess of the amount paid for such New Common Stock).
If and to the extent that Tronox has a built-in loss in its assets, then Tronoxs ability to claim
a deduction for those built-in losses (including as depreciation or amortization deductions for its
assets) also could be subject to that annual limitation during the first five years after the
restructuring is completed. To the extent that Tronox has a built-in gain in its assets, Tronox
could be entitled to an increase in the amount of its NOLs that it can use on an annual basis.
B. Consequences to Holders of Allowed Claims
(i) Consequences to Holders of Class 3-General Unsecured Claims
Pursuant to the Plan, each Holder of an Allowed General Unsecured Claim will receive New
Common Stock and Rights to purchase additional New Common Stock in the Rights Offering (the
Rights) in partial satisfaction of its Claim. The U.S. federal income tax treatment to
Holders of Allowed General Unsecured Claims may depend in part on whether such General Unsecured
Claims are Unsecured Notes.
(a) Unsecured Notes
The U.S. federal income tax treatment to Holders of Unsecured Notes will depend in part on
whether or to what extent such Unsecured Notes constitute securities for tax purposes.
Whether an instrument constitutes a security is determined based on all the facts and
circumstances, but most authorities have held that the length of the term of a debt instrument is
an important factor in determining whether such instrument is a security for federal income tax
purposes. These authorities have indicated that a term of less than five years is evidence that the
instrument is not a security, whereas a term of ten years or more is evidence that it is a
security. There are numerous other factors that could be taken into account in determining whether
a debt instrument is a security, including the security for payment, the creditworthiness of the
obligor, the subordination or lack thereof to other creditors, the right to vote or otherwise
participate in the management of the obligor, convertibility of the instrument into an equity
interest of the obligor, whether payments of interest are fixed, variable or contingent, and
whether such payments are made on a current basis or accrued. The Unsecured Notes had an initial
term of approximately seven years. While not free from doubt, Tronox intends to take the position
that the Unsecured Notes are securities.
If the Unsecured Notes do qualify as securities for federal income tax purposes, a Holder of
Unsecured Notes that receives New Common Stock and Rights in satisfaction of such Claim should
recognize no gain or loss (or bad debt deduction) on the receipt of New Common Stock and Rights,
except to the extent that a portion of the consideration received in exchange for the Unsecured
Notes is allocable to accrued but untaxed interest. To the extent that a portion of such
consideration is allocable to accrued but untaxed interest, the Holder may recognize ordinary
income (as discussed in greater detail in Section B(viii) of this Article IX herein, Accrued but
Untaxed Interest). A Holders aggregate tax basis in the New Common Stock and Rights received under
the Plan in respect of an Unsecured Note that qualifies as a security, apart from amounts allocable
to accrued but untaxed interest, generally should equal the Holders tax basis in the Unsecured
Note. The holding period for any New Common Stock and Rights received under the Plan in respect of
an Unsecured Note constituting a security, apart from amounts allocable to Accrued but Untaxed
Interest, generally should include the holding period of the Unsecured Notes surrendered.
If the Unsecured Notes do not qualify as securities for federal income tax purposes, a
Holder of such Unsecured Notes should be treated as exchanging its Unsecured Notes for New Common
Stock and Rights in a fully taxable exchange. A Holder of an Unsecured Note who is subject to
fully taxable exchange treatment should recognize gain or loss equal to the difference between (i)
the fair market value of the New Common Stock and Rights as of the Effective Date, and (ii) the
Holders tax basis in the surrendered Unsecured Note. Such gain or loss should be capital in
nature (subject to the market discount rules described below) and should be long-term capital
gain or loss if the Unsecured Notes were held for more than one year. To the extent that a portion
of the New Common Stock and Rights received in exchange for the Unsecured Notes is allocable to
accrued but untaxed interest, the Holder may recognize ordinary income (as discussed in greater
detail in Section B(viii) of this Article IX herein, Accrued but Untaxed Interest). Such Holders
tax basis in the New Common Stock received should equal
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the fair market value of the New Common Stock and Rights as of the Effective Date. A Holders
holding period for the New Common Stock and Rights should begin on the day following the Effective
Date.
(b) Other Class 3 General Unsecured Claims
A Holder of a General Unsecured Claim that is not an Unsecured Note should be treated as
exchanging such General Unsecured Claim for New Common Stock and Rights in a fully taxable
exchange. Such Holder should recognize gain or loss equal to the difference between (i) the fair
market value of the New Common Stock and Rights as of the Effective Date, and (ii) the Holders tax
basis in the surrendered General Unsecured Claim. To the extent that the Holder held its General
Unsecured Claim as a capital asset, such gain or loss should be capital in nature (subject to the
market discount rules described below) and should be long-term capital gain or loss if the debts
constituting the surrendered General Unsecured Claim were held for more than one year. To the
extent that a portion of the New Common Stock and Rights received in exchange for the Allowed
Claims is allocable to Accrued but Untaxed Interest, the holder may recognize ordinary income (as
discussed in greater detail in Section B(viii) of this Article IX herein, Accrued but Untaxed
Interest). A Holders tax basis in the New Common Stock and Rights received should equal the fair
market value of the New Common Stock and Rights as of the Effective Date, and a Holders holding
period for the New Common Stock and Rights should begin on the day following the Effective Date.
(c) Tax Consequences to Holders who Exercise Rights
A Holder of a General Unsecured Claim who receives Rights generally will not recognize gain or
loss upon the exercise of such Rights to acquire New Common Stock. New Common Stock that such a
Holder acquires pursuant to the exercise of the Rights will have a tax basis equal to the Holders
adjusted tax basis in the Rights so exercised, increased by any amount paid to exercise the Rights.
If the Rights are received and are allowed to lapse unexercised, a Holder will have a capital loss
equal to such Holders adjusted tax basis in the Rights. Such loss would be a capital loss even if
a Holder did not hold its original Claim as a capital asset. The deductibility of capital losses
is subject to certain limitations. Holders should consult their tax advisor if they believe that
they may not wish to receive or exercise the Rights.
HOLDERS SHOULD CONSULT THEIR OWN TAX ADVISORS CONCERNING THE RECOGNITION OF GAIN OR LOSS, FOR
FEDERAL INCOME TAX PURPOSES, ON THE SATISFACTION OF THEIR GENERAL UNSECURED CLAIMS AND ON THE
EXERCISE OF RIGHTS TO PARTICIPATE IN THE RIGHTS OFFERING.
(ii) Consequences to Holders of Class 4-Tort Claims
Pursuant to the Plan, on the Effective Date, Tronox will establish the Tort Claims Trust (to
be administered by the Tort Claims Trustee pursuant to the Tort Claims Trust Agreement) and
transfer to the Tort Claims Trust the following consideration: (i) the right to 12% of the proceeds
of the Anadarko Litigation, in accordance with the Anadarko Litigation Trust Agreement, (ii) the
Funded Tort Claims Trust Amount and (iii) the Tort Claims Insurance Assets.
To the extent that payments from the Tort Claims Trust to Holders of Tort Claims constitute
damages received by such Holders on account of personal injuries, such payments should not
constitute gross income to such Holders, except to the extent that such payments are attributable
to medical expense deductions allowed under section 213 of the IRC for a prior taxable year.
To the extent that payments to Holders of Tort Claims constitute compensatory damages for
destruction or damage to property, and the fair market values of such payments do not exceed the
Holders tax basis in its property, such payments should not be included in taxable income.
Instead, such payments would be treated as a return of capital to such Holder, reducing the
Holders tax basis in the property by the fair market value of such payments. Any amounts received
in excess of the Holders tax basis should be treated as gain from the disposition of the property,
and would therefore give rise to capital gain assuming that the Holder held such property as a
capital asset.
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(iii) Consequences to Holders of Class 5-Environmental
Claims
Pursuant to the Plan, each Holder of a Class 5 Environmental Claim will receive Cash
distributions from the Environmental Response Trusts in partial satisfaction of its Claim.
To the extent that payments made from the Environmental Response Trusts to Holders of Class 5
Environmental Claims constitute damages received by such Holders on account of personal injuries,
such payments should not constitute gross income to such Holders, except to the extent that such
payments are attributable to medical expense deductions allowed under section 213 of the IRC for a
prior taxable year.
To the extent that payments from the Environmental Response Trusts to Holders constitute
compensatory damages for destruction or damage to property, and the fair market values of such
payments do not exceed the Holders tax basis in its property, such payments should not be included
in taxable income. Instead, such payments would be treated as a return of capital to such Holder,
reducing the Holders tax basis in the property by the fair market value of such payments. Any
amounts received in excess of the Holders tax basis should be treated as gain from the disposition
of the property, and would therefore give rise to capital gain assuming that the Holder held such
property as a capital asset.
(iv) Consequences to Holders of Class 6-Indirect Environmental
Claims
Pursuant to the Plan, each Holder of a Class 6 Indirect Environmental Claim will have its
Claim split to share in the distributions to Holders of Class 3 General Unsecured Claims and
Holders of Class 5 Tort Claims. 50% of each Class 6 Indirect Environmental Claim will receive New
Common Stock and Rights in accordance with the treatment provided to Other Class 3 General
Unsecured Claims (as discussed in greater detail in Section O(i)(b) of this Article IX herein,
Other Class 3 General Unsecured Claims). The remaining 50% of each Class 6 Indirect Environmental
Claim will receive its pro rata share of up to 6.25% of the Tort Claims Trust in accordance with
the treatment provided to Class 4 Tort Claims (as discussed in greater detail in Section O(ii) of
this Article IX herein, Consequences to Holders of Class 4 Tort Claims).
(v) Consequences to Holders of Class 7-Convenience Claims
Pursuant to the Plan, each Holder of an Allowed Convenience Claim will receive Cash
distributions in partial satisfaction of its Claim.
To the extent that payments made to Holders of Convenience Class Claims constitute damages
received by such Holders on account of personal injuries, such payments should not constitute gross
income to such Holders, except to the extent that such payments are attributable to medical expense
deductions allowed under section 213 of the IRC for a prior taxable year.
To the extent that a Holder of a Convenience Class Claim held such Claim as a capital asset,
the Holder should recognize capital gain or loss equal to the difference between (a) the amount of
Cash received that is not allocable to accrued interest and (b) the Holders tax basis in the
Convenience Class Claim surrendered therefor by the Holder. Such gain or loss should be (subject
to the market discount rules described below) long-term capital gain or loss if the Holder had a
holding period in the Convenience Class Claim of more than one year. To the extent that a portion
of the Cash received in exchange for the Convenience Class Claims is allocable to accrued but
untaxed interest, the Holder may recognize ordinary income (as discussed in greater detail in
Section B(viii) of this Article IX herein, Accrued but Untaxed Interest).
(vi) Consequences to Holders of Class 8-Equity Interests in
Tronox Incorporated
Holders of Equity Interests in Tronox Incorporated, to the extent that they vote to approve
the Plan, will receive a pro rata share of the New Warrants. Holders of such Equity Interests
will therefore not recognize any gain or loss with respect to such exchange, but will instead be
treated as having exchanged their stock for warrants in a tax-free reorganization. A Holders tax
basis in its New Warrants will be the same tax basis that such Holder had in its Tronox
Incorporated Equity Interest, and will have a holding period in such New Warrants that includes the
period that such Holder held such Equity Interest.
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If the Holders of Equity Interests in Tronox Incorporated vote to reject the Plan, then such
Holders shall receive no consideration under the Plan. In that case, such Holders would recognize
a loss with respect to such Equity Interests in an amount equal to their tax basis in such Equity
Interests. This loss would be a capital loss to the extent that such Holder held such Equity
Interests as a capital loss, and would be a long-term capital loss if such Holder has held such
Equity Interests for more than twelve months.
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Treatment of the Environmental Response Trusts, the Tort
Claims Trust and the Anadarko Litigation Trust |
Tronox currently expects that the Environmental Response Trusts, Tort Claims Trust and the
Anadarko Litigation Trust could be eligible to be treated as QSFs for federal income tax purposes,
but it may be beneficial for Tronox to elect to treat some or all of the trusts as grantor trusts.
If any of the Environmental Response Trusts, Tort Claims Trust or the Anadarko Litigation
Trust is treated as a QSF, such trust would be subject to a separate entity level tax on its income
at the maximum rate applicable to trusts and estates. In determining the taxable income of any
trust treated as a QSF, (a) any amounts contributed to such trust would not be treated as taxable
income, (b) any sale, exchange or distribution of property by such trust would result in the
recognition of gain or loss in an amount equal to the difference between the fair market value of
the property on the date of the sale, exchange or distribution and the adjusted tax basis of such
property, (c) interest income and dividend income would be treated as taxable income, and (d)
administrative costs (including state and local taxes) would be deductible. In general, the
adjusted tax basis of property received by any trust treated as a QSF would be its fair market
value at the time of receipt.
If any of the Environmental Response Trusts, Tort Claims Trust or the Anadarko Litigation
Trust is treated as a grantor trust then such trust would not be subject to federal income tax as a
separate entity. Instead, Tronox would be treated for tax purposes as if it continued to own such
trusts assets until the trust distributed such assets to its beneficiaries.
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Accrued but Untaxed Interest |
A portion of the consideration received by Holders of Claims may be attributable to Accrued
but Untaxed Interest on such Claims. Such amount should be taxable to that Holder as interest
income if such accrued interest has not been previously included in the Holders gross income for
United States federal income tax purposes. Conversely, Holders of Claims may be able to recognize
a deductible loss to the extent any accrued interest on the Claims was previously included in the
Holders gross income but was not paid in full by the Tronox Debtors.
