Nature of the Case
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Facts
Three cases were consolidated relating to the Mexican reorganization proceeding of Vitro S.A.B. de C.V., a corporation organized under the laws of Mexico. Vitro S.A.B. de C.V. (Vitro) is a holding company that, together with its subsidiaries, constitutes the largest glass manufacturer in Mexico. Vitro employs approximately 17,000 workers, the majority of whom work in Mexico. Vitro borrowed a total of approximately $1.216 billion, predominately from United States investors. There are three series of unsecured notes. The first series was issued on October 22, 2003, and consisted of $225 million aggregate principal amount of 11.75% notes due 2013; the second and third series were issued on February 1, 2007, and consisted of $300 million of 8.625% notes due 2012 and $700 million of 9.125% notes due 2017 (collectively the 'Old Notes'). Payment in full of the Old Notes was guaranteed by all of Vitro's subsidiaries (the 'Guarantors'). The obligations of the Guarantors were not to be released, discharged, or otherwise affected by any settlement or release as a result of any insolvency, reorganization, or bankruptcy proceeding affecting Vitro. The guarantees were to be governed and construed under New York law and include the Guarantors' consent to litigate any disputes in New York state courts. In February of 2009, Vitro announced its intention to restructure its debt and stopped making scheduled interest payments on the Old Notes. Vitro entered into a sale-leaseback transaction with Fintech Investments Ltd. ('Fintech'), one of its largest third-party creditors, holding approximately $600 million in claims (including $400 million in Old Notes). Fintech paid $75 million in exchange for the creation, in its favor, of a Mexican trust composed of real estate contributed by Vitro's subsidiaries. This real estate was then leased to one of Vitro's subsidiaries to continue normal operations. The agreement also gave Fintech the right to acquire 24% of Vitro's outstanding capital or shares of a sub-holding company owned by Vitro in exchange for transferring Fintech's interest in the trust back to Vitro or its subsidiaries. Vitro generated a large quantity of intercompany debt. Vitro's operating subsidiaries owed Vitro an aggregate of approximately $1.2 billion in intercompany debt. That debt was wiped out and, Vitro's subsidiaries became creditors to which Vitro owed an aggregate of approximately $1.5 billion in intercompany debt. Vitro did not disclose these transactions. Fintech purchased claims by five banks holding claims against Vitro and extended the maturity of various promissory notes issued by Vitro's subsidiaries. Fintech also agreed not to transfer any debt it held in Vitro unless such transfer was in line with the terms of that agreement. Three hundred days after completing the transactions with its subsidiaries, Vitro disclosed the existence of the subsidiary creditors. This took the transactions outside Mexico's 270-day 'suspicion period,' during which such transactions would be subject to additional scrutiny before a business enters bankruptcy. Vitro initiated in a Mexican court a concurso proceeding under the Mexican Business Reorganization Act, or Ley de Concursos Mercantiles (LCM). Eventually, Vitro was declared to be in bankruptcy. The conciliador filed an initial list of recognized claims and mediated the creation of a reorganization plan. The Old Notes would be extinguished, and the obligations owed by the Guarantors would be discharged. Vitro would issue new notes payable in 2019 with a total principal amount of $814,650,000. The New 2019 Notes would be issued to Vitro's third-party creditors (not including those subsidiaries holding intercompany debt who would receive other promissory notes. The New 2019 Notes would also 'be unconditionally and supportively guaranteed for each of the Guarantors.' Under Mexican law, approval of a reorganization plan requires votes by creditors holding at least 50% in aggregate principal amount of unsecured debt. Mexico counts the votes of all unsecured creditors, including insiders, as a single class. Over 50% of all voting claims were held by Vitro's subsidiaries in the form of intercompany debt. The Mexican court approved the Concurso plan. Dissatisfied creditors filed involuntary Chapter 11 petitions against fifteen Guarantors domiciled in the United States. They sought a declaratory judgment confirming the Guarantors' obligations under the related indentures. The court held that New York law applied to the dispute and that under the unambiguous terms of the relevant Old Notes, 'any non-consensual release, discharge or modification of the obligations of the Guarantors . . . is prohibited.' The court went on to find, however, that 'whether such prohibitive provisions may be modified or eliminated by applicable Mexican laws is not at issue here.' Vitro commenced a Chapter 15 proceeding in United States bankruptcy court by filing a petition for recognition of the Mexican concurso proceeding. The bankruptcy court denied the Enforcement Motion. The court also denied Vitro's motion to enjoin the Objecting Creditors from initiating litigation against the Guarantors. The bankruptcy court granted recognition of the concurso proceeding as a foreign main proceeding under 11 U.S.C. § 1517. On appeal, the district court affirmed, holding that it was sufficient that the representatives were authorized as co-foreign representatives in the context of a foreign bankruptcy proceeding and that Vitro retained sufficient control over its business to be a debtor in possession.
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