1. INSOL International Mexico City Seminar Thursday 22 April 2010

2. Welcome Bienvenida e inauguración Howard Seife Chadbourne & Parke LLP Board Director, INSOL International

3. Seminar Chair Presidente del Seminario Jorge Sepúlveda Bufete García Jimeno, S.C.

4. Organising Committee / Comité de Organización Jorge Sepúlveda, Bufete Garcίa Jimeno S.C., Presidente Thomas Heather, Heather & Heather, Copresidente Educacional Howard Seife, Chadbourne & Parke LLP, Copresidente Educacional Adam Bryk, Deloitte, Copresidente Sponsor Jaime Guerra González, Guerra González Abogados, S.C. Copresidente Sponsor Henri Bricard, Bricard, Egure y Espindola Asociados, Copresidente Marketing Antonio Silva Oropeza, Instituto Iberoamericano de Derecho Concusal, Copresidente Marketing

6. AlixPartners LLP Allen & Overy LLP Alvarez & Marsal LLC Baker Tilly Begbies Global Network Bingham McCutchen LLP Cadawalader, Wickersham & Taft LLP Chadbourne & Parke LLP Cleary Gottlieb Steen & Hamilton LLP Davis Polk & Wardwell De Brauw Blackstone Westbroek Deloitte Ernst & Young Ferrier Hodgson Freshfields Bruckhaus Deringer Goodmans LLP Grant Thornton Greenberg Traurig LLP Huron Consulting Group Jones Day Kaye Scholer LLP Kirkland & Ellis LLP KPMG LLP Linklaters LLP Lovells LLP Norton Rose LLP Pepper Hamilton LLP PPB PricewaterhouseCoopers RSM Corporate Advisory Services Skadden, Arps, Slate, Meagher & Flom LLP Shearman & Sterling LLP Vantis Weil, Gotshal & Manges LLP White & Case LLP Zolfo Cooper LLP Group of Thirty-Six El Grupo de Treinta y Seis

7. Housekeeping No Smoking Coffee Breaks and Lunch – timing Mobile telephone & Blackberry switched off Assessment forms – completion & return

8. Cross-border proceedings Procesos transfronterizos Preside: Thomas Heather Heather & Heather The Honorable Samuel Bufford US Bankruptcy Court Brock Edgar FTI Consulting Bill Govier Bingham McCutchen LLP

9. Cross-border proceedings Thomas S. Heather Heather & Heather

10. Cross-border insolvencies: an overview 2008-2009, International financial crisis of unprecedented proportions. Particularly in Mexico, a handful of important cross-border insolvencies developed into precedent setting matters. Concurso Mercantil: 10 years under a “new” law External factors and failure to address key structural reform, (taxes, labor, antitrust, telecomunications, security) may lead to more cases.

11. Critical factors must be considered in answering basic questions: –Are creditors/debtors treated equally? –Has progress been substantial? –Is Chapter II an alternative for Mexican/Latinamerican debtors? When? –What are the liabilities to management and to the board? –Is Mexico/Latinamerica competitive? –Is there an effective international cooperation among our tribunals?

12. 12 Overview Comparison of Mexican Concurso Mercantil to US Chapter 11 Bill Govier Bingham McCutchen LLP

13. 13 Topics For Discussion Overview The Players Commencement of a Case Key Issues Treatment of Certain Claims The Creditors’ Voice Establishing a Claim The Plan Conclusion

14. 14 Overview Primary Goals the Same: –Owners and Management Can Preserve a Going Concern, and Restructure Debts and Operations, with the Support of Most Creditors, While Binding Dissenting Creditors Major Policy Differences: –Chapter 11 Can Also Impose a Change of Control of the Restructured Going Concern, Concurso Cannot –Equity is “Just One More Constituency” in Chapter 11, but in Concurso, Equity Enjoys Veto on the Reorganization –Chapter 11 Can Impose a Restructuring on Secured Creditors Without Their Consent, Concurso Cannot

15. The Players Mexico Proceedings Debtor Judge Secured Lenders (not required to participate) Unsecured Bonds Trade Claims Visitador (examiner) Conciliador IFECOM (Instituto Federal de Especialistas de Concursos Mercantiles) Interventor Government Entities (Taxing Authorities, Attorney General, etc.) U.S. Proceedings Debtor/ Debtor-in- possession Judge Secured Lenders Unsecured Bonds Official Committee of Unsecured Creditors Other Committees Trade Claims Landlords Other “parties in interest” (SEC, unions, etc.) Foreign Representative (in chapter 15 cases) United States Trustee

16. Commencement of a Case U.S. Proceedings Voluntary petition Involuntary petition No insolvency requirement for voluntary petition Mexico Proceedings Voluntary petition Involuntary petition Insolvency requirement –IFECOM appoints Visitador who reviews the debtor’s books and records and issues a report within 15-30 days on whether debtor is insolvent

