Asarco parents' plan confirmed by district court; United Steelworkers union 'disappointed'

By Caroline Salls

Pittsburgh, Nov. 16 - Asarco LLC's parent companies' plan of reorganization was confirmed Friday by U.S. District Court judge Andrew Hanen, according to a news release.

As previously reported, the U.S. Bankruptcy Court for the Southern District of Texas recommended confirmation of the plan submitted by parent companies Asarco Inc. and Americas Mining Corp. for Asarco LLC's bankruptcy case in early September.

In his decision, Hanen said "This court agrees that the parent's plan is both feasible and confirmable. It offers the creditors full payment and is more likely to close than the debtor's plan."

In addition, the district court issued a channeling injunction that permanently resolves and enjoins all present and future asbestos-related claims against Asarco LLC, its subsidiaries and non-debtor affiliates.

The reorganization plan also resolves all of Asarco's historical environmental and toxic tort liabilities and satisfies in full all of the company's outstanding bonds.

Under the parents' plan, the parent companies will contribute $2.205 billion in cash, plus a $280 million promissory note to be contributed to an asbestos trust, which is fully secured by a lien on the assets of the reorganized company, 51% of the equity interests in the reorganized company and further guaranteed by the parents' corporate owner, Grupo Mexico.

The parents' plan also includes a $200 million working capital facility to fund the reorganized company's operations.

According to the release, the plan is expected to take effect this year.

The United Steelworkers took issue with the district court's ruling.

"The USW is certainly disappointed with the district court's decision," said Robert LaVenture, USW District 12 and union chairman of bargaining, said in a union news release.

"We are reviewing the 135-page decision, as well as our legal and other options.

"It appears that the district court committed the same error as the bankruptcy court by disregarding contractual provisions that protect employee rights and benefits in the event of a sale or other change in control."

The union said it supports a competing plan of reorganization submitted by Asarco LLC and financed by Sterlite USA.

The union and Sterlite have already bargained a new labor agreement in connection with Sterlite's reorganization plan, according to the union news release. The USW said it bargained with Asarco Inc.'s controlling entity Grupo Mexico earlier this year in an effort to reach a new agreement, but the parties have not met since July 24, when the USW submitted a comprehensive proposal.

"Grupo Mexico never offered a counter to our July 24 proposal and instead, mainly chose to communicate its bargaining position through court filings and the statements of its bankruptcy lawyers," the USW said in its news release.

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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