Asarco parent files competing reorganization plan that eliminates proposed asset sale

By Caroline Salls

Pittsburgh, Aug. 27 - Asarco LLC's parent company, Asarco Inc., and co-plan sponsor Americas Mining Corp. filed a competing plan of reorganization and related disclosure statement for Asarco LLC's bankruptcy case Tuesday with the U.S. Bankruptcy Court for the Southern District of Texas.

As previously reported, Asarco LLC filed its own plan of reorganization on July 31. Asarco Inc. and Americas Mining were granted court approval to file a competing plan on July 2.

Under the parent company's plan, Asarco Inc. will retain its equity interest in Asarco LLC, and Asarco will continue its operations as a going concern.

Asarco LLC's plan distributes the proceeds of a proposed sale of the company's assets.

Meanwhile, Asarco Inc.'s plan calls for the parent company and Americas Mining to fund the company's reorganization with a $2.7 billion contribution, plus a $440 million guarantee by Americas Mining. The contribution and guarantee will be used in conjunction with roughly $1 billion of Asarco LLC's cash on hand and other assets to fund plan distributions.

Asarco and Americas Mining said the total consideration to be provided under their plan is $6.73 billion, which exceeds the $5.7 billion high value of claims that Asarco LLC estimates will ultimately be allowed.

Also under Asarco Inc.'s plan, the holders of asbestos personal injury claims can elect to resolve their claims through the establishment of a Section 524(g) trust.

If the section 524(g) trust is not established, an asbestos claims trust will be established to pay the asbestos personal injury claims, which will remain liabilities of the reorganized company.

If the court rules that the primary asbestos treatment does not leave holders of the asbestos personal injury claims unimpaired, the claims will be reinstated and paid from a disputed claims reserve when they are ultimately allowed.

The parent company said it believes that Asarco LLC's plan is unconfirmable because it calls for payment of more than 100% of the allowable amounts of derivative asbestos claims and residual environmental claims.

In addition, Asarco Inc. said it and Americas Mining have offered to provide more consideration to the Asarco estate than would be realized under the company's proposed asset sale.

Plan creditor treatment

Treatment of creditors will include:

• Holders of administrative claims, priority claims, priority tax claims, toxic tort claims, previously settled environmental claims, miscellaneous environmental claims, late filed claims, subordinated claims and trade and general unsecured claims will recover 100% in cash;

• Holders of secured claims will recover 100% either in cash, through the return of the collateral securing the claim or through reinstatement of the claim;

• Bondholders will recover 100% either through payment in full or reinstatement of the claim;

• Holders of asbestos personal injury claims will recover 100% under one of three options. If at least 75% of these creditors elect the section 524(g) treatment, they will be paid in full through that trust. If at least 75% do not elect the 524(g) treatment and the court establishes the allowed amount of claims in this class, claimants will be paid from an asbestos personal injury trust. If the court does not deem the creditors unimpaired, the claims will be reinstated to be paid from a disputed claims reserve following allowance;

• Holders of reinstated environmental claims will have their claims reinstated to be assumed and paid by the applicable reorganized debtor; and

• Holders of the interests in Asarco and the other reorganizing debtors will retain their interests, which will be converted into interests in the applicable debtor on the plan effective date.

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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