If the fair value of the consideration is not sufficient to fully satisfy all principal and
interest on Allowed Claims, the extent to which such consideration will be attributable to Accrued
but Untaxed Interest is unclear. Under the Plan, the aggregate consideration to be distributed to
Holders of Allowed Claims in each Class will be allocated first to the principal amount of Allowed
Claims, with any excess allocated to unpaid interest that accrued on such Claims, if any. Certain
legislative history indicates that an allocation of consideration between principal and interest
provided in a chapter 11 plan of reorganization is binding for United States federal income tax
purposes, while certain Treasury Regulations treat payments as allocated first to any accrued but
unpaid interest. The IRS could take the position that the consideration received by the Holder
should be allocated in some way other than as provided in the Plan. Holders of Claims should
consult their own tax advisors regarding the proper allocation of the consideration received by
them under the Plan.
HOLDERS SHOULD CONSULT THEIR OWN TAX ADVISORS CONCERNING THE ALLOCATION OF CONSIDERATION
RECEIVED IN SATISFACTION OF THEIR CLAIMS AND THE FEDERAL INCOME TAX TREATMENT OF ACCRUED BUT UNPAID
INTEREST.
Under the market discount provisions of sections 1276 through 1278 of the IRC, some or all
of the gain realized by a Holder of a debt instrument constituting a General Unsecured Claim who
exchanges the debt
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instrument for other property on the Effective Date may be treated as ordinary income (instead
of capital gain), to the extent of the amount of market discount on the debt instruments
constituting the surrendered Claim.
In general, a debt instrument is considered to have been acquired with market discount if
its Holders adjusted tax basis in the debt instrument is less than (a) the sum of all remaining
payments to be made on the debt instrument, excluding qualified stated interest or, (b) in the
case of a debt instrument issued with original issue discount, its adjusted issue price, by at
least a de minimis amount (equal to 0.25% of the sum of all remaining payments to be made on the
debt instrument, excluding qualified stated interest, multiplied by the number of remaining whole
years to maturity).
Any gain recognized by a Holder on the taxable disposition of surrendered debts (determined as
described above) that had been acquired with market discount should be treated as ordinary income
to the extent of the market discount that accrued thereon while such debts were considered to be
held by the Holder (unless the Holder elected to include market discount in income as it accrued).
C. Information Reporting and Backup Withholding
In general, information reporting requirements may apply to distributions or payments under
the Plan. Additionally, under the backup withholding rules, a Holder of a Claim may be subject to
backup withholding (currently at a rate of 28%) with respect to distributions or payments made
pursuant to the Plan unless that Holder: (a) comes within certain exempt categories (which
generally include corporations) and, when required, demonstrates that fact; or (b) timely provides
a correct taxpayer identification number and certifies under penalty of perjury that the taxpayer
identification number is correct and that the Holder is not subject to backup withholding because
of a failure to report all dividend and interest income. Backup withholding is not an additional
tax but is, instead, an advance payment that may be refunded to the extent it results in an
overpayment of tax; provided, however, that the required information is timely
provided to the IRS.
|
|
Tronox will, through the Disbursing Agent, withhold all amounts required by law to be withheld from
payments of interest. Tronox will comply with all applicable reporting requirements of the
IRS. |
103
X. RECOMMENDATION OF TRONOX
In the opinion of Tronox, the Plan is preferable to the alternatives described in this
Disclosure Statement because it provides for a larger distribution to Tronoxs creditors than would
otherwise result in liquidation under chapter 7 of the Bankruptcy Code. In addition, any
alternative other than Confirmation of the Plan could result in extensive delays and increased
administrative expenses resulting in smaller distributions to Holders of Allowed Claims than
proposed under the Plan. Accordingly, Tronox recommends that Holders of Claims entitled to vote on
the Plan support Confirmation of the Plan and vote to accept the Plan.
Dated: October 1, 2010
|
|
|
|
|
|
|
Respectfully submitted, |
|
|
|
|
|
|
|
TRONOX INCORPORATED, on behalf of itself and all of the
other Tronox Debtors |
|
|
|
|
|
|
|
By:
|
|
/s/ Michael J. Foster |
|
|
|
|
|
|
|
Name:
|
|
Michael J. Foster |
|
|
Title:
|
|
Vice President, Secretary and General Counsel |
Prepared by:
Richard M. Cieri
Jonathan S. Henes
Nicole L. Greenblatt
Benjamin J. Steele
KIRKLAND & ELLIS LLP
601 Lexington Avenue
New York, New York 10022
Telephone: (212) 446-4800
Facsimile: (212) 446-4900
- and -
Patrick J. Nash, Jr.
KIRKLAND & ELLIS LLP
300 North LaSalle
Chicago, Illinois 60654
Telephone: (312) 862-2000
Facsimile: (312) 862-2200
Attorneys for the Debtors
and Debtors in Possession
104
EXHIBIT A
PLAN OF REORGANIZATION
EXHIBIT B
SOLICITATION PROCEDURES ORDER
(Exhibits Omitted)
EXHIBIT C
TRONOX INCORPORATED
UNAUDITED SUMMARY FINANCIAL PROJECTIONS
FOR THE YEARS ENDED 2010 2013
Financial Projections
For purposes of evaluating the Plan pursuant to the feasibility requirement set forth in
section 1129(a)(11) of the Bankruptcy Code, Tronox analyzed its ability to satisfy its financial
obligations under the Plan while maintaining sufficient liquidity and capital resources, consistent
with the Tronoxs Business Plan (the Business Plan), to prepare the following financial
projections (the Projections) for the calendar years 2010 through 2013 (the Projection Period).
As discussed in detail below, Tronox believes that the Plan meets the Bankruptcy Code feasibility
requirement, as confirmation is not likely to be followed by liquidation or the need for further
financial reorganization of Tronox or any successor under the Plan.
Tronox does not, as a matter of course, publish its business plans or strategies, projections
or anticipated financial position. Accordingly, Tronox does not anticipate that it will, and
disclaims any obligation to, furnish updated business plans or projections to holders of Claims or
Equity Interests or other parties in interest after the Confirmation Date, or to include such
information in documents required to be filed with the United States Securities and Exchange
Commission (the SEC) or otherwise make such information public.
In connection with the planning and development of the Plan, the Projections were prepared by
Tronox to present the anticipated impact of the Plan. The Projections assume that the Plan will be
implemented in accordance with its stated terms. The Projections are based on forecasts of key
economic variables and may be significantly impacted by, among other factors, changes in the
competitive environment, regulatory changes and/or a variety of other factors, including those
factors listed in the Plan and this Disclosure Statement. Accordingly, the estimates and
assumptions underlying the Projections are inherently uncertain and are subject to significant
business, economic and competitive uncertainties. Therefore, such Projections, estimates and
assumptions are not necessarily indicative of these current values or future performance, which may
be significantly less or more favorable than set forth herein. The Projections were prepared in
June 2010. Tronoxs management is unaware of any circumstances as of the date of this Disclosure
Statement that would require the re-forecasting of the Projections due to a material change in
Tronoxs prospects.
The assumptions, qualifications and notes set forth below comprise a material part of the
Projections and should be read in conjunction with the Projections. Additionally, the Projections
should be read in conjunction with the assumptions, qualifications and explanations set forth in
this Disclosure Statement and the Plan in their entirety.
TRONOXS MANAGEMENT PREPARED THE PROJECTIONS WITH THE ASSISTANCE OF THEIR PROFESSIONALS.
TRONOXS MANAGEMENT DID NOT PREPARE SUCH PROJECTIONS TO COMPLY WITH THE GUIDELINES FOR PROSPECTIVE
FINANCIAL STATEMENTS PUBLISHED BY THE AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS AND THE
RULES AND REGULATIONS OF THE SEC. TRONOXS INDEPENDENT ACCOUNTANTS HAVE NEITHER EXAMINED NOR
COMPILED THE PROJECTIONS AND, ACCORDINGLY, DO NOT EXPRESS AN OPINION OR ANY OTHER FORM OF ASSURANCE
WITH RESPECT TO THE PROJECTIONS, ASSUME NO RESPONSIBILITY FOR THE PROJECTIONS, AND DISCLAIM ANY
ASSOCIATION WITH THE PROJECTIONS. EXCEPT FOR PURPOSES OF THIS DISCLOSURE STATEMENT, TRONOX DOES NOT
PUBLISH PROJECTIONS OF ITS ANTICIPATED FINANCIAL POSITION OR RESULTS OF OPERATIONS.
MOREOVER, THE PROJECTIONS CONTAIN CERTAIN STATEMENTS THAT ARE FORWARD-LOOKING STATEMENTS
WITHIN THE MEANING OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995. THESE STATEMENTS ARE
SUBJECT TO A NUMBER OF ASSUMPTIONS, RISKS AND UNCERTAINTIES, MANY OF WHICH ARE BEYOND THE CONTROL
OF TRONOX, INCLUDING THE IMPLEMENTATION OF THE PLAN, THE CONTINUING AVAILABILITY OF SUFFICIENT
BORROWING CAPACITY OR OTHER FINANCING TO FUND OPERATIONS, ACHIEVING OPERATING EFFICIENCIES,
MAINTAINING GOOD EMPLOYEE RELATIONS, EXISTING AND FUTURE GOVERNMENTAL REGULATIONS AND ACTIONS OF
GOVERNMENTAL BODIES, NATURAL DISASTERS AND UNUSUAL WEATHER CONDITIONS, ACTS OF TERRORISM OR WAR,
INDUSTRY-SPECIFIC RISK FACTORS (AS DETAILED IN SECTION VII OF THIS DISCLOSURE STATEMENT ENTITLED
RISK FACTORS), AND OTHER MARKET AND COMPETITIVE CONDITIONS. HOLDERS OF CLAIMS AND
INTERESTS ARE
CAUTIONED THAT THE FORWARD-LOOKING STATEMENTS SPEAK AS OF THE DATE MADE AND ARE NOT
GUARANTEES OF FUTURE PERFORMANCE. ACTUAL RESULTS OR DEVELOPMENTS MAY DIFFER MATERIALLY FROM THE
EXPECTATIONS EXPRESSED OR IMPLIED IN THE FORWARD-LOOKING STATEMENTS, AND TRONOX UNDERTAKES NO
OBLIGATION TO UPDATE ANY SUCH STATEMENTS.
THE PROJECTIONS, WHILE PRESENTED WITH NUMERICAL SPECIFICITY, ARE NECESSARILY BASED ON A
VARIETY OF ESTIMATES AND ASSUMPTIONS WHICH, THOUGH CONSIDERED REASONABLE BY TRONOX, MAY NOT BE
REALIZED AND ARE INHERENTLY SUBJECT TO SIGNIFICANT BUSINESS, ECONOMIC, COMPETITIVE, INDUSTRY,
REGULATORY, MARKET AND FINANCIAL UNCERTAINTIES AND CONTINGENCIES, MANY OF WHICH ARE BEYOND
REORGANIZED TRONOXS CONTROL. TRONOX CAUTIONS THAT NO REPRESENTATIONS CAN BE MADE OR ARE MADE AS
TO THE ACCURACY OF THE PROJECTIONS OR TO REORGANIZED TRONOXS ABILITY TO ACHIEVE THE PROJECTED
RESULTS. SOME ASSUMPTIONS INEVITABLY WILL BE INCORRECT. MOREOVER, EVENTS AND CIRCUMSTANCES
OCCURRING SUBSEQUENT TO THE DATE ON WHICH TRONOX PREPARED THESE PROJECTIONS MAY BE DIFFERENT FROM
THOSE ASSUMED, OR, ALTERNATIVELY, MAY HAVE BEEN UNANTICIPATED, AND THUS THE OCCURRENCE OF THESE
EVENTS MAY AFFECT FINANCIAL RESULTS IN A MATERIALLY ADVERSE OR MATERIALLY BENEFICIAL MANNER.
EXCEPT AS OTHERWISE PROVIDED IN THE PLAN OR DISCLOSURE STATEMENT, TRONOX AND REORGANIZED TRONOX, AS
APPLICABLE, DO NOT INTEND AND UNDERTAKE NO OBLIGATION TO UPDATE OR OTHERWISE REVISE THE PROJECTIONS
TO REFLECT EVENTS OR CIRCUMSTANCES EXISTING OR ARISING AFTER THE DATE THIS DISCLOSURE STATEMENT IS
INITIALLY FILED OR TO REFLECT THE OCCURRENCE OF UNANTICIPATED EVENTS.
THEREFORE, THE PROJECTIONS MAY NOT BE RELIED UPON AS A GUARANTY OR OTHER ASSURANCE OF THE
ACTUAL RESULTS THAT WILL OCCUR. IN DECIDING WHETHER TO VOTE TO ACCEPT OR REJECT THE PLAN, HOLDERS
OF CLAIMS AND EQUITY INTERESTS MUST MAKE THEIR OWN DETERMINATIONS AS TO THE REASONABLENESS OF SUCH
ASSUMPTIONS AND THE RELIABILITY OF THE PROJECTIONS AND SHOULD CONSULT WITH THEIR OWN ADVISORS.
