Bondholders of TV Azteca are asking a U.S. bankruptcy judge to block the Mexican broadcaster's request for chapter 15 protection, arguing it would legitimize what they say was a fraudulent restructuring designed to dilute investors.
In an objection filed in Bankruptcy Court for the Southern District of New York on Tuesday, bond trustee Bank of New York Mellon alleged TV Azteca manipulated its debts and creditor voting rights to push through a restructuring that could wipe out much of the roughly $644 million bondholders say they are owed in principal and interest.
The company, one of the largest producers of Spanish-language television, sought insolvency protection in Mexico in March. It stopped paying interest on its $400 million notes in 2020 and failed to repay the debt when it matured in 2024, according to court papers. Last month, it petitioned for recognition of the Mexican proceedings under chapter 15 in the U.S.
BNY Mellon argues that granting recognition would effectively validate alleged fraudulent maneuvers and due process violations that have excluded bondholders from the Mexican insolvency proceedings.
BNY Mellon's filing says TV Azteca manufactured a $240 million loan in January with an affiliated lender to inflate the debt eligible to vote in the Mexican proceedings, weakening bondholders' voting power and claims.
The trustee also accused the broadcaster of transferring valuable assets beyond bondholders' reach, including its government-issued broadcasting license, into an entity that didn't guarantee the notes, violating its bond indentures.
TV Azteca submitted a declaration from a Mexican insolvency lawyer defending the legitimacy of its moves and arguing they provide adequate protections for foreign creditors.
The trustee says bondholders are owed about $644 million, but the Mexican solvency proceedings identified about $595 million in note claims. The trustee said TV Azteca disputed about $457 million of that $595 million, leaving roughly $137 million that is valued at distressed market prices unchallenged.
Under the proposed Mexican restructuring plan, the $240 million secured claim would be kept whole and equity holders' interests would remain intact while unsecured creditors could face steep losses, BNY Mellon's objection says.
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