Grupo Mexico says most of it safe from US court
Date: 13-Aug-02
Country: MEXICO
Author: Pav Jordan
The company's statement came as shares of the Mexico City-based firm slid 6.64 percent yesterday to close at 11.25 pesos per share, after dropping 7.31 percent on Friday.
The U.S. Department of Justice on Friday filed a request for a temporary restraining order against Grupo Mexico's Asarco Inc. unit, which owes the United States millions of dollars for environmental damages at mining and smelting sites.
The motion asked the U.S. District Court in Washington state to block Asarco from selling its 54 percent share in Southern Peru Copper Corp. (SPCC) to Asarco parent Americas Mining Corp. (AMC).
"Grupo Mexico notes the referred action has repercussions only in Asarco, and in no way will have effects in the rest of its subsidiaries," the company said in a statement.
Grupo Mexico said the subsidiaries that would not be harmed are its railway group Grupo Ferroviario Mexicano, Southern Peru Copper, and its Mexican mining arm Grupo Minero Mexico.
Americas Mining Corp. is the umbrella company that holds all of Grupo Mexico's mining companies.
Some mining industry analysts said Grupo Mexico, currently renegotiating a multi-million-dollar debt load, might see its risk profile raised amid the Justice Department's action.
"We believe the temporary restraining order may further complicate the debt restructuring and adds to the risk of Grupo Mexico's shares," UBS Warburg said in a research note.
Grupo Mexico had a total debt load as of June 30 of $2.76 billion and net debt of $2.47 billion.
In 2002, the company has to come up with some $626 million to meet debt obligations, most of which ($450 million) is owed by its Asarco unit.
An environmental advocacy group said last month that Asarco and Grupo Mexico were trying to avoid huge clean-up costs in Washington, Montana and elsewhere by stripping Asarco of assets that could be used to pay for clean-ups.
Analysts view Grupo Mexico's plan to sell Asarco's 54.3 percent stake in SPCC to its America's Mining company as an attempt to reduce debt levels at Asarco.
Grupo Mexico said in the statement yesterday that it has been discussing a potential sale of the SPCC stake for some time.
"This action by the (Justice) Department constitutes a preventive measure, and it takes place in the context of the discussions that Asarco has held with it for many weeks in order to agree upon the terms of the potential sale," Grupo Mexico said.
The company also argued the sale of SPCC to Americas Mining would allow it to improve its credit profile with a solid financial position.
