The Many Dimensions Of A Cross-Border Practice

Monday, October 14, 2013 - 08:37

The Editor interviews Pedro A. Jimenez, Partner-in-Charge of Jones Day’s Miami office.

Editor: Please give us a review of your background prior to joining Jones Day.

Jimenez: I was brought up in Miami and studied at the University of Miami School of Law. I started my career in White & Case’s Miami office in 1998, where I had the opportunity to be involved in a number of cross-border restructuring deals, particularly in Latin America. I joined Jones Day’s financial restructuring group in 2006. Since that time I have had the opportunity to work on a number of the firm’s highest-profile restructuring matters, such as the Chrysler bankruptcy case. I also have led a number of our teams in a variety of cross-border representations in Asia and Latin America.

Editor: Jones Day has recently opened a Miami office of which you are now the partner-in-charge. What was Jones Day’s purpose in opening in Miami?

Jimenez: Our reason for opening in Miami has to do with the importance of Florida and Miami, both in the U.S. economy and in Latin America, to which we believe Miami is a vital link. On the latter point, our presence in Miami gives us the ability to represent the interests of our clients who are doing business in Latin America from five different locations: Brazil, Mexico, Madrid, New York and now here in Miami. Very few firms can offer their clients this type of broad reach with significant experience in Latin America from each of those locations.

Editor: How does the Miami strategy tie in with the other Jones Day offices in Mexico and Brazil? Are you in constant communication with them?

Jimenez: I like to think of our strategy in Miami not as a Miami strategy but rather a Latin America strategy. We look at Latin America in a very integrated manner since all the lawyers in each of those locations is available to assist the client in a particular matter using his or her expertise, which we think better serves the needs of our clients.

Editor: What major opportunities are available for law firms and investors in Latin America today?

Jimenez: The opportunities that exist today in Miami and in Latin America have evolved since I started my practice 16 years ago. Now you have many more countries in Latin America that have begun to develop their own economies, not only creating opportunities for investment within those countries but also, for the first time, the development of capital in those countries that can be invested outside Latin America, with Miami being a very large recipient of that capital.

Editor: Do you think the rule of law is being instituted in those countries?

Jimenez: As countries are beginning to do more transactions with companies and investors from outside their own country, they need to be able to attract additional capital. In order to be able to attract that capital, those countries need to establish and observe the rule of law in order to provide the requisite comfort to foreign investors.

Editor: What differentiates Jones Day’s approach in Latin America from that of other law firms?

Jimenez: What really separates us from other firms that do work in the region is consistent with our commitment in every country in which we operate – to provide an integrated and seamless business and problem-solving solution to our clients. We look at our various offices around the world as one firm where we collaborate to give each client the benefit of the very best legal representation from the most-qualified person, no matter who that person may be or where he or she is located.

Editor: Do you consider that your expertise in restructurings, bankruptcy and cross-border insolvencies will fill an important niche in a Latin America practice?

Jimenez: Yes. Right now, we are seeing a real boom in the amount of investment activity in Latin America. But very much like the U.S. economy, those economies will go through their ebbs and flows. There will be companies or investments that become stressed, and as those companies or investments become stressed, there will be a need to assist those companies in restructuring their businesses in a way that preserves those companies and maximizes value for all stakeholders.

Editor: You had previously represented Corporación Durango, S.A. de C.V. in its cross-border restructuring. Please tell our readers about that transaction.

Jimenez: Corporación Durango presented a real challenge at the time I became involved because we were dealing with many U.S. financial institutions and funds that held several hundred millions of dollars in bonds. We were working with a company that clearly did not have the ability to service that amount of debt while simultaneously dealing with a new insolvency law in Mexico that was untested. We spent the better part of two years negotiating with those creditors, recognizing that a consensual deal with all of the creditors was going to allow the company to more effectively restructure its balance sheet and avoid the uncertainty of going through a Mexican legal process. One of the things of which I am most proud emanating from that deal is that through the commencement of the insolvency proceedings in Mexico and the commencement of parallel proceedings in the U.S., we were able to create a road map for other large Mexican companies that would need to be restructured in the future.

Editor: How does bankruptcy law under a civil law jurisdiction differ from U.S. bankruptcy law? Tell us about Mexico’s new insolvency law.

