================================================================= ASARCO BANKRUPTCY NEWS Issue Number 1* ----------------------------------------------------------------- Copyright 2005 (ISSN XXXX-XXXX) August 11, 2005 ----------------------------------------------------------------- Bankruptcy Creditors' Service, Inc. 215-945-7000 FAX 215-945-7001 ----------------------------------------------------------------- ASARCO BANKRUPTCY NEWS is published by Bankruptcy Creditors' Service, Inc., 572 Fernwood Lane, Fairless Hills, Pennsylvania 19030, on an ad hoc basis (generally every 10 to 20 days) as significant activity occurs in the Debtor's case. New issues are prepared by Juan Adolfo T. Amor, Christopher G. Patalinghug, Frauline S. Abangan and Peter A. Chapman, Editors. Subscription rate is US$45 per issue. Any re-mailing of ASARCO BANKRUPTCY NEWS is prohibited. ================================================================= IN THIS ISSUE ------------- [00000] HOW TO SUBSCRIBE TO ASARCO BANKRUPTCY NEWS [00001] BACKGROUND & DESCRIPTION OF ASARCO & ITS AFFILIATES [00002] ASARCO'S DEBT STRUCTURE & LIABILITIES [00003] COMPANY'S PRESS RELEASE ANNOUNCING CHAPTER 11 FILING [00004] ASARCO LLC CHAPTER 11 DATABASE [00005] LIST OF ASARCO'S 20 LARGEST UNSECURED CREDITORS [00006] LIST OF SUBSIDIARIES' 30 LARGEST UNSECURED CREDITORS [00007] BANKRUPTCY FILING CUES S&P TO LOWER ASARCO RATING FURTHER [00008] ASARCO'S MOTION FOR AUTHORITY TO USE CASH COLLATERAL KEY DATE CALENDAR ----------------- 04/11/05 Subsidiaries' Voluntary Petition Date 05/06/05 Future Claimants' Representative Appointed 05/31/05 Subsidiaries Schedules & Statements Filed 06/10/05 Expiration of Subsidiaries' Lease Decision Period 07/27/05 U.S. Trustee Appoints Asbestos Claimants' Committee 08/09/05 ASARCO's Voluntary Petition Date 08/24/05 Deadline for ASARCO's Schedules of Assets & Liabilities 08/24/05 Deadline for ASARCO's Statement of Financial Affairs 08/24/05 Deadline for ASARCO's Lists of Leases and Contracts 08/29/05 Deadline for ASARCO to provide Utilities Deposits 10/09/05 ASARCO's Deadline to make Lease Disposition Decisions 11/07/05 ASARCO's Deadline to remove actions under FRBP 9027 11/08/05 Expiration of Subsidiaries' Exclusive Plan Proposal Time 12/07/05 Expiration of ASARCO's Exclusive Plan Proposal Period 02/05/06 Expiration of ASARCO's Exclusive Solicitation Period 04/11/07 Deadline for Subsidiaries to Commence Avoidance Actions 08/09/07 Deadline for ASARCO to Commence Avoidance Actions Organizational Meeting to form ASARCO Committees First Meeting of ASARCO Creditors under 11 USC Sec. 341 Bar Date for filing Proofs of Claim against ASARCO ----------------------------------------------------------------- [00000] HOW TO SUBSCRIBE TO ASARCO BANKRUPTCY NEWS ----------------------------------------------------------------- ASARCO BANKRUPTCY NEWS is distributed to paying subscribers by electronic mail. New issues are published on an ad hoc basis as significant activity occurs (generally every 10 to 20 days) in the Debtor's chapter 11 proceeding. The subscription rate is US$45 per issue. Newsletters are delivered via e-mail; invoices, transmitted following publication of each newsletter issue, arrive by fax. Re-mailing of ASARCO BANKRUPTCY NEWS is prohibited. Distribution to multiple individuals at the same firm is provided at no additional charge; folks outside of your firm should set-up and pay for their own subscriptions. Subscriptions may be canceled at any time without further obligation. To continue receiving ASARCO BANKRUPTCY NEWS, please complete the form below and return it by fax or e-mail to: Bankruptcy Creditors' Service, Inc. 572 Fernwood Lane Fairless Hills, PA 19030 Telephone (215) 945-7000 Fax (215) 945-7001 E-mail: peter@bankrupt.com We have published similar newsletters tracking billion-dollar insolvency proceedings since 1990, starting with Federated Department Stores. Currently, we provide similar coverage about the restructuring proceedings involving Solutia, W.R. Grace & Co., Owens Corning, Armstrong World Industries, USG Corporation, Anchor Glass Container Corp., Allied Holdings, Inc., Collins & Aikman Corporation, Meridian Automotive Systems, Inc., Tower Automotive Inc., Federal-Mogul Corporation, Saint Vincent Catholic Medical Centers, Integrated Health Services, Mariner Post-Acute & Mariner Health, VARIG, S.A., ATA Airlines, US Airways, UAL Corporation and United Airlines, Air Canada, TECO Energy Inc.'s Panda Gila River and Union Power subsidiaries, Winn-Dixie Store, Inc., Kmart Corp., Ames Department Stores, Spiegel, Inc. (and its Eddie Bauer and Newport News subsidiaries), Yukos Oil Company, Mirant Corp., PG&E National Energy Group, Pacific Gas and Electric Company, Enron Corp., NRG Energy, ANC Rental, the Roman Catholic Church in the United States, Trump Hotels & Casino Resorts, Inc., Interstate Bakeries Corporation, Pegasus Satellite, RCN Corporation, Adelphia Communications and Adelphia Business Solutions, WorldCom, Global Crossing and Asia Global Crossing, Winstar, 360networks, Safety- Kleen, Laidlaw, Parmalat Finanziaria, S.p.A., Vlasic Foods, Bethlehem Steel, Kaiser Aluminum, WestPoint Stevens, Pillowtex, Burlington Industries, Hayes Lemmerz, Exide Technologies, National Century Financial Enterprises, American Business Financial Services, Inc., Reliance Group Holdings & Reliance Financial, The FINOVA Group, Inc., and Loewen Group. ================================================================= [ ] YES! Please enter my personal subscription