Sunday, June 29, 2008
"The takeover of U.S. copper giant Asarco LLC by India's Vedanta Resources PLC may have hit a bump Friday. A judge presiding over a U.S. bankruptcy court in Texas signaled he might give Grupo Mexico SA [GMSA], Asarco's estranged corporate parent, one last chance to resume control of its U. S. subsididary. ... The Mexican company has promised to pay all creditors in full and take Asarco, a copper-mining company in Tucson, Ariz., out of bankruptcy. Until now, the court has kept [GMSA] from filing its plan. ... But Thursday, the Mexican mining company proposed to recapitalize Asarco at $4.1 billion, part of that amount coming from Asarco's own assets, with the rest as a cash infusion from [GMSA]. ... Since it bought Asarco in 1999, [GMSA] has complained Asarco faced an unkown amount of liability from environmental claims because of a century of mining across the western U.S.", Joel Millman & David McLaughlin at the WSJ, 14 June 2008.
How much cash will GMSA contribute to its plan? I wouldn't let GMSA propose a plan. Southern Copper Corp.'s (PCU-NYSE) 2007 Form 10-K and 2008 Proxy Statement reveal GMSA held 221.1 million PCU shares, worth $22.8 billion at $102.95 each. On 1 April 2005 PCU issued GMSA 134.4 million shares in an "apparently" unrelated transaction. Assuming the balance, 86.7 million (221.1 - 134.4) were "old" Asarco shares, as I see it, GMSA holds an Asarco asset worth $8.9 billion (86.7 x $102.95). Judge Richard Schmidt should tell GMSA and its lawyers "get lost". GMSA put Asarco into bankruptcy in August 2005, after the 134.4 million shares were issued. Do I smell a "usurpation of corporate opportunity" suit here? Where's the FBI, SEC, DOJ? What's going on? Is this a bankruptcy fraud, 18 USC 152? Should GMSA's lawyer-client privilege be lost under the "crime-fraud exception"? Stay tuned.