New York: India’s biggest copper producer Sterlite Industries (India) Ltd has said it will not be able to close a $2.6 billion (Rs12,584 crore now) deal to buy US copper miner Asarco Llc. out of bankruptcy, due to troubles in the credit markets, an Asarco attorney said on Tuesday.

Legal issues: Asarco had filed for bankruptcy protection in 2005. Matthew Staver / Bloomberg

The development throws a wrench in Asarco’s plans to exit bankruptcy protection, as Sterlite has been the company’s preferred sponsor for its reorganization plan.

However, the move could be a boon for Mexico’s top copper miner Grupo Mexico SAB, which owns 100% of Asarco’s equity and has been fighting to regain control of the company. Grupo Mexico lacks board control of its subsidiary due to the bankruptcy.

Grupo Mexico has offered a competing $2.7 billion plan to fund Asarco’s bankruptcy exit, but that has had less support from creditors who believe it will take them longer to receive payments than under the Sterlite deal.

Representatives for Grupo Mexico declined to comment. A Vedanta representative was not immediately available for comment.

Asarco, Sterlite and Grupo Mexico will participate in a mediation on issues regarding Asarco’s bankruptcy exit before judge Marvin Isgur in Houston beginning 30 October, Kinzie said. It was unclear whether the deal could be renegotiated.

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

Asarco creditors were in the process of voting on the competing plans for Asarco’s emergence for bankruptcy, but at a hearing in US bankruptcy court in Corpus Christi, Texas, on Tuesday, Kinzie told the court Sterlite could not close the deal.

Judge Schmidt scheduled another status hearing in the case for 4 November, according to court papers.

Sterlite’s all-cash offer for Asarco was announced in May and, at the time, would have been the largest acquisition by an Indian company outside of India in 2008.

Grupo Mexico, which purchased Asarco in 1999, has been involved in legal battles in several courts throughout the state of Texas, to try to regain control of the miner.

If Grupo Mexico is the ultimate winner of Asarco’s assets in bankruptcy, it could also change the course of a lawsuit Asarco brought against Grupo Mexico over a 2003 transfer of a Peruvian mining unit. Reuters

(Mica Rosenberg contributed to this story.)