Vol 1 (2005) - Issue 3

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Recognition of Corporate Debt Restructuring Procedures in Latin America under US Law: Lessons from the Multicanal Case

Introduction

Recently, a United States (US) bankruptcy court has been faced with a corporate restructuring procedure under Argentine law which was seeking recognition under § 304 of the US Bankruptcy Code. Section 304 allows for the commencement of an ancillary case in the US - as an alternative of a plenary case under the Bankruptcy Code - to assist in the administration of a foreign bankruptcy procedure.

Multicanal SA (Multicanal), an Argentine cable company which had issued notes in the US, decided to restructure its outstanding debt by means of a prepackaged deal under Argentine law as the result of the economic and financial crisis that affected Argentina. Upon the filing of a claim in the US by certain creditors to collect their monies and upon a subsequent filing of an involuntary Chapter 11 of the US Bankruptcy Code, Multicanal decided to request recognition under US law of the restructuring procedure taking place in Argentina under Argentine law.

The analysis of this important precedent will commence with a brief description of the legal and economic consequences of the Argentine crisis in order to understand why Multicanal, as many other Argentine companies, was faced either with a complete restructuring of its outstanding debts or with its bankruptcy. Secondly, the Argentine restructuring procedure will be addressed to provide a framework to understand the main issues discussed in the US court.