Asarco Bankruptcy

Brief

In 1999, a conglomerate 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, the conglomerate transferred ASARCO’s controlling interest in another subsidiary to a different of the conglomerate’s subsidiaries.  ASARCO eventually filed for bankruptcy on August 9, 2005.  In 2007, ASARCO filed suit against the subsidiary where the conglomerate had transferred the stock seeking to avoid the fraudulent transfer of the firm’s stock to the subsidiary 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.  Our experts 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 the subsidiary where ASARCO held the controlling stock and the consideration paid for this stock to assess reasonably equivalent value.  We also conducted a valuation of the subsidiary where ASARCO held the controlling stock 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 favour of ASARCO and ordered the subsidiary where the stock was transferred to be returned to the original subsidiary and to ASARCO, worth approximately $4.68 billion at the time.  The Court also awarded damages of $1.35 billion reflecting dividends received by the subsidiary where the stock was transferred, prejudgement interest, and an offset for the amount the subsidiary originally paid to acquire the stock.