3 Min Read
By Tom Hals
Dec 5 (Reuters) - A U.S. judge ordered that 10 units of Mexican glassmaker Vitro SAB de CV be put into U.S. bankruptcy, and 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 Tuesday.
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.
Vitro general counsel Alejandro Sanchez Mujica added in a statement that the company believed Hale's opinion contains "numerous inaccurate assertions."
"Vitro has always complied with both Mexican and U.S. law, as well as all legal orders issued in both countries, including those related to Vitro's subsidiaries and their assets," Mujica said.
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 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