Basis of Presentation
The Projections reflect the reorganization and related transactions pursuant to the Plan;
however, the Projections do not reflect the comprehensive implementation of estimated fresh start
accounting adjustments pursuant with Accounting Standards Codification (ASC) Section 852-10-45,
Reorganizations Other Presentation Matters. It has not yet been determined if fresh start
accounting will be applicable. However, if fresh start accounting is applicable upon the
confirmation of the Plan, the reorganization value of Tronox will be assigned to its assets and
liabilities in accordance ASC Topic 805, Business Combination. These actual fresh start
accounting adjustments will restate the value of Tronoxs assets and liabilities to fair market
value and may result in the recognition of additional intangible assets including goodwill. The
presentation of inventory, plant, property and equipment and intangibles at fair value will likely
change the cost of sales and depreciation and amortization expense from that shown herein. While
the actual fresh start accounting adjustments may result in materially different values for
certain balance sheet assets and liabilities from those presented herein, such adjustments are not
anticipated to have an impact on the underlying economics of the Plan. The pro forma adjustments
presented herein are unaudited.
Tronox currently establishes a valuation allowance against the deferred tax assets of its U.S.
operations and the deferred tax assets of certain of its foreign subsidiaries. The tax assets and
liabilities presented in these projections have not been adjusted to reflect the release or
creation of any valuation allowances as of the emergence date, any other fresh start adjustments,
if required, or for all of the effects of the reorganization and related transactions contemplated
by the Plan. The tax presentation in the Statement of Operations does not provide for the
continuing application of a valuation allowance against any domestic or foreign deferred tax asset
resulting from operations after the Effective Date. The Projections do not make any assumptions to
the liability for uncertain tax positions that will need to be re-established for U.S. operations
after the Effective Date under the provisions of
2
FASB Interpretation No. 48 Uncertain tax
positions (ASC 740). The Projections provide that existing U.S. liability for uncertain tax
positions is released at Emergence.
Tronoxs operations are global and it recognizes income, purchases raw materials and incurs
expense in many currencies. The assets and liabilities of its foreign subsidiaries are recorded in
their functional currency. The projections assume constant foreign exchange rates for the
Projection Period. In practice, foreign exchange rates will vary constantly throughout the
Projection Period.
Assumptions to Projections
The Projections are based on a number of assumptions and qualifications made by management
with respect to the future performance of Tronoxs operations, which are reflected in the
discussion below and the footnotes set forth herein. These assumptions and footnotes comprise a
material part of the Projections and should be reviewed in conjunction with the Projections.
Additionally, although management has prepared the Projections in good faith and believes the
assumptions to be reasonable, Tronox can provide no assurance that such assumptions will be
realized. As described in detail in this Disclosure Statement, a variety of risk factors could
affect Reorganized Tronoxs future financial position and results of operations and must be
considered in connection with the Projections.
Tronox prepared the Projections in June 2010 reflecting estimates and market conditions at
that time, including a projected exit from chapter 11 on October 1, 2010. Since May 2010, Tronox
has outperformed the Projections and it is currently evaluating whether the changes in market
conditions and the prolonged chapter 11 cases will have a material effect on the projections.
3
Reorganized Tronox
Income Statement
Does not include the impact of fresh start accounting
($ in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009 |
|
|
|
Q1 2010 |
|
|
Q2 2010 |
|
|
Q3 2010 |
|
|
Q4 2010 |
|
|
|
2010 |
|
|
|
2011 |
|
|
2012 |
|
|
2013 |
|
Net Sales |
|
|
|
$ |
1,071,755 |
|
|
|
$ |
278,862 |
|
|
$ |
292,086 |
|
|
$ |
312,361 |
|
|
$ |
285,165 |
|
|
|
$ |
1,168,474 |
|
|
|
$ |
1,231,039 |
|
|
$ |
1,247,674 |
|
|
$ |
1,272,944 |
|
COGS |
|
|
|
|
(883,899 |
) |
|
|
|
(223,280 |
) |
|
|
(234,747 |
) |
|
|
(242,661 |
) |
|
|
(218,915 |
) |
|
|
|
(919,602 |
) |
|
|
|
(977,009 |
) |
|
|
(1,015,959 |
) |
|
|
(1,037,595 |
) |
SGA |
|
|
|
|
(69,238 |
) |
|
|
|
(12,507 |
) |
|
|
(12,304 |
) |
|
|
(13,230 |
) |
|
|
(18,371 |
) |
|
|
|
(56,412 |
) |
|
|
|
(72,962 |
) |
|
|
(75,413 |
) |
|
|
(77,919 |
) |
DD&A and Asset Write-off |
|
|
|
|
(61,404 |
) |
|
|
|
(12,420 |
) |
|
|
(13,015 |
) |
|
|
(13,332 |
) |
|
|
(14,365 |
) |
|
|
|
(53,132 |
) |
|
|
|
(58,389 |
) |
|
|
(60,845 |
) |
|
|
(63,262 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EBIT |
|
|
|
$ |
57,214 |
|
|
|
$ |
30,655 |
|
|
$ |
32,020 |
|
|
$ |
43,138 |
|
|
$ |
33,514 |
|
|
|
$ |
139,328 |
|
|
|
$ |
122,680 |
|
|
$ |
95,456 |
|
|
$ |
94,168 |
|
DD&A |
|
|
|
|
57,503 |
|
|
|
|
12,384 |
|
|
|
13,015 |
|
|
|
13,332 |
|
|
|
14,365 |
|
|
|
|
53,096 |
|
|
|
|
58,389 |
|
|
|
60,845 |
|
|
|
63,262 |
|
Asset Write-off (Accelerated Depr) |
|
|
|
|
3,901 |
|
|
|
|
36 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
36 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension/Post Retirement/SBC |
|
|
|
|
5,355 |
|
|
|
|
(1,883 |
) |
|
|
(925 |
) |
|
|
312 |
|
|
|
|
|
|
|
|
(2,496 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Non-Cash |
|
|
|
|
(38,361 |
) |
|
|
|
(9,793 |
) |
|
|
(7,090 |
) |
|
|
(9,774 |
) |
|
|
|
|
|
|
|
(26,657 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Professional Fees |
|
|
|
|
44,948 |
|
|
|
|
9,324 |
|
|
|
6,780 |
|
|
|
10,500 |
|
|
|
|
|
|
|
|
26,604 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EBITDAR |
|
|
|
$ |
130,561 |
|
|
|
$ |
40,724 |
|
|
$ |
43,800 |
|
|
$ |
57,509 |
|
|
$ |
47,879 |
|
|
|
$ |
189,912 |
|
|
|
$ |
181,069 |
|
|
$ |
156,301 |
|
|
$ |
157,430 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for Environmental Remediation |
|
|
|
|
24 |
|
|
|
|
(55,560 |
) |
|
|
40,057 |
|
|
|
|
|
|
|
|
|
|
|
|
(15,504 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Restructuring |
|
|
|
|
(21,388 |
) |
|
|
|
(634 |
) |
|
|
|
|
|
|
(13,214 |
) |
|
|
|
|
|
|
|
(13,848 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Financing and Other Fees |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(24,288 |
) |
|
|
(16,775 |
) |
|
|
|
(41,063 |
) |
|
|
|
(250 |
) |
|
|
(250 |
) |
|
|
(250 |
) |
Other (Land Sales, Litigation, etc.) |
|
|
|
|
(27,070 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Profit |
|
|
|
$ |
8,779 |
|
|
|
$ |
(25,539 |
) |
|
$ |
72,077 |
|
|
$ |
5,637 |
|
|
$ |
16,739 |
|
|
|
$ |
68,914 |
|
|
|
$ |
122,430 |
|
|
$ |
95,206 |
|
|
$ |
93,918 |
|
Interest & Debt Expense |
|
|
|
|
(36,060 |
) |
|
|
|
(12,349 |
) |
|
|
(13,260 |
) |
|
|
(43,589 |
) |
|
|
(9,346 |
) |
|
|
|
(78,545 |
) |
|
|
|
(37,806 |
) |
|
|
(38,346 |
) |
|
|
(40,482 |
) |
Other Income |
|
|
|
|
(88,474 |
) |
|
|
|
(2,883 |
) |
|
|
(4,329 |
) |
|
|
90,617 |
|
|
|
|
|
|
|
|
83,405 |
|
|
|
|
(610 |
) |
|
|
(610 |
) |
|
|
(610 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings Before Tax |
|
|
|
$ |
(115,756 |
) |
|
|
$ |
(40,771 |
) |
|
$ |
54,488 |
|
|
$ |
52,665 |
|
|
$ |
7,393 |
|
|
|
$ |
73,774 |
|
|
|
$ |
84,014 |
|
|
$ |
56,250 |
|
|
$ |
52,826 |
|
Income Tax |
|
|
|
|
(4,788 |
) |
|
|
|
(871 |
) |
|
|
(2,861 |
) |
|
|
(4,721 |
) |
|
|
(7,723 |
) |
|
|
|
(16,175 |
) |
|
|
|
(29,070 |
) |
|
|
(21,181 |
) |
|
|
(21,181 |
) |
Discontinued Operations |
|
|
|
|
2,828 |
|
|
|
|
(1,000 |
) |
|
|
3,231 |
|
|
|
2,059 |
|
|
|
(1,571 |
) |
|
|
|
2,720 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income |
|
|
|
$ |
(117,716 |
) |
|
|
$ |
(42,643 |
) |
|
$ |
54,859 |
|
|
$ |
50,004 |
|
|
$ |
(1,901 |
) |
|
|
$ |
60,319 |
|
|
|
$ |
54,944 |
|
|
$ |
35,069 |
|
|
$ |
31,644 |
|
4
Reorganized Tronox
Balance Sheet
Does not include the impact of fresh start accounting
($ in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009 |
|
|
|
Q1 2010 |
|
|
Q2 2010 |
|
|
Q3 2010 |
|
|
Q4 2010 |
|
|
|
2010 |
|
|
|
2011 |
|
|
2012 |
|
|
2013 |
|
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash |
|
|
|
$ |
143,206 |
|
|
|
$ |
115,055 |
|
|
$ |
134,010 |
|
|
$ |
30,000 |
|
|
$ |
30,000 |
|
|
|
$ |
30,000 |
|
|
|
$ |
30,000 |
|
|
$ |
30,942 |
|
|
$ |
30,942 |
|
Accounts Receivable Net |
|
|
|
|
211,470 |
|
|
|
|
218,083 |
|
|
|
250,820 |
|
|
|
220,333 |
|
|
|
205,993 |
|
|
|
|
205,993 |
|
|
|
|
223,480 |
|
|
|
225,892 |
|
|
|
230,702 |
|
Inventory |
|
|
|
|
193,293 |
|
|
|
|
190,742 |
|
|
|
183,723 |
|
|
|
179,697 |
|
|
|
199,372 |
|
|
|
|
199,372 |
|
|
|
|
215,598 |
|
|
|
222,222 |
|
|
|
228,054 |
|
Other Current Assets |
|
|
|
|
142,878 |
|
|
|
|
137,945 |
|
|
|
137,099 |
|
|
|
20,451 |
|
|
|
20,451 |
|
|
|
|
20,451 |
|
|
|
|
20,451 |
|
|
|
20,451 |
|
|
|
20,451 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Current Assets |
|
|
|
$ |
690,846 |
|
|
|
$ |
661,826 |
|
|
$ |
705,652 |
|
|
$ |
450,481 |
|
|
$ |
455,815 |
|
|
|
$ |
455,815 |
|
|
|
$ |
489,528 |
|
|
$ |
499,506 |
|
|
$ |
510,149 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PPE Net |
|
|
|
|
293,256 |
|
|
|
|
286,978 |
|
|
|
283,693 |
|
|
|
323,910 |
|
|
|
328,283 |
|
|
|
|
328,283 |
|
|
|
|
327,076 |
|
|
|
315,312 |
|
|
|
299,550 |
|
Goodwill & Intangibles |
|
|
|
|
26,479 |
|
|
|
|
24,987 |
|
|
|
22,758 |
|
|
|
22,758 |
|
|
|
22,758 |
|
|
|
|
22,758 |
|
|
|
|
22,758 |
|
|
|
22,758 |
|
|
|
22,758 |
|
Other Long Term Assets |
|
|
|
|
105,763 |
|
|
|
|
103,490 |
|
|
|
101,255 |
|
|
|
3,525 |
|
|
|
3,525 |
|
|
|
|
3,525 |
|
|
|
|
3,525 |
|
|
|
3,525 |
|
|
|
3,525 |
|
Total Long Term Assets |
|
|
|
$ |
425,499 |
|
|
|
$ |
415,455 |
|
|
$ |
407,707 |
|
|
$ |
350,193 |
|
|
$ |
354,565 |
|
|
|
$ |
354,565 |
|
|
|
$ |
353,359 |
|
|
$ |
341,595 |
|
|
$ |
325,833 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Assets |
|
|
|
$ |
1,116,345 |
|
|
|
$ |
1,077,281 |
|
|
$ |
1,113,359 |
|
|
$ |
800,674 |
|
|
$ |
810,380 |
|
|
|
$ |
810,380 |
|
|
|
$ |
842,887 |
|
|
$ |
841,101 |
|
|
$ |
835,982 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities & Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts Payable Trade |
|
|
|
|
151,141 |
|
|
|
|
122,861 |
|
|
|
133,701 |
|
|
|
117,937 |
|
|
|
132,438 |
|
|
|
|
132,438 |
|
|
|
|
142,299 |
|
|
|
147,501 |
|
|
|
151,682 |
|
Other Current Liabilities and Accrued Expenses |
|
|
|
|
182,344 |
|
|
|
|
182,944 |
|
|
|
229,408 |
|
|
|
43,941 |
|
|
|
30,770 |
|
|
|
|
30,770 |
|
|
|
|
30,770 |
|
|
|
30,770 |
|
|
|
30,770 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Current Liabilities |
|
|
|
$ |
333,484 |
|
|
|
$ |
305,805 |
|
|
$ |
363,108 |
|
|
$ |
161,877 |
|
|
$ |
163,209 |
|
|
|
$ |
163,209 |
|
|
|
$ |
173,069 |
|
|
$ |
178,271 |
|
|
$ |
182,452 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
DIP/Exit Revolver |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
44,047 |
|
|
|
54,943 |
|
|
|
|
54,943 |
|
|
|
|
25,558 |
|
|
|
|
|
|
|
|
|
Exit Term Loan - 1st Lien Term Loan A |
|
|
|
|
335,000 |
|
|
|
|
335,000 |
|
|
|
335,000 |
|
|
|
424,721 |
|
|
|
423,883 |
|
|
|
|
423,883 |
|
|
|
|
420,533 |
|
|
|
416,241 |
|
|
|
381,158 |
|
Exit Term Loan - 1st Lien Term Loan B |
|
|
|
|
90,000 |
|
|
|
|
90,000 |
|
|
|
90,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9.5% Senior Sub. Notes |
