A Different Take On Tronox – Not A Sign of the Times…
I have nothing but the upmost respect for Darren Currin, who writes the square foot blog. (UPDATE: AS OF WEDNESDAY THIS POST ON HAS DISAPPEARED). But I’m not so sure he’s nailed things down with Tronox.
Tronox, first of all, is in chemicals, not energy, and is the world’s third-largest producer of whitening pigment titanium dioxide. And while the economic downturn hasn’t helped Tronox, it’s role in the company’s bankruptcy is more likely due to a drop in construction and manufacturing, not in energy prices.
In the story today by Oklahoman business writer Don Mecoy, it’s clear the company believes it’s problems are due to a staggering amount of liabilities that Kerr-McGee dumped into Tronox when it spun off the former chemical division. Kerr-McGee then was taken over by Anadarko Petroleum. Interestingly, it appears as if Tronox, through the bankruptcy, is trying to place that debt back with Anadarko.
If the company succeeds, it’s not so ridiculous to allow for the possibility that the company can not only survive and reorganize, but once again thrive downtown.
Darren’s overall take on the downtown office market is correct – the wonderful drops in vacancy the past few years could be reversed if the energy sector craters. He mentions “many” energy firms have already closed downtown – that’s an outflux I’m not aware of and he’s not naming any names. His take, I guess, is that the glass is half empty and it’s getting emptier. My take is the glass is half full and the verdict is still out on what’s next.
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Comments
I wonder why Tronox decided to move into one of the most expensive properties downtown? Not that it has terribly much to do with their issues now, compared to the hundreds of millions of ill will that KMG and Anadarko left them.
I hear whispers that one major energy company might not survive this economic downturn. If natural gas doesn’t go back up sometime soon – to at least $8 – we may witness some difficult times in OKC. No way to know for sure, but I guarantee that with some of the things that have happened over the last few months, we would not even be in the top 10 of the “most recession proof” list.
I am a glass half full guy too, but my hand is shaking so bad it is really difficult to tell how much water is still in the glass.
Check the temps in the Midwest and NE tonight? Natural Gas usage will more than likely remain strong and bounce back.
You must not be from here. Remember the 80’s – Penn Square Bank? the oil bust? OKC has known difficult times and has persevered. If hard times come again, we’ll do the same.
KM stuck Tronox with everything they could when they split. KM had environmental obligations that go back to the fifties, and hundreds of pending cases. Titanium Dioxide has been selling relatively well, and Tronox could make a nice profit if it wasn’t getting slammed with litigation.
There’s a very strong argument that KM acted improperly when it spun Tronox off into a seperate entity. KM retained all the oil and gas properties (and all attendant liabilities), while Tronox got all the old chemical and nuclear properties (and all attendant liabilities). The thing is, most of those properties are shut down. KM hasn’t had a nuclear division since the 80s, and most of their chemical plants have been sold off, so the only thing remaining was the Titanium Dioxide. Tronox got that and hundreds of millions of dollars of environmental liabilities that they had no way to pay for. By creating that company without the capital to meet their liabilities, KM acted improperly. When Anadarko bought KM, that responsibility became theirs.
The biggest case in Tronox’s short history is going to be the one against Anadarko that will be coming up soon.