Involuntary Chapter 11 Case Against Vitro America
and Subsidiaries Continues; Company Officials are Optimistic in
Light of Recent Court Decisions
November 29, 2010
An expedited hearing was held last week in the recently filed involuntary
Chapter 11 case against Vitro America and its subsidiaries. Vitro
officials say the court has made several decisions in its favor,
including the denial of a motion by the bondholders who filed the
case seeking to restrict the U.S. subsidiaries' ability to enter
into transactions with their non-U.S. affiliates or participate
in Vitro SAB's planned restructuring and concurso proceeding in
Binswanger is among the Vitro America subsidiaries included in
The dissident minority bondholders, who together hold approximately
6 percent of Vitro SAB's outstanding U.S. bonds, had filed the motion
after commencing the involuntary cases on November 17, according
In addition, the court has approved a motion by Vitro's U.S. subsidiaries
for continued financing with their lender, Bank of America, and
granted in part a motion authorizing the U.S. subsidiaries to obtain
additional financing from their ultimate parent, Vitro SAB, according
to the company.
"In denying the motion of the petitioning bondholders in its
entirety, the U.S. Bankruptcy Court found the petitioning bondholders'
requested restrictions on the use of property by Vitro's U.S. subsidiaries
to be impermissibly vague, overbroad and not supported by the evidence
put forth by the bondholders," writes Vitro in a statement
released today. "Additionally, the court found that the petitioning
bondholders failed to provide legal justification for restricting
the U.S. subsidiaries' ability to vote or participate in a subsequent
restructuring of Vitro SAB in Mexico at this time."
The company adds, "The court's decision underscores that the
dissident minority bondholders' actions against the U.S. subsidiaries
are premised on baseless allegations and truly aimed at disrupting
Vitro SAB's ongoing restructuring process. Vitro SAB expects these
bondholders to continue seeking to challenge and delay its planned
concurso proceeding in Mexico (including continued efforts against
its U.S. subsidiaries), but it is fully prepared to face such challenges
and is confident that it will emerge from its concurso proceeding
a healthier and more stable company for the benefit of all stakeholders."
In addition, Vitro America officials say the court approved its
request for an order approving its continued working capital financing
with Bank of America on unchanged terms and for to incur additional
indebtedness from Vitro SAB, "but only on an unsecured basis
at this time, leaving the door open for a secured intercompany loan
in the future if it can be shown that necessary funding is not otherwise
"We are pleased that the bankruptcy court has acted with restraint
in responding to the baseless and disruptive requests of the dissident
minority bondholders," says Claudio Del Valle, chief restructuring
officer for Vitro SAB.
Vitro SAB officials say they continues to expect that both its
tender offer and its exchange offer and consent solicitation will
be concluded successfully and that any issues raised by the ad hoc
bondholder group will be resolved.
"We strongly encourage bondholders to objectively analyze
the terms and conditions of the tender offer, and the exchange offer
and consent solicitation," adds Del Valle, "and we also
urge each of them to respond to both offers promptly."
At press time the U.S. District Court for the Northern District
of Texas had not yet released orders from the hearing and currently
the hearing transcript is sealed.
Vitro America and its subsidiaries had filed an objection early
last week to the bondholders' motion that their use of property
"The dissident minority noteholders
imposed on this court by hauling the alleged debtors into court
on shortened notice to address, on an emergency basis, their supposed
concern with the leakage of the alleged debtors' asset value outside
the United States," writes the company. "The simple fact
is there is no emergency that requires action by this court."
Vitro America officials go on to call the motion "a thinly
veiled attempt by a group of disgruntled minority creditors to use
the involuntary chapter 11 process to interrupt the valid and consensual
restructuring under Mexican law of a Mexican company that is not
before this court."
"Were the court to grant the relief sought by the motion,
it would only condone the dissident minority noteholders' abuse
of the bankruptcy process and permit them to exercise undue influence
and gain leverage in the current restructuring process," writes
the company. "Indeed, the only logical reason that the dissident
minority noteholders have commenced involuntary cases against the
alleged debtors and filed the motion is because they believe that
Vitro SAB's proposed restructuring will ultimately be supported
by a majority of its creditors and be consummated under Mexican
law. To the extent that the dissident minority noteholders dislike
Vitro SAB's proposed restructuring, they can exercise their bargained-for
rights and express their displeasure through their votes, but they
must not be allowed to attack Vitro SAB's restructuring through
an abuse of the bankruptcy process in the United States."
The suit was filed by four
creditors: Knighthead Master Fund LP in New York, with a claim
of approximately $42 million in senior notes; Brookville Horizons
Fund L.P. in Greenwich, Conn., with a claim of $2 million in senior
notes; Davidson Kempner Distressed Opportunities Fund LP in New
York, with a claim of approximately $11 million in senior notes;
and Lord Abbett Bond-Debenture Fund Inc. in Jersey City, N.J., with
a claim of $20 million in senior notes. They own approximately $75
million (about six percent) of the Mexico-based company's debt.
Vitro America and its subsidiaries are represented by Fulbright
& Jaworski LLP of Dallas, Milbank, Tweed, Hadley & McCloy
LLP of New York and Andrew M. Leblanc of Washington, D.C.
Neither John Cunningham nor Richard Kebrdle of White and Case LLP,
spokespeople for the bondholder group, could be reached for comment
at press time.
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