to ASARCO BANKRUPTCY NEWS at US$45 per issue until I tell you to cancel my subscription. Name: ---------------------------------------------- Firm: ---------------------------------------------- Address: ---------------------------------------------- ---------------------------------------------- Phone: ---------------------------------------------- Fax: ---------------------------------------------- E-Mail: ---------------------------------------------- (Distribution to multiple professionals at the same firm is provided at no additional cost.) ASARCO BANKRUPTCY NEWS is distributed to paying subscribers by electronic mail. New issues are published on an ad hoc basis as significant activity occurs (generally every 10 to 20 days) in the Debtor's chapter 11 proceeding. The subscription rate is US$45 per issue. Newsletters are delivered via e-mail; invoices, transmitted following publication of each newsletter issue, arrive by fax. Re-mailing of ASARCO BANKRUPTCY NEWS is prohibited. Distribution to multiple individuals at the same firm is provided at no additional charge; folks outside of your firm should set-up and pay for their own subscriptions. Subscriptions may be canceled at any time without further obligation. ----------------------------------------------------------------- [00001] BACKGROUND & DESCRIPTION OF ASARCO & ITS AFFILIATES ----------------------------------------------------------------- ASARCO, LLC 1150 N. 7th Avenue Tucson, Arizona 85705 Telephone (520) 798-7500 Fax (520) 798-7780 Address: http://www.ASARCO.com/ ASARCO is an integrated copper mining, smelting and refining company. ASARCO, LLC, is 100% owned by Asarco, Incorporated, a Delaware corporation. Grupo Mexico S.A. de C.V. is ASARCO's ultimate parent. Originally organized in 1899 as American Smelting and Refining Company, ASARCO has operated for over 105 years -- first as a holding company for diverse smelting, refining, and mining operations throughout the United States and now as a Tucson-based integrated copper-mining, smelting, and refining company. ASARCO's active operations consist of: -- three open-pit copper mines in Arizona: 2004 Copper Name Location Production ---- -------- ----------- Mission Mine Pima County 54,000,000 pounds Ray Mine Pinal County 241,200,000 pounds Silver Bell Mine Pima County 47,500,000 pounds -- a copper refinery and precious metals plant in Amarillo, Texas, -- a copper smelter in Hayden, Arizona, and -- a specialty-chemicals plant in Globe, Colorado. The Mission Mine is leased by ASARCO from the Bureau of Indian Affairs under a long-term lease, and the Silver Bell Mine is owned by Silver Bell LLC, which is 75% owned by ASARCO and 25% owned by Mitsui & Co. (U.S.A.), Inc. With more than 2,000 employees in Arizona and Texas, ASARCO is one of the leading producers of copper and one of the largest nonferrous metal producers in the United States. The United States Department of the Interior reports that U.S. copper mine production in 2004 was 1.16 million tons, valued at about $3.4 billion. That implies that ASARCO's 171,350 tons of mined copper account for 15% of U.S. production. The Dept. of the Interior reports that copper recovered at 14 of 22 mines operating in the United States accounts for more than 99% of U.S. production. The Arizona Department of Mines and Mineral Resources reports that ASARCO accounted for 20% of copper production in the State of Arizona in 2004. Phelps Dodge accounted for 75% of Arizona's 2004 copper production, the ADMMR reports. The Arizona Mining Association identifies BHP Copper Inc. as the third major Arizona copper mining company. A map pirated from the ADMMR with the locations of ASARCO's Arizona mines highlighted is available at no charge at http://bankrupt.com/misc/AzCopperResMap.pdf The ADMMR reports that production fell 30 million pounds at Ray while increasing slightly at Mission and remaining stable at Silver Bell in 2004. In April 2004, ADMMR data shows, ASARCO increased stripping to take advantage of higher revenues and to achieve a long-term cash break-even point below $0.75 per pound of copper. As a result, the ADMMR adds, waste removal in 2004 increased by about 65% compared with that in 2003, while ore mined declined slightly. ASARCO's Products & Processes ASARCO's primary products include: * cathode copper, * five-sixteenth inch copper rod, * copper cake, * by-product silver and gold, and * some specialty metals. Extracting metals from the earth begins with exploration drilling into an ore body to define the presence of metal bearing material. Once sufficient ore has been located, excavation of overburden, which exposes the valuable ore, can commence. In order to move the ore and waste, rock must be fractured and broken into small pieces. This is accomplished by drilling a pattern of blast holes into the rock to be mined. Blast holes are loaded with explosives and the "shot" breaks the pieces into smaller pieces generally less than one foot in diameter. The broken material is then moved using large front-end loaders or electrically driven shovels to load large haul trucks. Material is then classified as waste or ore. Waste is hauled to a dump and ore is sent to a processing site. Ore from ASARCO's mines generally contains about 0.5% to 1.0% copper. Based on the type of mineral in the rock, one of two different processing methods are used to extract the copper and other metals in the rock: (1) The Copper Sulfide Process -- If the ore contains copper sulfide, a copper sulfide process is used to