|
|
|
|
350,000 |
|
|
|
|
350,000 |
|
|
|
350,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Environmental Reserves |
|
|
|
|
106,123 |
|
|
|
|
155,259 |
|
|
|
91,768 |
|
|
|
751 |
|
|
|
683 |
|
|
|
|
683 |
|
|
|
|
610 |
|
|
|
537 |
|
|
|
464 |
|
Other LT Liabilities |
|
|
|
|
163,413 |
|
|
|
|
162,265 |
|
|
|
158,251 |
|
|
|
139,206 |
|
|
|
139,491 |
|
|
|
|
139,491 |
|
|
|
|
137,247 |
|
|
|
123,358 |
|
|
|
114,515 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Long Term Liabilities |
|
|
|
$ |
1,044,536 |
|
|
|
$ |
1,092,524 |
|
|
$ |
1,025,019 |
|
|
$ |
608,725 |
|
|
$ |
619,001 |
|
|
|
$ |
619,001 |
|
|
|
$ |
583,948 |
|
|
$ |
541,079 |
|
|
$ |
497,079 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intercompany Assets & Liabilities |
|
|
|
|
(0 |
) |
|
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
|
|
0 |
|
|
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders Equity |
|
|
|
|
(261,675 |
) |
|
|
|
(321,048 |
) |
|
|
(274,768 |
) |
|
|
(234,929 |
) |
|
|
(236,829 |
) |
|
|
|
(236,829 |
) |
|
|
|
(179,130 |
) |
|
|
(143,249 |
) |
|
|
(108,549 |
) |
Post-Petition Equity Infusion |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
185,000 |
|
|
|
185,000 |
|
|
|
|
185,000 |
|
|
|
|
185,000 |
|
|
|
185,000 |
|
|
|
185,000 |
|
Equity Impact of Remediation Trust |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(270,000 |
) |
|
|
(270,000 |
) |
|
|
|
(270,000 |
) |
|
|
|
(270,000 |
) |
|
|
(270,000 |
) |
|
|
(270,000 |
) |
Preferred Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equitized Securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
350,000 |
|
|
|
350,000 |
|
|
|
|
350,000 |
|
|
|
|
350,000 |
|
|
|
350,000 |
|
|
|
350,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders Equity |
|
|
|
|
(261,675 |
) |
|
|
|
(321,048 |
) |
|
|
(274,768 |
) |
|
|
30,071 |
|
|
|
28,171 |
|
|
|
|
28,171 |
|
|
|
|
85,870 |
|
|
|
121,751 |
|
|
|
156,451 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities & Equity |
|
|
|
$ |
1,116,345 |
|
|
|
$ |
1,077,281 |
|
|
$ |
1,113,359 |
|
|
$ |
800,674 |
|
|
$ |
810,380 |
|
|
|
$ |
810,380 |
|
|
|
$ |
842,887 |
|
|
$ |
841,101 |
|
|
$ |
835,982 |
|
5
Reorganized Tronox
Statement of Cash Flows (contd)
Does not include the impact of fresh start accounting
($ in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009 |
|
|
|
Q1 2010 |
|
|
Q2 2010 |
|
|
Q3 2010 |
|
|
Q4 2010 |
|
|
|
2010 |
|
|
|
2011 |
|
|
2012 |
|
|
2013 |
|
Operating Activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income (Loss) |
|
|
|
$ |
(117,716 |
) |
|
|
$ |
(42,643 |
) |
|
$ |
54,859 |
|
|
$ |
50,004 |
|
|
$ |
(1,901 |
) |
|
|
$ |
60,319 |
|
|
|
$ |
54,944 |
|
|
$ |
35,069 |
|
|
$ |
31,644 |
|
Adjustments to Reconcile Net Cash Flows |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation & Amortization |
|
|
|
|
57,505 |
|
|
|
|
12,384 |
|
|
|
13,015 |
|
|
|
13,332 |
|
|
|
14,365 |
|
|
|
|
53,096 |
|
|
|
|
58,389 |
|
|
|
60,845 |
|
|
|
63,262 |
|
Deferred Income Taxes |
|
|
|
|
(22,114 |
) |
|
|
|
(1,300 |
) |
|
|
1,073 |
|
|
|
2,336 |
|
|
|
1,285 |
|
|
|
|
3,394 |
|
|
|
|
2,755 |
|
|
|
812 |
|
|
|
3,057 |
|
Provision for Environmental Net |
|
|
|
|
(24 |
) |
|
|
|
55,560 |
|
|
|
(40,057 |
) |
|
|
|
|
|
|
|
|
|
|
|
15,504 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asset Sales, Write-Downs, Retirements and Impairments |
|
|
|
|
47,429 |
|
|
|
|
37 |
|
|
|
(1 |
) |
|
|
15,800 |
|
|
|
|
|
|
|
|
15,836 |
|
|
|
|
|
|
|
|
0 |
|
|
|
|
|
Income From Equity Affiliates |
|
|
|
|
239 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of Debt Issuance Cost |
|
|
|
|
10,015 |
|
|
|
|
2,644 |
|
|
|
2,698 |
|
|
|
31,998 |
|
|
|
|
|
|
|
|
37,341 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financing Fees |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
24,288 |
|
|
|
16,775 |
|
|
|
|
41,063 |
|
|
|
|
250 |
|
|
|
250 |
|
|
|
250 |
|
Pension and Post Retirement Expense |
|
|
|
|
(45,129 |
) |
|
|
|
(2,270 |
) |
|
|
(691 |
) |
|
|
|
|
|
|
|
|
|
|
|
(2,962 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock Based Compensation |
|
|
|
|
396 |
|
|
|
|
108 |
|
|
|
116 |
|
|
|
|
|
|
|
|
|
|
|
|
224 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Non-Cash Items Affecting Net Income |
|
|
|
|
(5,000 |
) |
|
|
|
17,598 |
|
|
|
(8,289 |
) |
|
|
(184,404 |
) |
|
|
|
|
|
|
|
(175,096 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Non-Cash Items Affecting Net Income |
|
|
|
|
7,951 |
|
|
|
|
18,117 |
|
|
|
(6,167 |
) |
|
|
(112,318 |
) |
|
|
16,775 |
|
|
|
|
(83,594 |
) |
|
|
|
250 |
|
|
|
250 |
|
|
|
250 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Increase) Decrease In Accounts Receivable, Net |
|
|
|
|
11,256 |
|
|
|
|
(8,259 |
) |
|
|
7,264 |
|
|
|
30,487 |
|
|
|
14,340 |
|
|
|
|
43,833 |
|
|
|
|
(17,488 |
) |
|
|
(2,412 |
) |
|
|
(4,810 |
) |
(Increase) Decrease In Inventories |
|
|
|
|
112,346 |
|
|
|
|
330 |
|
|
|
4,016 |
|
|
|
4,025 |
|
|
|
(19,674 |
) |
|
|
|
(11,303 |
) |
|
|
|
(16,226 |
) |
|
|
(6,624 |
) |
|
|
(5,833 |
) |
(Increase) Decrease In Other Current Assets |
|
|
|
|
1,432 |
|
|
|
|
6,180 |
|
|
|
294 |
|
|
|
116,649 |
|
|
|
|
|
|
|
|
123,123 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Increase) Decrease In Goodwill & Intangibles |
|
|
|
|
34 |
|
|
|
|
(0 |
) |
|
|
0 |
|
|
|
|
|
|
|
|
|
|
|
|
0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Increase) Decrease In Other Long Term Assets |
|
|
|
|
(4,373 |
) |
|
|
|
(58 |
) |
|
|
(291 |
) |
|
|
65,732 |
|
|
|
|
|
|
|
|
65,383 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase (Decrease) In Liabilities Held For Sale/Discon. |
|
|
|
|
86,997 |
|
|
|
|
(2,210 |
) |
|
|
484 |
|
|
|
(3,960 |
) |
|
|
|
|
|
|
|
(5,685 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase (Decrease) In Accounts Payable |
|
|
|
|
(5,276 |
) |
|
|
|
(27,247 |
) |
|
|
12,482 |
|
|
|
(15,764 |
) |
|
|
14,502 |
|
|
|
|
(16,027 |
) |
|
|
|
9,860 |
|
|
|
5,203 |
|
|
|
4,181 |
|
Increase (Decrease) In Accrued Liabilities |
|
|
|
|
(42,591 |
) |
|
|
|
(5,702 |
) |
|
|
(3,913 |
) |
|
|
(101,696 |
) |
|
|
(3,298 |
) |
|
|
|
(114,608 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase (Decrease) In Other Current Liabilities |
|
|
|
|
(350,000 |
) |
|
|
|
|
|
|
|
275 |
|
|
|
(79,811 |
) |
|
|
(9,873 |
) |
|
|
|
(89,409 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase (Decrease) In Accum Comprehensive Income |
|
|
|
|
7,184 |
|
|
|
|
(6,756 |
) |
|
|
(8,265 |
) |
|
|
|
|
|
|
|
|
|
|
|
(15,020 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase (Decrease) in Environmental Res. (Net) |
|
|
|
|
(23,698 |
) |
|
|
|
(6,289 |
) |
|
|
(7,911 |
) |
|
|
(91,017 |
) |
|
|
(67 |
) |
|
|
|
(105,285 |
) |
|
|
|
(73 |
) |
|
|
(73 |
) |
|
|
(73 |
) |
Increase (Decrease) In Taxes On Income |
|
|
|
|
(38,088 |
) |
|
|
|
2,448 |
|
|
|
(2,975 |
) |
|
|
|
|
|
|
|
|
|
|
|
(527 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase (Decrease) In Other Long-Term Liabilities |
|
|
|
|
21,314 |
|
|
|
|
(1,135 |
) |
|
|
(1,830 |
) |
|
|
(19,044 |
) |
|
|
(1,000 |
) |
|
|
|
(23,010 |
) |
|
|
|
(2,245 |
) |
|
|
(13,888 |
) |
|
|
(8,843 |
) |
Other Changes in Assets and Liabilities |
|
|
|
|
(4,134 |
) |
|
|
|
(13,495 |
) |
|
|
9,059 |
|
|
|
|
|
|
|
|
|
|
|
|
(4,435 |
) |
|
|
|
(0 |
) |
|
|
|
|
|
|
|
|
Adjustment for Non-Cash Items |
|
|
|
|
5,000 |
|
|
|
|
|
|
|
|
|
|
|
|
184,404 |
|
|
|
(16,775 |
) |
|
|
|
167,629 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Changes in Working Capital |
|
|
|
|
(222,597 |
) |
|
|
|
(62,192 |
) |
|
|
8,690 |
|
|
|
90,004 |
|
|
|
(21,845 |
) |
|
|
|
14,658 |
|
|
|
|
(26,171 |
) |
|
|
(17,795 |
) |
|
|
(15,379 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Cash Flows From Operating Activities |
|
|
|
$ |
(296,995 |
) |
|
|
$ |
(20,073 |
) |
|
$ |
31,413 |
|
|
$ |
43,357 |
|
|
$ |
8,679 |
|
|
|
$ |
63,377 |
|
|
|
$ |
90,167 |
|
|
$ |
79,180 |
|
|
$ |
82,834 |
|
6
Reorganized Tronox
Statement of Cash Flows (contd)
Does not include the impact of fresh start accounting
($ in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009 |
|
|
|
Q1 2010 |
|
|
Q2 2010 |
|
|
Q3 2010 |
|
|
Q4 2010 |
|
|
|
2010 |
|
|
|
2011 |
|
|
2012 |
|
|
2013 |
|
Investing Activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital Expenditures |
|
|
|
|
(24,051 |
) |
|
|
|
(7,160 |
) |
|
|
(11,314 |
) |
|
|
(69,348 |
) |
|
|
(18,738 |
) |
|
|
|
(106,560 |
) |
|
|
|
(57,182 |
) |
|
|
(49,081 |
) |
|
|
(47,500 |
) |
Investments In Equity Affiliates |
|
|
|
|
16 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Increase) In Remediation Trust |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(270,000 |
) |
|
|
|
|
|
|
|
(270,000 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Settlement / payment to tort claimants |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(12,500 |
) |
|
|
|
|
|
|
|
(12,500 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Cash Flows From Investing Activities |
|
|
|
|
(24,035 |
) |
|
|
|
(7,160 |
) |
|
|
(11,314 |
) |
|
|
(351,848 |
) |
|
|
(18,738 |
) |
|
|
|
(389,060 |
) |
|
|
|
(57,182 |
) |
|
|
(49,081 |
) |
|
|
(47,500 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financing Activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Borrowing / (Repayment) of Exit Revolver |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
44,047 |
|
|
|
10,896 |
|
|
|
|
54,943 |
|
|
|
|
(29,385 |
) |
|
|
(25,558 |
) |
|
|
|
|
Borrowing / (Repayment) of Exit Term Loan - 1st Lien Term Loan A |
|
|
|
|
335,000 |
|
|
|
|
|
|
|
|
|
|
|
|
89,721 |
|
|
|
(838 |
) |
|
|
|
88,883 |
|
|
|
|
(3,350 |
) |
|
|
(4,292 |
) |
|
|
(35,084 |
) |
Borrowing / (Repayment) of Exit Term Loan - 1st Lien Term Loan B |
|
|
|
|
90,000 |
|
|
|
|
|
|
|
|
|
|
|
|
(90,000 |
) |
|
|
|
|
|
|
|
(90,000 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Borrowing / (Repayment) of 9.5% Sr. Sub. Notes |
|
|
|
|
350,000 |
|
|
|
|
|
|
|
|
|
|
|
|
(350,000 |
) |
|
|
|
|
|
|
|
(350,000 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Post-Petition Equity Infusion |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
185,000 |
|
|
|
|
|
|
|
|
185,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equitization of Securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
350,000 |
|
|
|
|
|
|
|
|
350,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of preferred stock / Accrued PIK Interest |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financing Fees |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(24,288 |
) |
|
|
(16,775 |
) |
|
|
|
(41,063 |
) |
|
|
|
(250 |
) |
|
|
(250 |
) |
|
|
(250 |
) |
Other Financing Activities |
|
|
|
|
(117,719 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
16,775 |
|
|
|
|
16,775 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Cash Flows from Financing Activities |
|
|
|
|
413,659 |
|
|
|
|
(1 |
) |
|
|
0 |
|
|
|
204,481 |
|
|
|
10,058 |
|
|
|
|
214,538 |
|
|
|
|
(32,985 |
) |
|
|
(29,158 |
) |
|
|
(35,334 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effects of Exchange Rates on Cash |
|
|
|
|
1,041 |
|
|
|
|
(917 |
) |
|
|
(1,144 |
) |
|
|
0 |
|
|
|
(0 |
) |
|
|
|
(2,061 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Change in Cash |
|
|
|
|
93,670 |
|
|
|
|
(28,150 |
) |
|
|
18,955 |
|
|
|
(104,010 |
) |
|
|
(0 |
) |
|
|
|
(113,206 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash at the Beginning of the Period |
|
|
|
|
49,536 |
|
|
|
|
143,206 |
|
|
|
115,055 |
|
|
|
134,010 |
|
|
|
30,000 |
|
|
|
|
143,206 |
|
|
|
|
30,000 |
|
|
|
30,000 |
|
|
|
30,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash at the End of the Period |
|
|
|
$ |
143,206 |
|
|
|
$ |
115,055 |
|
|
$ |
134,010 |
|
|
$ |
30,000 |
|
|
$ |
