Asarco creditors committee uncovers potential officer and director breach claims

By Caroline Salls

Pittsburgh, Aug. 6 - Asarco LLC's official committee of unsecured creditors is seeking court approval to file potential breach of fiduciary duties claims it has uncovered against some of the company's officers and directors, according to a Monday filing with the U.S. Bankruptcy Court for the Southern District of Texas.

According to the motion, following Grupo de Mexico SA de CV's leveraged buyout of Asarco, the officers and directors Grupo de Mexico appointed began selling Asarco's key assets to pay off acquisition debt.

"There was such a frenzy to liquidate Asarco's assets to fund its current operations and its crippling debt obligations that the directors and officers often sold vital assets at well below reasonably equivalent value and refused to authorize minimum amounts of funding in order to preserve the value of Asarco's assets and its long-term viability," the committee said in the motion.

The committee said three adversary proceedings have already been filed against the officers and directors in connection with the asset sales, but more alleged breach of fiduciary duties claims exist.

In addition, the committee said it has potential claims in connection with the monetization of Asarco's insurance policies for much less than the policies were worth, as well as claims for selling development properties with confirmed ore bodies for raw land prices.

The committee said the officers and directors also continually sold vital mining equipment that they knew would be difficult or impossible to replace.

"Throughout the course of Grupo Mexico's and [former Asarco parent Americas Mining Corp.'s] ownership, the directors and officers exhibited a complete disregard for the long-term viability of Asarco and its ability to satisfy the claims of its creditors," the committee said in the motion, adding that the officers and directors sought only to strip as much value as possible out of the company for the benefit of Grupo Mexico and AMC.

The committee said Asarco agrees with the committee's contentions that the potential claims exist against the officers and directors, but the company has chosen to allow the committee to act on the claims.

The committee said it must file the claims against the officers and directors by Aug. 9, two years following the company's bankruptcy filing, or the statute of limitations will run out on the breach allegations.

As a result, the committee has asked the court to schedule a hearing for no later than Aug. 8.

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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