extract the copper. This process consists of three stages: (A) milling concentrates -- Copper sulfide ore is first crushed to one-quarter-inch particles, and then milled into a powder in tumbling mills. Water and specialty chemicals are added to create a slurry, which is then sent to flotation cells where air bubbles are used to remove the mineral bearing particles from the waste material. The mineral bearing particles adhere to air bubbles and float to the top of the slurry and are removed from the flotation cells. The mineral-rich material, referred to as concentrate, is then thickened and dried in preparation for smelting. There is also a market for concentrate and the concentrate can be sold to third parties at this stage of the processing. (B) smelting concentrate to copper anodes -- The next stage in the process is the smelting stage. Concentrate is mixed with silica and limestone and then heated to about 2,700 degrees Fahrenheit to melt the concentrate. Through a series of pyrometallurgical steps, impurities are removed and copper anode is produced. Sulfur is collected in the waste gasses from the furnaces and converted into sulfuric acid. Other furnace waste is collected as slag and is disposed of on slag waste dumps. Anode copper contains about 99.5% copper. The copper anodes also contain other materials, including some amounts of silver, gold, nickel and other precious metals. Anodes, which are produced in the Arizona smelters, can either be sold at this time or shipped to the Amarillo refinery for further refining into copper cathodes (99.99% or more pure copper) and other copper products. As a result of the labor strike, the Amarillo refinery has been operating at very reduced levels, so ASARCO has been, and will need to continue, selling copper anodes to generate cash, rather than refining the anodes to cathodes and extracting the other precious metals contained in the anode ducts. (C) refining copper anodes to copper cathodes and other finished copper products -- The final processing step refines the anodes into high-purity copper of 99.99% or higher through electro-refining. Anodes are placed in tanks alternating with cathode starter sheets, which are high purity sheets of copper or stainless steel blanks. Electrolyte is pumped into the tanks and an electric current is applied to cause the anodes to dissolve into the electrolyte and form plates on the starter sheet. Completed cathodes, consisting of pure copper (99.99% or higher), are the result. Cathodes are then used to manufacture copper products. ASARCO uses cathodes to produce copper rod used in wire making and copper cake used in other applications. Waste sludge from this process contains by-product metals including silver, gold, platinum, and others. ASARCO processes this sludge using a similar electro-refining platting process at its precious-metals facility at the Amarillo refinery and the Globe specialty metals plant to create bars or units of silver, gold, nickel and other metals contained in the sludge. (2) The Copper Oxide Process -- If the ore contains copper oxide, a leaching process, commonly called an SXEW process, is used to extract the copper. Under this process, an acid irrigation system is created in large piles of crushed copper oxide ore. A leaching solution consisting of sulfuric acid and other reagents is sprayed onto the leach pile and copper is dissolved by the acid solutions as they trickle through the pile. The solutions are channeled out from under the rock dump and collected in solution ponds. Copper-bearing solution, called pregnant leach solution, is pumped to a solvent extraction plant where the solutions pass through a series of tanks containing special reagents in an organic solution (primarily fuel oil or kerosene). By the process, copper in the solution is upgraded from about two grams of copper per liter of solution to about fifty grams of copper per liter. The high-grade solution, called electrolyte, is sent to an electro-winning tank house where a starter sheet of pure copper is added to the solution, an electric charge is then added, and the molecules of copper in the solution migrate and attach to the molecules of copper in the starter sheet to create a thicker sheet of pure copper called a copper cathode (99.99% pure copper). Under this process, only copper is produced. Unlike the sulfide process, no other metals, like silver, gold or nickel, are produced during the SXEW process. Subsidiary Chapter 11 Cases Five of ASARCO's subsidiaries: * Lac d'Amiante Du Quebec Ltee, * CAPCO Pipe Company, Inc., * Cement Asbestos Products Company, * Lake Asbestos Of Quebec, Ltd., and * LAQ Canada, Ltd., tumbled into chapter 11 in April 2005. Prior to 1986, Lac d'Amiante du Quebec Ltee was in the business of mining asbestos fiber from the Black Lake region of central Quebec, Canada. CAPCO Pipe Company, Inc. (f/k/a/ Cement Asbestos Products Company) formerly manufactured various asbestos- containing cement pipe products. LAQ, CAPCO and the other three Subsidiary Debtors are non-operating companies. In the Subsidiary Cases, the United States Trustee for Region 14 appointed an official committee of unsecured creditors on April 27, 2005. That committee has retained professionals. It is unclear today whether that committee will continue to separately represent unsecured creditors in the Subsidiary Cases, be deemed to represent ASARCO's unsecured creditor constituency, or be reconstituted to represent unsecured creditors of all six debtors' estates. ASARCO's