Sterlite to pay $50 mn break-up fee for dropping Asarco bid

Asarco will collect a $50 million break-up fee following the decision by Sterlite Industries (India) to cancel a $2.6 billion purchase of the bankrupt US copper producer, Asarco said today.

Asarco, based in Tucson, Arizona, will draw the entire amount of a $50 million letter of credit that Sterlite was required to post when it signed a contract to buy Asarco out of bankruptcy, said Asarco General Counsel Doug McAllister in a phone interview today. On October 13, Mumbai-based Sterlite told Asarco it must cut the purchase price by hundreds of millions of dollars, according to Asarco's lawyers.

The two companies and Asarco's parent, Grupo Mexico SAB, will participate in court-ordered mediation on October 30 and 31, McAllister said. US Bankruptcy Court Judge Richard Schmidt cancelled a vote by creditors on two competing reorganisation plans for Asarco.

"The whole reorganisation process has been suspended at this point," McAllister said. Sumanth Cidambi, Sterlite's associate director of investor relations, didn't immediately return a call seeking comment.

Asarco was trying to sell itself to Sterlite as part of a plan to reorganise and exit bankruptcy court protection. Grupo Mexico, through its America's Mining Corp unit has proposed a competing, $2.7 billion reorganisation plan.

Grupo Mexico, which owns Asarco through its Americas Mining unit, lost control of the copper miner after placing it in bankruptcy in 2005. Grupo Mexico is the largest mining company in Mexico.

Hearing cancelled
A November 17 hearing to decide between Grupo Mexico's reorganisation proposal and the former Sterlite plan has been cancelled, McAllister said.

Environmental and asbestos creditors supported the Sterlite plan because it included a settlement that would have paid them at least $2.1 billion.

Those creditors include government agencies trying to clean up pollution left behind by Asarco's mining activities and individuals who claim they were harmed by an Asarco affiliate's asbestos products.

Those two groups claim they are owed $5.2 billion. Grupo Mexico has offered to pay creditors in full to win back control of the company.