Vitro announced yesterday it has initiated a process in a Mexican court aimed at recovering close to $1.6 billion USD in damages resulting from lawsuits which placed the company and 17 subsidiaries into involuntary bankruptcy, later dismissed on appeal.
The Mexican glassmaker completed a bankruptcy restructuring plan in Mexico in February. Enforcement of the same restructuring plan was denied in the U.S. in November.
According to the Mexican restructuring plan, newly issued bonds and payments currently are held in a trust for noteholders who do not accept the Mexican plan.
“It should be noted that under the approved restructuring plan, the new bonds issued and payments made by Vitro to bondholders who opposed the restructuring were placed in a trust which stipulates that Vitro may collect from this trust the amounts that these creditors are liable for due to these actions,” says Vitro in a statement released yesterday. “The funds that are exposed to these damages are Moneda, Brookville Horizons Fund, Davidson Kempner Distressed Opportunities Fund and Knighthead Master Fund.”
“Under the applicable legal framework in Nuevo Leon, the amount claimed could reach US$1.59 billion, which corresponds to 20 percentof the total amount claimed at the time by the so-called vulture funds from each of the companies in those proceedings,” continues Vitro in the statement.
"If they do have such agreements, we will pursue such recoveries from all relevant parties, including Aurelius and Elliott," says Claudio del Valle, chief restructuring officer of Vitro.
The Court of Appeals of the United States Fifth Circuit in New Orleans had ruled in favor of granting a motion to lift the temporary restraining orders put in place that initially prevented collection actions against Vitro and its subsidiaries.
“In view of this decision the company could be facing a unique situation, since it has two conflicting orders and therefore two markedly different obligations in both countries,” says Vitro. “The debt that could form the basis for the dissident funds' collection actions in the United States has been restructured and replaced with new debt in Mexico. Consequently the company is evaluating the financial implications of this particular situation.”
Donald C. Cutler, spokesperson for the noteholders, declined to comment.
In February 2009, the Mexico-based manufacturer defaulted on more than $1 billion in bonds. Vitro completed a Mexican court approved debt restructuring plan this past February. A Texas court ruled against enforcement of the reorganization in the U.S. in June which led to the appeal decided in November. Mexican officials showed their support of the appeal by filing Amicus Curiaewith the Fifth Circuit. Additionally, Mexico's Second Circuit Court in Monterrey ruled in favor of Vitro November 27, upholding the legitimacy of the company's restructuring under Mexican law. Vitro filed a petition for reconsideration of the U.S. appeal case December 13.