Need for Bankruptcy Protection Karen C. Paul, Senior Assistant General Counsel for ASARCO, explains that ASARCO needs to reorganize under chapter 11. Although copper prices recently have reached record highs, Ms. Paul relates, ASARCO is still recovering from the last long downturn in the copper market. Additionally, Ms. Paul says, despite the company's efforts to negotiate new contracts with its labor unions, ASARCO is currently experiencing a labor strike at its copper-mining and smelting facilities. Furthermore, ASARCO is subject to hundreds of millions of dollars in environmental claims and is burdened by over 95,000 asbestos-related personal- injury claims pending against the company and the Subsidiary Debtors. ASARCO also has nearly $490 million in bond debt and lease obligations. Ms. Paul says that Standard & Poor's Rating Services' recent downgrade of ASARCO's long-term corporate credit rating from BB- to CCC and negative outlook makes it difficult for ASARCO to negotiate new financial support outside the protections afforded a DIP lender in chapter 11 to overcome the negative effects of the strike on the company's finances. As a result, ASARCO has elected to seek protection under the bankruptcy laws for the benefit of all its creditors and stakeholders. ----------------------------------------------------------------- [00002] ASARCO'S DEBT STRUCTURE & LIABILITIES ----------------------------------------------------------------- Bond and Lease Debt ------------------- ASARCO has approximately $440 million in long-term bond debt, with maturities ranging from April 2013 to October 2033: Creditor Coupon Maturity Obligation -------- ------ -------- ---------- Lewis & Clark County Environmental Bond (IRB) 5.85% Oct. 2033 $34,800,000 Nueces River Environmental Bond (IRB) 5.60% Jan. 2027 $27,740,000 Lewis & Clark County Environmental Bond (IRB) 5.60% Jan. 2027 $33,160,000 Gila County -- Installment Bond 5.55% Jan. 2027 $71,900,000 CSFB Corporate Debentures 8.50% May 2025 $150,000,000 Nueces River Environmental Bond (IRB) Series 1998 A 5.60% Apr. 2018 $22,200,000 CSFB JP Morgan Secured Debentures 7.875% Apr. 2013 $100,000,000 Other Funded Debt ----------------- Creditor Obligation -------- ---------- Mitsui & Company (U.S.A.), Inc. $21,000,000 Other Funded Debt $9,000,000 Environmental Obligations ------------------------- As a result of ASARCO's 105 years of operating history, ASARCO and certain of its non-operating subsidiaries are subject to actual and potential environmental remediation obligations at numerous sites around the country. There are approximately 94 sites spread over approximately 21 states, in which ASARCO or one of its subsidiaries is alleged to be responsible for environmental clean-up costs, in some cases at the state level (approximately 45 sites), in other cases at the federal level (approximately 38 sites), and in some cases both (approximately 10 joint federal/state sites). ASARCO is a party to numerous consent decrees and lawsuits brought by federal and state governments and private parties as a result of the company's lead, zinc, cadmium, arsenic, and copper mining, smelting, and refining operations. A three-year standstill agreement with the federal government ends in early 2006, and the company is feeling rising pressure from federal and state governments to meet increased remediation demands. Asbestos-Related Claims ----------------------- ASARCO's alleged asbestos liabilities relate primarily to historical operations of its CAPCO and LAQ subsidiaries. Although LAQ has not milled asbestos since the late 1980s and CAPCO has not produced asbestos-containing products for over a decade, by the late 1990s, both CAPCO and LAQ had been named in thousands of asbestos lawsuits around the country. As a result of the massive asbestos litigation, five of ASARCO's non- operating subsidiaries filed the Subsidiary Cases currently pending in the U.S. Bankruptcy Court for the Southern District of Texas. Having never mined, milled, manufactured or sold asbestos or asbestos-containing products, ASARCO has no direct liability for any materials or products mined, milled, manufactured or sold by CAPCO or LAQ. Nonetheless, ASARCO has been named as defendant in a large number of the asbestos actions against either CAPCO or LAQ. Although a limited number of the claims are based on direct theories of liability, the majority are derivative of claims against CAPCO or LAQ. To address the derivative actions in a consolidated manner, on June 15, 2005, ASARCO filed an Adversary Proceeding in the Bankruptcy Court seeking a declaration that it is not liable under any alter ego theory for asbestos claims asserted against LAQ or CAPCO. That proceeding is captioned ASARCO LLC v. Lac d'Amiante du Quebec Ltee, et al., Adv. Pro. No. 05-02048, and names the future claimants' representative appointed in the Subsidiaries' chapter 11 cases as a defendant. A copy of that 15-page Complaint, is available at no charge at http://bankrupt.com/misc/05-02048-001.pdf The parties to that lawsuit have agreed to extend the deadline for answering or otherwise defending the complaint to September 13, 2005. ----------------------------------------------------------------- [00003] COMPANY'S PRESS RELEASE ANNOUNCING CHAPTER 11 FILING ----------------------------------------------------------------- ASARCO Files Chapter 11 Reorganization TUCSON, Arizona -- August 10, 2005 -- ASARCO LLC filed a voluntary petition for Chapter 11 reorganization in the United States