By Tom Hals
Dec 5 A U.S. judge ordered that 10 units of
Mexican glassmaker Vitro SAB de CV be put into U.S.
bankruptcy and he found that several of them had taken secret
steps to prevent creditors from collecting money owed to them.
Several U.S. hedge funds led by Aurelius Capital Management
and Elliott International hold defaulted notes issued by the
subsidiaries and sought to put the units into bankruptcy.
After the hedge funds sought involuntary bankruptcy
proceedings, five of the subsidiaries secretly reincorporated in
the Bahamas and one of the subsidiaries was sold, according to
Harlin Hale, a U.S. bankruptcy judge in Dallas.
"These acts were taken, apparently, to prevent creditors
with guarantee claims from taking steps to collect on their
judgments," Hale wrote in a 15-page opinion published on
Vitro said in a statement it is considering an appeal.
"The impact of the ruling on Vitro is minimal given that the
entities placed into bankruptcy by the ruling constitute a very
small portion of Vitro's global business enterprise," the
company said. It also noted that its main subsidiary was
protected by a Mexican reorganization proceeding.
Parent company Vitro went through a $3.4 billion bankruptcy
reorganization in Mexico. U.S. creditors have strenuously
opposed that plan, which short-changed creditors while
preserving $500 million for shareholders.
Hale has declined to enforce the Mexican plan on the U.S.
creditors, finding it was contrary to U.S. policy.
Last month, the U.S. Fifth Circuit Court of Appeals in New
Orleans affirmed Hale's decision to reject the plan. The court
also lifted a stay that had prevented the creditors from
collecting on various judgments by U.S. courts against Vitro's
subsidiaries, a move the judges said might cause "financial
chaos" for Vitro.
The subsidiaries included Binswanger Glass Co and VVP Auto
Glass Inc. A spokesman for Binswanger Enterprises, an
unaffiliated glass maker, said his company was not part of the
involuntary bankruptcy and had been sold by Vitro in 2011.
The bankruptcy has pitted one of Monterrey, Mexico's
politically powerful "Group of 10" businesses against two hedge
funds that have been vilified in Latin America as vultures.
The two funds have been battling Argentina for full repayment
on the country's defaulted debt.
The case is Vitro Asset Corp, U.S. Bankruptcy Court,
Northern District of Texas, No. 11-32600