U.S. judge approves break-up fee for Asarco bidder

Tag : Non-ferrous Metal
India - (Updates with Asarco statement)
HOUSTON (Reuters) - A U.S. bankruptcy judge approved a break-up feeand other protections Tuesday sought by India's top non-ferrousmetal producer, Sterlite Industries Ltd (nyse: SLT - news - people ), in its $2.6 billion bid for bankrupt copper miner Asarco LLC,according to court documents.
Judge Richard Schmidt also said Asarco parent Grupo Mexico couldput forward its own bankruptcy reorganization plan for thesubsidiary it lost board control over when Asarco filed forbankruptcy nearly three years ago.
Schmidt's ruling during a hearing in Corpus Christi, Texas, willallow Sterlite and Grupo Mexico to compete against one another toresolve the bankruptcy that began in 2005 when Asarco was sued for$1 billion over environmental cleanup and asbestos claims.
After the ruling, Grupo Mexico vowed to win back control of Asarcoin the competition.
"Although we disagree with the court's ruling in granting bidprotections to Sterlite Industries and we intend to appeal thatdecision, we are gratified that the court also recognized that weshould have the right to file our own reorganization plan and weare confident that our plan will ultimately be confirmed by thebankruptcy court," Grupo Mexico said in a statement.
Sterlite, an affiliate of London-listed Vedanta Resources Plc, hasproposed a straight purchase of Asarco's assets for $2.6 billion.
Asarco LLC's lawyer praised the judge's ruling.
"Judge Schmidt's opinion was thorough and well reasoned," said JackKinzie. "His approval of the Sterlite break-up fee sustains aprocess which will maximize the value of the assets for allinterested parties. We are pleased with this result."
Allowing Grupo Mexico to file a competing plan "will subject thatplan to a market test and it will now rise or fall on its ownmerit," Kinzie said.
Sterlite was the winning bidder at an auction of the assets May 30.It needed an agreement on the protections by Wednesday before itwould go forward with negotiating a deal, which must be reached bythe end of the year.
The break-up fee could be triggered by the acceptance of a rivalbid by the Asarco board.
For its part, Grupo Mexico, instead of purchasing assets it alreadyowns, has proposed providing as much as $4.14 billion to pay offenvironmental and asbestos claims against Asarco.
Grupo Mexico would initially put up $2.7 billion, use $1 billionthat Asarco has on hand and then kick in an additional $440 millionif needed. Asarco faces $5.3 billion in claims.
Critics of the Grupo Mexico proposal say it would lead to lengthytrials to determine how much Asarco has to pay to clean up coppermining and refining sites across the United States. (Reporting byErwin Seba; Editing by Braden Reddall and Carol Bishopric) Copyright 2008 Reuters, Click for Restriction