Bankruptcy Court in Corpus Christi, Texas, yesterday. "ASARCO has elected to seek protection under the bankruptcy laws for the benefit of all of its creditors and stakeholders," said Daniel Tellechea, CEO and President of the Company. "We are determined to complete our reorganization as quickly and smoothly as possible," Mr. Tellechea said. "ASARCO regrets any inconvenience that this decision may impose on its creditors and stakeholders," said Mr. Tellechea, "but we believe that the Chapter 11 process is the best way for the Company to reorganize its liabilities, reduce its operating costs and restructure its balance sheet in order to be viable in the long term." "I have been asked, 'Why now'?" said Mr. Tellechea. "Creditors and labor unions may mistakenly believe that Company operations have returned to profitability, given currently high copper prices. But in fact we are still recovering from the last long downturn in the copper market. A number of factors have combined to overwhelm us, including historical asbestos and environmental liability, high cost pension and health benefits plans, the current labor strike and the downgrading of the Company's debt rating. Because of these factors, ASARCO has some of the highest cost operations in the copper industry. By filing chapter 11 now, Company management can act to protect jobs, reduce costs and preserve ASARCO's long-term viability," Mr. Tellechea added. Approximately 95,000 asbestos-related personal injury claims are pending against ASARCO and two non-operating subsidiaries that historically engaged in asbestos mining and cement pipe manufacturing. ASARCO's asbestos-impacted subsidiaries voluntarily filed for chapter 11 last April in Corpus Christi to take advantage of the Bankruptcy Code's special provisions for asbestos-related liabilities. In addition, ASARCO is a party in numerous consent decrees and lawsuits brought by federal and state environmental authorities and private entities as a result of the Company's lead, zinc, cadmium, arsenic and copper mining, smelting and refining operations over the last 106 years. "A three-year standstill agreement with the federal government on environmental remediation obligations, negotiated in 2003, ends in early 2006," said Mr. Tellechea. "Although the deadline is several months away, we are already feeling increased pressure to meet additional remediation demands. Global settlement of our historical environmental liability has not been possible, leaving ASARCO without legal or economic certainty," he concluded. In June 2004, ASARCO began negotiating new collective agreements with union officials, which include health and pension benefits. The Company has sought concessions to reduce costs in order to achieve long-term profitability. Approximately 1,500 hourly employees in Arizona and Texas commenced a strike over the July 4th holiday weekend as part of the unions' negotiating strategy. ASARCO's facilities presently are producing copper on a reduced basis with the help of salaried and some hourly employees. "We hope our hourly employees return to work so that ASARCO can improve its existing financial position and continue operating," Mr. Tellechea said. Within the last month, Standard & Poor Services downgraded ASARCO's long-term corporate credit rating from BB- to CCC and changed its outlook on the Company from positive to negative. S&P cited the same challenges and uncertainties ASARCO says motivated the chapter 11 filing. ----------------------------------------------------------------- [00004] ASARCO LLC CHAPTER 11 DATABASE ----------------------------------------------------------------- Debtor: ASARCO LLC 1150 North Seventh Avenue Tucson, Arizona 85705 Bankruptcy Case No.: 05-21207 Chapter 11 Petition Date: August 9, 2005 Debtor Affiliates that filed for Chapter 11 protection on April 11, 2005: Debtor Entity Case No. ------------- -------- Lac d'Amiante Du Quebec Ltee 05-20521 CAPCO Pipe Company, Inc. 05-20522 Cement Asbestos Products Company 05-20523 Lake Asbestos Of Quebec, Ltd. 05-20524 LAQ Canada, Ltd. 05-20525 Court: United States Bankruptcy Court Southern District of Texas 1133 N. Shoreline Blvd. Corpus Christi, Texas 78401 Telephone (361) 888-3483 Judge: The Honorable Richard S. Schmidt Debtors' Counsel: James R. Prince, Esq. Jack L. Kinzie, Esq. Eric A. Soderlund, Esq. Baker Botts L.L.P. 2001 Ross Avenue Dallas, Texas 75201 Tel: (214) 953-6612 Fax: (214) 953-6503 -- and -- Nathaniel Peter Holzer, Esq. Shelby A. Jordan, Esq. Harlin C. Womble, Esq. Jordan, Hyden, Womble & Culbreth, P.C. 500 North Shoreline Drive, Suite 900 Corpus Christi, Texas 78471 Tel: (361) 884-5678 Fax: (361) 888-5555 ASARCO's Total Assets: $600 Million ASARCO's Total Debts: $1 Billion United States Trustee: Barbara C. Jue, Esq. Office of U.S. Trustee 606 N. Carancahua, Suite 1107 Corpus Christi, Texas 78476 Telephone (361) 888-3261 Fax (361) 888-3263 Future Claimants' Representative: The Honorable Robert C. Pate Counsel to the Future Claimants' Representative: John H. Tate, II, Esq. Oppenheimer, Blend, Harrison & Tate, Inc. 711 Navarro, Suite 600 San Antonio, Texas 78205 Asbestos Claimants' Committee's Members Appointed in Subsidiary Cases: Barbara Zondervan c/o Robert Phillips Simmons Cooper, LLC 707 Berkshire Blvd. PO Box 521 East Alton, IL 62024 Telephone (312) 759-7500 Fax (312) 759-7516 Thomas Brown c/o Ryan A. Foster Ryan A. Foster Law Firm 440 Louisiana St., Suite 2100 Houston, TX 77002 Telephone (713) 236-2975 Melvin Eldon Boggs c/o Alan Rich Baron & Budd, P.C. 