2009 Chapter 11 Recent Developments (Part I)

Rules:

(1)

Just treatment of creditors:

a.

"[F]actor is satisfied on a showing that the applicable law 'provides for a comprehensive procedure for the orderly and equitable distribution of [the debtor's] assets among all of its creditors.'"

(2)

Definition of comity: "'the recognition which one nation allows within its territory to the legislative, executive or judicial acts of another nation, having due regard both to international duty and convenience, and to the rights of its own citizens, or of other persons who are under the protection of its laws.'"

a.

Comity is generally granted where the foreign "'proceedings do not violate the laws or public policy of the United States and if the foreign court abides by fundamental standards of procedural fairness.'"

Holding: Bankruptcy Court and District Court affirmed.

Reasoning:

(1)

Just Treatment of Creditors. Throughout the entire process of Telecom's reorganization, Argo had the opportunity (and the means) to object to the terms of the APE, to vote on the APE, and to object in the Argentine Court. Argo chose not to do so. Therefore, the bankruptcy court did not abuse its discretion in finding that the Argentine APE proceeding justly treated creditors.

(2)

Comity. Argo argued that comity was inappropriate on three bases: (I) the bondholders' rights were not protected under the Trust Indenture Act § 316(b); (II) the best interests of the creditors were not protected under 11 U.S.C. § 1129(a)(7); and (III) the APE does not meet the good faith requirement of 11 U.S.C. § 1129(a)(3).

a.

TIA: the TIA is subject to the Bankruptcy Code, and § 304 is part of the Bankruptcy Code, therefore, if a Bankruptcy Court grants a § 304 petition, the TIA gives way to the debtor's restructuring in the foreign court.

b.

11 U.S.C. § 1129(a)(7): comity does not require that a foreign proceeding be identical to the Bankruptcy Code. So long as § 304 is satisfied, the Bankruptcy Code does not require that the distributions in the foreign court be equal to what would have been paid in the U.S. The APE provided creditors with options paying between 80-100%, plus some other factor to adjust for unpaid interest. Under this particular case, Argo's objection is denied.

c.

11 U.S.C. § 1129(a)(3): Argo did not contest that Telecom was able to file an APE under Argentine law. In any event, the Bankruptcy Court noted that Telecom faced a severe liquidity crisis and had not been able to pay its debts in 2002. The Argentine Insolvency Law did not require a party to be insolvent to commence APE proceedings. And, lastly, the APE met with overwhelming approval by Telecom's creditors. There was no evidence of bad faith.

(3)

The Bankruptcy Court did not err in denying Argo's request to present evidence of Telecom's financial state before filing an APE.