Reuters: Bankruptcy News: UPDATE 1-U.S. appeals court upholds ruling against Vitro reorganization

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UPDATE 1-U.S. appeals court upholds ruling against Vitro reorganization Nov 28th 2012, 18:38 Wed Nov 28, 2012 1:38pm EST Nov 28 (Reuters) - A U.S. federal appeals court on Wednesday upheld a ruling denying enforcement of the reorganization plan of glassmaker Vitro SAB de CV, which had been approved by a Mexican court. The case was closely watched by foreign investors in Mexico, who claimed Vitro's reorganization favored shareholders over creditors and could raise the cost of capital for Mexican companies if the plan were recognized in the United States. The Fifth Circuit Court of Appeals affirmed an opinion by a federal district judge in Dallas who refused to recognize the $3.4 billion Mexican reorganization plan because it was contrary to U.S. policy. Vitro has been locked in a battle with the hedge funds Elliott Capital Management and Aurelius Capital Management, which hold debt issued by Vitro's subsidiaries. Under Vitro's reorganization, the subsidiaries' debt was replaced with bonds of a much lower value, even as shareholders ended up with $500 million. The subsidiaries never filed for bankruptcy and therefore were never protected from their creditors. Elliott and Aurelius have won judgments against them, although a stay had been in place preventing them from acting on those judgments. The ruling by the Fifth Circuit lifted the stay.

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