3102 Oak Lawn Ave., Suite 1100 Dallas, TX 75219 Telephone (800) 946-9646 Fax (214) 520-1181 Kenna Hall Terrell c/o Steven Kazan Kazan McClaim Abrams Fernandez Lyons & Farrise 171 Twelfth St., Suite 300 Oakland, CA 94607 Telephone (877) 995-6372 Fax (510) 835-4913 Robert H. Lawhorn c/o Robert Shuttlesworth Williams Bailey Law Firm 8441 Gulf Freeway, Suite 600 Houston, TX 77017 Telephone (800) 220-9341 Fax (713) 643-6226 Benito T. Caceres c/o Eric Bogdan The Bogdan Law Firm 8866 Gulf Freeway, Suite 515 Houston, TX 77017 Telephone (713) 378- 9378 Fax (713) 378-9379 James A. Bailey c/o Brian Blevins Provost Umphrey Law Firm 490 Park St. Beaumont, TX 77704 Telephone (409) 835-6000 Fax (409) 838-8888 Robert Ryan c/o Christina Skubic Brayton Purcell 222 Rush Landing Rd. Novato, CA 94948 Telephone (415) 898-1555 Fax (415) 898-1247 Timothy Crisler c/o Lou Thompson Black Brent Coon and Associates 917 Franklin, Suite 100 Houston, TX 77002 Telephone (713) 224-5949 Fax (713) 227-2018 Myra Meiers c/o Thomas W. Bevan Bevan & Associates, LPA 10360 Northfield Rd. Northfield, OH 44067 Telephone (330) 467-8571 Fax (330) 467-4493 Samuel M. Cox c/o Thomas M. Wilson Kelley & Ferraro, LLP 1300 E. Ninth St., Suite 1901 Cleveland, OH 44114 Telephone (216) 575-0777 Counsel to the Asbestos Claimants' Committee: Robert T. Brousseau, Esq. Stutzman, Bromberg, Esserman & Plifka 2323 Bryan Street, Suite 2200 Dallas, TX 75201 Financial Advisor to the Asbestos Claimants' Committee: Loreto T. Tersigni L Tersigni Consulting PC 1010 Summer Street Stamford, Connecticut 06905 Insurance Consultant to the Asbestos Claimants' Committee: David P. Anderson Risk International Services, Inc. 16356 Briarwood Court Olathe, Kansas 66062-4518 ----------------------------------------------------------------- [00005] LIST OF ASARCO'S 20 LARGEST UNSECURED CREDITORS ----------------------------------------------------------------- Entity Nature of Claim Claim Amount ------ --------------- ------------ Deutsche Bank Trust Company Indenture Trustee Americas Trust Securities Services Gila County $73,895,225 60 Wall Street Installment Bond New York City 60-2715 5.55% Series 1998 New York, NY 10005 Attn: Safet Kalabovic Tel: (212) 250-2679 Lewis & Clark $35,728,480 County Env Bond (IRB) 5.85% Series 1998 Lewis & Clark $33,668,950 County Env Bond (IRB) 5.60% Series 1998 Nueces River $28,516,721 Env Bond (IRB) 5.60% Series 1998 Nueces River $22,510,800 Env Bond (IRB) 5.60% Series 1998A Wilmington Trust Company Indenture Trustee Rodney Square North 1100 North Market Street CSFB Corporate $152,125,000 Wilmington, DE 19890-0001 Debentures at Attn: Joseph W. Callaway, Jr. 8.500% Tel: (302) 636-6059 Wells Fargo Bank Minnesota NA CSFB JP Morgan $101,640,623 Corporate Trust Services Sec Debentures 608 Second Avenue South at 7.875% Minneapolis, MN 55479 Attn: Joseph J. Taffe Tel: (612) 667-6961 St. Paul Travelers Surety Bond $31,369,020 One Square 4PB Hartford, CT 06183 Attn: Robert L. Scanlon Tel: (860) 277-4275 Mitsui and Co. (U.S.A.), Inc. Loan $21,084,000 New York Headquarters Met Life Building 200 Park Avenue New York, NY 10166-0130 Attn: Nao Hayashi Tel: (212) 878-4125 Montana Resources Incorporated Contractual Debt $7,729,847 P.O. Box 16630 Missoula, MT 59808 Attn: Greg L. Stricker Tel: (406) 829-2312 American Home Assurance Co. Surety Bond $5,832,064 175 Water Street, 26th Floor New York, NY 10038 Attn: Todd Robinson Tel: (212) 458-1621 CAN Surety Surety Bond $4,493,591 333 South Wabash-135 Chicago, IL 60685 Attn: Sylvester Bracey Tel: (312) 817-3764 Wachovia Promissory Note $2,340,170 301 South College St., 18th Flr. Charlotte, NC 28292-0738 Attn: Lee Hemphill Tel: (704) 374-4306 Chevron Natural Gas Trade Debt $1,850,188 P.O. Box 730116 Dallas, TX 75373-0116 Attn: Michael Surginer Tel: (832) 854-5020 Sidley Austin Brown & Wood LLP Legal Fees $1,699,819 787 Seventh Avenue New York, NY 10019 Attn: Jonathan Williams Tel: (212) 839-5310 Road Machinery Trade Debt $1,395,803 716 South Seventh Street Phoenix, AZ 85034 Attn: Claude Dew Tel: (602) 256-5152 Komatsu Financial Equipment Lease $1,142,313 719 South Seventh Street Phoenix, AZ 85034 Attn: Randy Smith Tel: (480) 756-2341 AT&T US Bank Lease $1,053,344 One Federal Street Boston, MA 02110 Attn: Todd Dinezza Tel: (617) 603-6573 P&H Mine Pro Services Trade Creditor $601,791 3200 Paysphere Circle Chicago, Illinois Tel: (480) 834-7656 Williams Detroit Diesel Trade Creditor $449,300 West Glenn Street 1375 Tucson, Arizona Attn: Jerry Martinez Tel: (520) 624-8377 Department of Justice Environmental Unknown Environmental and Natural Resources Division P.O. Box 7611 Washington, D.C. 20044-7611 Attn: David Dain Tel: (202) 514-3644 State of Washington Environmental Unknown Washington State Department of Ecology P.O. Box 47600, Olympia, WA 98504-7600 Attn: Tim Nord Tel: (360) 407-7226 State of Texas Environmental Unknown Texas Commission on Environmental Quality MC 175 P.O. Box 13087 Austin, TX 78711-3087 Attn: Paul C. Sarahan Tel: (512) 239-3424 State of Arizona Environmental Unknown Arizona Department of Environmental Quality Phoenix Main Office 1110 West Washington Street Phoenix, AZ 85007 Attn: Stephen Owens Tel: (602) 771-2203 ----------------------------------------------------------------- [00006] LIST OF SUBSIDIARIES' 30 LARGEST UNSECURED CREDITORS ----------------------------------------------------------------- Entity Nature of Claim Claim Amount ------ --------------- ------------ Brayton Purcell Settled unfunded $15,300,000 Al Brayton claims 222 