Harbinger Capital, a hedge fund and one of US copper firm Asarco’s largest bondholders, has offered its own $500 million reorganisation plan for the bankrupt US copper miner in response to Sterlite Industries’ and Asarco’s parent Grupo Mexico’s claim for control of the company. The fund house termed Sterlite and Grupo Mexico as ‘unreliable suitors’ while making its own proposal at the Southern District court of Texas.
Asarco, which filed for bankruptcy in 2005 with over $1 billion in environmental damage and asbestos claims, is seeking to sell assets as part of a bankruptcy reorganisation plan. Sterlite has offered $1.1 billion in cash and a $600 million note. Mexican miner Grupo Mexico, which acquired Asarco in a leveraged buyout in 1999 but lost board control of the company due to the bankruptcy, has made a $1.55 billion competing offer for Asarco (including $1.3 billion in cash).
Harbinger, which is offering $500 million in cash and the assumption of certain liabilities for Asarco, asked the court to terminate the exclusivity period, so that various plans can compete against each other.
Despite offering less than half the cash offered by Sterlite and Grupo Mexico, Harbinger feels it has a better chance of winning. This is because, it feels, Sterlite’s plan cannot be confirmed because it will lack votes from asbestos creditors who have agreed to support Grupo Mexico’s plan.
Harbinger believes its plan is better than Grupo Mexico’s because it would allow Asarco to keep a $6.87 billion judgment against the Mexican miner that arose from a dispute over the
transfer of its one-time Peruvian mining unit, Southern Copper Corp. Moreover, it feels Grupo Mexico’s plan cannot be approved because it would allow the Mexican firm to retain control of Asarco.
Just Starting Over
Harbinger has stated that it would team up with another large bondholder, Citigroup Global Markets, to vote to reject Grupo Mexico’s reorganisation plan for Asarco. Harbinger and Citigroup together are owed about $300 million by Asarco. The attorneys of the fund house have indicated that they hope another suitor would offer more before August 31, the deadline set by all stakeholders to reorganise Asarco.
The three plans will be presented to creditors who will vote on the proposals. It is not going to be an easy way out as creditors themselves are split between the plans. Government agencies responsible for cleaning up Asarco’s pollution support the Sterlite sale, while people harmed by the asbestos products of an Asarco unit support the Grupo Mexico plan.
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