Asarco looks to reject tax sharing agreement

By Caroline Salls

Pittsburgh, Feb. 2 - Asarco LLC requested court approval to reject its tax sharing agreement with Americas Mining Corp. and Asarco Inc., according to a Friday filing with the U.S. Bankruptcy Court for the Southern District of Texas.

According to the motion, the tax sharing agreement was entered into between Americas Mining and Asarco LLC predecessor Asarco Inc. in January 2004 to provide for the allocation, payment and accounting of tax attributes, including tax liabilities and losses, deferred intercompany gains and tax refunds.

Asarco said it believes Americas Mining restructured Asarco Inc. as a limited liability company and caused it to enter into the tax sharing agreement for the sole purpose of improving Americas Mining's tax position.

In addition, Asarco said it has filed a suit alleging that Americas Mining's sale of Asarco's 54% interest in Southern Peru Copper Corp. was a voidable fraudulent transaction.

The motion said the transaction created about $600 million of tax gain, but recognition of the gain was deferred for tax purposes because the transaction was among related parties.

Asarco said in the motion that the gain would have been triggered with a transfer of more than 20% of old Asarco's stock, and the Internal Revenue Service would look to Americas Mining first for payment related to the tax gain.

Asarco LLC said it is entitled to a $40.5 million tax refund related to overpayment of taxes in 1987, 1988 and 1989 and the carryback of old net operating losses.

Asarco agreed with the United States to escrow the refund until the United States' claim and alleged right of setoff can be resolved, but Americas Mining objected to the escrow, saying Asarco had no interest in the tax refund.

Asarco, a Tucson, Ariz., mining company, filed for bankruptcy on Aug. 9, 2005. Its Chapter 11 case number is 05-21207.

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