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Tronox Trust Ends Arguments in $14 Billion Anadarko Case

Tronox Inc. (TROX) creditors concluded their case for recovering at least $14 billion in damages from Anadarko Petroleum Corp. (APC)’s Kerr-McGee unit over a spinoff they say drove Tronox into bankruptcy.

David Zott, an attorney for a litigation trust, delivered a closing argument today in a trial started in May in U.S. Bankruptcy Court in Manhattan over the unit’s sale. The trust is charged with pursuing claims stemming from the deal on behalf of Tronox creditors.

Tronox, previously under bankruptcy protection, alleges that Anadarko’s Kerr-McGee unit made the company insolvent by stripping away valuable oil and natural-gas assets and saddling it with legacy costs for environmental remediation.

Kerr-McGee spun off part of its business as Tronox before selling itself to Anadarko for $18.4 billion in 2006.

Zott told U.S. Bankruptcy Judge Allan Gropper today that Kerr-McGee knew that environmental liabilities were an obstacle to a merger.

“They knew they were big,” he said. “They knew they were an impediment, and they wanted to get a clean break.”

The trial, conducted in increments, began with the trust seeking damages of at least $14 billion, according to court papers.

In January, Gropper ruled that damages would not be capped in the case and said they could be as high as $15.5 billion, under one calculation method. Gropper will decide whether his decision in the case is binding.

‘Sensational’ Allegations

Kerr-McGee called the allegations in the suit “sensational” in a brief filed Nov. 21. Kerr-McGee believed Tronox was solvent, worth more than $1 billion and “poised to succeed,” according to the filing.

“It ultimately failed only because of an unprecedented adverse business climate,” the company said. “And when those business headwinds came, Tronox was open and candid with investors about the challenges it faced -- and never once mentioned the legacy liabilities as among them.”

Tronox, the world’s third-largest producer of the white pigment titanium dioxide, filed for bankruptcy in January 2009. It implemented a confirmed reorganization plan in February 2011 that created the trust to prosecute the suit, which alleges fraudulent transfer claims.

Anadarko, based in The Woodlands, Texas, was a defendant in the suit until May when Gropper threw out the trust’s claims against the parent. The judge said that Tronox’s fraudulent transfer theories only worked against Kerr-McGee, Anadarko’s wholly-owned subsidiary.

The lawsuit is Tronox Inc. v. Anadarko Petroleum Corp. (In re Tronox Inc.), 09-1198, U.S. Bankruptcy Court, Southern District New York (Manhattan). The Chapter 11 case was In re Tronox Inc., 09-10156, in the same court.

To contact the reporters on this story: David McLaughlin in New York at dmclaughlin9@bloomberg.net Christie Smythe in New York at csmythe1@bloomberg.net

To contact the editor responsible for this story: John Pickering at jpickering@bloomberg.net

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