30,000 |
|
|
|
$ |
30,000 |
|
|
|
$ |
30,000 |
|
|
$ |
30,000 |
|
|
$ |
30,000 |
|
7
General Assumptions
Note 1
The financial information in this Disclosure Statement is unaudited, presented on a going-concern
basis and does not purport to show the financial statements in accordance with GAAP, and therefore
may exclude items required by GAAP, such as certain reclassifications, eliminations, accruals,
valuations and disclosure items. There can be no assurance that such information is complete and
may be subject to revision.
The unaudited financial statements have been derived from the books and records of Tronox. This
information, however, has not been subject to procedures that would typically be applied to
financial information presented in accordance with GAAP, and upon the application of such
procedures, we believe that the financial information could be subject to changes, and these
changes could be material. The information furnished in the Projections includes primarily normal
recurring adjustments but does not include all of the adjustments that would typically be made for
financial statements prepared in accordance with GAAP. In addition, certain information and
footnote disclosures normally included in financial statements prepared in accordance with GAAP
have been condensed or omitted.
Note 2
Interest expense excludes the interest on the Tronoxs $350 million Unsecured Notes no longer being
accrued subsequent to Tronoxs Chapter 11 filings.
Note 3
On May 5, 2009, Tronox filed a statement of Non-Reliance on Previously Issued Financial Statements
or Related Audit Report or Completed Interim Review on Form 8-K indicating that Tronoxs previously
filed financial reports should no longer be relied upon because Tronox failed to establish adequate
reserves as required by applicable accounting pronouncements. In the report, Tronox indicated that
it has not yet completed its review of contingency reserves and other related liabilities.
Therefore, the amount of any increase to its reserves that may need to be taken is not known at
this time. However, the adjustments will be material. Tronox continues to review its
environmental and other contingent liability reserves. As a result, due to the further work being
done on the environmental reserves, accrued liabilities, environmental remediation and/or
restoration, total current liabilities and total liabilities not subject to compromise will be
impacted.
Pursuant to the Plan, the legacy environmental obligations of the company will be transferred to
environmental response trusts or otherwise discharged and released and therefore are not included
in the financial forecast after the exit from bankruptcy.
Note 4
On March 13, 2009, Tronoxs German subsidiaries, Tronox GmbH and its wholly owned subsidiary,
Tronox Pigments GmbH, filed applications with the Insolvency Court in Krefeld, Germany, to commence
insolvency proceedings. Tronox did not petition for self-administration
during the insolvency proceedings and thus, has relinquished management control over these
subsidiaries. The German subsidiaries have been deconsolidated from Tronoxs consolidated
financial statements as of March 31, 2009. As a result of the deconsolidation, Tronoxs German
subsidiaries, Tronox GmbH and its wholly owned subsidiary, Tronox Pigments GmbH are not included in
the financial projections.
Note 5
On July 21, 2009, Tronox announced its decision to idle the pigment production at its Savannah
facility until a time when the TiO2 market recovers and/or a sale of the plant was
completed.
Pursuant to the Plan, the real property associated with the Savannah site, including the recently
shutdown chloride plant, the previously shut down sulfate plant and the still operating sulfuric
acid plant will be transferred to an environmental response trust. As a result, the financial
projections exclude the operations of the Savannah facility.
8
Note 6
For purposes of preparing these projections, Tronox has recorded tax amounts based upon known
available information. Significant uncertainties exist related to the treatment of various
reorganization and restructuring items, along with significant uncertain international tax
positions, that have not been reflected in these Projections.
Note 7
The Projections are based upon Tronoxs detailed operating budget for calendar 2010 and for
calendar years 2011 through 2013, and incorporate managements assumptions regarding the strength
of the economy, implementation of various strategic and operating initiatives and projected
customer and end market trends. The Projections do not reflect any acquisitions or divestitures
but do reflect certain expansions of productive capacity in accordance with management plans.
Note 8
The Projections assume that the Plan will be confirmed and consummated in the third quarter of 2010
with an expected emergence date of October 1, 2010. Although Tronox would seek to cause the
Effective Date to occur as soon as is practicable, there can be no assurance as to when, or
whether, the Effective Date actually will occur.
Note 9
General Market Conditions: the Projections assume that the global economy continues to grow at
historical norms.
Note 10
Foreign Exchange Rates: Tronoxs operations are global and it recognizes income, purchases raw
materials and incurs expense in many currencies. The assets and liabilities of its foreign
subsidiaries are recorded in their functional currency. The Projections assume constant foreign
exchange rates for the Projection Period. In practice, foreign exchange rates will vary constantly
throughout the Projection Period and it is unlikely that Tronox will be able to hedge a majority,
if any, of its foreign exchange exposures.
Projected Statements of Operations:
|
1. |
|
Net Sales: Projected net sales are the aggregation of revenues from Tronoxs Pigment
(titanium dioxide and minerals products) and Electrolytic businesses. Sales are projected
to grow throughout the forecast period in line with historical industry norms. |
|
|
2. |
|
Cost of Goods Sold: Cost of goods sold (COGS) consists of costs incurred to produce
and manufacture Tronoxs products including raw materials and fixed operating costs. COGS
are assumed to increase over the Projection Period as a result of increased sales volumes
as the company adds capacity through 2011. In addition it is forecasted that raw material
costs and process chemicals will increase over time as the demand increase. |
|
|
3. |
|
Selling, General and Administrative Expenses: Selling, general and administrative
(SG&A) expenses include costs related to sales and marketing, accounting and finance,
legal, information systems and other corporate functions. Tronox implemented several SG&A
reduction programs prior to the bankruptcy filing including staff reductions. After
exiting bankruptcy, Tronox expects to increase its investment in R&D, strengthen certain
functionality and skills in certain departments and re-implement employee benefit programs.
After these additions, Tronox expects to maintain SG&A at about 6% of sales revenue. |
|
|
4. |
|
Interest Expense: Interest expense following the Confirmation Date reflects the
extinguishment of prepetition Claims as well as anticipated entry into of the Exit
Financing in the form of (a) a $335 million exit term loan with up to $90 million in
incremental debt, with an assumed interest rate of 8.0% and (b) a senior secured
asset-based revolver. The exact structure and pricing of the Exit |
9
|
|
|
Financing may change
based on market conditions at the time of the financing. Other interest includes unused
line fees on the new revolving asset-based credit facility and the amortization of deferred
financing fees. |
|
|
5. |
|
Other Expense/(Income): Other includes sundry expenses, foreign exchange
(gains)/losses, interest income and other. |
|
|
6. |
|
Income Taxes: The tax effects of the reorganization are still under evaluation. For
purposes of creating the Projections, Tronox has assumed a tax rate of 35% in the United
States, 28% in Holland and 30% in Australia upon exit from bankruptcy. Actual cash taxes
may differ materially based on varying levels of debt, interest rates, actual results,
geographic income distribution assumptions and final resolution of the remaining U.S. tax
attributes in the reorganization process. |
Projected Balance Sheets and Statements of Cash Flows:
|
1. |
|
Working Capital: Trade receivables and inventory have been projected according to
historical relationships with respect to receivable days outstanding and inventory turns
and expected improvements. Due to the bankruptcy, Tronox is experiencing shorter terms and
in some cases cash in advance for the purchase of certain materials and services. The
Projections assume that Tronoxs accounts payable terms return to normalized terms in the
Projection Period. |
|
|
2. |
|
Capital Expenditures: Tronox continues to invest in capital expenditures for
maintenance, environmental, health and safety and growth initiatives. 2010 and 2011 capital
expenditures are higher than the other years in the Projection Period due to specific
initiatives. Investments in capital expenditures are recorded at cost and are depreciated
over their estimated useful lives. |
10
EXHIBIT D
VALUATION ANALYSIS
Rothschild Inc. (Rothschild), financial advisor to Tronox in the Chapter 11 Cases, has
performed an analysis of the estimated value of Reorganized Tronox on a going-concern basis.
In preparing its analysis, Rothschild has, among other things: (i) reviewed certain recent
publicly available financial results of Tronox; (ii) reviewed certain internal financial and
operating data of Tronox, including the business projections prepared and provided by Tronoxs
management relating to its business and its prospects; (iii) discussed with certain senior
executives the current operations and prospects of Tronox; (iv) reviewed certain operating and
financial forecasts prepared by Tronox, including the business projections in this Disclosure
Statement (the Projections); (v) discussed with certain senior executives of Tronox key
assumptions related to the Projections; (vi) prepared discounted cash flow analyses based on the
Projections, utilizing various discount rates, and separately valued and accounted for Tronoxs
NOLs; (vii) considered the market value of certain publicly-traded companies in businesses
reasonably comparable to the operating businesses of Tronox; (viii) considered the value assigned
to certain precedent transactions for businesses similar to Tronox; and (xii) conducted such other
analyses as Rothschild deemed necessary under the circumstances.
Rothschild also has considered a range of potential risk factors, including: (i) overhang and
impact from operating under bankruptcy protection; (ii) Reorganized Tronoxs capital structure; and
(iii) ability to meet projected growth targets. Rothschild assumed, without independent
verification, the accuracy, completeness and fairness of all of the financial and other information
available to it from public sources or as provided to Rothschild by Tronox or its representatives.
Rothschild also assumed that the Projections have been reasonably prepared on a basis reflecting
Tronoxs best estimates and judgment as to future operating and financial performance. Rothschild
did not make any independent evaluation of Tronoxs assets, nor did Rothschild verify any of the
information it reviewed. To the extent the valuation is dependent upon Reorganized Tronoxs
achievement of the Projections, the valuation must be considered speculative. Rothschild does not
make any representation or warranty as to the fairness of the terms of the Plan.
