What to expect from Aeromexico’s Chapter 11

What to expect from Aeromexico’s Chapter 11

 

Grupo Aeromexico, S.A.B. de C.V. (Aeroméxico), is a publicly held company incorporated under the Mexican laws. It has its establishment in Mexico and yet filed for bankruptcy in a US court. Probably Aeromexico wanted to get access to a more flexible and expedited bankruptcy, but at the end of the day, its bankruptcy story will be finished in Mexico.

Under the Mexican Bankruptcy Law (LCM, for Ley de Concursos Mercantiles), the bankruptcy proceeding that Aeromexico started in the US is a foreign proceeding (art. 279, LCM). If Aeromexico wants to replicate in Mexico its reorganization plan approved or the stays granted in the US, it will be necessary to open a bankruptcy proceeding in Mexico under the LCM, provided that it has an establishment in Mexico (art. 293, 306, LCM). The bankruptcy proceeding in Mexico will start at the reorganization stage, the process for allowing claims will commence again, and Aeromexico must submit a plan to avoid the conversion to the liquidation stage. The problem here is that there could be contradictory resolutions between the US and the Mexican proceeding. There is the antecedent of a US court that did not grant the recognition of a plan approved in Mexico (the Vitro case). We may have a case now where a Mexican court will not grant recognition of a plan approved in the US.

The story can get more difficult, provided that Aeromexico is the holder of companies that received an administrative concession from the Mexican government to operate as airlines. In a concessionary’s bankruptcy proceeding, the granting authority has an important role. For example, the granting authority appoints the trustee (visitador, conciliador, síndico) and not the Insolvency Institute (art. 240, LCM); the granting authority may remove the debtor from the possession of the company (art. 241); and most importantly, the granting authority may veto the reorganization plan (art. 242, LCM).

 

In sum, Aeromexico’s bankruptcy may have started in the US, but its story will end in Mexico.

 

For further info about cross-border insolvency in Mexico, you can download my work “CROSS-BORDER INSOLVENCY - Recognition of foreign proceeding under the Mexican Bankruptcy Law” for free at https://works.bepress.com/francisco-rodrigueznepote/


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