September 22, 2009 / 12:32 AM / 11 years ago

UPDATE 1-Sterlite offers to let Grupo out of Asarco penalty

* Sterlite offers to release Asarco from $8 bln of penalty

* Grupo Mexico’s potential liability would not top $900 mln

By Emily Chasan

NEW YORK, Sept 21 (Reuters) - Sterlite Industries Ltd STRL.BO said on Monday that it would release Grupo Mexico SAB de CV (GMEXICOB.MX) from a potential legal liability of nearly $8 billion if the Indian miner can win control of bankrupt U.S. copper miner Asarco LLC.

In a court document filed on Monday, Sterlite said that if a federal court approves its plan to acquire Asarco over rival bidder Grupo Mexico’s offer, it would not hold Grupo Mexico liable for more than about $900 million of liability related to the 2003 transfer of a Peruvian mine.

This is the latest twist in the year-long battle for control of Asarco, which owns three copper mines in Arizona.

Grupo Mexico has been desperate to regain control of Asarco after a federal district judge found in April that Grupo Mexico had made a “fraudulent transfer” of Asarco’s “crown jewel” stake in Peruvian miner Southern Copper Corp PCU.N in 2003 and ordered Grupo Mexico to return the stake along with a cash payment.

Grupo Mexico, the largest copper miner in Mexico, acquired Asarco in a leveraged buyout in 1999 but lacks board control because of the bankruptcy.

Grupo Mexico is appealing the decision, but until now a central issue in the case has been that the judgment would disappear if Grupo Mexico wins, but would stand if Sterlite were to take over Asarco.

Sterlite said in court papers on Monday that it was willing to stipulate that the “net present value” of the judgment was $9.13 billion, and based on that value, it would agree to release Grupo Mexico from most of the obligation.

Sterlite said in the court papers that Grupo Mexico could still appeal the decision and may end up paying nothing to Asarco.

A Grupo Mexico spokesman was not immediately available to comment.

In August, a federal bankruptcy judge made a nonbinding recommendation that Mexican miner Grupo Mexico be allowed to take control of U.S. copper miner Asarco LLC as it emerges from bankruptcy.

Judge Richard Schmidt of the U.S Bankruptcy Court in Corpus Christi, Texas, had said Grupo Mexico’s $2.48 billion plan was better than Sterlite’s plan, as it would offer more recovery to creditors. Sterlite has contested that decision and earlier this month Sterlite raised its offer for Asarco to $2.57 billion.

Asarco sought bankruptcy protection in 2005 amid a strike and more than $1 billion in environmental damage and asbestos claims.

The cases are In re: Asarco LLC, U.S. Bankruptcy Court, Southern District of Texas, No. 05-21207 and In re: Asarco LLC, U.S. District Court, Southern District of Texas, No. 09-00177.

Reporting by Emily Chasan; additional reporting by Phil Wahba; Editing by Phil Berlowitz

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