Asarco files plan of reorganization to distributes asset sale proceeds

By Caroline Salls

Pittsburgh, July 31 - Asarco LLC filed a plan of reorganization and related disclosure statement Thursday in the U.S. Bankruptcy Court for the Southern District of Texas that implements the previously-announced sale of Asarco's operating assets to Sterlite (USA), Inc., a subsidiary of Sterlite Industries (India) Ltd. and Vendanta Resources plc.

According to the disclosure statement, the majority of the proceeds from the sale, together with distributable cash and subsequent distributions, will be paid to creditors under the plan.

The plan also contains the framework of agreements that Asarco is formulating with its principal creditors, including the U.S. government, various states, its unsecured creditors' committee, a committee of asbestos creditors and a representative of potential future asbestos claimants, according to a company news release.

"This plan will allow the company to emerge from bankruptcy in a manner that is fair to all constituencies and puts Asarco's assets under ownership of a world-class global mining company," Asarco president and chief executive officer Joseph F. Lapinsky said in the release.

"While we still need court approval of our plan, we believe the end of this complex bankruptcy finally is in sight."

An asbestos trust will be established under the plan for the benefit of holders of unsecured asbestos personal injury claims and demands.

The trust and holders of residual environmental claims will each receive 50% of the interests in a litigation trust, according to the disclosure statement, and these creditors have agreed that litigation proceeds can first be paid to holders of non-priority unsecured claims until their claims are paid in full.

The next $100 million of the litigation proceeds will be paid to the asbestos trust, with half of the proceeds to be paid to trust creditors and half to holders of residual environmental claims.

Plan creditor treatment

Under the plan:

• Holders of administrative priority claims, priority tax claims and priority claims will be paid in full;

• Secured claims will either be paid in full or reinstated, at the company's option;

• Bondholder claims will either be reinstated will be treated the same as general unsecured claims, at Asarco's option;

• Non-priority unsecured claims, except for unsecured asbestos personal injury claims and some environmental claims, will be paid in full, plus interest at the federal judgment rate;

• Unsecured asbestos personal injury claim and residual environmental claim classes will receive $750 million each, as well as a $102 million supplemental distribution;

• Holders of interests in Asarco will receive any remaining funds available after all other claims have been paid in full; and

• Holders of interests in the Asarco subsidiary debtors or other subsidiary debtors will receive no distribution under the plan.

The disclosure statement approval hearing is scheduled for Sept. 23, and the plan confirmation hearing will be held Nov. 17.

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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