Grupo Mexico should get Asarco back, judge recommends

Vancouver – It’s time for a bankrupt American runaway to go back home to its Mexican parent company.

At least that’s what a U.S. bankruptcy judge has essentially recommended in the latest chapter of Asarco’s four year bankruptcy process that has lately seen Grupo Mexico (GMBXF-O, GMEXICOB- M) wrangling with Indian-commodities giant Vedanta Resources (VDNRF-O, VED-L) for control of Asarco, a titan of America’s copper mining industry.

In what has been called one of the most complex bankruptcy proceedings in America’s history Schmidt has ruled that a US$2.2 billion reorganization plan proposed by Grupo Mexico – one of many submitted over the years by various stakeholders – is superior to Vedanta’s competing plan.

According to a Grupo Mexico press release Judge Richard Schmidt made a decision in its favour on Aug. 31. The decision is a major victory for Grupo Mexico as it tries to regain the control of a company it lost after putting it under creditor protection in 2005, largely due to outstanding environmental liabilities.

For a final decision on the matter Schmidt has referred his recommendation to U.S. district court judge Andrew Hanen who has ultimate authority over deciding which route Asarco will take as it climbs out of bankruptcy.

But how likely is it that Hanen will uphold Schmidt’s decision?

“I think there’s still some fog before us,” says Asarco’s lead bankruptcy counsel Jack Kinzie, adding: “It’s hard to say with certitude what’s going to happen.”

Kinzie notes that Vedanta and Asarco’s other creditors and parties of interest all have court standing to object to judge Schmidt’s report and recommendation. He says they have until Sept. 10 to file their objections.

Whether Vedanta plans on objecting is unclear, however. Vedanta has not issued a press release in response to the ruling and U.K.-based Vedanta officials were not available at presstime for comment.

Like Schmidt, Hanen will have a chance to weigh the pros and cons of Grupo Mexico’s plans versus the desires of creditors, which have in the past been split over Grupo and Vedanta’s plans. 

Asarco’s major creditors are the U.S. government, a number of state governments and thousands of claimants who seek compensation from injuries incurred at Asarco’s now shuttered operations which manufactured asbestos and asbestos-containing products

More to come