Asarco parent gives creditors recovery options via plan supplement

By Caroline Salls

Pittsburgh, July 27 - Asarco LLC parent Americas Mining Corp. has filed a supplement to its plan of reorganization for Asarco's bankruptcy case that is designed to provide Asarco's creditors with enhanced flexibility and superior value, according to a news release.

The parent company said the supplement includes new terms that relate to a lawsuit pending in Brownsville, Texas, and offers more recovery choices to Asarco's creditors.

Americas Mining said it is convinced that a judgment made against it in the lawsuit will be reversed on appeal.

However, while some creditors want a higher immediate cash recovery that does not depend on the outcome of the lawsuit, the company said others believe that the merits of a judgment against Americas Mining would be enough to satisfy 100% of their claims plus interest.

For that reason, Americas Mining said the plan supplement offers creditors the option of choosing between its current plan or the same terms and conditions available under Asarco's plan with two "significant improvements."

The parent company said its current plan calls for payment in full of the principal amount of the claims and a projected 97% cash recovery at closing, while Asarco's plan preserves creditors' litigation rights in connection with the Brownsville proceedings.

According to the release, the improvements being offered under the Asarco plan option include also giving creditors litigation rights against Sterlite for its breach of a $2.6 billion cash contract to buy Asarco and offering additional cash that would be generated by converting a nine-year non-interest-bearing promissory note included in Asarco's plan to its present cash value.

Creditor options

Specifically, Americas Mining said Asarco's creditors will have three options under the parent company's plan, including:

• The recovery slated under the original Americas Mining plan, which would mean a 100% recovery on the value of the claims, 97% in the form of $3.15 billion in cash and cash equivalents payments as well as the remaining 3% from proceeds from the Sterlite lawsuits and other proceedings;

• The recovery proposed under Asarco's plan with improvements, which would consist of a $1.1 billion payment on the plan effective date, plus a $770 million nine-year promissory note guaranteed by Americas Mining with no interest. Creditors would also receive proceeds from the Brownsville lawsuit and litigation rights against Sterlite, for a total of $2.81 billion; and

• Asarco's plan in cash, which offers the same terms as the second option but gives creditors the option to convert their back-loaded nine-year recovery under the promissory note through a cash exchange.

The parent company said the present value of the promissory note is $309 million.

In addition, Americas Mining said it has made $125 million in cash immediately forfeitable through the sale of stock in a good faith escrow if the parent company withdraws or adversely amends its plan and $1.3 billion in cash fully forfeitable if it does not meet the strict conditions of the plan after confirmation.

Americas Mining parent Grupo Mexico SA de CV has also signed an agreement with Americas Mining to provide any cash necessary to fund its plan.

Meanwhile, Americas Mining said Sterlite has only $125 million at stake to support its plan, and its corporate parent is offering no guaranty of its copper note and no support for the cash requirements under Asarco's plan.

Lawsuit contingency

Americas Mining said it intends to follow through with its appeal of the Brownsville lawsuit until there is a final judgment in order to determine whether the parent company is liable.

If the decision is unfavorable to Americas Mining, it will offer creditors up to 100% of the value of the claims plus post-bankruptcy interest, amounting to an estimated $428 million payment.

As previously reported, Asarco was awarded damages valued at $6.04 billion in connection with district judge Andrew Hanen's August 2008 ruling that Americas Mining fraudulently transferred Asarco's 54.18% interest in Southern Peru Copper Corp. to Americas Mining.

As restitution, the judge ordered Americas Mining to return to Asarco 260.09 million shares of stock in Southern Peru - renamed Southern Copper Corp. - and pay $1.35 billion in monetary damages.

As a result, Asarco will own a 30% equity interest in Southern Copper.

Asarco, a Tucson mining company, filed for bankruptcy on Aug. 9, 2005 in the U.S. Bankruptcy Court for the Southern District of Texas. Its Chapter 11 case number is 05-21207.

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