Reuters cited an Asarco attorney said that Sterlite Industries will not be able to close a USD 2.6 billion deal to buy US copper miner Asarco LLC out of bankruptcy due to troubles in the credit markets.

Mr Jack Kinzie a lawyer who represents Asarco in the case said that Sterlite a unit of Vedanta Resources Plc they will not close the deal absent a substantial reduction in the purchase price. 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.

Mr Kinzie said that Asarco, Sterlite and Grupo Mexico will participate in mediation on issues regarding Asarco's bankruptcy exit before Judge Marvin Isgur in Houston beginning October 30th.

Mr Kinzie told the court Sterlite could not close the deal, 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.

However the move could be a boon for Mexico's top copper miner Grupo Mexico 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 USD 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.

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.

Asarco which owns 3 copper mines in Arizona filed for bankruptcy protection in 2005 after it was sued for USD 1 billion over environmental cleanup and asbestos claims.

The copper markets also look starkly different from when the deal was