Latinnews Archive

Latin American Weekly Report - 26 July 1990

Cananea back on the block; JUDGE LETS GOVERNMENT OFF BY RULING AUCTION ILLEGAL

Being the only official bidder was not enough for Grupo ICA to buy Compania Minera Cananea, Mexico's largest copper company (WR-90-26). A bankruptcy judge has ruled that the bid submitted on 25 June by Cuprifera Cananea -- a firm set up by ICA with minority interests from Teck Corp in Canada and Metallgesellschaft from Germany -- was unacceptable because 'it was manifestly illegal under the law covering the auction of bankrupt companies.'


Technical hitches

The judge, Sergio Higuera Mota, who is overseeing Cananea's bankruptcy, added that the US$ 45m letter of credit which served as a guarantee for Cuprifera's bid was not in the form it should have been. Apparently a letter of credit was not good enough. It should have provided a banker's draft which is for payment on demand.

The judge added that the Financiera Nacional Azucarera (Finasa), which acted as receiver, had wanted to be paid 50% of the amount within 30 days, while the remainder was to be paid 15 days later. In its bid Cuprifera Cananea offered payments over six months starting on 31 March 1993.

Fourth time lucky

This is the third time the government has failed to sell Cananea. In the first auction in April 1988, Grupo Protexa bid US$ 910m in Mexican debt for Cananea, but the deal fell through because Protexa's bankers could not arrange a debt swap for that amount. In October 1988, negotiations to sell Cananea directly began with Grupo Penoles and, again, with Protexa, but in November all negotiations were suspended.

The auction of 25 June was marred by the fact that Grupo Sintermex's higher bid arrived three minutes after the auction officially closed.

Judge Higuera has now announced that a new auction will take place on 25 August.


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