For the last several years, distressed multinational glass maker Vitro, acting through its holding company’s Mexican insolvency proceeding, has sought to implement a reorganization plan purporting to severely restrict, if not eliminate, U.S. bondholder claims against both the debtor and its non-debtor subsidiary guarantors. Bondholders and their indenture trustees have relentlessly battled against aspects of the Mexican plan, which preserved value for Vitro’s equity holders, but (i) failed to respect the provisions of the indenture, especially with respect to the non-debtor subsidiary guarantees; and (ii) relied upon the votes of such non-debtor guarantors, which were based on intercompany debt, to support the release of the bondholders’ guaranties.

The tortured history of the Vitro restructuring includes litigation in New York state court (whose law governed the unsecured bonds) and bankruptcy courts in New York, Texas and Mexico, where an ad hoc group of bondholders vigilantly defended their rights. Initially, problems with Vitro’s derivatives created bond defaults and forced restructuring discussions. When talks failed, bondholders accelerated the debt and initiated enforcement litigation in the New York court, as well as involuntary bankruptcy cases against subsidiary guarantors in Texas. While defending the involuntary Chapter 11 petitions, Vitro pursued a pre-packaged plan, commencing the holding company’s Mexican insolvency proceeding and an ancillary bankruptcy case in the United States directed at staying the bondholderslitigation.

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