Vitro Soars as U.S. Bondholder Deal Seen Near: Mexico City Mover

Vitro SAB, Mexico’s largest glassmaker, gained the most in almost three years on the possibility that it’s near a settlement with U.S. bondholders who have opposed the company’s Mexican restructuring.

The shares rose 19 percent to 25.79 pesos at the close in Mexico City for their biggest gain since April 2010. They had climbed 29 percent this year through Feb. 8, outpacing the Mexican IPC index’s 3.2 percent increase.

Vitro has been in a legal battle with hedge funds such as Paul Singer’s Elliott Management Corp. over debt from the glassmaker’s $1.2 billion bond default in 2009. The two sides are in talks, according to legal filings in the U.S. in late January and a Vitro statement to Mexico’s stock exchange today.

“Vitro looks like it’s closer to a legal settlement in the U.S.,” Lilian Ochoa, an analyst at Corporativo GBM SAB who rates its shares market outperform, said in a telephone interview from San Pedro Garza Garcia, Mexico. “The market applies a discount to Vitro because of the legal risk. In the case of a settlement, the discount would be a lot less.”

The company is “holding talks with creditors regarding its financial restructuring process,” according to its statement. Vitro, based in San Pedro Garza Garcia, said it would inform the stock exchange if it has any “material information” to disclose about the discussions.

Donald Cutler, a spokesman for the bondholders, declined to comment.

A Mexican court approved Vitro’s restructuring a year ago. That proposal was rejected in June by U.S. Bankruptcy Judge Harlin Hale in Dallas. The U.S. Court of Appeals in New Orleans upheld Hale’s decision in November, ruling that Vitro’s Mexican reorganization plan wasn’t worthy of enforcement in the U.S. because it absolved Vitro subsidiaries of their bond guarantees without the units being in bankruptcy anywhere.

The bondholders have contended that Vitro orchestrated fraudulent transfers before and during bankruptcy. In December, Vitro began legal action in Mexico seeking damages of as much as $1.59 billion from bondholders who sought to push it and 17 subsidiaries into involuntary bankruptcy.