Asarco requests court approval of claims settlement with bondholders

By Jennifer Lanning Drey

Portland, Ore., Aug. 25 - Asarco LLC requested court approval of a settlement resolving a series of bondholder claims against the company, according to a Monday filing with the U.S. Bankruptcy Court for the Southern District of Texas.

Harbinger Capital Partners Master Fund I Ltd. and Citigroup Global Markets, Inc. are the holders of a majority of the bonds included under the settlement, according to the filing.

Wilmington Trust Co., Wells Fargo Bank, NA and Deutsche Bank Trust Co. Americas are each indenture trustees under one or more indentures governing the bonds.

On behalf of the bondholders, the indenture trustees filed more than 200 proofs of claim, asserting damages for principal, pre-bankruptcy accrued interest, post-petition interest, interest on pre-bankruptcy and post-petition interest, prepayment "no-call" damages and prepayment premiums in connection with the bonds.

Asarco said it is seeking approval of the settlement to avoid the cost and uncertainty of further litigation of the claims.

The settlement applies to the company's 8½% CSFB corporate debentures due 2025, CSFB JPMorgan 7 7/8% debentures due 2013, Lewis and Clark County Montana bonds due 2033, Nueces River 2027 bonds, Lewis and Clark County Montana bonds due 2027, Gila County installment bonds due 2027 and Nueces River bonds due 2018.

Settlement terms

Under the proposed settlement:

• The bondholders will receive a $447.6 million claim for principal amounts and unpaid pre-bankruptcy interest and a $162 million claim for post-petition interest;

• Holders of the company's Lewis and Clark County Montana bonds due 2033, Nueces River 2027 bonds, Lewis and Clark County Montana bonds due 2027, Gila County installment bonds due 2027 and Nueces River bonds due 2018 will be allowed claims in the amount specified under the indenture governing such bonds for prepayment premiums; provided, that such claims will only be payable after all general unsecured claims for post-petition interest have been paid in full;

• Holders of the company's CSFB JPMorgan 7 7/8% debentures due 2013 will be allowed a $5 million claim, calculated as 5% of the original principal amount, for alleged prepayment damages;

• Holders of the company's CSFB 8½% debentures due 2025 will be allowed a $15 million claim, calculated as 10% of the original principal amount, for alleged prepayment damages. The claims will be payable after general unsecured claims for post-petition interest have been paid in full.

• In recognition of the contribution of the Harbinger plan, Asarco will support an administrative expense claim by the majority bondholders for attorneys' fees and expenses incurred in connection with the plan, up to a maximum of $6 million; and

• The indenture trustee will be allowed an administrative expense claim for fees and expenses incurred under the bonds of approximately $5.2 million.

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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