Rush Landing P.O. Box 6169 Novato, CA 94948 Karl Asch, Esq. Settled unfunded $4,300,000 150 Tices Lane claims East Brunswick, NJ 08816 Garruto, Galex & Cantor Settled unfunded $4,000,000 c/o Tortoreti Tomes & claims Callahan PC 150 Tices Lane East Brunswick, NJ 08816-2089 Paul Hanley & Harley LLP Settled unfunded $3,700,000 Dean Hanley claims 1608 Fourth Street, Suite 300 Berkeley, CA 94710 Baron & Budd, P.C. Settled unfunded $3,100,000 Russell Budd claims 3102 Oak Lawn Avenue Suite 1100 Dallas, TX 75219-4281 Kazan, McClain, Abrams, Settled unfunded $2,200,000 Fernandez, Lyones & claims Farrise, PLC Steven Kazan 171 Twelfth, Suite 300 Oakland, CA 94607 Environmental Attorneys Settled unfunded $2,100,000 Group LLC claims Marty Berks 1900 28th Avenue South, Suite 107 Birmingham, AL 35209 Waters & Kraus, LLP Settled unfunded $2,000,000 Peter Kraus claims 3219 McKinney Ave., Suite 3000 Dallas, TX 75204 $2,000,000 Early Ludwick & Settled unfunded $1,600,000 Sweeney, LLC claims One Century Tower 265 Church St., 11th Floor P.O. Box 1866 New Haven, CT 06508-1866 Pitkow & Witt Settled unfunded $1,400,001 Hal Pitkow claims 138 N. State Street Newtown, PA 18940 Greitzer & Locks Settled unfunded $1,200,000 1500 Walnut Street claims Philadelphia, PA 19102 Reaud, Morgan & Quinn, Inc. Settled unfunded $1,100,000 Glen Morgan claims 801 Laurel Beaumont, TX 77704 Wilentz Goldman & Settled unfunded $1,000,000 Spitzer, P.C. claims 90 Woodbridge Center Drive Suite 300, Box 10 Woodbridge, NJ 07095 Simmons Law Firm, L.L.C. Settled unfunded $750,000 Andy Bono claims 707 Berkshire Boulevard P.O. Box 521 East Alton, IL 62024 Brookman Rosenberg Brown & Settled unfunded $660,000 Sandler claims 17th Floor, One Penn Square West 30 South Fifteenth Street Philadelphia, PA 19102 Lynch Martin Settled unfunded $625,000 1368 How Lane claims North Brunswick, NJ 08902 James F. Humphreys & Settled unfunded $580,000 Associates LC claims David Cecil United Center, Suite 800, 500 Virginia Street, East Charleston, WV 25301 Robert E. Sweeney Co., Settled unfunded $478,000 L.P.A. claims 55 Public Square, Suite 1500 Cleveland, OH 44113 Jacobs & Crumplar, P.A. Settled unfunded $392,000 2 East 7th St claims P.O. Box 1271 Wilmington, DE 19899 McCurdy & McCurdy, LLP Settled unfunded $390,000 524 E. Lamar Blvd., claims Suite 250 Arlington, TX 76011 Brent Coon & Associates Settled unfunded $383,000 Brent Coon claims 917 Franklin Suite 210 Houston, TX 77002 Cooney & Conway Settled unfunded $375,000 John Cooney claims 120 N. LaSalle, 30th Floor Chicago, IL 60602 Gavin & Gavin PC Settled unfunded $370,000 22 Beech Lane claims Edison, NJ 08820 John Arthur Eaves Law Firm Settled unfunded $347,000 101 North State St. claims Jackson, MS 39201-2811 Hamburg, Rubin, Mullin, Settled unfunded $324,000 Maxwell & Lupin claims 375 Morris Road P.O. Box 1479 Lansdale, PA 19446-0773 Shein Paul Reich & Settled unfunded $269,000 Meyers PC claims Shein Law Center 121 South Broad Street, 21st Floor Philadelphia, PA 19107 Bevan & Associates, Settled unfunded $255,000 L.P.A., Inc. claims Tom Bevan 10360 Northfield Road Northfield, OH 44067 Morris Eisen & Perry Settled unfunded $250,000 Weitz PC claims c/o Weitz & Luxenberg,P.C. Perry Weitz 180 Maiden Lane New York, NY 10038 Foster & Sear, LLP Settled unfunded $232,000 Scott Wert claims 524 E. Lamar Blvd., Suite 200 Arlington, TX 76011 Law Offices of Peter G. Settled unfunded $225,000 Angelos (Baltimore) claims One Charles Center, 22nd Floor, 100 North Charles Street Baltimore, MD 21201 ----------------------------------------------------------------- [00007] BANKRUPTCY FILING CUES S&P TO LOWER ASARCO RATING FURTHER ----------------------------------------------------------------- NEW YORK, New York -- August 10, 2005 -- Standard & Poor's Ratings Services today lowered its long-term corporate credit rating on Asarco Inc. (Asarco) to 'D' from 'CCC' after the company announced that it voluntary filed for bankruptcy under Chapter 11. Tucson, Ariz.-based Asarco had total debt of about $363 million as of June 30, 2005. "Although currently the company has not missed any interest or principal payments, we consider a bankruptcy filing as a default," said Standard & Poor's credit analyst Juan P. Becerra. "The 'D' rating is not prospective; rather, it is used only when a default has actually occurred, and not if a default is only expected." Asarco's next interest payments are US$100,000 in August and September, and Standard & Poor's expects that these payments will not be made. However, we expect AMC to make interest and principal payments to Asarco. Standard & Poor's also said that the 'BBB/Stable/--' rating assigned to Grupo Mexico S.A. de C.V., Americas Mining Corp. (AMC), Southern Peru Copper Corp., and Minera Mexico S.A. de C.V. was not adversely affected by the voluntary filing for Chapter 11 of Asarco, an AMC subsidiary. Asarco has six mining units and four smelters and refinery complexes located in the U.S. During the first half of 2005, the company's revenues and total copper production were US$253 million and 87 thousand metric tons, respectively, which compares favorably with 2004 numbers. Complete ratings information is available to subscribers of RatingsDirect, Standard & Poor's Web-based credit analysis system, at http://www.ratingsdirect.com/ All ratings affected by this rating action can be found on Standard & Poor's public Web site at http://www.standardandpoors.com/ under Credit Ratings in the left navigation bar, select Find a Rating, then Credit Ratings