In addition to the foregoing, Rothschild relied upon the following assumptions with respect to
the valuation of Tronox:
|
|
|
Reorganized Tronox is successfully reorganized with an assumed emergence date of September 30, 2010; |
|
|
|
|
Reorganized Tronox is reorganized excluding its legacy environmental and tort liabilities; |
|
|
|
|
Excess cash accumulated prior to exit is used to fund Environmental Response Trusts and Tort Claims Trust; |
|
|
|
|
Nevada Assets are contributed to the Environmental Response Trusts; |
|
|
|
|
Reorganized Tronox is able to recapitalize with adequate liquidity upon emergence from bankruptcy; |
|
|
|
|
Industry pricing, volumes and conditions as assumed by the Business Plan; |
|
|
|
|
Tronox funds its portion of the expansion at its Australian joint venture at exit; |
|
|
|
|
Reorganized Tronox successfully performs to the levels specified in its Business Plan; |
|
|
|
|
No significant disruption of operations (e.g., no unanticipated customer losses or plant shutdowns); |
|
|
|
|
Capital markets consistent with those that existed as of July 2010; and |
|
|
|
|
Exchange rates consistent with the Business Plan. |
As a result of such analyses, review, discussions, considerations and assumptions, Rothschild
estimates the total enterprise value (TEV) of Reorganized Tronox at approximately $975 million to
$1,150 million, with a midpoint of $1,063 million. Rothschild reduced such TEV estimates by the
estimated pro forma net debt levels of Reorganized Tronox (approximately $468 million) to estimate
the implied reorganized equity value of Reorganized Tronox. Rothschild estimates that Reorganized
Tronoxs implied total reorganized equity value will range from $507 million to $682 million.
Any variance on the ultimate General Unsecured Claims pool could have a material impact on
recoveries achieved. These estimated ranges of values and recoveries are based on a hypothetical
value that reflects the estimated intrinsic value of Reorganized Tronox derived through the
application of various valuation methodologies. The implied reorganized equity value ascribed in
this analysis does not purport to be an estimate of the post-reorganization market trading value.
Such trading value may be materially different from the implied reorganized equity value ranges
associated with Rothschilds valuation analysis. Rothschilds estimate is based on economic,
market, financial and other conditions as they exist, and on the information made available as of,
the date of this
Disclosure Statement. It should be understood that, although subsequent
developments, before or after the Confirmation Hearing, may affect Rothschilds conclusions,
Rothschild does not have any obligation to update, revise or reaffirm its estimate. The summary
set forth above does not purport to be a complete description of the analyses performed by
Rothschild. The preparation of an estimate involves various determinations as to the most
appropriate and relevant methods of financial analysis and the application of these methods in the
particular circumstances and, therefore, such an estimate is not readily susceptible to summary
description. The value of an operating business is subject to uncertainties and contingencies that
are difficult to predict and will fluctuate with changes in factors affecting the financial
conditions and prospects of such a business. As a result, the estimate of implied reorganized
equity value set forth herein is not necessarily indicative of actual outcomes, which may be
significantly more or less favorable than those set forth herein. In addition, estimates of
implied reorganized equity value do not purport to be appraisals, nor do they necessarily reflect
the values that might be realized if assets were sold. The estimates prepared by Rothschild assume
that Reorganized Tronox will continue as the owner and operator of its businesses and assets and
that such assets are operated in accordance with Tronoxs business plan. Depending on the results
of Tronoxs operations or changes in the financial markets, Rothschilds valuation analysis as of
the Effective Date may differ from that disclosed herein.
In addition, the valuation of newly issued securities, such as the New Common Stock, is
subject to additional uncertainties and contingencies, all of which are difficult to predict.
Actual market prices of such securities at issuance will depend upon, among other things,
prevailing interest rates, conditions in the financial markets and other factors that generally
influence the prices of securities. Actual market prices of such securities also may be affected
by other factors not possible to predict. Accordingly, the implied reorganized equity value
estimated by Rothschild does not necessarily reflect, and should not be construed as reflecting,
values that will be attained in the public or private markets.
THE FOREGOING VALUATION IS BASED UPON A NUMBER OF ESTIMATES AND ASSUMPTIONS THAT ARE
INHERENTLY SUBJECT TO SIGNIFICANT UNCERTAINTIES AND CONTINGENCIES BEYOND THE CONTROL OF TRONOX OR
REORGANIZED TRONOX. ACCORDINGLY, THERE CAN BE NO ASSURANCE THAT THE RANGES REFLECTED IN THE
VALUATION WOULD BE REALIZED IF THE PLAN WERE TO BECOME EFFECTIVE, AND ACTUAL RESULTS COULD VARY
MATERIALLY FROM THOSE SHOWN HERE.
THE ESTIMATED CALCULATION OF ENTERPRISE VALUE IS HIGHLY DEPENDENT UPON ACHIEVING THE FUTURE
FINANCIAL RESULTS AS SET FORTH IN THE TRONOXS PROJECTIONS, AS WELL AS THE REALIZATION OF CERTAIN
OTHER ASSUMPTIONS, NONE OF WHICH ARE GUARANTEED AND MANY OF WHICH ARE OUTSIDE OF TRONOXS CONTROL,
AS FURTHER DISCUSSED IN ARTICLE VII, RISK FACTORS.
THE CALCULATIONS OF VALUE SET FORTH HEREIN REPRESENT ESTIMATED REORGANIZATION VALUES AND DO
NOT NECESSARILY REFLECT VALUES THAT COULD BE ATTAINABLE IN PUBLIC OR PRIVATE MARKETS. THE EQUITY
VALUE STATED HEREIN DOES NOT PURPORT TO BE AN ESTIMATE OF THE POST-REORGANIZATION MARKET VALUE.
SUCH VALUE, IF ANY, MAY BE MATERIALLY DIFFERENT FROM THE REORGANIZED EQUITY VALUE RANGES ASSOCIATED
WITH THIS VALUATION ANALYSIS. NO RESPONSIBILITY IS TAKEN BY ROTHSCHILD FOR CHANGES IN MARKET
CONDITIONS AND NO OBLIGATIONS ARE ASSUMED TO REVISE THIS CALCULATION OF REORGANIZED TRONOXS VALUE
TO REFLECT EVENTS OR CONDITIONS THAT SUBSEQUENTLY OCCUR. THE CALCULATIONS OF VALUE DO NOT CONFORM
TO THE UNIFORM STANDARDS OF PROFESSIONAL APPRAISAL PRACTICE OF THE APPRAISAL FOUNDATION.
2
EXHIBIT E
LIQUIDATION ANALYSIS
This hypothetical liquidation analysis (the Liquidation Analysis) was prepared by Alvarez &
Marsal North America, LLC (A&M) in connection with A&Ms representation of Tronox in its Chapter
11 bankruptcy proceeding and for use in this Disclosure Statement. The Liquidation Analysis
indicates the values which may be obtained by classes of Claims upon disposition of assets,
pursuant to a Chapter 7 liquidation, as an alternative to the continued operation of the business
under the Plan. Accordingly, asset values discussed herein may be different than amounts referred
to in the Plan. The Liquidation Analysis is based upon the assumptions discussed herein. All
capitalized terms not defined in this Exhibit have the meanings ascribed to them in the Disclosure
Statement to which this Exhibit is attached.
On January 12, 2009, Tronox filed for Chapter 11 bankruptcy protection in the Southern
District of New York. This Liquidation Analysis has been prepared assuming that Tronox filed for
Chapter 7 protection on the Effective Date of the Plan (the Liquidation Date).
The Liquidation Analysis assumes an immediate shut down of all Tronoxs operations, the
continued remediation of certain Tronox Owned Sites and Other Sites, and the sale of all other
non-debtor operations as going concerns (unless otherwise noted). The liquidation of Tronoxs
assets is based on book values as of January 31, 2010, unless otherwise stated. These book values
are assumed to be representative of Tronoxs assets and liabilities at or about the Liquidation
Date. This Liquidation Analysis also assumes Tronoxs estates are substantively consolidated.
The Liquidation Analysis represents an estimate of recovery values and percentages based upon
a hypothetical Chapter 7 liquidation of Tronox, if a Chapter 7 trustee were appointed by the
Bankruptcy Court to convert assets into cash. The determination of the hypothetical proceeds from
the liquidation of assets is an uncertain process involving the extensive use of estimates and
assumptions which, although considered reasonable by A&M and management, are inherently subject to
significant business, economic and competitive uncertainties and contingencies beyond the control
of Tronox and its management.
ACCORDINGLY, NEITHER TRONOX NOR ITS ADVISORS MAKE ANY REPRESENTATION OR WARRANTY THAT THE
ACTUAL RESULTS OF A LIQUIDATION OF TRONOX WOULD OR WOULD NOT APPROXIMATE THE ASSUMPTIONS
REPRESENTED HEREIN. ACTUAL RESULTS COULD VARY MATERIALLY. MOREOVER, THE RECOVERIES SHOWN DO NOT
CONTEMPLATE A SALE OF TRONOXS ASSETS ON A GOING CONCERN BASIS (UNLESS OTHERWISE NOTED). WHILE
TRONOX MAKES NO ASSURANCES, IT IS POSSIBLE THAT THE PROCEEDS RECEIVED FROM SUCH A GOING CONCERN
SALE(S) WOULD BE MORE THAN THE HYPOTHETICAL LIQUIDATION, THE COSTS ASSOCIATED WITH THE SALE(S)
WOULD BE LESS, FEWER CLAIMS WOULD BE ASSERTED AGAINST THE BANKRUPTCY ESTATE AND/OR CERTAIN ORDINARY
COURSE CLAIMS WOULD BE ASSUMED BY THE BUYER(S) OF SUCH ASSETS.
THE UNDERLYING FINANCIAL INFORMATION IN THE LIQUIDATION ANALYSIS WAS NOT COMPILED, EXAMINED OR
AUDITED BY ANY INDEPENDENT ACCOUNT.
Summary Notes to the Liquidation Analysis
1. In preparing the Liquidation Analysis, A&M and Tronox have estimated an amount of Allowed Claims
for each class of claimants based upon a review of Tronoxs scheduled claims and claims filed and
liquidated to date in the Chapter 11 proceeding. The only additional claims estimated and added to
the Liquidation Analysis were for post-petition accounts payable obligations (i.e., Chapter 11
administrative claims). It should be noted that the cessation of a business in liquidation will
trigger certain claims that otherwise would not exist under the Plan absent a liquidation.
Examples of these kinds of claims include various potential employee claims (e.g., severance
claims, WARN Act claims), executory contract claims, customer claims, and lease rejection damage
claims. Some of these types of claims could be significant and would be entitled to priority in
payment over general unsecured claims. Those priority claims would be paid in full from the
liquidation proceeds before the balance would be made available to pay general unsecured claims.
Thus, other than post-petition accounts payable claims, no attempt has been made to estimate other
additional unsecured claims that may result from such events under a Chapter 7 liquidation because
no funds are estimated to be available to Chapter 11 general unsecured creditors.
The estimate of all Allowed Claims in the Liquidation Analysis is based on either the face value of
claims filed (which amounts could include unliquidated claims), or management-estimated values of
claims to be liquidated. The estimate of the amount of Allowed Claims set forth in the Liquidation
Analysis should not be relied upon for any other purpose, including any determination of the value
of any distribution to be made on account of Allowed Claims under the Plan. The actual amount of
Allowed Claims could be materially different from the amount of claims estimated in the Liquidation
Analysis as the claims process is on-going.
2. The Liquidation Analysis assumes the liquidation of substantially all of Tronoxs domestic
operations over a 12 month period and the sale of the remaining non-debtor operations as going
concerns, followed by a wind-down of the Chapter 7 estate (collectively, the Wind-Down). During
the first 60 days of the Wind-Down, it is assumed that the chapter 7 trustee would arrange for
Tronox to discontinue all of its business operations other than the operations required to complete
work-in-process inventory and clean and safely secure all equipment. Subsequently, a limited group
of personnel would be retained to pursue orderly sales of all of the remaining assets, collect
accounts receivable, liquidate claims, arrange distributions, and administer and close the estate.
3. The Liquidation Analysis does not include estimates for tax consequences, both foreign and
domestic, that may be triggered upon the liquidation and sale of assets in the manner described
above. Such tax consequences may be material.
4. The Liquidation Analysis does not include recoveries resulting from any potential preference,
fraudulent transfer or other litigation or avoidance actions, including the Anadarko Litigation.
5. The Liquidation Analysis assumes that all asset proceeds and creditor recoveries are at nominal
amounts and does not consider the discounting of values over time. The discounting of values would
result in lower recoveries to constituents than presented in this Liquidation Analysis.
*******************
A summary of Tronoxs hypothetical Chapter 7 Liquidation Analysis is as follows:
2
Tronox, Inc.
