TV Azteca SAB agreed to negotiate with US bondholders owed $400 million after a US judge warned the second biggest broadcaster in Mexico that it could be forced to participate in a bankruptcy case in New York.
(Bloomberg) — TV Azteca SAB agreed to negotiate with US bondholders owed $400 million after a US judge warned the second biggest broadcaster in Mexico that it could be forced to participate in a bankruptcy case in New York.
US Bankruptcy Judge Lisa G. Beckerman told the company that it was obvious to her that TV Azteca had to restructure its debt, despite strong resistance from the company. TV Azteca opposes a US bankruptcy and has used court rulings in Mexico to try to block bondholders from collecting on the defaulted bonds.
“Your position that there should be no restructuring is not going over very well with me,” Beckerman said during a court hearing in Manhattan on Tuesday evening. “It is one thing to say that a restructuring should not take place in the United States and it’s another thing to say ‘I’m ducking restructuring.’”
Beckerman said she would delay ruling on whether she should force the producer of some of the most-watched Spanish-language shows to participate in a bankruptcy case in New York brought by US bondholders. Instead, the two sides will try to hire a former federal judge to act as mediator for about 60 days.
Although the company is unwilling to be involved in a US bankruptcy case against it, the broadcaster is willing to participate in court-ordered mediation, TV Azteca attorney William Clareman said in court. Creditors have unfairly attacked the company because of a dispute over whether TV Azteca must pay a penalty related to the default called by the bondholders’ agent, Clareman said.
“A ‘bad debtor’ is a debtor that doesn’t do what they want the debtor to do,” Clareman said, using the phrase that bondholders have applied to TV Azteca. “We have said we are willing to mediate.”
Bondholders have accused TV Azteca of refusing to negotiate and of trying to avoid repaying the bonds.
Good faith talks can happen in or out of court, but either way “it means parties will have to recognize that it’s restructuring time,” Beckerman said in court.
Disgruntled Creditors
Lawyers for TV Azteca and the bondholders were in federal court on Tuesday for the end of a two-day trial over the company’s request to dismiss the bondholders’ effort to put the broadcaster into Chapter 11 bankruptcy.
TV Azteca argues that disgruntled creditors can’t force it into bankruptcy because the company doesn’t own or operate anything of substance in the US. And even if Beckerman later rules that TV Azteca must participate in the proposed Chapter 11, company managers, who are based in Mexico, may refuse to cooperate, Clareman told the judge.
If TV Azteca simply ignores Beckerman, she would eventually issue orders about the debt and then ask courts in Mexico to enforce them.
“I acknowledge how horrible it would be to have your client refuse to cooperate and I having to issue a billion orders that will probably be ignored in Mexico,” Beckerman told Clareman. “I would not enjoy that.”
TV Azteca has been locked in court battles in the US and Mexico with bondholders who say TV Azteca quit paying on more than $400 million in notes that come due next year. Bondholders filed an involuntary bankruptcy case against the company on March 20 that would force it to negotiate a payment plan under the supervision of a US judge.
Bondholders Plenisfer Investments SGR SpA, Cyrus Capital Partners LP and Sandpiper Ltd. argue that when TV Azteca borrowed the $400 million in 2017, it agreed to submit disputes about the debt to a state or federal court in New York. Instead, the company convinced a local judge in Mexico City last year to suspend interest payments on the bonds, the creditors said in bankruptcy court papers.
Later, a court in Mexico also barred creditors from taking any action to collect on their debt.
Past negotiations between creditors and the media company, which is controlled by Mexico’s third-richest man, Ricardo Salinas Pliego, failed and there have been no talks since the involuntary case was filed, lawyers said.
Involuntary bankruptcy cases require a company to either agree to put itself under court protection or fight creditors in court.
The case is TV Azteca, SAB de CV, 23-10385, US Bankruptcy Court for the Southern District of New York (Manhattan).
(Updates with comments from company attorney from fifth paragraph onward.)
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