Vancouver – It appears that Grupo Mexico (GMBXF-O, GMEXICOB-M) has dodged a US$10 billion bullet.
In a duel between the Mexican mine and rail conglomerate and India-based Vedanta Resources (VDNRF-O, VED-L) for control of a bankrupt stalwart of the American copper industry, Asarco, district court judge Andrew Hanen has deemed Grupo’s plan or reorganization better for creditors than its rival’s designs.
The upshot is that Grupo will not only get back the company it, in 2005, forced into bankruptcy – and of which it subsequently lost control – but also a 30.5% stake of Southern Copper (PCU-N) which judge Hanen, in a separate decision in August 2008, said had been fraudulently transferred from Asarco by Grupo to its own, wholly-owned, subsidiary.
Hanen essentially characterized Grupo’s 2003 acquisition of the Southern Copper stake as the plucking of Asarco’s crown jewel which then made it difficult for the soon-to-be-bankrupt company to pay back its creditors. Those vying for payment from Asarco include U.S. state and federal governments for environmental liabilities and an umbrella group overseeing an asbestos related settlement.
Hanen ordered Grupo return the shares, now worth about US$9 billion, and about US$1.4 billion in missed dividends and interest to Asarco.
But Hanen’s latest decision in favour of Grupo appears to make moot his earlier opinion on the shady share transfer. By choosing Grupo over Vedanta, both of which have submitted increasingly sweet reorganization plans over the past year, Hanen assures Grupo will ultimately retain control of the 30.5% stake in Southern Copper. Including that stake Grupo has about a 75% interest in Southern Copper.
Asarco vice president and general counsel Jorge Lazalde says in a statement that the restructuring plan will result in a more vibrant Asarco.
“Our plan not only accomplishes those goals,” Lazalde says, “but will allow us to achieve our original vision when we acquired Asarco in 1999 of capitalizing on the significant synergies that exist between Asarco and (Grupo’s) other operations around the world while enhancing the quality products and dependable services (Grupo) and Asarco provide to their customers.”
Among other stipulations, Grupo’s plan puts it on the hook for US$2.2 billion in cash to help pay back Asarco’s creditors. Grupo says it has arranged a syndicate of financial institutions to finance US$1.4 billion of the US$2.2 billion, with US$800 million coming from its coffers.
Grupo expects the plan to close in December.
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