Asarco files revised plan based on new sale agreement, environmental settlement

By Caroline Salls

Pittsburgh, March 18 - Asarco LLC filed its third amended plan of reorganization and related disclosure statement with the U.S. Bankruptcy Court for the Southern District of Texas.

As previously reported, the hearing for confirmation of the company's second amended plan was postponed indefinitely in November after a previous asset purchase contract with Sterlite (USA) Inc. was terminated.

However, the company announced on March 6 that it had negotiated a new $1.7 billion asset purchase agreement with Sterlite.

The third amended plan is based on the new sale agreement, as well as global environmental settlements under which the company will allow $835.7 million in general unsecured claims and give $275.3 million in cash to federal and state governments to pay its share of environmental liability at 54 sites across the country.

According to the disclosure statement, a majority of the sale proceeds, together with distributable cash and subsequent distributions, will be used to pay creditors.

An asbestos trust will be established for the benefit of unsecured asbestos personal injury claimants.

In addition to cash and litigation trust interests, the asbestos trust will receive asbestos insurance recoveries and 100% of the interests in reorganized subsidiary debtor Covington Land Co.

Treatment of plan creditors will include:

• Holders of $423 million to $723 million in administrative claims, $4 million in priority tax claims, convenience claims and priority claims will recover 100% in cash;

• Holders of $28 million to $33 million in secured claims will either be paid in full in cash, plus interest, or have their claims reinstated;

• Holders of $2.1 billion to $2.4 billion in general unsecured claims will recover 60% to 75% in cash and litigation trust interests;

• Holders of demand claims and unsecured asbestos personal injury claims will recover 60% to 75% in cash and litigation trust interests, plus asbestos insurance recoveries and Covington interests; and

• Holders of $4 million to $15 million in late-filed claims, subordinated claims, interests in Asarco, interests in the asbestos subsidiary debtors and interests in other subsidiary debtors will receive no distribution.

In comparison, the previous plan called for holders of non-priority unsecured claims, except for unsecured asbestos personal injury claims and some environmental claims, to be paid in full, plus interest at the federal judgment rate, unsecured asbestos personal injury claim and residual environmental claim classes to receive $750 million each, as well as a $102 million supplemental distribution and holders of interests in Asarco to receive any remaining funds available after all other claims have been paid in full.

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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