With Asarco coming out of bankruptsy. Q gold can now sell the option holdings we have to them.
Bankruptcy judge endorses Grupo Mexico's Asarco reorganization plan
Although Sterlite's proposed plan for the reorganization of bankrupt US copper miner Asarco was overwhelmingly preferred by creditors, a U.S. bankruptcy judge has recommended Asarco be returned to its parent, a Grupo Mexico subsidiary.
Author: Dorothy Kosich
Posted: Tuesday , 01 Sep 2009
RENO, NV -
A Corpus Christi, Texas, federal bankruptcy judge Monday endorsed the reorganization plan offered by Asarco parent Grupo Mexico over the reorganization plan offered by Sterlite Industries and its parent Vedanta Resources of India.
The ruling marked the culmination of a four-year bankruptcy case, which began in 2005 when Asarco first sought bankruptcy protect because it had run out of cash, was saddled with a huge environmental liability, potential asbestos liability, debt, falling copper prices and a workforce on strike.
In his decision Judge Richard S. Schmidt praised "Asarco's leadership and its workers "who had achieved cooperative relations, which have enabled the U.S. copper miner to improve operations and capitalize on rising copper prices during the past four years.
"In that time, the Debtors have devoted significant attention to continuing operations in Chapter 11 with minimal disruption, improving corporate governance and controls, stabilizing the Debtors' financial condition, increasing productivity, improving labor relations, and most importantly, improving the Debtor's cash condition, all of which paved the way for a successful reorganization. Moreover, the Debtor and its professionals continuously moved this case toward the confirmation and a plan that results in the best possible recovery for credits-full payment."
Grupo Mexico's plan will contribute $2.2 billion in cash to Asarco's debtors; provide a $280 million promissory note, a $200 million working capital facility to fund reorganized Asarco's operations after bankruptcy and a release of Grupo Mexico's claims against Asarco.
"To demonstrate its intension and ability to fully and timeously consummate its plan, the parent has established an escrow account funded with 83,710,000 shares of SCC [Southern Copper Company), with a market valuation as of the close of the confirmation hearing in excess of $2.4 billion," the court noted.
Grupo has deposited $500 million in cash in an escrow account that ensures the parent will timeously implement its Asarco reorganization plan.
Asarco and the United Steel Workers are the only parties objecting to Grupo Mexico's resumption of the ownership of Asarco, the judge said.
However, the court said, "Ultimately, this exceedingly complex bankruptcy case boils down to two major issues. ...1) whether the parent's plan violated the special successorship clause of the collective bargaining between the debtor and the union, and 2) assuming it does not, which plan should be confirmed under Section 1129(c) of the Bankruptcy Code."
"Because this Court believes both plans are confirmable but that the Parent's Plan should be confirmed, the Court will make detailed recommended findings with respect to the Parent's Plan," the judge wrote.
Judge Schmidt recommends that the District Court confirm Grupo's plan and deny confirmation of Asarco's preferred option of the $2.1 billion Sterlite Plan which also offered a $208 million copper price participation note and full repayment of creditor's claims.
Sterlite originally contracted to purchase the assets of Asarco for $2.6 billion, but later defaulted.
A federal district judge will have final say over the bankruptcy court's recommendation.
Meanwhile, Grupo Mexico also owes Asarco more than $6 billion from a fraudulent stock conviction handed down by a U.S. District judge in Brownsville, Texas earlier this year. Grupo's subsidiary Americas Mining Corporation was ordered to return 260,093,694 shares of Southern Copper Corporation stock to Asarco.
The stock is worth $4.68 billion, and AMC must pay $1.35 billion in monetary damages to Asarco for taking the stock away from Asarco in the first place. Asarco will now own a 30% interest in Southern Copper Corporation. Grupo has appealed the decision.
The Arizona Star suggested Schmidt's decision sets the stage for a possible strike by the United Steelworkers, which represents 1,400 of Asarco's 2,500 employees.
