Mexicana Wins Legal Shield to Aid Mexican Bankruptcy

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Mexicana de Aviacion Files for Bankruptcy in Mexico
Ticket agents wait for customers at a Mexicana airline ticket counter. Photographer: David McNew/Getty Images

Compania Mexicana de Aviacion SA, Mexico’s biggest airline by passengers, won its request for bankruptcy protection from U.S. creditors, after disputes were resolved with a bank and a group of airports.

U.S. Bankruptcy Judge Martin Glenn in Manhattan court today approved Mexicana’s request for protection under Chapter 15 of the U.S. bankruptcy code. The ruling will help the 87-year-old company reorganize in its main bankruptcy in Mexico by giving it a legal shield from U.S. creditors.

“All objections have been resolved,” allowing the company to use cash collateral of its bank lender, and resolving amounts the airline owes to U.S. airports, Mexicana lawyer William Heuer told Glenn today.

Heuer also told Glenn that the airline, which had grounded flights, plans to fly again.

“We’re in process of putting that together,” Heuer said, without giving a date.

Mexicana filed for protection from creditors in Mexico in August, and also sought protection under Chapter 15 in New York. A group of investors, Tendora K, bought 95 percent of the company on Aug. 20, and are seeking to turn it around after disputes with labor unions and a rise in jet fuel prices drove the company to bankruptcy.

Airport Action

International airports in Denver, Dallas, Miami and Sacramento, California, sought court permission in August to take legal action against Mexicana if they didn’t get “timely” payment of passenger facility charges. Glenn had refused their request and ordered a resolution of the dispute.

Glenn also overruled objections today raised in court by lawyers who said they represented union members who work for the airline. They sought to object to Mexicana’s motion to designate the Mexican bankruptcy a main bankruptcy proceeding, saying that filings in the U.S. contradicted or omitted information filed in the Mexican proceeding.

“All creditors are not served in the petition for recognition,” Glenn said, noting that his court only has jurisdiction over assets in the U.S. He also said the lawyers had failed to file objections in a timely manner.

Mexicana’s Chapter 15 petition in New York listed more than $500 million in assets and $1 billion in debt. Around $1.57 billion Mexican pesos ($125 million) was held by Grupo Financiero Banorte SAB unit Banco Mercantil Del Norte, according to court papers.

The U.S. case is Compania Mexicana De Aviacion SA de CV, 10-14182; U.S. Bankruptcy Court, Southern District of New York (Manhattan).

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