*** Durango Default: Rincon's Family Strikes Again ***
Rincon Family bought its own cheap and defaulted Durango bonds From durangodefault.blogspot.com
18:35 Corporacion Durango-related entity spends USD 27m on bond purchase – source
Story: ANG Entreprise Privee, an entity related to Corporacion Durango, completed a USD 27m transaction to acquire the Mexican paper company's bonds, according to a source familiar with the matter. The transaction resulted in ANG Entreprise acquiring USD 100m face value of Corporacion Durango's bonds, based on recent bond price indications.
The transaction took place on 22 October 2008 via Jefferies & Company, the source said. It was authorized by Jose Alfredo Velasco Najar, husband of Corporacion Durango CFO Mayela Rincon, the same source indicated. The other signature authorizing the wire transfer is that of Gabriela Romo Fragoso, the head of the Finance area of the Mexican paper product manufacturer. Rincon did not return requests for comment.
Corporacion Durango’s USD 509m 10.5% 2017 bonds were indicated at 21 on 10 October and at 28 on 20 October. As of 4 November, the company’s bonds were indicated at 25, according to two traders. ANG executed the trade shortly after Durango’s 6 October 2008 filings for bankruptcy protection in both Mexico and the US.
Under the 10.5%’s indenture, Corporacion Durango and its affiliates are permitted to reduce debt via bond purchases in the secondary market, a source that follows the name said. Before filing for bankruptcy, the company disclosed it had bought USD 11m face value in bonds in the open market, thereby reducing its debt from USD 520m to USD 509m.
If Corporacion Durango were undergoing a strictly US-court supervised reorganization, a friendly entity’s purchase of the debt could be considered a positive because “it means debt was reduced by 20%,” a second source close to the situation said. However, under Mexico’s bankruptcy code, Ley de concursos mercantiles (LCM), the voting power associated with the repurchased bonds could be used to support a restructuring that benefited the company at the expense of un- affiliated bondholders, said the source following Durango. When it announced its bankruptcy on 6 October, Corporacion Durango said it “will reorganize its outstanding indebtedness of approximately USD 1.5bn pursuant to LCM. The indebtedness includes USD 509m of senior notes due 2017 and intercompany indebtedness of approximately USD 1bn.
Under Mexico’s LCM, no differentiations are made per creditor class; intercompany debt is recognized and related party debt is allowed to vote to confirm a reorganization plan.
An ad-hoc committee of Durango’s bond holders and share holders holds a total of USD 269m of the company’s USD 509m 10.5% notes issued last year via Merrill Lynch. The group comprises Carval Investors, Credit Renaissance, Deutsche Bank, Gramercy Advisors, James Caird Asset Management, JPMorgan, Moneda Asset Management, Octavian Advisors and TPG Credit, according to court documents.
ANG Entreprise Privee is a heretofore unknown entity with a Mexico City address and answering service. Jose Alfredo Velasco Najar, who in the past has been a Durango state health official, was not immediately available to confirm the purchase of the Corporacion Durango bonds.