In Restructuring Being Completed Under New Argentine Bankruptcy Law …

In Restructuring Being Completed Under New Argentine Bankruptcy Law

Chadbourne & Parke LLP is representing Sideco Americana, an Argentina-based conglomerate, in the restructuring of approximately US $125 million (about $390 million Argentine pesos) of notes pursuant to an Argentine Acuerdo Preventivo Extrajudicial, or “APE”, which is an out-of-court restructuring agreement filed for court approval akin to a U.S. pre-packaged Chapter 11 filing.

Even though it offers advantageous features for corporate restructurings, the APE still remains fairly untested in Argentina, as none of the few cases filed to date by other Argentine corporates currently restructuring similar type of debt has yet closed.

Under the APE, a company is able to restructure its unsecured debt with the consent of 1) more than 50% of all unsecured creditors, determined on a head count basis, regardless of the principal amount held, and 2) at least 2/3 of the aggregrate principal amount of unsecured debt. If the APE is approved, then it binds all the unsecured creditors, regardless of whether or not they granted their consent or participated in the process. The APE is proving particularly effective in cases where the bonds or loan participations are widely held pursuant to bond or loan documentation which may only be amended by unanimouns consent or supermajorities and where the uncertainties surrounding Argentina’s economic viability and political future have kept creditors undecided or unwilling to take on additional risks.

Pursuant to a consent solicitation launched on November 10, 2003, Sideco obtained from 91.11% of the holders of its notes consents to its APE and powers of attorney to execute an APE agreement which will provide for the exchange of its notes for cash, new notes and a combination thereof. Out of the $114 million in notes tendered, holders of $106 million elected a cash payment (35 cents for each 1.00 dollar in notes tendered), holders of $5.6 million elected 5-year secured notes and holders of $2.5 million elected 10-year unsecured notes. The consents to the APE and the elections were confirmed at a bondholders meeting held by Sideco simultaneously in Buenos Aires and New York, on December 9, 2003. Following execution of the APE agreement, Sideco will file the APE agreement and the consents from its noteholders with the courts of Buenos Aires, where an APE proposal already consented to by Sideco’s unsecured creditors is pending review and final approval.

Chadbourne advised Sideco on the U.S. legal aspects of the bonds and the consent solicitation governed by New York law as well as the overall restructuring of the debt. Chadbourne attorneys working on the deal include New York office partners Alejandro R. San Miguel and Talbert I. Navia and Barry A. Dinaburg as well as Latin America Counsel Carlos Albaraccin. Also working on the deal was the Argentine law firm of Klein and Franco.

Sideco Americana is a diversified conglomerate engaged in engineering and construction, infrastructure development and public services, with most of its operations in Argentina and Brazil. The economic deterioration and devaluations that both countries experienced in recent years have forced the company to restructure its operations and U.S. dollar denominated debt.

Chadbourne, which has a strong Latin American practice, is currently advising on a number Argentine and Latin American debt restructurings and advised Chivor S.A. of Colombia last year in a pre-packaged Chapter 11 filed in the United States.

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