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This article examines the role of international bondholders in restructuring Mexican insolvent companies, focusing on bonds issued under U.S. Rule 144A and Regulation S. It argues for legal reforms to address cross-border challenges in restructuring processes.
Over the last decade, the Mexican financial and bankruptcy landscape has undergone significant changes. International bondholders have assumed an increasingly pivotal role in the restructuring of Mexican companies facing insolvency processes. This evolution not only reflects changes in market dynamics but also underscores the increasing complexity and sophistication of global financial instruments, including the application of foreign law. The introduction of these complex financial instruments, along with the trend towards the internationalization of investment portfolios, has necessitated a novel approach in managing insolvency processes. This approach demands a reevaluation of our legal framework, as well as restructuring mechanisms, to effectively address the complex nature of financial commitments of Mexican companies and the interests of the various creditors involved.
A notable example of the growing influence of international bondholders was demonstrated in the bankruptcy process of UNIFIN Credit, S.A. de C.V. SOFOM, E.N.R. (UNIFIN), which concluded in February of this year, following the approval of the reorganization plan by the majority of its recognized creditors, including international bondholders. However, despite the success of this restructuring, it is essential to note that the Mexican Insolvency Law does not fully provide the mechanisms required by the current financial landscape for all companies to achieve successful restructuring.
Therefore, the purpose of this article is to conduct a brief analysis of the main characteristics of international bonds issued by Mexican companies and their impact on restructuring processes under the Mexican Insolvency Law. This analysis will serve as a foundational guide on some of the most common issues in the restructuring processes of Mexican companies that issue such international bonds (typically in the United States) that are governed by U.S. law, and which are then subject to a commercial bankruptcy process in Mexico (Concurso).
A number of Mexican companies, including PEMEX and CFE, as well as the major Mexican banks, have successfully issued international bonds. This group includes well-known names such as FEMSA, America Movil, CEMEX, Coca-Cola FEMSA, Grupo Televisa, Grupo Bimbo, and many others spanning diverse sectors such as telecommunications, construction, food and beverages, energy, mining, and financial services.1 The move to diversify financing sources by issuing debt in various currencies and jurisdictions, with a primary focus on the United States, reflects international investors’ confidence in the Mexican market and also showcases the strength and dynamism of the Mexican corporate sector on a global scale. The significant influence that international bondholders are likely to assert in future Mexican insolvency proceedings underscores the crucial role that international investors play in shaping the financial landscape. As major creditors to some of Mexico’s largest companies across diverse industries, international bondholders will likely play a pivotal role in the outcomes of such proceedings.
We hope this article will enable more Mexican insolvency lawyers to become familiar with the structure of international bonds and encourage dialogue to advance a more sophisticated bankruptcy practice. This necessarily involves thoroughly analyzing how to balance the rights of international bondholders (which rights are often set forth in U.S. indentures that are governed by U.S. law) with the need for efficient restructuring processes in the Mexican market, achieving the fundamental objective of the Mexican Insolvency Law: to preserve companies and to prevent the widespread default on payment obligations from jeopardizing a company’s viability and the viability of the other companies with whom they maintain business relationships.
Over the last decade, the Mexican financial and bankruptcy landscape has undergone significant changes. International bondholders have assumed an increasingly pivotal role in the restructuring of Mexican companies facing insolvency processes. This evolution not only reflects changes in market dynamics but also underscores the increasing complexity and sophistication of global financial instruments, including the application of foreign law. The introduction of these complex financial instruments, along with the trend towards the internationalization of investment portfolios, has necessitated a novel approach in managing insolvency processes. This approach demands a reevaluation of our legal framework, as well as restructuring mechanisms, to effectively address the complex nature of financial commitments of Mexican companies and the interests of the various creditors involved.
A notable example of the growing influence of international bondholders was demonstrated in the bankruptcy process of UNIFIN Credit, S.A. de C.V. SOFOM, E.N.R. (UNIFIN), which concluded in February of this year, following the approval of the reorganization plan by the majority of its recognized creditors, including international bondholders. However, despite the success of this restructuring, it is essential to note that the Mexican Insolvency Law does not fully provide the mechanisms required by the current financial landscape for all companies to achieve successful restructuring.
Therefore, the purpose of this article is to conduct a brief analysis of the main characteristics of international bonds issued by Mexican companies and their impact on restructuring processes under the Mexican Insolvency Law. This analysis will serve as a foundational guide on some of the most common issues in the restructuring processes of Mexican companies that issue such international bonds (typically in the United States) that are governed by U.S. law, and which are then subject to a commercial bankruptcy process in Mexico (Concurso).
A number of Mexican companies, including PEMEX and CFE, as well as the major Mexican banks, have successfully issued international bonds. This group includes well-known names such as FEMSA, America Movil, CEMEX, Coca-Cola FEMSA, Grupo Televisa, Grupo Bimbo, and many others spanning diverse sectors such as telecommunications, construction, food and beverages, energy, mining, and financial services.1 The move to diversify financing sources by issuing debt in various currencies and jurisdictions, with a primary focus on the United States, reflects international investors’ confidence in the Mexican market and also showcases the strength and dynamism of the Mexican corporate sector on a global scale. The significant influence that international bondholders are likely to assert in future Mexican insolvency proceedings underscores the crucial role that international investors play in shaping the financial landscape. As major creditors to some of Mexico’s largest companies across diverse industries, international bondholders will likely play a pivotal role in the outcomes of such proceedings.
We hope this article will enable more Mexican insolvency lawyers to become familiar with the structure of international bonds and encourage dialogue to advance a more sophisticated bankruptcy practice. This necessarily involves thoroughly analyzing how to balance the rights of international bondholders (which rights are often set forth in U.S. indentures that are governed by U.S. law) with the need for efficient restructuring processes in the Mexican market, achieving the fundamental objective of the Mexican Insolvency Law: to preserve companies and to prevent the widespread default on payment obligations from jeopardizing a company’s viability and the viability of the other companies with whom they maintain business relationships.
