Vedanta push for Asarco hits bump in US court

June 14th, 2008 - 9:22 pm ICT by IANS  

New York, June 14 (IANS) Vedanta Resources’ takeover bid of US copper mining giant Asarco hit a bump Friday when a judge of a bankruptcy court in Texas signalled he might give Grupo Mexico SA, Asarco’s estranged corporate parent, one last chance to resume control of its US subsidiary. Judge Richard Schmidt asked why Grupo Mexico should not have the opportunity to file a plan to take the century-old American Smelting and Refining Co (Asarco) out of bankruptcy. While bidding, the Mexican company had promised to pay all creditors in full and take out of bankruptcy the mining company based in Tucson, Arizona.

London-based Vedanta’s subsidiary Sterlite Industries (India) has offered $2.6 billion to buy the operating assets of Asarco. But on Thursday, the Mexican firm proposed to recapitalise Asarco at $4.1 billion, part of that amount coming from Asarco’s own assets, with the rest as a cash infusion from Grupo Mexico.

The Mexican company has argued that auctioning Asarco’s assets, and applying any proceeds to settle outstanding claims, is unfair because it ignores the true value of what creditors are owed, assigning restitution based on what a bidder is offering, not actual liabilities.

Asarco has faced an unknown amount of liability from environmental claims because of a century of mining across the western US. Grupo Mexico has said one reason Asarco chose bankruptcy was to allow determining of claims against the company once and for all. Auctioning assets to Vedanta subverts that process, they said.

Asarco’s attorney has rejected that argument on the grounds that there are “execution risks” to Grupo Mexico’s plan, while Vedanta is ready to close the deal.

Vedanta’s takeover of Asarco has also been objected to by two Arizona Congressmen who expressed concerns about the metals and mining major’s environment track record.

Gabrielle Giffords and Raul Grijalva sent a letter Wednesday to US Attorney General Michael Mukasey, urging the Department of Justice to investigate Vedanta’s environmental record before allowing the deal to proceed.

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