Chapter 7 Liquidation Analysis
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted 1/31/10 |
|
|
|
|
|
|
|
($s in thousands) |
|
|
|
Balance (excluding |
|
|
Estimated |
|
|
Estimated |
|
Assets |
|
Footnotes |
|
Intercompanies) |
|
|
Recovery % |
|
|
Recovery $ |
|
Cash |
|
(a) |
|
$ |
77,031 |
|
|
|
100 |
% |
|
$ |
77,031 |
|
Accounts Receivable |
|
(b) |
|
|
78,322 |
|
|
|
58 |
% |
|
|
45,518 |
|
Other/Miscellaneous Receivables |
|
(c) |
|
|
56,202 |
|
|
|
0 |
% |
|
|
|
|
Inventory |
|
(d) |
|
|
115,119 |
|
|
|
66 |
% |
|
|
75,752 |
|
Other Assets |
|
(e) |
|
|
171,368 |
|
|
|
21 |
% |
|
|
36,347 |
|
Property, Plant and Equipment (net) |
|
(f) |
|
|
175,158 |
|
|
|
82 |
% |
|
|
144,300 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Recoverable Assets Debtors |
|
|
|
|
673,199 |
|
|
|
|
|
|
|
378,948 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Add Recoveries from Equity Interests
and Non-Debtor Foreign Subsidiaries: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest in BMI |
|
(g) |
|
|
|
|
|
|
|
|
|
|
5,000 |
|
TPL |
|
(h) |
|
|
|
|
|
|
|
|
|
|
47,000 |
|
TWA |
|
(i) |
|
|
|
|
|
|
|
|
|
|
150,000 |
|
Botlek |
|
(j) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Additional Value from
Non-Debtor Equity Interests |
|
|
|
|
|
|
|
|
|
|
|
|
202,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds Available for Distribution |
|
|
|
|
|
|
|
|
|
|
|
|
580,948 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liquidation Expenses |
|
|
|
Expenses & Claims |
|
|
|
|
|
|
|
|
Wind-Down Costs |
|
|
|
|
(84,000 |
) |
|
|
100 |
% |
|
|
(84,000 |
) |
Trustee Fees |
|
|
|
|
(14,938 |
) |
|
|
100 |
% |
|
|
(14,938 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Total Liquidation Expenses and Fees |
|
(k) |
|
|
(98,938 |
) |
|
|
100 |
% |
|
|
(98,938 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Remaining Proceeds |
|
|
|
|
|
|
|
|
|
|
|
|
482,010 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
DIP Lenders Secured Claim |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
DIP Principal |
|
|
|
|
(425,000 |
) |
|
|
100 |
% |
|
|
(425,000 |
) |
DIP Accrued Interest |
|
|
|
|
(3,398 |
) |
|
|
100 |
% |
|
|
(3,398 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Total DIP Lenders Secured Claims |
|
(l) |
|
|
(428,398 |
) |
|
|
100 |
% |
|
|
(428,398 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Remaining Proceeds |
|
|
|
|
|
|
|
|
|
|
|
|
53,612 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pre-Petition Secured Claims |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Taxes |
|
|
|
|
(3,241 |
) |
|
|
100 |
% |
|
|
(3,241 |
) |
Lien Claimants |
|
|
|
|
(909 |
) |
|
|
100 |
% |
|
|
(909 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Total Pre-Petition Secured Claims |
|
(m) |
|
|
(4,150 |
) |
|
|
100 |
% |
|
|
(4,150 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Remaining Proceeds |
|
|
|
|
|
|
|
|
|
|
|
|
49,461 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Administrative Claims |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
503b(9) Claims |
|
|
|
|
(1,124 |
) |
|
|
74 |
% |
|
|
(831 |
) |
Pre-Petition Priority Claims |
|
|
|
|
(1,221 |
) |
|
|
74 |
% |
|
|
(903 |
) |
Post-Petition Trade Accounts Payable |
|
|
|
|
(64,512 |
) |
|
|
74 |
% |
|
|
(47,727 |
) |
Unquantified Administrative/Priority
Claims Arising From Liquidation |
|
|
|
Not Estimated |
|
|
|
0 |
% |
|
Not Estimated |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Administrative Claims |
|
(n) |
|
|
(66,857 |
) |
|
|
74 |
% |
|
|
(49,461 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Remaining Proceeds |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unsecured Claims |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pre-Petition Trade Accounts Payable |
|
|
|
|
(23,368 |
) |
|
|
0 |
% |
|
|
|
|
Pre-Petition Human Resources |
|
|
|
|
(18,476 |
) |
|
|
0 |
% |
|
|
|
|
Unsecured Notes |
|
|
|
|
(370,412 |
) |
|
|
0 |
% |
|
|
|
|
Governmental & Tribal Claims |
|
|
|
|
(4,906,512 |
) |
|
|
0 |
% |
|
|
|
|
Personal Injury Claims |
|
|
|
|
(2,049,503 |
) |
|
|
0 |
% |
|
|
|
|
Pension Claims |
|
|
|
|
(653,313 |
) |
|
|
0 |
% |
|
|
|
|
Indirect Environmental Claims |
|
|
|
|
(426,425 |
) |
|
|
0 |
% |
|
|
|
|
Unquantified Unsecured Claims arising
from Liquidation |
|
|
|
Not Estimated |
|
|
|
0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Unsecured Claims |
|
(o) |
|
|
(8,448,008 |
) |
|
|
0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Remaining Proceeds |
|
|
|
|
|
|
|
|
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3
Detailed Footnotes
Asset Recovery Estimates
(a) Cash: The Liquidation Analysis assumes that Tronoxs operations during the Wind-Down would not
generate additional cash available for distribution except for the disposition of non-cash assets.
All outstanding cash balances are assumed to be 100% recoverable.
(b) Accounts Receivable: Accounts receivable consist of amounts owed from customer sales generated
by Tronoxs TiO2 and electrolytic operations. The Liquidation Analysis assumes that a
Chapter 7 trustee would retain certain existing staff to handle an aggressive collection effort of
outstanding trade accounts receivable. While Tronoxs historical bad debt reserve is less than
0.5% of sales, Tronox anticipates an increase in non-collectible trade accounts receivable as a
result of potential supply and business interruption issues with customers, as well as an inability
to collect some foreign receivables (e.g., Mexico). Thus, the Liquidation Analysis assumes that
Tronox would be able to recover approximately 90% of the net book value of domestic accounts
receivable (this amount excludes all foreign receivables, receivables 60 days past due, subject to
offset, or attached to a customer rebate program).
|
|
|
|
|
|
|
|
|
|
|
|
|
($s in thousands) |
|
Trial Balance |
|
|
Estimated |
|
|
Estimated |
|
Assets |
|
1/31/2010 |
|
|
% Recovery |
|
|
$ Recovery |
|
Accounts Receivable Summary |
|
|
|
|
|
|
|
|
|
|
|
|
Trade Accounts Receivable |
|
$ |
78,322 |
|
|
|
|
|
|
|
|
|
Foreign Receivables |
|
|
(24,057 |
) |
|
|
|
|
|
|
|
|
A/R >60 Days past due date |
|
|
(594 |
) |
|
|
|
|
|
|
|
|
A/R subject to Offset |
|
|
(297 |
) |
|
|
|
|
|
|
|
|
Customer Rebate Accrual |
|
|
(2,797 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Accounts Receivable |
|
$ |
50,576 |
|
|
|
90 |
% |
|
$ |
45,518 |
|
|
|
|
|
|
|
|
|
|
|
(c) Other/Miscellaneous Receivables: This asset class includes receivables from employees,
receivables from the Department of Energy and insurance policies for environmental remediation, and
a fully reserved note receivable related to a prior property sale. It is assumed that the employee
receivables will be offset by outstanding employee claims in a liquidation and the receivables for
environmental remediation will be offset by administrative claims for further clean-up. Thus,
there is no recovery percentage estimated for this asset class.
(d) Inventory: Tronoxs inventory includes raw materials (ore feedstock), work-in-process,
finished goods, and materials and supplies. Estimated recovery has been valued as if an orderly
liquidation had taken place. Inventory recovery values are based upon assumptions from the
Tronoxs management and generally range from 0% to 85% of book value and represent distressed sales
values. Raw materials are assumed to be sold at 50% to 85% of book value (most likely to strategic
competitors); recovery percentages are based upon the quality and grade of ore. Recoveries from
the sale of finished goods (net of reserves) and completed work-in-progress inventories are assumed
to range from 60% to 85%; recovery percentages are based upon quality and specification of product.
Materials and supplies represent chemicals and packaging used in the pigment and electrolytic
operations; recovery percentages are assumed to range from 0% to 75% and are based upon chemical or
container type.
4
|
|
|
|
|
|
|
|
|
|
|
|
|
($s in thousands) |
|
Trial Balance |
|
|
Estimated |
|
|
Estimated |
|
Assets |
|
1/31/2010 |
|
|
% Recovery |
|
|
$ Recovery |
|
Inventory Summary |
|
|
|
|
|
|
|
|
|
|
|
|
Raw Materials |
|
$ |
24,129 |
|
|
|
63 |
% |
|
$ |
15,290 |
|
Work-in-Process |
|
|
3,995 |
|
|
|
82 |
% |
|
|
3,276 |
|
Finished Goods |
|
|
63,958 |
|
|
|
82 |
% |
|
|
52,252 |
|
Materials and Supplies |
|
|
23,037 |
|
|
|
21 |
% |
|
|
4,933 |
|
|
|
|
|
|
|
|
|
|
|
Total Inventory |
|
$ |
115,119 |
|
|
|
66 |
% |
|
$ |
75,752 |
|
|
|
|
|
|
|
|
|
|
|
(e) Other Assets: The primary assets in this asset class include prepayments to vendors,
deposits held by professionals, insurance prepayments, deposits held by utility providers, deferred
tax assets, cash held in escrow, cash collateralized letters of credit, VAT tax refunds,
unamortized debt issuance costs and benefit restoration plan assets.
Prepayments, deposits, and cash collateralized letters of credit are all assumed to yield no
value in a liquidation scenario, as it is assumed that these assets would be offset against
respective claims or used to reduce costs during the Wind-Down. Deferred income taxes and
unamortized debt issuance costs are a GAAP accrual and are assumed to yield no value in
liquidation. The $35 million held in escrow as part of the proposed Plan would be fully
recoverable and used to settle the Replacement DIP Facility balance. Management estimates that 50%
of the VAT tax refund would be collectable as a result of some uncertainty concerning the amount of
funds awarded by the German government, foreign exchange rate fluctuations, and potential offsets
applied by Tronoxs German subsidiary. The benefit restoration plan assets are held in a Rabbi
type trust and are estimated to be fully recoverable. A summary of other assets is listed below.
|
|
|
|
|
|
|
|
|
|
|
|
|
($s in thousands) |
|
Trial Balance |
|
|
Estimated |
|
|
Estimated |
|
Assets |
|
1/31/2010 |
|
|
% Recovery |
|
|
$ Recovery |
|
Other Assets |
|
|
|
|
|
|
|
|
|
|
|
|
Prepayments/Deposits |
|
$ |
14,694 |
|
|
|
0 |
% |
|
$ |
|
|
Deferred Tax Asset |
|
|
1,163 |
|
|
|
0 |
% |
|
|
|
|
Settlement Escrow |
|
|
35,000 |
|
|
|
100 |
% |
|
|
35,000 |
|
Cash Collateralized LCs |
|
|
82,553 |
|
|
|
0 |
% |
|
|
|
|
VAT Tax Refund |
|
|
558 |
|
|
|
50 |
% |
|
|
279 |
|
Unamortized Debt Issuance Costs |
|
|
36,332 |
|
|
|
0 |
% |
|
|
|
|
BRP Assets |
|
|
1,067 |
|
|
|
100 |
% |
|
|
1,067 |
|
|
|
|
|
|
|
|
|
|
|
Total Other Assets |
|
$ |
171,368 |
|
|
|
21 |
% |
|
$ |
36,347 |
|
|
|
|
|
|
|
|
|
|
|
(f) Property, Plant and Equipment: Represents Tronoxs land, land improvements, buildings,
plant machinery and equipment, office furniture and office equipment. This asset class includes the
Hamilton, Savannah, Henderson and Oklahoma City facilities, as well as the Owned Sites.
