Chile’s WOM faces case dismissal motion from group of noteholders

By Sarah Lizee

Olympia, Wash., April 24 – An informal group of WOM SA noteholders have filed a motion seeking dismissal of the company’s Chapter 11 bankruptcy case with the U.S. Bankruptcy Court for the District of Delaware.

The group said the debtors’ cases should be dismissed because they have insubstantial connections with the United States.

“As Chilean companies with operations, assets, employees and customers confined almost exclusively to Chile, and with the vast majority of their creditors located in Chile, the debtors’ lack of connections with the United States has several disqualifying consequences,” the noteholders said in the motion.

The group noted that the debtors’ lack of connections with the United States means that the Chilean courts would not recognize the Chapter 11 cases as foreign main proceedings. Currently, the debtors do not plan to start a recognition proceeding in Chile.

“Without a recognition proceeding, there is no practical mechanism for the enforcement of the bankruptcy code or any Chapter 11 plan against the debtors’ creditors – save perhaps for the few that happen to have connections with the United States,” the group said.

As a result, most creditors may choose to disregard the Chapter 11 cases, pursue their rights against the debtors under Chilean law and recover on their claims ahead of the claims of the few creditors who, because of their connections with the United States, have to abide by the bankruptcy code’s provisions and the court’s orders, the group added.

The noteholder group also said that the debtors’ need for bankruptcy relief is a “self-inflicted machination pursued for tactical advantage.”

“The debtors’ equity holders engineered the debtors’ financial crisis by draining the debtors of cash, promising, but then reneging on, an agreement to reinvest a portion of such distributions to refinance debt, and then refusing an available out-of-court financing bail-out,” the group said.

The noteholders said the equity holders now seek to put together a new-value Chapter 11 plan that permits them to retain ownership of the debtors at the expense of creditors bound by the plan.

The noteholder group said that if the case isn’t dismissed, a Chapter 11 trustee should be appointed.

The Santiago, Chile-based telecom operator filed Chapter 11 bankruptcy on April 1 under case number 24-10628.

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