Asarco creditors claim sale offer ignores court-mandated criteria

By Caroline Salls

Pittsburgh, June 11 - Asarco LLC creditors Harbinger Capital Partners Master Fund I, Ltd. and Harbinger Capital Partners Special Situations Fund, LP objected to the final bid protections set for the proposed sale of substantially all of Asarco's assets, arguing that the stalking horse bid does not comply with a number of court-approved criteria.

According to the objection filed Tuesday with the U.S. Bankruptcy Court for the Southern District of Texas, although the $2.6 billion stalking horse bid submitted by Sterlite (USA), Inc. "was, on its face, the highest bid, it was by no means the best bid" because it does not meet several of the 12 bid factors previously approved by the court.

Harbinger said the Sterlite bid's flaws include the fact that Sterlite has no deal with the United Steel, Paper and Forestry, Rubber, Manufacturing, Energy, Allied Industrial and Service Workers International Union.

Instead, Harbinger said Sterlite plans to close the sale without any collective bargaining agreement with the USW, and the stalking horse bid commits Asarco to prosecute closing even if Sterlite decides against making a deal with the USW.

In addition, Harbinger said Sterlite and its controlling affiliate Vedanta are "environmental predators," with "a well-documented and appalling track record of running roughshod over environmental laws and regulations," despite the court's direction to consider the bidder's history of environmental compliance in determining the highest and best bid.

Harbinger also disputed the guaranty of Sterlite's performance by parent Sterlite Industries (India) Ltd., which Harbinger said has no assets or operations in the United States and no investment in Asarco.

"The only assets Sterlite has risked in its bid is a paltry $50 million letter of credit," Harbinger said in the objection.

Finally, Harbinger objected to Sterlite's plans to finance its acquisition with $780 million to $1.3 billion of uncommitted external financing.

Asarco, a Tucson, Ariz., mining company, filed for bankruptcy on Aug. 9, 2005. Its Chapter 11 case number is 05-21207.

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