With an increasing number of businesses operating without regard to borders in today’s global economy, the importance of understanding Chapter 15 — the Bankruptcy Code provisions instructing the cooperation between the United States and courts of foreign lands involved in cross-border insolvency cases — has never been greater. This advisory will touch on the scope of Chapter 15 and its attempt to balance comity and domestic legal policy, as highlighted in the recent Fifth Circuit Court of Appeals decision, Ad Hoc Group of Vitro Noteholders v. Vitro SAB de CV, No. 12-10542 (5th Cir. Nov. 28, 2012). The relevant facts can be summarized as follows: From 2003 to 2007, Vitro S.A.B. de C.V. (“Vitro”), Mexico’s largest glass manufacturer, borrowed approximately $1.2 billion predominately from US investors (“Old Notes”).

The Old Notes were guaranteed by Vitro’s subsidiaries (the “Guarantors”). The guarantees provided that they would not be released in any bankruptcy proceeding affecting Vitro and that Mexican law would not apply. In December 2009, a series of financial transactions wiped out subsidiary debt (owed to Vitro) and resulted in Vitro’s subsidiaries becoming its creditors, to the tune of approximately $1.5 billion. These transactions were revealed approximately 300 days after their completion, thereby bypassing Mexico’s 270-day “suspicion period” in which the transactions could be voided.