CORPORATE BANKRUPTCY: Down by law

Jul 1, 2012

A tough ruling on Mexican glassmaker Vitro’s bankruptcy appeal has triggered heated debate in financial markets – not least for its far reaching implications

By Ivan Castano

Mexico's bankruptcy law must be overhauled and more specialized judges hired to prevent insolvent corporations from flouting their creditor obligations.

This was the resounding message from corporate turnaround experts, during a LatinFinance panel event held in Mexico City on June 21. The event - The Rules of the Game in Mexico: The Corporate Workout Law in Practice - brought heavy condemnation on bankrupt Mexican glass-maker Vitro for pursuing a 'fraudulent' turnaround that has raised a slew of controversial headlines.

The case, which has also spawned big cross-border lawsuits, could change the way future Latin American corporate bankruptcies are decided in the US, Mexico and Latin America.

At stake are $1.6 billion of bond debt (plus $600 million of unpaid interest) held by a clutch of US hedge funds, which Mexico's bankruptcy court has failed to recognize, 'twisting the law' and enabling Vitro to avoid payment, according to observers...

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