Asarco, Sterlite ink new $1.7 billion sale agreement

By Caroline Salls

Pittsburgh, March 6 - Asarco LLC has signed a new $1.7 billion agreement to sell substantially all of its operating assets to Sterlite (USA), Inc., a subsidiary of Sterlite Industries (India) Ltd. and Vedanta Resources plc, according to a company news release.

"Reaching this agreement in such difficult economic times is a tribute to our board of directors and principal creditor groups," Asarco president and chief executive officer Joseph F. Lapinsky said in the release.

"It is satisfying to see months of negotiations finally bear fruit in an agreement that achieves value for all concerned."

Asarco said the sale price is $1.1 billion in cash plus a $600 million senior secured, non-interest bearing promissory note payable over nine years.

The principal amount of the note is subject to adjustment post-closing based on a reconciliation of Asarco's working capital.

According to the release, the operating assets to be sold include three copper mines, associated mills and SX-EW plants in Arizona; a copper smelter in Arizona; and a copper refinery, rod and cake plants and precious metals plant in Texas.

The sale is part of Asarco's Chapter 11 plan of reorganization.

The company said two letters of credit totaling $100 million secure the agreement. The letters of credit were issued by ABM Amro Chicago.

Asarco said an additional $25 million letter of credit will be issued if the bankruptcy court approves the disclosure statement for the company's reorganization plan.

Sterlite Industries (India) is guaranteeing the purchaser's performance under the new agreement, and Asarco has agreed to release Sterlite from any claims arising out of the first purchase and sale agreement signed in May 2008.

Until the U.S. Bankruptcy Court for the Southern District of Texas approved specified portions of the new agreement, Asarco said it can solicit and negotiate other offers under a go-shop provision. Following court approval, a no-shop restriction goes into effect; but Asarco's board of directors will have a fiduciary out, enabling it to consider and move forward with any superior alternative proposed transaction.

Asarco said it expects to receive the required court approval by April 15.

The entire agreement is subject to later approval of the bankruptcy court and confirmation of Asarco's plan of reorganization.

As previously reported, Asarco's plan confirmation was postponed indefinitely in October after mediation with Sterlite failed in connection with the first purchase agreement, valued at $2.6 billion.

Asarco terminated the first contract after Sterlite said it would not close the sale unless Asarco agreed to a price reduction.

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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