Mexico Pledges Reliable Bankruptcy Process

Mexican officials are calling on distressed corporates and their shareholders/creditors to view the country’s concurso mercantil procedure as a safe and reliable way of resolving financial problems. “Please consider the concurso as a path to a solution for both creditors and the company,” Luis Manuel Mejan, head of the Instituto Federal de Especialistas de Concursos Mercantiles in Mexico, tells LatinFinance, speaking on the sidelines of a Chadbourne & Parke panel last week. “Creditors should remain calm and have confidence in the Mexican authorities. We have good laws and good judges,” he adds. Mejan points to Vitro as an example of a company that has handled its proceedings in a responsible manner. “Vitro is dealing with its problems in a transparent way. It’s not hiding from its responsibilities,” says Mejan. The Mexican glassmaker is in talks with counterparties to settle a $227m negative position on FX derivatives. It announced it would miss coupons in both MXP and USD, and told its creditors in the last week of January to hire counsel and organize in anticipation of a workout. However, not all are convinced that the new system works. “The jury is still out on whether you can reorganize a large multinational company in Mexico,” says Howard Seife, a partner at Chadbourne & Parke, speaking on a panel hosted by his firm last week. Among concerns for creditors facing a restructuring or potential concurso mercantil are Mexican courts’ ability to understand and process a complicated workout with fairness and predictability; creditors’ ability to keep the securitization trusts they lend to outside a bankruptcy proceeding of the ceding company; companies’ ability to gain immediate protection from creditors once they have moved to file for bankruptcy; how companies with assets in the US and other jurisdictions should file; and controlling families’ and shareholders’ influence over a company and its assets throughout a concurso.