17. Commencement of a Case: (cont’d) Stay U.S. Proceedings Automatic stay halts efforts by secured and unsecured creditors to collect prepetition debts Relief from the stay is available, for cause if the debtor has no equity in property that is not needed for reorganization, or failure to compensate secured creditor for declines in collateral value Automatic stay is a central component of forcing creditors to stay at the table Mexico Proceedings Court issues “Declaration of Insolvency”, which will date back to the filing date and act as a “stay” Stay is valid as against secured and unsecured creditors during the “conciliation phase” (185 days + up to 2 potential extensions of 90 days each) Limited opportunity for relief from the stay during conciliation phase

18. Key Issues Post Petition Borrowing U.S. Proceedings Debtor-in-possession financing (“DIP financing”) is encouraged, and is given super-priority status Existing secured lenders often use it to shore-up or protect their position, and impose restraints on operations Mexico Proceedings Theoretically available, but no specific mechanism Lack of post petition loans can be a major impediment to seeking Concurso protection Mexico Proceedings No interim payments during proceedings, limited opportunity to protect against decline in collateral value absent special Court permission to foreclose U.S. Proceedings Interim payments during proceedings to secured creditors to compensate for diminution of value of collateral during the case Adequate Protection

19. Key Issues (cont’d) Status of Executory or Partially Performed Contracts U.S. Proceedings Debtor may assume, assume and assign, or reject executory contracts as it sees fit, may “pick and choose” Key flexibility to restructuring the operations of the debtor Mexico Proceedings General rule is that debtor must continue to comply with contracts, unless the Conciliador objects or rejects the contract Can be an impediment to a restructuring of operations Substantive Consolidation U.S. Proceedings Multiple debtors may be combined into one “estate” for purposes of calculating assets and liabilities Mexico Proceedings Not permitted; although related party filings handled by same judge

20. Key Issues (cont’d) Preference/ Fraudulent Transfers U.S. Proceedings Fraudulent transfers: Two year look back period –Debtor-in-possession or trustee may file action to avoid certain transfers Preferences: 90 day look back period on existing debt; 1 year look back period for insiders Mexico Proceedings Court may invalidate transactions made within 270 day period before Declaration of Insolvency that are made with intent to defraud, or are otherwise gratuitous or at a discount –Interventor can extend 270 day period to up to 540 days Presumption that certain transactions made during look back period were made in attempt to defraud of creditors, unless debtor shows good faith

21. Treatment of Certain Claims U.S. Proceedings Secured claims –Continue to accrue interest (including default rate) up to value of collateral –Can be impaired and compromised under a plan of reorganization so long as recovery value of restructured claim equals or exceeds the value of the collateral Priority unsecured claims –Typically includes administrative expenses, taxes, and wages –“Super priority” for DIP financing; trumps almost all else Mexico Proceedings Secured claims –Continue to accrue interest (not including default rate) up to value of collateral (remainder is unsecured claim) –If secured creditor agrees to restructure in Concurso, paid pursuant to agreed Convenio –Cannot be forced to restructure in Concurso, pre-Concurso liens and rights ride through the proceeding unimpaired, and must be honored in full after Convenio finalized Priority claims –Costs of administration, taxes, wages, and unsecured claims with attachments under Mexican law

22. Treatment of Certain Claims (cont’d) Mexico Proceedings Unsecured claims –Cease to accrue interest –Converted into UDIs (Unidades de Inversión) –If denominated in foreign currency, converted first to pesos, then to UDIs - currency risk issues here –Before filing, unsecured creditors with obligations under Mexican law may seek attachment of assets –Treatment under concurso is governed by consensual decision of 51% of the claims U.S. Proceedings “General” unsecured claims –Cease to accrue interest –No adequate protection right –Can be impaired and compromised under a plan of reorganization –Receives all plan value after secured recoveries, and if not paid in full, can force a conversion of debt to equity, and wipe out all of the shareholders, and elect a new board

23. The Creditors’ Voice U.S. Proceedings Official Committee of Unsecured Creditors: –Appointed by the US Trustee (usually 5-7 largest creditors) –Consults with debtor –Receives confidential information from debtor –Fiduciary for all unsecured creditors –Paid for by the debtor’s estate Additional official committees: –Court may appoint or US Trustee may recommend –All expenses paid for by estate No secured creditor committees Mexico Proceedings No official committees Creditor(s) representing ten percent of “recognized credits” may request the court appoint an Interventor –Representative of appointing creditor(s); not a fiduciary –Fees paid for by the requesting creditor(s) “Recognized creditors” vs. unrecognized creditors –Only “recognized creditors” may appear before the court or file pleadings –Individual bondholders not expressly recognized (unless they individualize their claim) –Indenture trustee recognized (as long as it files a proof of claim)

24. Establishing a Claim U.S. Proceedings Bar date –Claim allowed unless debtor or party in interest objects –Those who file a proof of claim are subject to the jurisdiction of the bankruptcy court and allowed to vote on the plan of reorganization Bankruptcy court may estimate a claim for voting purposes or for allowance purposes Typically, indenture trustee files proof of claim on behalf of all bondholders, but individual bondholders retain right to vote Mexico Proceedings To be a “recognized creditor”, must file proof of claim within certain time period after insolvency judgment published –20 days for Mexican creditors –45 days for foreign creditors Conciliador files provisional list of creditors and claims, then final list Court reviews and publishes a “Final List of Recognized Credits” Right to vote is separate from recognition as a “recognized creditor” May need to file separate “voting writs”

