Multicanal fails in bid to hold Argentinian Recovery in contempt

By Jeff Pines

Washington, April 1 - Multicanal SA failed in its attempt to have a group including Argentinian Recovery Co. LLC and its attorneys held in contempt, according to an April 1 order from Judge Alan Gropper of the U.S. Bankruptcy Court for the Southern District of New York.

In a separate April 1 order, the judge also refused to dismiss the involuntary Chapter 11 case against Multicanal, which means both sides will press ahead to prove their cases - Multicanal that it deserves permanent protection under Section 304 and Argentinian Recovery to put the company involuntarily into Chapter 11.

In January, Multicanal SA sought and obtained temporary protection from legal action in U.S. courts under section 304 of the U.S. Bankruptcy Code while it conducts an out-of-court restructuring under Argentine law called an acuerdo preventivo extrajudicial or APE. To ensure the protection, the court issued a temporary restraining order.

Argentinian Recovery consented to an extension of the order and the court allowed it to file a motion to consider the legal issues questioning whether section 304 applied because of a possible violation of the Trust Indenture Act. Argentinian Recovery's group said it holds about a third of Multicanal's public debt.

The day after the hearing, the creditors filed to start involuntary Chapter 11 proceedings. In response Multicanal filed to hold the group in contempt, alleging it violated the temporary restraining order.

In the creditor group's Feb. 2 motion asking the court to vacate the restraining order, Argentinian Recovery argued that the Buenos Aires-based cable television systems company benefited from the Trust Indenture Act's protection in marketing and selling its bonds and "now seeks to eviscerate each bondholder's fundamental rights."

Gropper ruled that Section 304 trumped the Trust Indenture Act and on March 29 he denied a petition filed by the Argentinian Recovery group to dismiss the company's temporary protection under section 304 of the U.S. Bankruptcy Code.

The case number for the involuntary Chapter 11 filing is 04-10523, while the section 304 proceedings are under case 04-10280.

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