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February 11, 2008 |
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GRUPO MEXICO: Asarco Wants Lehman to Make Asset Valuation Report Grupo Mexico SA, de C.V.'s unit ASARCO LLC and its debtor- affiliates seek authority from the U.S. Bankruptcy Court for the Southern District of Texas to expand the scope of services of Lehman Brothers Inc., the company's exclusive financial advisor and investment banker, and increase the firm's compensation for certain completed services. ASARCO had asked permission from the Court in August 2007 to expand the scope of Lehman Brothers' services and increase its compensation structure. That application, however, was met with many objections. Jack L. Kinzie, Esq., at Baker Botts, L.L.P., in Dallas, Texas, says negotiations regarding the production of documents and the deposition schedule relating to that application are ongoing. Mr. Kinzie relates that before the Court can hear the August 2007 Amended Employment Application, ASARCO asked Lehman Brothers to perform additional services relating to the pending fraudulent transfer complaint asserted against Grupo Mexico S.A. de C.V., and Americas Mining Corporation. Those services included the preparation on a highly expedited basis of a voluminous, detailed valuation report of ASARCO's assets, to be used in support of certain fraudulent transfer actions, Mr. Kinzie says. Subsequently, ASARCO and Lehman Brothers amended the 2005 Engagement Letter to include the terms and conditions under which Lehman Brothers would act as the exclusive valuation consultant regarding the value of ASARCO's operating assets in those proceedings. The Amended Engagement Letter provides that Lehman Brothers will perform these additional services: (a) Assist ASARCO in developing exit financing alternatives that may result in a "Liquidity Event," which, if asked by ASARCO, will include Lehman Brothers' assistance in the formulation and execution of an exit working capital facility; (b) Advise and assist ASARCO in connection with the recruitment of independent members of the company's board of directors, a new chief executive officer and a new chief financial officer; (c) Advise and assist ASARCO in connection with the creation and implementation of a new employee incentive program and new key employee retention program; and (d) Develop and implement a hedging program designed to protect ASARCO from copper price volatility. Mr. Kinzie also relates that ASARCO's Board has asked assistance and advice from Lehman Brothers in connection with certain labor negotiations, the retention of a crisis management firm, and the fraudulent transfer proceeding related to the South Mill Property. The Amended Engagement Letter provides that Lehman Brothers will: (a) receive a US$150,000 monthly cash fee effective as of March 2007, which Advisory Fee will not be creditable against the Transaction Fee; (b) be entitled to a US$4,000,000 flat fee on the closing of a sale of substantially all of ASARCO's assets; (c) receive 0.5% of the cash consideration involved in a Liquidity Event, which payment is capped at US$2,500,000, pursuant to agreements with the Official Committee of Unsecured Creditors for the Asbestos Subsidiary Debtors and the Court-appointed Future Claims Representative; (d) receive US$800,000 for analyzing and preparing a written report regarding the current value of ASARCO's operating assets for use in connection with the fraudulent transfer proceedings pending against Americas Mining and Montana Resources Inc.; and (e) receive additional US$200,000 on delivery of valuation reports if ASARCO identifies Lehman Brothers as its valuation expert in the litigations against Montana Resources and August Resource Corporation. About ASARCO Based in Tucson, Arizona, ASARCO LLC -- http://www.asarco.com/ -- is an integrated copper mining, smelting and refining company. Grupo Mexico S.A. de C.V. is ASARCO's ultimate parent. The Company filed for chapter 11 protection on Aug. 9, 2005 (Bankr. S.D. Tex. Case No. 05-21207). James R. Prince, Esq., Jack L. Kinzie, Esq., and Eric A. Soderlund, Esq., at Baker Botts L.L.P., and Nathaniel Peter Holzer, Esq., Shelby A. Jordan, Esq., and Harlin C. Womble, Esq., at Jordan, Hyden, Womble & Culbreth, P.C., represent the Debtor in its restructuring efforts. Lehman Brothers Inc. provides the ASARCO with financial advisory services And investment banking services. Paul M. Singer, Esq., James C. McCarroll, Esq., and Derek J. Baker, Esq., at Reed Smith LLP give legal advice to the Official Committee of Unsecured Creditors and David J. Beckman at FTI Consulting, Inc., gives financial advisory services to the Committee. When the Debtor filed for protection from its creditors, it listed US$600 million in total assets and US$1 billion in total debts. About Grupo Mexico Grupo Mexico SA de C.V. -- http://www.grupomexico.com/ -- through its ownership of Asarco and the Southern Peru Copper Company, is the world's third largest copper producer, fourth largest silver producer and fifth largest producer of zinc and molybdenum. * * * As reported in the Troubled Company Reporter-Latin America on Dec. 29, 2006, Fitch upgraded the local and foreign currency Issuer Default Rating assigned to Grupo Mexico, S.A. de C. V. to 'BB+' from 'BB'. The rating still holds to date with a stable outlook. |
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