25. The Plan U.S. Proceedings Debtor has 120 day exclusivity period to file a plan, but often extended by the court, up to 18 months maximum Requires filing of disclosure statement containing adequate information Plan of reorganization details creditor classification and treatment –Impaired classes vote on plan; one “impaired class” must vote in favor of plan Acceptance = consent by 2/3 in amount of claims and more than 50% in number (of claims actually voted) –Absolute priority of claims, and potential cramdown Mexico Proceedings Concurso Mercantil (2 stage process) –Insolvency test requirement –Stage 1: Conciliation 185 days, extension for two additional 90 day periods with certain approvals –Stage 2: Liquidation (quiebra) If consensual reorganization not reached within 365 days Convenio Concursal not voted on, signed Presented first to Concilador for review and approval before filed Acceptance = consent by more than 50% of allowed unsecured claims –Debtor must agree to and sign the Convenio –Participating secured creditors may agree to treatment pursuant to Convenio, nonparticipating secured creditors ride through Concurso Court issues notice of approval after 5 day objection period. 9 days after notice, Convenio approval order is final New pre-pack provisions (2007) –Filing, signed by debtor & creditors representing 40% of debtor’s credits, and debtor declaration required

26. Conclusion: Practical Considerations Chapter 11 More Useful at Changing Operations and Cash Flow of Operating Companies Many Mexico Operating Companies or Subsidiaries Cannot Make It Through a Concurso Chapter 11 Creditors’ Committee Hires Advisors Paid For by the Estate, Not the Personal Creditors -- Can be a Major Factor, Positive or Negative, Depending on Where You Sit Convenio Can Be Much More Flexible and Favorable, From Debtor Viewpoint, as to Classification, Treatment, and Voting of Claims Convenio Cannot Force Secured Creditors to Agree to Less Than Full Payment, While a Chapter 11 Plan May Cramdown Dissenting Secured Creditors Equity Cramdown is a Major Differentiating Factor, and Again, Positive or Negative Depending on Where You Sit

27. Cross-border proceedings Brock J. Edgar FTI Consulting

28. What happens after default? Initial reaction of foreign creditors is often to consider filing an involuntary insolvency proceeding –Mexican involuntary proceedings typically take 7+ months to gain traction –Practically, the main reason to file an involuntary proceeding in Mexico is to get the debtor to file a Mexian voluntary proceeding

29. USA or Mexican Proceeding? Creditors always consider filing Chapter 11 to obtain USA jurisdiction over a Mexican Company Efforts are unlikely to ever succeed given that the Mexican statue states that a Mexican company’s reorganization is governed by Mexican law (Concurso Mercantil) However, this is sometimes an effective tool to get the Mexican company to file voluntarily in Mexico

30. What type of Company can file? Basically all companies are eligible but on a practical basis: –Operating companies cannot file and survive as there is: No critical supplier concept that can be implemented immediately No debtor-in-possession financing on a practical basis Therefore the Concurso Mercantil law is mainly useful for holding companies

31. Individual or Consolidated Cases? The concept of a consolidated filing does not exist in Mexico – each individual company has its own estate

32. Who are the Creditors? All liabilities of the company are creditors –Third party debt –Intercompany debt –Suppliers –Employees While there is “superior” treatment for secured creditors all other creditors receive pari passu treatment unless they agree to receive worse treatment

33. Cross-Border Proceedings Hon. Samuel L. Bufford US Bankruptcy Court – Los Angeles (C.D. Cal.)

34. Sale of Assets under § 363 in Multinational Case If done in a chapter 15 case, limited to assets within US territorial jurisdiction US chapter 11 case – no such limitation –Comity concerns apply

35. Sale of Assets under § 363 in Multinational Case Court must strike balance between debtor’s ability to sell assets and constituents’ rights to vote on a plan Some articulated business justification required May not be a sub rosa plan or attempt to circumvent plan confirmation requirements

36. Sale of Assets under § 363 in Multinational Case Factors –the proportionate value of the asset to the estate as a whole –the amount of elapsed time since the filing –the likelihood that a plan of reorganization will be proposed and confirmed in the near future –the effect of the proposed disposition on future plans of reorganization

37. Sale of Assets under § 363 in Multinational Case Factors –the proceeds to be obtained from the disposition vis-a-vis any appraisals of the property –which of the alternatives of use, sale or lease the proposal envisions –whether the asset is increasing or decreasing in value.

