Will the auction for bankrupt copper mining company Asarco LLC ever end? Asarco is set to head to the U.S. Bankruptcy Court for the Southern District of Texas in Corpus Christi Tuesday for a hearing on a joint disclosure statement for three reorganization plans, but the disclosure statement had yet to be filed by early Tuesday. The heated bidding for Asarco's assets could be one reason for the delay -- Judge Richard Schmidt of the Corpus Christi court originally was to weigh the joint disclosure statement on May 26.
Interest in Asarco has ebbed and flowed. In June 2008, Sterlite (USA) Inc., an affiliate of London's Vedanta Resources plc, was named the winner -- of the moment, apparently -- of Asarco with a $2.6 billion bid. Both estranged Asarco parent Grupo México SAB de CV and bondholder Harbinger Capital Partners Master Fund I Ltd., losing bidders in the auction to sponsor Asarco's reorganization plan, objected to the sale.
Schmidt in September subsequently approved the disclosure statement for Asarco's reorganization plan, as well as a disclosure statement for a rival plan submitted by Grupo México that centered on a $2.7 billion cash payment plus an additional $440 million guaranteed payout. A Nov. 17 confirmation hearing was set on the plans, setting up a battle to be decided by voting creditors of Asarco.
Creditors, however, never got a chance to choose a winner, because Sterlite pulled its bid Oct. 13, blaming frozen credit markets and the decline in copper prices for its inability to finance its operations and complete the acquisition. Asarco terminated the deal on Oct. 22. Grupo México dropped its own bid on Dec. 1.
But that was only the first act in a riveting play in bankruptcy court that awaits its denouement. Even before the end of October, as Asarco, Sterlite and Grupo México participated in a court-ordered mediation, Sterlite was rumored to be back on the scene with a lowered $2.1 billion bid. Sterlite's return became official in March when it offered $1.7 billion: $1.1 billion in cash plus a $600 million promissory note.
Grupo México in April said during a court hearing it would offer $1.3 billion, all in cash. Nevertheless, Schmidt on April 22 approved bidding protections for the Sterlite deal, including a $26 million breakup fee and up to $10 million in expense reimbursement if Asarco chose another buyer or decided to pursue a standalone plan. The judge signed off on the disclosure statement for a plan including the sale on May 12. Three days later Grupo México filed a reorganization plan containing its proposed sale.
Harbinger returned to the fold as well. On May 26, the hedge fund won the right to file a third plan centered on a $500 million cash purchase plus the assumption of certain liabilities. Since then, Grupo México and Sterlite have repeatedly upped their offers. Grupo México added $3.1 million in cash plus a $250 million note for asbestos claimholders on June 2; Sterlite added $170 million to its note on June 14. Most recently, on June 23, Grupo México again increased the cash payment, this time to $1.4625 billion and inflated the note to $280 million. The parent said work continued on a joint disclosure statement with Asarco.
The company looks set to go ahead with the hearing on the statement -- solicitation materials for voting were filed Monday -- but with the way the case is going, however, don't count on the disclosure statement surfacing. - David Elman
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