Vitro SAB (VITROA), Mexico’s largest glassmaker, filed a lawsuit seeking damages of as much as $1.6 billion from bondholders including U.S. hedge funds that shunned the company’s restructuring plan and tried to force it into involuntary bankruptcy in Mexico.
Under the company’s restructuring, approved by a Mexican court in February and subsequently rejected by U.S. courts, a trust holds newly issued bonds and payments for bondholders not accepting the plan. Vitro, which defaulted on $1.2 billion in bonds in 2009, will seek to collect damages from the trust related to efforts by dissident bondholders to put the company and 17 units into involuntary bankruptcy in Mexico, the company said in a filing yesterday to the Mexican stock exchange.
The glassmaker also said the U.S. Court of Appeals in New Orleans lifted temporary restraining orders that suspended bondholders’ efforts to collect on judgments against Vitro and its units in the U.S. A three-judge panel of the appeals court last month affirmed a June ruling by a U.S. bankruptcy judge in Dallas who refused to enforce Vitro’s restructuring plan, handing another U.S. legal victory to bondholders including Aurelius Capital Partners LP and billionaire Paul Singer’s Elliot Management Corp.
“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,” Vitro said in the filing. “The debt that could form the basis for the dissident funds’ collection actions in the U.S. has been restructured and replaced with new debt in Mexico. Consequently the company is evaluating the financial implications of this particular situation.”
Donald Cutler, a spokesman for the bondholders, declined to comment.
Vitro identified the funds from which it would seek damages as Moneda, Brookville Horizons Fund, Davidson Kempner Distressed Opportunities Fund and Knighthead Master Fund. The glassmaker said it would also pursuit compensation from Elliott and Aurelius if it determines the various funds “have agreements to share the costs of actions certain funds took on behalf of the whole group.”
Vitro, based in San Pedro Garza Garcia, Mexico, is asking for a full panel of judges on the federal appeals court in New Orleans to reconsider last month’s ruling against enforcing its bankruptcy plan in the U.S.
On Dec. 4, the bankruptcy court in Dallas ruled that 10 Vitro units should be in bankruptcy involuntarily because they guaranteed the defaulted bonds. Bankruptcy Judge Harlin Hale said in his ruling he was convinced partly because Vitro failed to make several disclosures that were “particularly disturbing because of previous questionable acts.”
Those acts included the transfer by a Vitro unit of $100 million out of the U.S. when “there was not a single shred of documentary evidence” to show a “bona fide tax purpose,” Hale wrote.
Vitro said Hale’s ruling contained “numerous inaccurate assertions.”
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