Court Awards Fees, Applauds Baker Botts' Performance in Multi-Billion-Dollar ASARCO Bankruptcy

Aug 19, 2011, 10:18 ET from Baker Botts L.L.P.

HOUSTON, Aug. 19, 2011 /PRNewswire/ -- The Honorable Richard S. Schmidt, United States Bankruptcy Judge for the Southern District of Texas, Corpus Christi Division, has entered an order approving the fees previously paid, and awarding additional fees, in recognition of Baker Botts' role as chapter 11 counsel to ASARCO LLC.  


Judge Schmidt wrote in his supporting opinion that the ASARCO bankruptcy was "truly a rags-to-riches story" and "probably the most successful Chapter 11 of any magnitude in the history of the [Bankruptcy] Code." Creditors in the ASARCO bankruptcy received more than $3.5 billion, which represented payment in full of all claims, plus interest and attorney's fees.  

Judge Schmidt wrote that: "Baker Botts lawyers conducted themselves with the utmost professionalism and commitment, addressing an array of challenging legal issues with sophistication, creativity, and skill. . . . Few firms in the country have the breadth and depth of experience in different disciplines necessary to handle these cases with the skill demonstrated by Baker Botts" and  "no other firm could have achieved the results in these cases at the rates charged by Baker Botts" during the fee application period.

Originally organized in 1899, ASARCO initially held diverse smelting, refining and mining operations throughout the United States and now operates as a Tucson-based fully integrated copper mining, smelting and refining company. Judge Schmidt wrote that when ASARCO filed bankruptcy in August 2005, "'the [C]ompany had essentially run out of cash and was saddled with massive environmental liability, financial debt, potential asbestos-related liability, falling copper prices, and a striking workforce.' Creditors were expected to receive cents on the dollar." Ultimately, Americas Mining Corporation (AMC), a subsidiary of Mexican mining giant Grupo Mexico, retained the ownership of its wholly-owned subsidiary, ASARCO, in the bankruptcy by funding a plan that resulted in payment in full to creditors.  

"That ASARCO resolved all of these issues, cleansed its balance sheet of billions of dollars of debt, and confirmed a chapter 11 plan that paid creditors in full is an exceptional result that no one could have predicted at the time ASARCO filed bankruptcy in 2005," said Jack Kinzie, the lead bankruptcy lawyer in the case and the head of Baker Botts' bankruptcy and restructuring group.  

Judge Schmidt wrote that the "pivotal event" in the bankruptcy was Baker Botts' successful prosecution of a multi-billion-dollar fraudulent transfer lawsuit (the SCC Litigation) against AMC, the parent of ASARCO. "Through its creativity, tenacity, and legal talent, Baker Botts was able quickly and efficiently to prosecute the [l]itigation, prevail at trial, and obtain and secure a judgment . . . valued in excess of $6 billion"— likely the largest fraudulent transfer judgment in United States history.  Judge Schmidt found that the "results obtained by Baker Botts in the SCC Litigation are rare and extraordinary."

"The fraudulent transfer litigation was particularly challenging and unique," said Irv Terrell, the lead Baker Botts trial lawyer in the case, "not only because of its fast pace, which was essential to accommodate the needs of the restructuring proceedings in Corpus Christi, but also because, as Judge Schmidt noted in his opinion, we had to decipher millions of pages of documents and use those documents to tell a compelling story out of the mouths of adverse witnesses in the courtroom."

Judge Schmidt also recognized Baker Botts' "outstanding achievements" in other areas of the case, which has been described by the United States Department of Justice, Environmental and Natural Resource Division (DOJ) as "the largest environmental bankruptcy in U.S. history." Regarding ASARCO's environmental liabilities, for example, Judge Schmidt wrote that "Baker Botts managed to craft a global environmental settlement that resolved billions of dollars of environmental liabilities. And the Firm did it in a demanding, compressed time frame." The environmental settlement will help fund clean-up efforts at over 80 sites in 19 different states (Alabama, Arizona, Arkansas, California, Colorado, Idaho, Illinois, Indiana, Kansas, Missouri, Montana, Nebraska, New Jersey, New Mexico, Ohio, Oklahoma, Texas, Utah, and Washington).  

Judge Schmidt also found that Baker Botts "conceived, recommended, and commenced an innovative auction of the multi-billion-dollar judgment against AMC that, under the Debtors' unique plan structure, exposed [Grupo Mexico] to the possibility that it could lose the Company and have to pay the judgment in full."

"ASARCO was an extraordinary case," said Kinzie. "I am thankful and proud of many things about it, but I think I am proudest of the positive impact the successful reorganization had on ASARCO stakeholders. Nearly 2,000 union and non-union workers depend on ASARCO for their livelihood. In some Arizona towns, such as Hayden, ASARCO is the primary source of tax revenues to keep schools and other public service functions going. Federal and state regulators received funding for many of the largest, oldest and most complex Superfund sites in the country. That ASARCO, a company that has operated for over 112 years, exited chapter 11 financially sound and cleansed of billions of dollars of liabilities proves that chapter 11 works."

In his order and supporting opinion, Judge Schmidt awarded Baker Botts approximately: (a) $113 million in fees and $6 million in expenses incurred during the 52 months of the ASARCO bankruptcy, virtually all of which have previously been paid; (b) $5 million in fees and $450,000 in expenses incurred in preparing and defending the firm's final fee application after confirmation of the bankruptcy plan; and (c) an additional $4 million in fees because he found "Baker Botts' services were instrumental in producing the exceptional results that were unanticipated at case commencement."

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