PREVIEW-Grupo Mexico's Asarco appeal hinges on technicality

By Emily Chasan

NEW YORK, Aug 19 (Reuters) - Grupo Mexico's (GMEXICOB.MX) fight to regain control of bankrupt U.S. copper miner Asarco LLC could pick up steam again on Wednesday as it faces a hearing in its latest appeal of a bankruptcy court ruling.

The Mexican miner is arguing that the bankruptcy court improperly approved a break-up fee in rival bidder Sterlite Industries Ltd's (STRL.BO) $2.6 billion offer for Asarco, since Grupo Mexico had offered more.

But Grupo Mexico's appeal likely hinges on whether the District Court, which is hearing the appeal, believes the bankruptcy court's order was final, experts say.

"The basic rule is that in a court case, whether it is bankruptcy or another case, we don't want people always running off to the appellate court," said Mark Scarberry, a bankruptcy law professor at Pepperdine University School of Law.

"In order to appeal, typically the law requires there be a final order or a final judgment in the case."

Lawyers for Asarco have claimed the District Court cannot hear Asarco's appeal because the bankruptcy court's decision, which would allow a $52 million break-up fee to be paid to Sterlite if the deal does not go through, was an interim order to create a process for evaluating reorganization plans for Asarco.

"All the (bankruptcy) court has done is prescribe the procedures it chooses to follow in selecting competing plans," said David Carlson, a bankruptcy law professor at the Cardozo School of Law in New York. "No plan has been approved and no bid has been accepted."

Grupo Mexico bought Asarco in 1999 and owns 100 percent of Asarco's shares. However, the Mexican miner lacks board control of the company due to the bankruptcy filing.

Asarco, which owns three copper mines in Arizona, filed for bankruptcy protection in 2005 after it was sued for $1 billion over environmental clean-up and asbestos claims.

Sterlite, an affiliate of London-listed Vedanta Resources PLC (VED.L) , said in late May it would buy the operating assets of Asarco in a $2.6 billion all-cash deal.

Grupo Mexico, in turn said it would do absolutely everything in its power to block the sale of its subsidiary, and made an alternate bid of $2.7 billion in cash, plus a promise of full recovery for Asarco's creditors -- an offer a Grupo Mexico unit said is worth at least $7 billion in court documents filed last week.

However, Grupo Mexico may have a tough time convincing the higher courts to hear its arguments on appeal, experts say.

"It's really stacked against the parent here," Carlson said. "(The District Court) can either do a ton of work on the finality question and on the merits of the case and take the appeal, or it can do very little work and find it's not final."

If the District Court ultimately agrees with Asarco that the order was not final, then Grupo Mexico may have to wait to fight the break-up fee until December, when the bankruptcy court is scheduled to approve a reorganization plan for Asarco.

The bankruptcy court has allowed Grupo Mexico to put forward its own reorganization plan for Asarco, which could still potentially be chosen as the final plan.

Grupo Mexico, however, claims that Asarco has "demonized" it, put up obstacles to a bid from Grupo and that the order was final, according to court documents.

Even if the District Court finds that the order was not final, Grupo Mexico has asked for an exception so it can go forward with its appeal. The reason, experts say, is what could happen if it waits until the final order.

"It's a Catch-22," said Jay Westbrook, a bankruptcy law professor at University of Texas's School of Law in Austin. "...if this one isn't appealed the parent might have to wait until there's an order approving the sale (to Sterlite), put up a multi-billion dollar bond in order to appeal, and as a practical matter, the case could be finished." (Reporting by Emily Chasan; editing by Carol Bishopric)