38. Hearing – first day motions Evidence of notice to major creditors –Some will normally attend hearing Presentation of case –May require oral testimony Setting timetable for case

39. Hearing – first day motions Motions – typical for US –Use of cash collateral –Paying prepetition wages –Post-petition financing –Cash management system –Utilities

40. Hearing – first day motions Main Point – to have the judge become involved in the planning and scheduling of the case

41. Equality of Arms Principle of “fair legal process” Derives from European Convention on Human Rights Applied in European Court of Justice in bankruptcy cases _ Eurofood

42. Equality of Arms Right to a full and fair opportunity to present facts of one’s case to the court Right to present one’s legal arguments to the court Right to comment on evidence and legal arguments of opponent

43. Cross-border proceedings Procesos transfronterizos Preside: Thomas Heather Heather & Heather The Honorable Samuel Bufford US Bankruptcy Court Brock Edgar FTI Consulting Bill Govier Bingham McCutchen LLP

44. Procedimientos con plan de reestructura (Pre-packs) Preside: Jaime Guerra González Guerra González Abogados Mark Bloom Greenberg Traurig P.A. Richard Cooper Cleary Gottlieb Steen & Hamilton LLP Luis Enrique Graham Chadbourne & Parke LLP

45. Prepackaged Plans Under U.S. Bankruptcy Law Richard J. Cooper Cleary Gottlieb Steen & Hamilton LLP

46. Prepackaged Plans in U.S. Bankruptcy: Overview In a prepackaged bankruptcy, creditors of a distressed company arrive at a mutually acceptable reorganization plan with the debtor prior to the commencement of the Chapter 11 case A conventional Chapter 11 case can take a long time (often more than 18 months) A prepackaged bankruptcy shortens the plan process by allowing the debtor to enter Chapter 11 having already formulated and negotiated a plan with creditors (and in the case of a true prepackaged plan, as opposed to a prenegotiated or prearranged plan, having solicited sufficient acceptances for the plan) Prepackaged bankruptcies also offer debtors greater flexibility than out-of-court restructurings because of the ability to bind a dissenting minority of creditors

47. Prepackaged Chapter 11 Plans: Advantages to Debtors Speed –Expedite reorganization and exit from Chapter 11 Cost –Minimize typical expenses and deterioration in business associated with protracted Chapter 11 proceedings Control –Minimizing amount of time in Chapter 11 reduces influence of court and creditor constituencies Creditors are less likely to force the debtor to replace company executives –Ability to bind a dissenting minority of creditors In order to block plan approval, dissenting creditors must constitute at least 1/3 of the face amount of the class of claims being impaired under the plan (and even then, cramdown is a possibility)

48. Prepackaged Chapter 11 Plans: Advantages Unlike out-of-court restructuring, Chapter 11 process provides releases and exculpation to the debtor, professionals and creditors Confirmation Protections –Court confirmation of plan mitigates risks of claims arising from out-of-court deal: Fraudulent Transfer Preference Lender Liability

49. Prepackaged Chapter 11 Plans: Other Considerations Under certain circumstances, it may be in the debtor’s best interest to immediately seek Chapter 11 protection rather than negotiate a prepackaged plan with creditors: –If a debtor is burdened with costly executory contracts and leases, it might be in its best interest to first file for bankruptcy, reject its burdensome contracts and leases (thereby converting them into general unsecured claims), and then negotiate a plan with creditors –A debtor that has defaulted on a debt obligation or is a defendant in litigation may prefer an immediate bankruptcy filing to take advantage of the automatic stay By soliciting creditor acceptances for a prepackaged plan, a debtor alerts its creditors that it intends to file for bankruptcy –This advance notice may increase the likelihood of creditors acting adversely to the debtor (e.g., filing an involuntary bankruptcy petition against the debtor, tightening credit terms or ceasing to extend credit altogether)

50. Prepackaged Chapter 11 Plans: Other Considerations Prepackaged plans are more appropriate in the context of financial restructurings (as opposed to operational restructurings) –Prepackaged plans are well suited to situations in which a sophisticated bondholder group holds most of the debt and a single representative can negotiate with the debtor on behalf of the bondholders In contrast, where a debtor has a large number of creditors representing different types of claims, it is often too difficult for a debtor to negotiate plan terms with enough of its creditors to obtain the requisite number of plan acceptances –Problematic with respect to trade, litigation, employment and other claims –Difficult to adequately identify and solicit claims other than financial debt

51. There Are Three Variants of Prepackaged Restructuring Plans: “True” Prepackaged Plan of Reorganization –Prior to filing for bankruptcy, the debtor: Enters into a plan support agreement with creditors in numbers sufficient to ensure plan approval –With respect to each impaired creditor class, 2/3 of face amount of claims and 1/2 of number of creditors voting Prepares and disseminates the Disclosure / Solicitation Statement and Plan Solicits and obtains votes sufficient to ensure plan approval Prenegotiated Plan of Reorganization –Prior to filing for bankruptcy, the debtor enters into a plan support agreement with creditors in numbers sufficient to ensure plan approval –After filing for bankruptcy, the debtor: Solicits and obtains votes sufficient to ensure plan approval Seeks court approval of the Disclosure Statement Prearranged Plan of Reorganization –Prior to filing for bankruptcy, the debtor may enter into a plan support agreement with creditors (but generally not in numbers sufficient to ensure plan approval) –After filing for bankruptcy, the debtor: Solicits and obtains votes sufficient to ensure plan approval

