Vitro Sidesteps Legal Block to Restructuring

Mexico’s troubled glass maker Vitro managed to sidestep a restraining order preventing its subsidiaries from voting for a controversial $3.6bn debt restructuring that has bondholders up in arms. The US Court of Appeals for the Fifth Circuit reinstated the company’s Chapter 15 filing rights and eliminated a NY State Supreme Court’s mid-December restraining order blocking the company’s subsidiaries from voting in favor of Vitro’s restructuring plan. Vitro supported the move in a press statement and noted that “the NY State Court decision was not enforceable since our subsidiaries had already consented to the plan.” The glassmaker has used roughly $1.9bn in intercompany debt to give itself enough voting power to approve what has been largely an unpopular restructuring plan for other creditors. As it stands, the company’s restructuring proposal includes $814.7m in new 2019 bonds, a fee of up to $32.7m and mandatory convertible debt of $95.8m. JPMorgan has estimated that creditors who accept the deal may recover between 48 and 60 cents on the dollar, depending on the level of debt-holder support. Vitro’s move has aggrieved bondholders and caused other investors to worry about the repercussions that Vitro’s successful restructuring would have on the access to credit of other Mexican companies.