Bankruptcy judge backs Grupo Mexico over India’s Sterlite in bid for Asarco operations

Bankruptcy judge backs Grupo Mexico bid for Asarco

DENVER — A bankruptcy judge has recommended Sterlite Industries’ latest $2.57 billion cash bid for Asarco LLC’s assets be disregarded, saying it was filed after the deadline and a competing bid remains superior.

U.S. Bankruptcy Judge Richard Schmidt said Sterlite could have submitted the bid before he recommended on Aug. 31 that Grupo Mexico be allowed to regain control over the Arizona mining company.

“The debtor should not be allowed to undermine the comprehensive evidentiary process and legal analysis that applied to the plans under consideration at the time of the court’s recommendation,” Schmidt wrote in a recommendation filed Thursday.

“To do so would set a bad judicial precedent and bog down the final confirmation determination with endless post-trial plan amendments by both plan sponsors and related litigation which could ultimately prevent consummation,” he added.

A spokesman for London-based Vedanta Resources, the parent of Mumbai-based Sterlite, declined comment Friday.

Schmidt’s recommendation goes to U.S. District Judge Andrew Hanen, who is expected to make a final decision by the end of October.

“Of greatest concern to the court is the fact that failure of either plan to close before the end of the year will likely lead to the loss of both plans and could lead to a plan which pays less than 100 percent to creditors,” Schmidt said.

After a two-week hearing in August, Schmidt recommended Grupo Mexico be allowed to regain control over Asarco LLC, saying its $2.2 billion bid is more likely to fully repay creditors.

Ten days after that recommendation was issued, Sterlite Industries raised its offer to $2.57 billion from $2.1 billion.

Schmidt said both bids are likely to pay all creditors with full interest but Sterlite’s plan pays less equity. And, he added, Grupo Mexico’s plan has a greater certainty of closing.

The outcome involves Asarco’s three Arizona mining operations and a Texas refinery placed in bankruptcy in August 2005 when the company ran out of cash and faced hefty environmental liability and potential asbestos-related claims.

Grupo Mexico lost control of Asarco shortly after the company filed for bankruptcy protection when independent directors were placed on the board.

A key issue in the bankruptcy proceeding is a separate more than $6 billion civil conviction against Grupo Mexico in which Hanen, the federal district judge, found it fraudulently transferred stock in Southern Copper Corp., a Peruvian mining company, away from Asarco. Grupo Mexico has appealed that decision.

The stock will remain with Grupo Mexico’s subsidiary, Americas Mining Corp., if the plan is confirmed and takes effect. That means Grupo Mexico will not have to pay the $6 billion in damages to Asarco and won’t pursue the appeal.