52. Prepackaged Plans in U.S. Bankruptcy: A Comparison True Prepackaged PlanPrenegotiated PlanPrearranged Plan Approval Timeline Generally 30-60 days from bankruptcy filing Generally 60-90 days from bankruptcy filing (extra time required for approval of Disclosure Statement and solicitation of votes) Can be as short as 60- 90 days from bankruptcy filing; however, can be much longer SEC Registration May be registered or unregistered (depending on applicability of exemption from registration) Exempt from registration pursuant to 11 USC §1145 (for new money invested, another exemption must also apply; e.g., §4(2) of the Securities Act) Solicitation of Votes for Plan of Reorganization Solicitation occurs prior to bankruptcy filing and prior to approval of Disclosure Statement Upon filing for bankruptcy, debtor seeks a date for combined hearing on approval of Disclosure Statement and Plan confirmation Votes not solicited until after bankruptcy filing and after approval of Disclosure Statement Plan Support / Lock-Up Agreement Executed prior to bankruptcy filing May or may not be part of process

53. U.S. vs. Mexico: A Comparative View U.S. Prepackaged PlanExpedited Restructuring Under Mexican Concurso Mercantil Requirements to Qualify for Expedited Procedure  No insolvency requirement to file for Chapter 11  Debtor must be “in generalized breach of payment of obligations” –Where a debtor misses payments to two or more creditors over a thirty-day period, these missed payments represent at least 35 percent of the debtor’s total debts, and the assets of the debtor do not cover 80 percent of its total outstanding debts  Creditors representing at least 40 percent of the company’s total debts must agree to the restructuring plan Acceptance Thresholds for Plan to be Approved  With respect to each impaired creditor class, 2/3 of face amount of claims and 1/2 of number of creditors voting  50 percent of votes of unsecured and secured or preferred creditors Parties Bound by Plan  The debtor  All creditors  The debtor  Unsecured creditors  Secured and preferred creditors that agreed to the plan Experience With Expedited Restructuring Process  Bankruptcy judges are very experienced in dealing with prepackaged bankruptcies, particularly in the District of Delaware and the Southern District of New York  Well established process with developed precedent  Virtually untested  Unclear whether procedure significantly expedites restructuring process

54. The Pre-Pack Sale - An English Perspective Mark Bloom Greenberg Traurig P.A.

55. Pre-Packs – An English Perspective Pre-packs are creatures of practice not creatures of statute There is little or no judicial involvement in a pre-pack sale There is little or no consultation with creditors

56. The scope of the Administrator’s appointment The hierarchy of purposes The approval of the Administrator’s proposals The “traditional” marketing process

57. Anatomy of a pre-pack [Marketing] Negotiation of sale contract Agreement with secured creditors Appointment of Administrator Completion of sale Inform creditors

58. Risk The risk associated with a pre-pack sale is faced by the Administrator Risk may be financial, regulatory or reputational The court will not approve the pre- pack sale Creditor remedies Minimising risk

59. Pre-Pack as a deleveraging tool IMO Car Wash WIND Hellas

60. Government intervention SIP 16 Consultation paper

61. Pre-negotiated plans in insolvency proceedings in Mexico Luis Enrique Graham Tapia Chadbourne & Parke, S.C.

62. Summary Brief overview of the Mexican Insolvency proceedings Where do pre-negotiated plans come from? Relevant differences between Mexican pre- negotiated plans and US pre-packaged plans Challenges of the Mexican pre-negotiated plans Some immediate benefits derived from filing a pre-negotiated plan

63. Brief overview of the Mexican Insolvency proceedings Mexican insolvency proceedings have three identifiable stages: Bankruptcy trial (concurso) 116 days (from the request or claim to the order for relief)* Conciliation phase 219 days (from the order for relief to the order for liquidation) Liquidation Pre-negotiated plans are filed with the request for reorganization to initiate bankruptcy trial * All statistics were obtained from IFECOM’s report available at http://www.ifecom.cjf.gob.mx/

64. Where do pre-negotiated plans come from? Pre-negotiated plans are not an invention of Mexican law

65. Relevant differences between Mexican pre- negotiated plans and US pre-packaged plans United States’ regime In the US, through a "lockup agreement," the votes solicited prior to the bankruptcy filing are binding on creditors during the bankruptcy case A pre-packaged plan can generally become effective 45 to 60 days after the bankruptcy case is commenced

66. Relevant differences between Mexican pre- negotiated plans and US pre-packaged plans Mexican regime Before the recent amendments to the law in 2007, a reorganization plan could not be filed at the same time as the petition for relief The recently passed amendments allow a debtor to file a pre-negotiated plan of reorganization signed by creditors holding at least 40% of its total debt However, the votes obtained prior to the bankruptcy filing are not binding, so the debtor is required to re- solicit the votes during the bankruptcy

