Credito Real SAB, once the biggest payroll lender in Mexico, will try to sign up a majority of unsecured creditors to a deal that would restructure more than $1.9 billion in notes, attorneys told a US bankruptcy judge Monday.
(Bloomberg) — Credito Real SAB, once the biggest payroll lender in Mexico, will try to sign up a majority of unsecured creditors to a deal that would restructure more than $1.9 billion in notes, attorneys told a US bankruptcy judge Monday.
The proposal would end a court battle between the company and a bond group over whether the lender should go bankrupt in the US or Mexico. Should more than 50% of unsecured creditors agree to the proposal in the next 60 days, the company will finish liquidating itself in Mexico under a pre-packaged bankruptcy case, Credito Real attorney John Cunningham said in during a court hearing in Wilmington, Delaware.
The tentative deal is backed by a group of bondholders who have been fighting Credito Real for months in a US bankruptcy court. The deal should boost recoveries for unsecured creditors, bondholder attorney David Botter told US Bankruptcy Judge Thomas Horan during the hearing, which was held by video.
Last year, a group of creditors — Banco Monex, S.A, Institutional Multiple Investment Fund LLC and Solitaire Fund — filed an involuntary Chapter 11 petition against Credito Real, a maneuver designed to force the Mexico City-based company before a US judge. The lender opposed the filing and asked a US bankruptcy judge to instead defer to a liquidation case in Mexico, according to US court papers.
A liquidator appointed in the Mexican liquidation case settled with nearly all of the company’s secured creditors, who are owed $615 million, Credito Real said in US court papers. The lenders accepted a “significant discount” on what they are owed, the company said.
Under the proposal to resolve $1.9 billion in unsecured bond debt, Credito Real would set up a shell company controlled in part by bondholder representatives. The shell company would get Credito Real’s remaining assets, Cunningham said. A judge in Mexico would oversee that process.
The new bankruptcy case in Mexico would begin after a majority of unsecured creditors sign onto the deal. The company is very close to winning enough support from bondholders to cross that threshold, Cunningham and Botter told Horan.
The company defaulted last year after it failed to pay about $100 million in debt, Cunningham said.
The case is Crédito Real, S.A.B., U.S. Bankruptcy Court, District of Delaware (Wilmington).
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