Vitro to Appeal Recent Bankruptcy Court Ruling; Court Orders Stay of Temporary Restraining Order Expiration
June 29, 2012

by Penny Stacey,

The U.S. Court of Appeals for the Fifth Circuit has granted Vitro S.A.B. permission to appeal a recent decision by the U.S. Bankruptcy Court for the District of Northern Texas not to enforce the company’s Mexican reorganization plan in the United States. In addition, the court has issued an order granting a stay for the expiration of a temporary restraining order (TRO) previously instated in the case, at Vitro’s request.

The TRO, which had been set to expire today at 5 p.m., prohibits Vitro’s creditors “from taking actions to enforce judgments against Vitro SAB and its non-debtor affiliates.”

“It also protects the appellees by enjoining Vitro SAB and its non-debtor affiliates from transferring any assets other than in the ordinary course of business,” writes the company in its June 28 motion. “ ... Absent the TRO, Vitro will be expected to somehow comply with fundamentally conflicting orders issued by a court in the United States and a court in Mexico and, moreover, Vitro and its subsidiaries, and their customers, will be exposed to relentless attacks by the apellees across several courts in the United States—which attacks are expressly forbidden by order of the Mexican court.”

Without the TRO, Vitro officials allege that the company’s creditors would begin “turnover proceedings against Vitro customers,” as they did before the TRO was entered in March.

Vitro's request for preliminary injunction (which resulted in the stay of the TRO expiration) also includes some insight toward its view of the bankruptcy court’s recent decision—and its optimism for the appeal.

The company alleges that the bankruptcy court’s decision not to enforce the Mexican reorganization plan in the U.S. “was based solely on the fact that the Concurso plan included what the bankruptcy court termed a ‘release’ of the obligations of non-debtor guarantors of certain of Vitro SAB’s restructured indebtedness.”

“Indeed, the Bankruptcy Court reached this conclusion despite expressly rejecting arguments made by the objecting noteholders that the Mexican process that resulted in the Concurso plan was either procedurally unfair for creditors or the product of corruption, or that such plan would have an adverse impact on the credit markets in the  United States,” writes Vitro. “In not enforcing the Concurso plan, the bankruptcy court completely ignored binding Fifth Circuit law and issued an unprecedented, erroneous decision that will have far-reaching negative effects on the future of Chapter 15 and cross-border judicial relations between the United States and Mexico.”

Company officials predict they will “succeed on the merits of this appeal in light of binding Fifth Circuit precedent .... that compels reversal of the legal conclusions reached by the Bankruptcy Court.”

“Second, there is no question that Vitro will suffer irreparable harm due to both the legal and financial uncertainty resulting from Vitro entities having to comply with competing court orders in the United States and Mexico, which conflict by, among other things, creating radically different liabilities for Vitro in the United States and Mexico, and Vitro and its customers having to defend against serial creditor enforcement actions in the United States,” writes the company.

The court’s order granting the stay of the TRO does not provide a specific deadline for when the TRO will now expire, but is “pending further order of [the court].” Additionally, the court has denied a motion by Vitro for expedited consideration of its appeal.

Stay tuned to™ for the latest updates as they become available.

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