NEW YORK/MEXICO CITY, April 22 (Reuters) - A U.S. bankruptcy judge allowed U.S. copper miner Asarco LLC to proceed with a plan to sell itself to India’s Sterlite Industries STRL.BO for $1.7 billion, and for Sterlite to protect its bid from competing offers.
Judge Richard Schmidt, who sits in U.S. bankruptcy court in Corpus Christi, Texas, entered an order on Wednesday, approving the proposed sale agreement, which will be incorporated into Asarco’s reorganization plan, according to court papers.
The agreement allows for Sterlite to receive certain protections designed to protect its bid from competing offers, including a break-up fee and expense reimbursement if its deal does not go through.
Creditors will have the ability to vote to accept or reject the proposed Sterlite plan, according to court documents.
The decision, pushes Asarco one-step closer to exiting its four-year-long bankruptcy as creditors will soon have the opportunity to vote on its revised organization plan.
Asarco, which owns three copper mines in Arizona, filed for bankruptcy protection in 2005 after it was sued for $1 billion over environmental cleanup and asbestos claims.
In October, Sterlite, a unit of London-listed Vedanta Resources PLC (VED.L), backed out of an earlier $2.6 billion deal to buy the company, saying it would need a substantial reduction in price after a drop in the copper markets. [ID:nN14530773]
In the order posted on Wednesday, Judge Schmidt found that Asarco had fully-marketed its assets and is “unlikely to identify new qualified bidders, absent a dramatic increase in copper prices.”
Mexican miner Grupo Mexico SAB de CV GMEXICOB.M, which acquired Asarco in 1999 but lacks board control due to the bankruptcy, said on Wednesday it will still go through with its competing $1.3 billion cash offer to regain control of the company through its own reorganization plan.
“The path is clear for our plan and most importantly, our right to sue Sterlite after our plan has been confirmed (by the court) has been preserved,” said Jorge Lazalde, Grupo Mexico’s legal council in the Asarco case.
Lazalde said Grupo Mexico reserves the right to sue Sterlite for breach of contract for pulling out of the earlier $2.6 billion offer.
Under the new purchase agreement, Sterlite is released from any claims Asarco would have against it for backing out of the earlier deal.
Under the proposed Sterlite deal, Sterlite will pay $1.1 billion cash plus $600 million in senior secured notes, payable over nine years.
Sterlite’s plan will allow Asarco company to pay its administrative priority claims in full, and provide initial cash distributions to unsecured creditors of about 70 cents on the dollar on their claims, according to court documents.
The case is In re: Asarco LLC, U.S. Bankruptcy Court, Southern District of Texas, No. 05-21207 (Reporting by Emily Chasan in New York and Mica Rosenberg in Mexico City; Editing by Anshuman Daga)