Asarco creditors support Sterlite bid

Committee of unsecured creditors mobilises members; says the offer outscores others.

Asarco’s unsecured creditors will support Sterlite Industries, the flagship firm of London-listed Vedanta group, in the bidding war for the bankrupt US copper mining firm.

A committee of unsecured creditors has written a letter to its members and requested them to vote in favour of Sterlite, keeping the estranged parent and rival bidder, Grupo Mexico, away from regaining control of the company.

The committee has filed the letter that it sent to its members with the US Bankruptcy Court at Corpus Christi in Texas. The committee said Sterlite’s plan would help Asarco to completely settle its debts.

Last week, bankruptcy court judge Richard Schmidt said the three bidders vying to buy Asarco should send out their proposals to creditors for a vote. The judge will take votes into consideration when he makes the final decision about which plan to adopt, after a week of hearings scheduled to begin in August.

The creditors’ committee said Sterlite’s plan would pay 72.5 per cent of their claims in cash. It also said Sterlite is the only one of the three bidders to reach a deal with Asarco’s primary union, which has threatened to strike if the company emerges from bankruptcy without a new labour deal.

Sterlite, which signed a memorandum of understanding (MoU) to acquire Asarco in March, had revised its offer late last month, increasing the non-cash component to $770 million from $600 million. The cash component of Sterlite’s bid stands at $1.1 billion. The non-ferrous metals producer had also improved its terms of payment to asbestos claimants, a vital group of creditors of Asarco, who had been seeking a settlement of personal injury claims.

Grupo Mexico had also revised their bid after Sterlite’s latest offer. The Mexican metal giant offered $1.46 billion in cash and a $280 million note. Hedge fund Harbinger Capital Partners, with the support of Citigroup Global Markets, had also submitted a $500 million all-cash offer for Asarco. Both Harbinger and Citigroup are creditors of Asarco.

Earlier this year, a federal judge in Brownsville ruled that Grupo defrauded Asarco’s creditors when it transferred Asarco’s stake in Southern Copper Corp, then known as Southern Peru Copper, to a subsidiary prior to Asarco’s bankruptcy case. The judge ordered Grupo to return to Asarco 30 per cent of Southern Copper’s shares, plus dividends, an award valued by the committee at $6.6 billion. Grupo Mexico is appealing against the judgment.