Hedge fund joins race for Asarco

The one-year-old takeover battle for bankrupt American copper miner Asarco has taken a new twist with the entry of a New York-based hedge-fund Harbinger Capital Partners.

Though Harbinger's $500 million bid to buy Asarco's assets is less than half the offers from Sterlite Industries and Grupo Mexico, the hedge fund said its plan stood a better chance because others would either lack enough votes from creditors or would not meet certain bankruptcy standards.

“A subsidiary of Harbinger submitted the offer to the bankruptcy court at Corpus Christi last week and the court will take the decision on June 5. Sterlite will not take any immediate steps until the court completes its hearing related to takeover offers,” said sources close to the development.

Harbinger, which has support from Citigroup Global Markets Inc, has given support to Asarco in its fight against Grupo and environmental suits. Asarco, which owns three copper mines in Arizona, was sued for $1.6 billion due in an environmental clean-up suit. According to court documents, Citigroup Global Markets and Harbinger together comprise Asarco's largest bondholders.

Grupo Mexico on May 15 formalised its $1.55 billion offer for bankrupt miner by filing its own proposal for Asarco's reorganisation in the court. The Mexican company, which acquired Asarco in a leveraged buyout in 1999 but lacks board control of the company due to the bankruptcy, was competing against the revised offer submitted by Vedanta group company, Sterlite.

The Indian copper producer had offered $1.1 billion in cash and and about $600 million of senior secured notes, payable over nine years, to Asarco. Grupo had offered $1.3 billion in cash and a $250 million fully committed loan to regain control of Asarco.

After the crash of the commodity market, Sterlite had successfully renegotiated the acquisition price down by $900 million from the earlier offer price of $2.6 billion in March after Grupo had withdrawn its first counter bid. Now the commodity market revival is forcing other players to enter the fray, said a Mumbai-based metals analyst.

Copper prices surged to the highest — about 50 per cent rise globally this year — since October 2008 on speculation that increased spending in China will boost demand.

When Asarco filed for bankruptcy in 2005, the court and a creditors committee assumed control of the company, which Grupo bought in 1999. Labour disputes led to a four-month strike and it ended after Asarco filed for bankruptcy protection. Recovering from the hurts of bankruptcy, Asarco had posted profit of about $1.9 billion last year.