67. Challenges for the Mexican pre-negotiated plans Short deadlines within the insolvency proceedings –Difficulties in proceedings involving international parties –Difficulties in proceedings involving complex financial instruments Evolution of the pre-negotiated plan into a creditors’ agreement –Effective management of this evolution –Making an agreement that is attractive and functional –Gaining the 50% needed for the creditors’ agreement –Advisable to make a joint appointment of the conciliator

68. Some immediate benefits derived from filing a pre-negotiated plan It serves lowering the risk of not getting the request for reorganization admitted Creditors have a clear starting position in regard to their credits

69. Some immediate benefits derived from filing a pre-negotiated plan It helps shortening the time needed for the insolvency proceedings –Time between the filing of a request or claim for reorganizations and its admittance Ordinary proceedings: 23 days With pre-negotiated plan: 15 days ± –Time between the filing of a request or claim for reorganizations and the order for relief Ordinary proceedings: 116 days With pre-negotiated plan: 30 days ± Timeframes for the pre-negotiated plan case were obtained from the public information concerning the only insolvency proceedings started with a pre-negotiated plan

70. Some immediate benefits derived from filing a pre-negotiated plan It helps shortening the time needed for the insolvency proceedings –Time between the order for relief and the Order of Recognition, Ranking and Preference of Claims Ordinary proceedings: 144 With pre-negotiated plan: 128

71. Procedimientos con plan de reestructura (Pre-packs) Preside: Jaime Guerra González Guerra González Abogados Mark Bloom Greenberg Traurig P.A. Richard Cooper Cleary Gottlieb Steen & Hamilton LLP Luis Enrique Graham Chadbourne & Parke LLP

72. Networking Coffee Break

74. Post-petition financing Financiamiento a las empresas en procesos concursales Preside: Alan Kornberg Paul, Weiss, Rifkind, Wharton & Garrison LLP Henri Bricard Bricard, Egure y Espindola Asociados William Fitzgerald Rabobank International

75. Delegate Lunch Almuerzo sponsoreado por Bufete Garcίa Jimeno S.C. Guerra González Abogados, S.C.

76. Independência S.A. Giuliano Colombo Pinheiro Neto Advogados

77. Hot topics Topicos controvertidos Preside: Adam Bryk Deloitte

78. Treatment of derivatives El tratamiento de los derivados Mauricio Basila Basila Abogados S.C. Karen Wagner Davis, Polk & Wardwell LLP

79. Treatment of Credit Derivatives in Mexico (CDO’s) Mauricio Basila Basila Abogados S.C.

80. Principal Terms  Credit Derivatives Default. Transactions in which a Protection Buyer is bind to pay a premium to the Protection Seller, in exchange of a consideration when a Credit Event occurs.  Derivados de Incumplimiento Crediticio. A las operaciones en las que el Comprador de Protección se obliga a pagar una prima al Vendedor de Protección, a cambio de que éste le entregue la contraprestación acordada en caso de que ocurra el Evento Crediticio.

81.  Protection Seller. A person that executes a Credit Derivatives Transaction covering to a counterpart, partially or a totally, the Credit Risk of and Risky Asset.  Vendedor de Protección. A la persona que al participar en una Operación de Derivados de Crédito cubre a su contraparte, en forma parcial o total, del Riesgo de Crédito de un Activo de Riesgo.

82.  The Financial Entities (banks and stock brokerage houses) that deal with credit derivatives to guarantee its own risk, must execute the intermediation and dealing only with financial entities, licensed by the Mexican Central Bank, to act as intermediaries foreign entities or recognized markets.  Las Entidades Financieras (bancos y casas de bolsa) que realicen operaciones con derivados para la cobertura de riesgos propios, sólo podrán llevarlas a cabo con entidades autorizadas por el Banco de México para actuar como intermediarios, con entidades financieras del extranjero o en mercados no reconocidos.

83.  The Commercial Banks can only execute transactions with credit derivatives with other financial entities as Commercial Banks, and foreign financial entities*.  Las Instituciones de Banca Múltiple solo podrán llevar acabo operaciones de derivados de crédito con otras Instituciones de Banca Múltiple, otros Intermediarios mexicanos y autorizados, para poder realizarlas o en su caso, con entidades financieras del exterior. * The financial entities that are licensed to perform on a professional basis with securities and derivatives, in the country they were corporated.

