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Tronox Will Raise $450 Million through Senior Notes

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Tronox will issue senior notes

On September 14, 2017, Tronox (TROX) announced that it will raise $450 million through senior notes. The offer was made to qualified institutional buyers at par and carries a coupon rate of 5.8%. The interest will be paid semi-annually. The notes will mature in 2025. The offer is expected to close on September 22, 2017—subject to closing conditions. The offer was made through Tronox’s subsidiary—Tronox Finance.

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The proceeds from the notes, along with additional borrowing from the new credit facility, will be used to redeem the outstanding amount of $900 million senior notes due in 2020. They carry a coupon rate or 6.38%. As a result, we can expect Tronox’s interest expense to fall. At the end of 2Q17, Tronox had an outstanding debt of ~$3.0 billion including long-term and short-term debt. Tronox’s interest expense was $92 million for the same period.

Tronox’s stock performance

Tronox continued its upward journey. The stock rose 2.40% and closed at $22.96. The stock traded 29.50% above the 100-day moving average price of $17.73, which indicates the upward trend in the stock. However, investors need to be cautious. The 14-day relative strength index of 72 indicates that the stock temporarily moved into an overbought situation. Tronox is also trading 20.80% above the target price recommended by analysts’ consensus. On a year-to-date basis, the stock has returned 122.70%. Tronox’s peers FMC (FMC), Albemarle (ALB), and Chemocurs (CC) have returned 58.40%, 47.90%, and 128%, respectively.

Investors looking to invest indirectly in Tronox can invest in the Rare Earth/Strategic Metals ETF (REMX). REMX has invested 6.0% of its portfolio in Tronox as of September 15, 2017.

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