A group of Vitro bondholders urged U.S. Bankruptcy Judge Russell Nelms in Fort Worth, Texas, at a court hearing today to approve their involuntary bankruptcy petitions filed against U.S. units of the company.
“They have debts they can’t pay,” Christopher Shore, a lawyer for a group of creditors, told Nelms during closing arguments. “These cases need to be in Chapter 11. We need to get down to the business of figuring out a way to restructure these debts.”
Vitro, which inscribed the names on the Vietnam Veterans Memorial in Washington, according to its website, opposes the involuntary petitions and has been fighting creditors over its default on $1.2 billion in bonds. U.S. subsidiaries issued guarantees on the debt.
Vitro makes glass containers and flat glass for the construction and automotive industries. It defaulted as demand for cars, trucks and new homes dropped. Four creditors, including Davidson Kempner Capital Management LLC, filed the involuntary bankruptcy petitions in November. Their law firm said in a February court filing that they represent a group holding more than $770 million in notes.
Creditors also have filed involuntary bankruptcy petitions against the company in Mexico, according to court papers.
Nelms adjourned today’s hearing without saying when he will rule.
Vitro tried to restructure through a bankruptcy filing in Mexico. A Mexican judge dismissed the bankruptcy, saying the petition and plan because it didn’t meet requirements under Mexican law, Vitro said in court papers. Vitro is appealing the decision.
Andrew Leblanc, a lawyer for Vitro, asked Nelms at the hearing to dismiss the involuntary petitions, saying creditors must meet strict requirement to win approval and haven’t done so. Forcing a company into bankruptcy is “one of the most extreme acts a judge can do,” he said.
In court papers, Vitro also argued that the U.S. units are paying their debts as they come due and that the involuntary bankruptcy was filed as a way to gain leverage over the parent company in negotiations.
“They’re paying everything but these guarantee obligations,” Leblanc said.
Vitro wants to find a buyer for its U.S. businesses if Nelms orders them into bankruptcy, Alejandro Sanchez, Vitro’s legal director, said in an interview. The operations would face liquidation without a buyer.
The case is In re Vitro Asset Corp., 10-47470, U.S. Bankruptcy Court, Northern District of Texas (Fort Worth).
--With assistance from Thomas Black in Monterrey. Editors: Fred Strasser, Glenn Holdcraft
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