84. Selected derivative cases in the United States Karen E. Wagner Davis Polk & Wardwell, LLP

85. OUTLINE General Bankruptcy Structure –Derivative Contracts May Be Executory –Protected Contracts May Be Terminated After Party’s Bankruptcy Filing Despite Automatic Stay –Generally Rights Determined As Of Filing Date

86. BANKRUPTCY CASES – LEHMAN Dante –Swap Terminated After Lehman Filing –English Court – Honored Priorities Under Transaction (English Law) Documents –US Bankruptcy Court – Did Not Honor Priorities – Held Triggers Were Ipso Facto Provisions

87. BANKRUPTCY CASES – LEHMAN Metavante –Swap Agreement Not Terminated After Filing –Court Ruled: Performance (Payment) Required From Non-Debtor Party Before Termination Termination Right Waived Because Not Exercised Contemporaneously With Filing

88. BANKRUPTCY CASES – SEMCRUDE –Many ISDA Contracts Provide Setoff Permitted As To Affiliate Obligations –Triangular Setoff Not Permitted In Bankruptcy –Mutuality Required

89. NON-BANKRUPTCY CASES – VITRO AND CCM Both Pending In State Court In New York –Complaints Sought Payment After Derivative Contracts Under Master ISDA Agreements Were Terminated Upon Default –Defenses Included Illegality Under Mexican And US Law –CCM Decision In Banks’ Favor

90. Treatment of derivatives El tratamiento de los derivados Mauricio Basila Basila Abogados S.C. Karen Wagner Davis, Polk & Wardwell LLP

91. Treatment of inter-company loans Los préstamos inter-compañías Fernando del Castillo Santamarian y Steta Judge Cristina O’Reilly Poder Judicial de la Nacion, Argentina

92. Concurso Mercantil / Insolvency Proceeding Subsidiaries Creditors Fernando del Castillo Santamarina y Steta

93. Subsidiaries Creditors Créditos Intercompañías Upon declaration of concurso the Conciliation period begins. Una vez declarado el concurso mercantil, la etapa de Conciliación comienza.

94. During the Conciliation the creditors have the right to file proofs of claims. Durante la etapa de Conciliación los acreedores tienen el derecho de solicitar sus reconocimientos de crédito.  Financial / Financieros  Suppliers / Intercompañías  Subsidiaries / Proveedores

95. The purpose of the Conciliation is to reach a convenio concursal. La finalidad de la Conciliación es celebrar un convenio concursal con los acreedores.

96. The convenio concursal might be executed by the recognized creditors including subsidiaries. El convenio concursal será firmado por los acreedores reconocidos, incluidos los créditos intercompañías.

97. Treatment of Intercompany Loans Tratamiento de los Préstamos Interempresarios María Cristina O’Reilly Commercial Judge/Juez Comercial

98. Treatment of Intercompany Loans Tratamiento de los Préstamos Interempresarios OVERVIEW OF ARGENTINE BANKRUPTCY LAW BREVE DESCRIPCION DE LA LEY CONCURSAL ARGENTINA JUDICIAL REORGANIZATION/ CONCURSO PREVENTIVO EXTRA JUDICIAL REORGANIZATION / ACUERDO PREVENTIVO EXTRAJUDICIAL (APE) LIQUIDATION/ QUIEBRA

99. Treatment of Intercompany Loans INTERCOMPANY LOANS IN BANKRUPTCY LAW AND CASE LAW PRÉSTAMOS INTEREMPRESARIOS EN LA LEY DE CONCURSOS Y EN LA JURISPRUDENCIA  BOND HOLDERS RIGHTS AND LIMITATIONS/ DERECHOS Y LIMITACIONES DE TENEDORES DE OBLIGACIONES NEGOCIABLES JUDICIAL REORGANIZATION/ CONCURSO PREVENTIVO EXTRA JUDICIAL REORGANIZATION/ ACUERDO PREVENTIVO EXTRAJUDICIAL  COMPANIES FILING TO BE REORGANIZED AS AN ECONOMIC GROUP/ SOCIEDADES QUE SOLICITAN SU CONCURSO COMO CONJUNTO ECONÓMICO

100. Treatment of inter-company loans Los préstamos inter-compañías Fernando del Castillo Santamarian y Steta Judge Cristina O’Reilly Poder Judicial de la Nacion, Argentina

101. Networking Coffee Break

103. Distressed debt trading Compraventa de deuda de la insolvente Jeffrey Hoberman Recovery Group Anthony Murphy Citi

104. Distressed debt trading Jeff Hoberman CEO Recovery Asset Management

105. DISTRESSED ASSET TRADING – THE PERSPECTIVE OF A BUYER Give me your tired, your poor,Your huddled masses yearning to breathe free,The wretched refuse of your teeming shore.Send these [Distressed Assets], tempest-tost to me,I lift my lamp beside the golden door! One man’ meat is another man’s poison.

106. Overview Market –Lots of distressed assets out there to buy. Types of distressed assets are bought/ sold. Experiences with larger credits. Experiences with less liquid pools of credits. Some conclusions: a few take aways. Questions.

107. STOCK OF DA’s – Example: BRAZILAN NPLS 107 On-balance NPL Inventory Evolution (BRL billions) Delinquent Credits > 180 days (H) are fully charged-off Letters D-H refer to the aging (D>60d / H>180d) The NPL inventory in Brazil was growing alongside the expansion of the overall credit market until 4Q08; Post-4Q08, the supply of new NPLs grew at a faster rate; On-balance sheet NPLs inventory (less than 360 days delinquency) reached BRL 126bn as of Dec/09; Total Banking NPLs inventory (On- Balance + Off Balance) is estimated at BRL200bn+ as of Dec/09; Non-Banking NPLs (retailers, utilities, funds/securitizations) potential market is estimated at BRL100bn+. Overview 20% p.a. growth Source: Central Bank of Brazil

108. Tradable exchange listed securities Very little due diligence Comparatively liquid. Single Loans Due Diligence Intensive Pools of Loans DD intensive – structurally intensive Less liquid. What are these loans and how do you get these loans to trade?

