Bondholders: Vitro Restructuring Aims to Protect Sada Family

Date: 27 April 2011
Vitro SAB’s massive bankruptcy case, which spans two countries and has played out in at least six courts, has one simple purpose, say the company’s bondholders: keep Mexico’s Sada family at the helm of the glass maker.

The reorganization plan that Vitro is pursuing in Mexico would force bondholders to accept a $650 million loss on their investment while leaving the company’s stockholders, including the Sadas, virtually untouched, said John Cunningham, an attorney for the bondholders, at a hearing held Wednesday in the U.S. Bankruptcy Court in Dallas, the newest venue for the case.

Vitro sought approval in Mexico late last year for a restructuring plan that “preserves the equity of the Sada family at the expense of third-party creditors,” Cunningham said. The Sada family, including Vitro Chairman Adrian Sada, has long held a stake in the 100-year-old Monterey, Mexico, glass maker. The company’s roots are in making beer bottles for the city’s breweries, another industry that the Sadas are tied to.

Now the company wants “to come here to the U.S. and have U.S. courts bless” its plan, Cunningham said at the hearing.

The White & Case LLP partner gave that explanation while attempting to bring Judge Harlin Hale up to speed on the case during a status conference. Hale was holding his first hearing in the case after stepping in for an ailing colleague.

Cunningham represents a quartette of investment firms that moved to push Vitro’s U.S. units into Chapter 11 bankruptcy last year as the company finalized its plans in Mexico. The Vitro bondholders took that action to “get a transparent process” in U.S. courts, he said. Vitro’s attorneys stepped up to defend their client.

One, Andrew Leblanc of Milbank, Tweed, Hadley & McCloy LLP, said that Vitro and its creditors are subject to Mexico’s laws, but the bondholders are asking U.S. courts to supersede those laws.

That would be the first time in “at least time a very long time” that a U.S. court found “Mexico is such a lawless state” that its legal rulings can’t be respected, he said.

At the moment, Vitro’s three-front strategy includes gaining approval for its restructuring plan in Mexico, gaining U.S. recognition of its Mexican case in New York and selling four U.S. units through a bankruptcy sale in Texas.

The bondholders group is battling Vitro in each of those venues.

600450 Bondholders: Vitro Restructuring Aims to Protect Sada Family

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