Judge Richard Schmidt of the U.S. Bankruptcy Court for the Southern District of Texas, Corpus Christi Division, on Monday issued a formal recommendation to confirm the reorganization plan sponsored by Americas Mining Corp., an affiliate of Grupo Mexico SAB de CV, and Asarco Inc., the parent companies of copper miner Asarco LLC. The judge's recommendation proposes that the federal district court approve the parent companies' plan rather than the one filed by the debtor, Asarco LLC and its sponsor, Sterlite (USA), Inc.
Schmidt reportedly wrote in his 27-page recommendation that the parent plan, which is for Mexican miner Grupo Mexico to take control of the company as it emerges from bankruptcy, pays $2.4799 billion for the assets of the debtor, while the debtor's plan pays $2.1675 billion.
Although the recommendation is not binding, it is expected to weigh on the final decision. Judge Andrew Hanen of the U.S. Federal District Court in Brownsville, Texas has the responsibility of confirming any plan of reorganization.
Mired in asbestos claims, Asarco LLC filed for chapter 11 bankruptcy protection on August 9, 2005. Its main creditors include government agencies seeking environmental claims and asbestos claims from individuals. Although Grupo Mexico acquired Asarco in a leveraged buyout in 1999, it lost control when an independent board was constituted, and Grupo Mexico's interest in Asarco vacillated in tandem with the fluctuation in copper prices.
Last year, Vedanta Resources Plc (VED.L) made a $2.6 billion offer for the miner through Sterlite Industries India Ltd. (SLT) and withdrew it later citing the price was too high. But earlier this year Vedanta approached the company again with a $1.1 billion offer in cash and a promissory note worth $600 million. Last month, Sterlite raised its offer for the operating assets of Asarco LLC by about $500 million, resulting in a revised total consideration of about $2.1 billion.
Commenting on the judge's recommendation, Joseph Lapinsky, President and Chief Executive Officer of Asarco LLC, said, "Our Board will consider the court's recommendations and findings and then, in consultation with our advisors, major creditor constituencies, and Sterlite, will determine the next steps that are in the best interest of the debtors and their estates."
It is reported that the creditors favor the Sterlite deal.
The court issued the ruling after a two and a half week confirmation hearing.
ASARCO operates a smelter, three mines, associated mills and solvent extraction-electrowinning plants in Arizona, and a refinery complex in Texas. It has about 2500 employees.
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