Jimenez: In civil law countries, one of the biggest differences that I have experienced is that lesser notice of the proceeding is provided to parties versus what is normally required in a Chapter 11 bankruptcy-type proceeding, where there are a number of procedural rules that govern notice to all parties and the types of notices that are required. One of the bigger challenges we deal with when we are involved in a cross-border transaction or restructuring is making sure that the correct type of notice is provided since many of these cross-border restructurings will ultimately need some recognition from a U.S. court because the company has assets in the U.S. or has a significant number of creditors in the U.S. As far as the Mexican bankruptcy law is concerned, one of the biggest challenges that we experienced in the Corporación Durango restructuring was the manner in which the law protected secured creditors to a much greater degree than secured creditors are protected under U.S. bankruptcy law. To be more precise, in Mexico you cannot give the secured creditor anything less than what it is entitled to under its contract without that creditor’s consent, making the restructuring of a secured obligation much more difficult in Mexico than it is in the U.S., where you could give that secured creditor different treatment over its objection.

Editor: Don’t you have a problem with the subordinated creditors also bringing a cram down in the U.S.?

Jimenez: Right. There are ways to provide secured creditors with value that is different or less than what they are otherwise entitled to in their loan documents if you meet certain requirements in the U.S. In Mexico, with respect to secured creditors, it is very difficult, if not impossible, to deny them what is agreed to under contract without their consent.

Editor: Do you seek to use U.S. bankruptcy law-like protections in the cross-border deals in which you are involved?

Jimenez: In recognition of the fact that many times the company has assets in the U.S. or it has creditors here who may seek to take action against the company in the U.S., we ultimately need to have U.S. courts give the company some protection as part of its overall restructuring in a foreign country. We generally try to implement certain procedural protections and notices that would make a foreign restructuring resemble a U.S.-type restructuring. It may not be identical, but at least it allows us to come into a U.S. bankruptcy court and let the judge know that we are trying to run the process in the foreign country somewhat like a U.S.-restructuring proceeding. It in turn allows the judges to become comfortable that creditors, especially the U.S.-based creditors, are being treated fairly in the foreign jurisdiction, as well as provide some protection to the foreign company here in the U.S.

Editor: Describe the use of Chapter 15, a relatively new bankruptcy proceeding.

Jimenez: Chapter 15 grew out of what is called the old section 304 ancillary proceedings that existed under the previous version of the bankruptcy code. It follows the model law that was created by UNCITRAL to govern cross-border restructurings. One of the purposes behind Chapter 15 is to cooperate with foreign courts to allow a company that is undergoing foreign restructuring proceedings to obtain some protections here in the U.S. in the hopes that protection here will assist in the administration and success of the restructuring that is occurring in the foreign country. By way of example, one thing you normally tend to do in Chapter 15 proceedings is obtain a stay of actions against the foreign company or its assets that are located here in the U.S. in order to: (1) preserve those assets for the value of all creditors and prevent certain creditors from effectively getting a preference by attempting to go after those assets; or (2) prevent litigation against a foreign company while it is attempting to reorganize in the foreign country so it is not distracted from its efforts in trying to restructure in that foreign country proceeding.

Editor: When do you use Chapter 15 in the U.S.?

Jimenez: Normally you would utilize Chapter 15 to complement a foreign bankruptcy proceeding and increase the potential for its success in the situation where the foreign company has assets in the United States or could be subject to suit here.

Editor: Do you have a 90-day stay period in Chapter 15 as under Chapter 11?

Jimenez: In a Chapter 15, depending on the exigency of the situation, the foreign debtor would seek a temporary injunction called “provisional relief” on the very first day of the case in order to preserve the status quo pending the U.S. court's recognition of the foreign proceeding. Typically, the foreign debtor would come back 20 to 30 days later in order for the U.S. court to consider whether it will recognize the foreign proceeding, as a result of which a stay of all actions would be triggered very much like in a typical Chapter 11 bankruptcy.

Editor: Do you expect to see an ever-growing practice in transnational deals such as the ones you have overseen? What is the driving force behind them?

Jimenez: Absolutely. In a global economy, as trade and investment continues to increase, we are going to see more companies with assets or businesses here in the U.S. or in other countries different from its home country. When those situations arise and the company is involved in a restructuring or bankruptcy, it is going to need some transnational bankruptcy assistance from courts in other countries. Otherwise, assets are going to be picked off by certain creditors to the detriment of others. Bankrupt companies need to have the benefit of one home-country restructuring that is recognized by courts outside of that country in order to give the company a real opportunity to try and successfully reorganize.

 

Please email the interviewee at pjimenez@jonesday.com with questions about this interview.