largely irrelevant if the plan
has been pre-negotiated with
As in the US, conciliation triggers
a stay against enforcement of any claims.
However, unlike the US, this moratorium
does not take effect until the court signs a
judgment commencing the conciliation phase
and appointing a concliliador (or, a “conciliator,” in
English). However, in a voluntary, or a “pre-packaged,”
case, this judgment will quickly follow the filing.
The purpose of the conciliation is to preserve operations
while a plan is negotiated. The conciliation terminates at the
end of 185 days, unless the court grants a 90-day extension for
exceptional circumstances. The statute permits only two such
extensions, both of which must be supported by a supermajority
of creditors. If a plan is not approved within 365 days, the case
moves into the liquidation phase. At that point, a bankruptcy
trustee is appointed and the debtor is no longer able to manage
its business or dispose of assets.
A reorganization plan must be accepted by a majority of
creditors, both secured and unsecured. It is then presented to
the judge for approval. Once approved, the plan binds all creditors, including those who dissented, if it provides for payment
of their claims in accordance with its terms. However, dissenting
secured creditors will be able to foreclose on their collateral,
unless the plan provides for a payment of either the amount of
their claims or the value of their collateral. This is similar to,
but less flexible than, a secured creditor cram-down under
CROSSING THE BORDER
When a debtor has either assets or creditors in different countries, enforcing a restructuring approved by a court in one
country may require obtaining the assistance of a court in
another country. This cross-border assistance is generally needed either to protect assets located outside the jurisdiction of
the court that approves the plan or to bind non-consenting
creditors that are not subject to its jurisdiction. In 1997, the
United Nations Commission on International Trade Law published a Model Law on Cross-Border Insolvency (the Model
Law) to create procedures for providing this assistance. The
purpose of the Model Law was to create uniform procedures
for ancillary proceedings, in which local court could issues
orders extending the reach of the reorganization court.
The Model Law has been adopted in both the US and Mexico.
In fact, Mexico was one of the first countries to adopt the Model
Law in 2000. In Mexico, an ancillary proceeding is known as
“Título XII,” and, in the US, it is incorporated into Chapter 15
of the Bankruptcy Code.
In either country, an ancillary proceeding is commenced by
filing a petition seeking recognition of an insolvency pending
in another country. If recognition is granted, the court can grant
“appropriate relief,” which usually takes the form of enforcing
the plan approval or confirmation order.
In other words, a cross-border debtor may be able to select
the best place to file its reorganization. While that selection
could have a significant impact on the success or failure of the
reorganization, it requires an evaluation of a variety of legal,
financial, and logistical considerations.
As the Mexican market develops, the oil and gas industry will
need to continue accessing capital from the US. Therefore, when
projects encounter operational and financial headwinds, solutions will usually require efforts in both countries. However, if
the assets are valuable, this will not be a meaningful obstacle.
There are options on both sides of the border. Navigating the
complexities of two legal systems requires some expertise, but
with careful analysis and efficient execution, they provide the
means to preserve that value.
ABOUT THE AUTHORS
Michael J. Venditto is a partner in the New York
office of Reed Smith LLP, focusing on corporate
restructuring, insolvency, and bankruptcy law. He
obtained his law degree from Cornell University
and taught bankruptcy law as an Adjunct Associate
Professor of Law at the Benjamin Cardozo School
of Law for 10 years.
Alonso Gómez del Campo is a Senior Associate at
Rodríguez Dávalos Abogados in Mexico City, focusing on energy, regulatory, and project financing.
He obtained his law degree from the Universidad
Panamericana in Mexico and a Master of Law degree from Northwestern University in the United
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