The Hamilton facility is likely to have recoverable value in a Chapter 7 scenario. In the
liquidation scenario, it is assumed that the Hamilton facility would be brought to a cold idle by
the Chapter 7 trustee and any purchaser would then incur significant capital costs to bring the
plant back to steady state, including costs to re-commission the plant, working capital rebuild,
and recalibration to customer product quality specifications (the Liquidation Analysis assumes that
the recalibration process takes six months to complete). The following discounted cash flow model
was developed to estimate the recoverable value from the Hamilton facility given a Chapter 7
liquidation sale to a third party (a 50% risk factor is applied to the net present value
calculation to account for a Chapter 7 scenario as the cash flow and cost of capital assumptions
were based on going-concern conditions):
5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
($s in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hamilton Pigment & Electrolytic |
|
Yr 0 1 |
|
|
Yr 1 |
|
|
Yr 2 |
|
|
Yr 3 |
|
|
Yr 4 |
|
|
Terminal Value |
|
Net Sales |
|
$ |
284,648 |
|
|
$ |
570,455 |
|
|
$ |
576,785 |
|
|
$ |
581,603 |
|
|
$ |
584,511 |
|
|
$ |
584,511 |
|
COGS |
|
|
(209,378 |
) |
|
|
(436,632 |
) |
|
|
(443,399 |
) |
|
|
(446,943 |
) |
|
|
(458,116 |
) |
|
|
(458,116 |
) |
SGA (6% of sales) |
|
|
(34,000 |
) |
|
|
(34,227 |
) |
|
|
(34,607 |
) |
|
|
(34,896 |
) |
|
|
(35,071 |
) |
|
|
(35,071 |
) |
DD&A and Asset Write-off |
|
|
(32,110 |
) |
|
|
(33,118 |
) |
|
|
(33,351 |
) |
|
|
(33,971 |
) |
|
|
(34,820 |
) |
|
|
(18,000 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EBIT |
|
|
9,160 |
|
|
|
66,478 |
|
|
|
65,428 |
|
|
|
65,793 |
|
|
|
56,504 |
|
|
|
73,324 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EBIT (1-t) |
|
|
5,954 |
|
|
|
43,210 |
|
|
|
42,528 |
|
|
|
42,766 |
|
|
|
36,728 |
|
|
|
47,661 |
|
DD&A and Asset Write-off |
|
|
32,110 |
|
|
|
33,118 |
|
|
|
33,351 |
|
|
|
33,971 |
|
|
|
34,820 |
|
|
|
18,000 |
|
Change in WC |
|
|
(90,000 |
) |
|
|
(3,000 |
) |
|
|
180 |
|
|
|
50 |
|
|
|
|
|
|
|
|
|
Start-up costs |
|
|
(15,000 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capex |
|
|
(15,000 |
) |
|
|
(20,000 |
) |
|
|
(18,000 |
) |
|
|
(18,000 |
) |
|
|
(18,000 |
) |
|
|
(18,000 |
) |
FCFF |
|
|
(81,935 |
) |
|
|
53,329 |
|
|
|
58,059 |
|
|
|
58,787 |
|
|
|
53,548 |
|
|
|
47,661 |
|
Terminal Value2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
366,622 |
|
|
|
|
|
|
|
|
|
|
|
|
Net Annual Cash Flows |
|
$ |
(81,935 |
) |
|
$ |
53,329 |
|
|
$ |
58,059 |
|
|
$ |
58,787 |
|
|
$ |
420,170 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NPV2 |
|
|
273,599 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
50% Risk Factor Applied for Ch. 7
Scenario |
|
|
(136,800 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Estimated Recoverable Value in
Ch. 7 Liquidation |
|
$ |
136,800 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1 |
|
Assumes that sales volumes are limited to 50% of production capacity as the plant is brought back
online and recalibrated |
|
2 |
|
Assumes a 13% cost of capital |
The Liquidation Analysis also assumes the following regarding Tronoxs property, plant and
equipment:
|
|
The environmental liabilities at the Savannah facility, primarily associated with the
clean-up of waste disposal ponds, would offset any potential recoverable value from the
Savannah land and operating assets (no attempt was made to quantify Savannahs environmental
costs). |
|
|
|
The legacy environmental liabilities at the Henderson facility would offset any potential
recoverable value from the Henderson electrolytic assets; however, it was assumed that the
100% Tronox owned land surrounding the Henderson plant footprint could be sold for
approximately $5 million (this estimate takes into consideration the current depressed real
estate market in Nevada). |
|
|
|
The sale of the Oklahoma City headquarters land and building, and miscellaneous equipment
and furniture sales could recover up to $2.5 million. |
|
|
|
No attempt was made to value any of the Tronox Owned Sites subject to various environmental
claims (e.g., Mobile, Soda Springs, West Chicago, numerous service station locations, etc.),
as it was assumed that the environmental liabilities exceeded any recoverable value. |
6
|
|
|
|
|
|
|
|
|
|
|
|
|
($s in thousands) |
|
Trial Balance |
|
|
Estimated |
|
|
Estimated |
|
Assets |
|
1/31/2010 |
|
|
% Recovery |
|
|
$ Recovery |
|
Net Property Summary (by plant) |
|
|
|
|
|
|
|
|
|
|
|
|
Hamilton (Pigment & Electrolytic) |
|
$ |
143,013 |
|
|
|
96 |
% |
|
$ |
136,800 |
|
Savannah |
|
|
431 |
|
|
|
0 |
% |
|
|
|
|
Henderson |
|
|
10,062 |
|
|
|
50 |
% |
|
|
5,000 |
|
Corporate/Miscellaneous |
|
|
21,652 |
|
|
|
12 |
% |
|
|
2,500 |
|
|
|
|
|
|
|
|
|
|
|
Net Property, Plant & Equipment |
|
$ |
175,158 |
|
|
|
82 |
% |
|
$ |
144,300 |
|
|
|
|
|
|
|
|
|
|
|
Additional Recoveries from Equity Interests and Non-Debtor Foreign Subsidiaries
(g) Interest in Basic Management, Inc. (BMI): The Liquidation Analysis assumes that Tronoxs 31%
equity interest in BMI (i.e., Henderson land, water/power rights and distribution systems, etc.) is
liquidated through an expedited sale of the interest for $5 million (this estimate takes into
consideration the current depressed real estate market in Nevada and the environmental liabilities
and further remediation costs associated with BMIs owned property).
(h) Tronox Pigments Limited (TPL): The Liquidation Analysis assumes the orderly liquidation of
TPL (a non-debtor Bahamian entity that markets pigment for Tronoxs North American and Australian
operations). It is assumed that TPLs cash and accounts receivable would be offset by outstanding
accounts payable and accrued liabilities in a liquidation scenario. Included in these liabilities
are payables to Exxaro (Tronoxs 50% TiWest Joint Venture partner) for its 50% interest in the
TiWest Joint Venture pigment that is marketed through TPL (Exxaro has a security interest in TPLs
cash accounts up to the outstanding balance owed for pigment). As previously noted in the accounts
receivable section above, Tronox anticipates an increase in non-collectible receivables due to
supply and business interruption with customers that would be impacted by the Chapter 7
liquidation. Thus, only 85% of TPLs receivables are estimated to be collectable in the Chapter 7
liquidation scenario.
|
|
|
|
|
|
|
|
|
|
|
|
|
($s in thousands) |
|
Trial Balance |
|
|
Estimated |
|
|
Estimated |
|
Assets |
|
1/31/2010 |
|
|
% Recovery |
|
|
$ Recovery |
|
TPL Summary |
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash |
|
$ |
29,471 |
|
|
|
100 |
% |
|
$ |
29,471 |
|
Accounts Receivable |
|
|
74,836 |
|
|
|
85 |
% |
|
|
63,610 |
|
|
Accounts Payable |
|
|
(45,577 |
) |
|
|
100 |
% |
|
|
(45,577 |
) |
Accrued Liabilities |
|
|
(876 |
) |
|
|
100 |
% |
|
|
(876 |
) |
|
|
|
|
|
|
|
|
|
|
Total TPL |
|
$ |
57,854 |
|
|
|
81 |
% |
|
$ |
46,628 |
|
|
|
|
|
|
|
|
|
|
|
(i) Tronox Western Australia (TWA): As part of its recent Chapter 11 sale process, Tronox
received indications of interest for TWAs 50% interest in the TiWest Joint Venture in the $200
million range. These offers were conditioned upon a transfer of customer contracts and accounts
receivable that reside at TPL, a smooth operational and customer transition, continued research and
development support, and various other issues. Under a Chapter 7 liquidation scenario, none of
these conditions would be present, and thus this Liquidation Analysis assumes that approximately
$150 million would be recoverable from this asset (a 25% risk factor was applied to account for a
going-concern quick sale as the previous offers were based upon smooth operational and customer
transitions, along with the transfer of customer accounts receivable at TPL).
7
(j) Botlek: The Liquidation Analysis assumes no recovery from the going-concern sale of Botlek, as
projected EBITDAR is nominal and potential liabilities associated with the operations outweigh any
recover to equity (i.e., the debtors).
Liquidation Expenses and Claims
(k) Liquidation Expenses: The Liquidation Analysis assumes the Chapter 7 liquidation of
substantially all of Tronoxs assets over a 12 month period. During the first 60 days, it is
assumed that the Chapter 7 trustee would arrange for Tronox to discontinue all of its domestic
business operations other than the operations required to complete work-in-process inventory and
clean and safely secure all equipment. It is also assumed that the Chapter 7 trustee would arrange
for Tronox to focus all of its efforts to sell all assets in an orderly and expeditious manner.
It should be noted that the Liquidation Analysis only assumes a $35 million legacy
environmental spend to maintain the status quo for certain of the Owned Sites and Other Sites
during the Wind-Down (i.e., no significant remediation activities). No attempt has been made to
quantify the ultimate remediation costs or the priority of such costs associated with the Owned
Sites and Other Sites.
Additional liquidation expenses include third party warehouse leases required to store
finished products through the Wind-Down, monthly expenditures to maintain the corporate
headquarters through a sale, personnel to manage and execute the Wind-Down (e.g., accounting,
inventory marketing and receivable collection efforts), plant closure costs (cleaning and safety
costs to provide for proper cold-idled plant closures), utilities for the plants through a sale,
insurance renewals through the Wind-Down, 12 months of professional fees for legal, accounting, and
other professionals to assist the Chapter 7 trustee, and a $10 million contingency for all other
expenses that may arise. A summary of liquidation expenses is listed below.
|
|
|
|
|
|
|
|
|
|
|
($s in thousands) |
|
|
|
|
|
Liquidation |
|
|
Wind-Down Costs Summary: |
|
Monthly |
|
Period |
|
Comments |
Third Party Warehouse Leases |
|
$ |
600 |
|
|
$ |
3,600 |
|
|
Monthly lease expenses for 3rd party warehouse facilities over 6 months. |
|
OKC Tech Center Expenses |
|
|
330 |
|
|
|
1,000 |
|
|
Monthly
expenses to Trammel Crow for managing the Tech Center (e.g., facilities maintenance, janitorial, utilities, etc.), assumed to occupy for 3 months. |
|
AR Collection Expenses |
|
|
500 |
|
|
|
2,000 |
|
|
Payroll required over 4 month time period to collect accounts receivable. |
|
Inventory Liquidation and Plant
Closure Expenses |
|
|
2,500 |
|
|
|
10,000 |
|
|
Payroll and plant closure expenses over 4 months (Hamilton & Henderson). |
|
Utilities for Plants |
|
|
400 |
|
|
|
2,400 |
|
|
Utilities for plants over 6 months (Hamilton and Henderson). |
|
Insurance Policy Extensions |
|
|
N/A |
|
|
|
5,000 |
|
|
Property, casualty, general liability (and excess layers), workers comp, surety bonds, and broker fees. |
|
12 Months Environmental Spend |
|
|
2,917 |
|
|
|
35,000 |
|
|
Status quo estimate. |
|
Professional Fees |
|
|
1,250 |
|
|
|
15,000 |
|
|
Assumed 12 month Chapter 7. |
|
Contingency |
|
|
N/A |
|
|
|
10,000 |
|
|
|
|
|
|
|
|
Total Wind-Down Costs |
|
$ |
8,497 |
|
|
$ |
84,000 |
|
|
|
|
|
|
|
|
Liquidation expenses would also include Chapter 7 trustee fees of 3% of total assets available
for distribution, in the amount of $15 million.
(l) DIP Lenders Secured Claims: On December 23, 2009, Tronox entered into the Replacement DIP
Agreement and refinanced the Prepetition Facilities and the Original DIP Facility. The Replacement
DIP Facility lenders secured claims represent the DIP loan balance of $425 million and outstanding
accrued interest of approximately $3.4 million as of January 31, 2010. Based on calculated
recoveries from the Liquidation Analysis, it is assumed that the Replacement DIP Facility lenders
will receive 100% of their secured claims.
8
(m) Pre-Petition Secured Claims: Includes approximately $3.2 million in outstanding secured tax
claims (of which $2.9 million is related to Savannah property taxes currently under dispute -
for purposes of this Liquidation Analysis, the claim is assumed to be settled at 100% of face value
and secured) and approximately $1 million in claims related to shippers, warehousemen, and
mechanics that are assumed to have valid liens. Based on calculated recoveries from the
Liquidation Analysis, it is assumed that the secured tax and lien claimants will receive 100% of
their secured claims.
(n) Administrative Claims: Includes approximately $1.1 million in claims arising under section
503(b)(9) of the Bankruptcy Code, $1.2 million in pre-petition priority claims (including
current/former employee claims, tax claims, and third party environmental claims), and $64.5
million in post-petition accounts payable claims as of January 31, 2010. As previously noted, the
cessation of the business in liquidation will trigger certain administrative claims that would not
exist under the plan absent liquidation. A&M and Tronox did not attempt to estimate any further
post-petition administrative claims (other than post-petition accounts payable) because only
pro-rata funds are estimated to be available to satisfy such claimants (i.e., administrative claims
are impaired).
(o) |
|
Unsecured Claims: Includes general unsecured claims for: |
|
|
|
$23.4 million in pre-petition trade accounts payable claims; |
|
|
|
$18.5 million in pre-petition human resources claims (e.g., benefits restoration plan
claims and current/former employee contract claims); |
|
|
|
$370.4 million in outstanding principal and interest related to the Unsecured Notes; |
|
|
|
$4.9 billion in face value of governmental (Federal, State, and local) and tribal
environmental claims (all of these claims remain unliquidated in a Chapter 7 liquidation); |
|
|
|
$2 billion in face value of personal injury claims (including asbestos, benzene and
creosote exposure claims all of these claims remain unliquidated in a Chapter 7
liquidation); |
|
|
|
$654.3 million in face value of current/former employee pension claims (all of these claims
remain unliquidated in a Chapter 7 liquidation); and |
|
|
|
$426.4 million in Indirect Environmental Claims (a significant number of these claims
remain unliquidated in a Chapter 7 liquidation. |
|
|
|
Claims from the rejection of executory contracts or unexpired leases and other general
unsecured claims that may arise from the cessation of Tronoxs businesses have not been
estimated and these amounts may be substantial. Based on calculated recoveries from the
Liquidation Analysis, it is assumed that there would be no proceeds available to distribute to
any unsecured claims. |
9