ASARCO BANKRUPTCY

Brief

In 1999, Grupo Mexico acquired ASARCO in a leveraged buyout, causing ASARCO to assume a large amount of debt.  In early 2003, a period in which ASARCO struggled financially, Grupo Mexico transferred ASARCO’s controlling interest in Southern Peru Copper Corporation (“SPCC”) to another Grupo Mexico subsidiary, AMC.  ASARCO eventually filed for bankruptcy on August 9, 2005.  In 2007, ASARCO filed suit against AMC seeking to avoid the fraudulent transfer of SPCC stock to AMC either through a recovery of the actual stock transferred or the approximate value, including dividends.

What we did

HKA was retained by counsel for ASARCO to provide analyses and expert opinions related to the alleged fraudulent conveyance.  HKA assessed ASARCO’s financial health over a ten-year period and conducted detailed tests for solvency at several points in time.  HKA conducted a valuation of SPCC and the consideration paid for SPCC to assess reasonably equivalent value.  HKA also conducted a valuation of SPCC at the time of its report to assess potential damages.

Outcomes

The matter went to trial in the United States District Court for the District of Northern Texas.  The Court ruled in favor of ASARCO and ordered that AMC return the SPCC stock to ASARCO, worth approximately $4.68 billion at the time.  The Court also awarded damages of $1.35 billion reflecting dividends received by AMC, prejudgement interest, and an offset for the amount AMC originally paid to acquire SPCC.