Wednesday, July 16, 2008

Asarco Followup-4

"A U.S. judge on Tuesday breathed new life into Mexico mining giant Grupo Mexico SA's [GMSA] efforts to win back its U.S. subsididary, Asarco, LLC, despite Asarco's plan to sell its assets to an Indian metals group. Judge Richard Schmidt of the U.S. Bankruptcy Court in Corpus Christi, Texas, gave [GMSA] permission to file a reorganization plan for the company, something the Mexican company has been barred from doing so far in Asarco's bankruptcy case. ... [GMSA] said its own plan would top the $2.7 billion and satisfy Asarco's many creditors, including federal and state environmental agencies. ... 'Although we disagree with the court's ruling in granting bid protections to Sterlite Industries, we are gratified that we should have the right to file our own reorganization plan,' said Luc Despins of the New York firm Milbank Tweed, which represented [GMSA]. ... Throughout the case Asarco has resisted [GMSA's] efforts to regain control. Asarco says it was forced into bankruptcy in an attempt by the Mexican parent to avoid paying Asarco's environmental liabilties resulting from its mining activities", WSJ, 2 July 2008.

What's Judge Schmidt doing? That GMSA effected a fraudulent transfer in relieving Asarco of its Southern Coppper shares seems obvious to me. GMSA has "dirty hands" and should be thrown out of court. Or a lot worse. The GMSA-Asarco situation reminded me of a case I encountered 18 years ago, Voest-Alpine v. Vantage, 919 F2d 206 (3rd Cir., 1990). "On June 13, 1986, the day after VATCO filed for summary judgment against Paige, the Stablers, through their attorney in that action and in conjuction with their secured lender, New Jersey National Bank (NJNB), to which they owed over $1,5 million, put the Paige Group up for sale. ... That purchase was found by the district court to have been structured 'through a "foreclosure" by NJNB in order to launder the assets [in question] and cleanse the Paige Group of its unsecured debt'," my emphasis. Didn't German Larrea (GL) admit GMSA wanted to do this with respect to Asarco's environmental liabilities? Or did I fail to understand what GL said? "Before the foreclosure, Paige was a troubled but going business with assets of over $1.7 million, a debt to NJNB of $1.5 million (guaranteed by the Stablers whose known assets were about $300,000), and debts to unsecured creditors of about $800,000, which included the debt owed to VATCO. After the August 8, 1986 transactions, Paige had no assets and no secured debts. It did, however, continue to owe its unsecured creditors, who for their part, however, now had no Paige assets from which to collect". Sound familiar? What happened to Asarco's interest in Southern Copper?

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