109. Some thoughts About Single Names Individual credits. Liquid trades. Case of forestry company. We were interested in getting into industry. Two partners fighting. Both said they wanted to sell. Local guy continued to steal from foreign partner – foreign partner didn’t bring investment and markets. We ended up buying out the distressed loan. Blocked competitors from coming into the equity deal to some extent. Worst cash – new buyer would mean coming out at par.. Debtor with control threatened bankruptcy. That would allow him to continue not too nice local practices. He wouldn’t let us get cash. He would create damage. We brought in criminal lawyer. At end of day we traded into buying out equity. One deal for one guy, and another deal for other seller. Flip side – we bought highway bonds in liquid trade in Argentina. Didn’t have control. Largest private holder but state banks wouldn’t sell. Should have traded up because of tariff improvements. Didn’t happen. Could try to kick out operator and take control. Blocked. Operator stealing cash and got an injunction against taking over the company and collecting more cash. Locked in a bad deal. Could trade out. Similarities – Court systems don’t work well. In all cases we entered willing to take over companies – some industry expertise. While locked away discussing, people pillaring cash. One worked. Other didn’t. Make sure you have a portfolio. Guys who buy these are big guys. Liquid. Love sovereigns too in many case. Maybe they have an industry play but not all have management team behind. Generally more or less liquid. Size depends. Not everyone is willing to step up and go to the mat.

110. Distressed Pools We have bought all sorts of pools. –Some are homogenous – residential mortgages, credit cards or SME loans. –Others are mixed bag – bank sells in batch. We have bought in auctions. We have bought in negotiated transactions. My question in life is trying to find banks that sell & trying to get to a reasonable price with them… my biggest concern but not resolved here.

111. What are key things for buying distressed loans. Have a servicer. Who is aligned. –Many banks don’t have a servicer when buying. They hire advisors. How to translate info into price is hard. –Others hire former bankers who translate existing practices. –Or they buy with someone who is not specialist but engaged in collecting but not as a principal (ie. call center or law firm.) –Don’t blame the pig – blame the guy who fed it.

112. Two Key PSA Issues (here is some proprietary information that I probably shouldn’t share) Purchase and sales agreement – reps and warranties. Usually enforceable credit and balance. On mortgage usually get a rep that it is a mortgage. There is a put back if not mortgage or difference – this practice doesn’t exist in normal collections because unique for buying. Not rocket science Additional issue is put back/ reps and warranties are also good to defend against liabilities. Fraud on credit cards. Some avoid. Some don’t. Power of atty to instruct lawyers. Usually buy with lawyers already in place. Hard to change. Cant always change formal actor in litigation. Sometimes doesn’t make sense. Key is power of atty to act in name of selling entity and give lawyers these instructions. Need to give a good indemnity.

113. Making illiquid assets liquid. Advice is to always have a way to make an illiquid asset slightly more liquid. Vehicle – spvs – tax is king, and isolating liabilities important but I would add liquidity. Align servicer. Don’t buy if not going to do the the work.

114. Changes Market was overheated. People went into portfolios. Then blew up. Market stopped. Thought that people were going to trade when desperate. Not too many hail mary trades. Some exceptions but not rule. Sellers may be coming back. Big loans first. Then portfolios perhaps. Right now still wanting to keep portfolios – lots of people in lending who are moving over to recovery etc….

115. Take Aways Buyers should try to structure so that later they can sell without having to own through collection. Buyers of single names. Better to be able to hold through collection and not just trading. Finding assets is not the problem – pricing and volatility on particular credit. Greed is biggest issue for bad deals. Buyer of portfolios tend be more about holding assets through collection process. Harder to find deals and place cash. –tie into servicers – without too many bodies –be careful with psa’s. –structure vehicles so that investment more liquid

116. INSOL CITI Anthony Murphy April 22, 2010

117. ISSUES IMPACTING DISTRESSED DEBT TRADING Regulatory and Accounting environment Mexico vs South America International banks vs Regional Banks Clarity of financial information

118. ISSUES IMPACTING BANKS AS SELLERS Relationship with Borrower Relationship with Private Equity Sponsor Creditor dynamics Derivative exposures

119. Distressed debt trading Compraventa de deuda de la insolvente Jeffrey Hoberman Recovery Group Anthony Murphy Citi

120. Cierre Seminar Chair Presidente del Seminario Jorge Sepúlveda Bufete García Jimeno, S.C.

121. Cierre Howard Seife Chadbourne & Parke LLP Board Director INSOL International

123. Cocktail reception Cocktail de recepción sponsoreado por