US seeks court order to block Asarco unit sale
Date: 12-Aug-02
Country: USA
Author: Deborah Charles
In a motion filed with the U.S. District Court in Washington state, the Justice Department asked the court to block Asarco, a unit of Grupo Mexico , from selling its 54 percent share in Southern Peru Copper Corp. to Asarco parent Americas Mining Corp. (AMC).
Asarco said it was surprised and "very troubled" by the Justice Department's move last week, saying a block of the deal could derail the company's financial restructuring plans.
The Justice Department's Environment and Natural Resources Division said financially strapped Asarco owes the United States hundreds of millions of dollars for environmental liabilities incurred from mining and smelting facilities across the country.
Asarco has told the government it is unable to meet its cleanup obligations. The miner has federal environmental cleanup liability in at least 18 sites around the United States in addition to responsibilities in various state sites.
The government, in its role as a creditor to Asarco, rejected the miner's plans to sell its holding of Southern Peru Copper to AMC, which was due to take place later this month.
Justice Department lawyers said in the court documents that the sale amount is "significantly below" the stock's fair market value and is not in Asarco's best interests nor that of its creditors.
"If allowed to proceed, this transfer will strip Asarco of the only asset that can possibly provide the critically needed cash necessary to pay its outstanding creditors, including the United States," the government said in the court filing.
Asarco disagreed, saying independent experts had validated the proposed selling price.
Justice Department officials said they had been negotiating with Asarco over the terms of its deal to sell Southern Peru Copper but had failed to reach an agreement.
Consequently, the Justice Department decided to take the unusual step of filing for the temporary restraining order.
The government said the transfer of property is fraudulent under the Federal Debt Collection Procedures Act (FDCPA).
"Under the FDCPA, a transfer of property is fraudulent if...a person who is a 'debtor' to the United states does not receive a 'reasonably equivalent value' in exchange for the transferred property and the debtor is 'insolvent' at that time or becomes insolvent as a result of the transfer," it wrote.
Southern Peru Copper is one of the 10 largest private sector copper mining companies in the world, the court documents said, adding that a public sale of Asarco's interest in the Peruvian miner would generate "significant interest" within the industry and likely competitive bids.
The government objected to the price of the deal to sell Southern Peru Copper and the structure of the transaction.
"This is a transaction whose terms have been dictated to and imposed upon a failing subsidiary - Asarco-by its cash-poor parent - Grupo Mexico," the court document said. "The transfer comes at a time when Asarco is insolvent and on the verge of failure and when Grupo Mexico urgently wishes to keep control of this valuable stock option."
Asarco, bought by Mexican conglomerate Grupo Mexico in 1999, and its parent have been hit by sagging metal prices and lower sales. Asarco has shut several of its U.S. operations to cut costs and is renegotiating its heavy debt load.
The company has close to $1 billion in debt and is negotiating a restructuring of a $450 million revolving line of credit that comes due in November.
"Contrary to what the Justice Department has said, selling the shares of Southern Peru is the best way for Asarco to meet its future obligations and remain economically viable," said Asarco spokesman Clay Allen.
"By paying off this loan with proceeds from the sale, Asarco will free up significant cash each month that is now used for interest payments on the debt," he added.
The Justice Department said the United States would likely suffer "irreparable harm" if the court does not grant the rest