Search. ----------------------------------------------------------------- [00008] ASARCO'S MOTION FOR AUTHORITY TO USE CASH COLLATERAL ----------------------------------------------------------------- ASARCO LLC doesn't have enough unencumbered cash to fund its operations during the pendency of its Chapter 11 case. Thus, it needs immediate access to cash collateral securing repayment of its prepetition obligations to Mitsui & Co. (U.S.A.), Inc. Karen C. Paul, Senior Assistant General Counsel for ASARCO LLC, relates that in March 1999, Mitsui and ASARCO Inc., a predecessor of the Debtor, entered into a financing transaction whereby ASARCO sold Mitsui 1,000,000 troy ounces of 99.9% pure silver, which Mitsui then immediately leased back to ASARCO. Later that month, the amount of silver increased to 3,000,000 ounces. By 2002, ASARCO had consumed or sold all of the silver subject to the agreements. ASARCO owes Mitsui $21 million. To secure payment of this debt, Mitsui negotiated broader security agreements with ASARCO, and obtained a guaranty from ASARCO's parent company, Grupo Mexico, S.A. de C.V. Mitsui's Lien According to Ms. Paul, Mitsui asserts a lien against the Debtor's inventory of silver, including work in process inventory, like copper anodes and concentrates. "The lien does not expressly extend to accounts receivable, but does extend to proceeds of silver inventory." The Mitsui lien purports to secure a contractual obligation to pay the value of 3,000,000 ounces of silver to Mitsui. The lien is under-secured, Ms. Paul says. As of July 31, 2005, the Debtor's inventory report showed only 2,278,000 ounces of silver inventory, valued at approximately $16,510,000. The Debtor is in the process of updating its inventory report as of the Petition Date. In addition, the Debtor has determined that, as of the Petition Date, it has received approximately $1,280,000 on account of unidentifiable silver contained in sheets of copper anode that was sold and delivered in the ordinary course of business in the 20 days immediately preceding the Petition Date. The Debtor reserves the right to dispute the validity, enforceability and extent of Mitsui's lien. Other UCC Filings Ms. Paul relates that the Debtor ran several UCC-1 lien searches to confirm that no party other than Mitsui held or asserted a lien against any of the Debtor's personal property. These lien searches revealed two types of UCC filings: (1) there were old UCC-1s filed by former creditors that should be withdrawn or terminated because the debt has been paid in full; and (2) ASARCO accepts concentrates and other work-in-process materials from third parties under toll agreements. ASARCO smelts or refines the customer's product for a fee and returns the smelted or refined product, as the case may be, back to the Toll Party. ASARCO benefits from those toll agreements by: -- earning servicing revenue, and -- utilizing what would otherwise be under-capacity in its smelters and refinery, which in turn reduces ASARCO's per unit cost for smelting and refining ASARCO's own inventory. Many of these Toll Parties filed precautionary UCC filings notifying third parties of their interest in materials in ASARCO's possession. Ms. Paul tells Judge Schmidt that the Debtor does not in any way concede that any party holds a validly perfected and enforceable lien against its inventory, accounts receivable or prepetition cash, or that any cash received on account of alleged prepetition collateral would constitute cash collateral. Adequate Protection The Debtor will segregate -- and not spend -- proceeds allocated to the sale of silver inventory as those proceeds are received in the ordinary course pending a final hearing on its request. The Debtor will agree to segregate $1,280,000 upon entry of an interim order. "Segregating the proceeds prevents any potential diminution of value in Mitsui's collateral, and thus Mitsui is adequately protected until this Motion can be set for a final hearing," Ms. Paul says. At the final hearing, ASARCO proposes to grant adequate protection for the use of silver proceeds after that final hearing in this manner: a. The Debtor will continue to provide Mitsui with silver inventory reports on a monthly basis, as it did prior to bankruptcy; and b. To the extent Mitsui is determined to hold a validly perfected and unavoidable lien on silver inventory, and to the extent that Mitsui suffers a diminution in the value of its collateral after the Petition Date, the Debtor will grant Mitsui: (i) a replacement lien on silver inventory acquired after the Petition Date, and (ii) a super-priority claim that will have priority over, and be senior to, all other administrative claims, except with respect to any administrative claim of a postpetition DIP lender. Excluding Mitsui, the Debtor believes that all other parties with a UCC filing either: (i) have been paid in full prior to the Petition Date, and thus have no interest in the Debtor's cash, or (ii) have delivered their property to the Debtor for refining services in exchange for a fee, and thus have filed their UCC's in an abundance of caution. The Debtor intends to honor its contractual obligations under its toll contracts and will not sell the materials that are the subject of those contracts to a third party. Under those circumstances, the Debtor asserts that no adequate protection is required for those parties. Judge Schmidt will convene a hearing at 2:00 p.m. tomorrow, August 12, 2005, to consider this request. *** End of Issue No. 1 ***