Steve Marcus/Reuters
Paul Singer, chief of the hedge fund Elliott Management.
MEXICO CITY — The giant Monterrey glass maker Vitro said Monday that it had reached an agreement with bondholders, ending a dispute among powerful financiers that had ricocheted between Mexican and American courts.
Under the agreement, Fintech, which is owned by the Monterrey-born investor David Martinez, will buy the bonds held by a group of hedge funds and pay additional cash to cover legal fees. In return, Fintech will receive a 13 percent stake in a Vitro subsidiary and a $235 million note issued by the subsidiary.
Bondholders will receive 85.25 cents on the dollar for their bonds, according to the agreement. The company said that Fintech would buy a “substantial majority” of the $729 million in bonds that are in dispute.
The legal fight had produced ripple effects in the emerging debt markets. For example, Cemex, one of the world’s largest building materials companies, was forced to sign a “Vitro clause” when it issued debt last year. Cemex, with a reputation for strong corporate governance and a company that is also based in Monterrey, Mexico’s industrial heartland, promised debtors that it would not grant subsidiaries or related-party creditors the same rights as bondholders.
“Ever since Vitro came out with this cockamamie scheme,” there has been uncertainty about bankruptcy proceedings in Mexico, said Arturo C. Porzecanski, economist in residence at American University’s School of International Service.
The Vitro bondholders had been fighting the company in United States courts, arguing that Vitro borrowed money from its subsidiaries, turning them into new creditors who then outvoted bondholders on a plan to restructure $1.2 billion in defaulted debt.
A Monterrey court approved the plan in February 2012, where bondholders who agreed to the new financial plan received almost 69 cents on the dollar for their debt, according to James V. Harper, the head of research at BCP Securities in Greenwich, Conn.
But several giant hedge funds, including Elliott Management and Aurelius Capital Management, held out. Elliott Management is run by Paul E. Singer, who has made a career out of extracting payments from debtors that have defaulted.
Instead, the funds asked American courts to reject the Mexican bankruptcy plan, calling it “a testimony to audacity, brazen manipulation and greed.”
Last June, Judge Harlin DeWayne of the Federal Bankruptcy Court in Dallas refused to apply the Mexican bankruptcy plan in the United States. A federal appeals court upheld the judge’s decision in November.
Mr. Harper said those decisions removed any legal bankruptcy protection for Vitro in the United States and forced it to negotiate. “I think they were surprised when they didn’t get it,” he said. “I don’t think they counted on such aggressive opposition.”
Without protection, Vitro might have faced collection efforts on its sales in the United States, which amounted to $446 million last year.
It is rare for an American judge to refuse to enforce another country’s bankruptcy law in the United States, Mr. Harper said. “That was a substantial setback for Vitro and a substantial victory for the holdouts.”
Noting that the Mexican government had filed a brief in support of Vitro, Mr. Porzecanski, the economist, said, “The fact that the workout process was not recognized in the United States leaves Mexico with a black eye.”
Under the agreement announced Monday, Vitro and the bondholders agreed to drop all legal disputes.
“These agreements allow us to close the book on a challenging period for our company, and focus entirely on our business and meeting our customers’ needs,” said Vitro’s chairman, Adrián G. Sada.
It was Fintech’s owner, Mr. Martinez, who helped Vitro put together a plan to revamp its finances. Mr. Martinez remains a mystery, despite being known as a collector of art and owner of one of the most expensive apartments in Manhattan, atop the Time Warner Center.
“Fintech’s participation was crucial in order to establish the foundation for the agreements we have reached,” Claudio Del Valle, Vitro’s chief restructuring officer, said in a statement.
Paul Singer, chief of the hedge fund Elliott Management.
MEXICO CITY — The giant Monterrey glass maker Vitro said Monday that it had reached an agreement with bondholders, ending a dispute among powerful financiers that had ricocheted between Mexican and American courts.
Under the agreement, Fintech, which is owned by the Monterrey-born investor David Martinez, will buy the bonds held by a group of hedge funds and pay additional cash to cover legal fees. In return, Fintech will receive a 13 percent stake in a Vitro subsidiary and a $235 million note issued by the subsidiary.
Bondholders will receive 85.25 cents on the dollar for their bonds, according to the agreement. The company said that Fintech would buy a “substantial majority” of the $729 million in bonds that are in dispute.
The legal fight had produced ripple effects in the emerging debt markets. For example, Cemex, one of the world’s largest building materials companies, was forced to sign a “Vitro clause” when it issued debt last year. Cemex, with a reputation for strong corporate governance and a company that is also based in Monterrey, Mexico’s industrial heartland, promised debtors that it would not grant subsidiaries or related-party creditors the same rights as bondholders.
“Ever since Vitro came out with this cockamamie scheme,” there has been uncertainty about bankruptcy proceedings in Mexico, said Arturo C. Porzecanski, economist in residence at American University’s School of International Service.
The Vitro bondholders had been fighting the company in United States courts, arguing that Vitro borrowed money from its subsidiaries, turning them into new creditors who then outvoted bondholders on a plan to restructure $1.2 billion in defaulted debt.
A Monterrey court approved the plan in February 2012, where bondholders who agreed to the new financial plan received almost 69 cents on the dollar for their debt, according to James V. Harper, the head of research at BCP Securities in Greenwich, Conn.
But several giant hedge funds, including Elliott Management and Aurelius Capital Management, held out. Elliott Management is run by Paul E. Singer, who has made a career out of extracting payments from debtors that have defaulted.
Instead, the funds asked American courts to reject the Mexican bankruptcy plan, calling it “a testimony to audacity, brazen manipulation and greed.”
Last June, Judge Harlin DeWayne of the Federal Bankruptcy Court in Dallas refused to apply the Mexican bankruptcy plan in the United States. A federal appeals court upheld the judge’s decision in November.
Mr. Harper said those decisions removed any legal bankruptcy protection for Vitro in the United States and forced it to negotiate. “I think they were surprised when they didn’t get it,” he said. “I don’t think they counted on such aggressive opposition.”
Without protection, Vitro might have faced collection efforts on its sales in the United States, which amounted to $446 million last year.
It is rare for an American judge to refuse to enforce another country’s bankruptcy law in the United States, Mr. Harper said. “That was a substantial setback for Vitro and a substantial victory for the holdouts.”
Noting that the Mexican government had filed a brief in support of Vitro, Mr. Porzecanski, the economist, said, “The fact that the workout process was not recognized in the United States leaves Mexico with a black eye.”
Under the agreement announced Monday, Vitro and the bondholders agreed to drop all legal disputes.
“These agreements allow us to close the book on a challenging period for our company, and focus entirely on our business and meeting our customers’ needs,” said Vitro’s chairman, Adrián G. Sada.
It was Fintech’s owner, Mr. Martinez, who helped Vitro put together a plan to revamp its finances. Mr. Martinez remains a mystery, despite being known as a collector of art and owner of one of the most expensive apartments in Manhattan, atop the Time Warner Center.
“Fintech’s participation was crucial in order to establish the foundation for the agreements we have reached,” Claudio Del Valle, Vitro’s chief restructuring officer, said in a statement.
