May 27, 2021 – The Debtors filed a Modified Amended Prepackaged Plan and a related redline (changed pages only) showing changes to the version filed on April 29, 2021 [Docket Nos. 143 and 144, respectively].

The changes, incorporated in the summary chart below, largely reflect an evolving description of how holders of prepetition notes will receive their recoveries; with U.S. securities laws dovetailing awkwardly with bankruptcy law in respect of effectively Chilean Debtors. The changes clarify the steps that creditors will have to take to qualify to receive new notes (the notes will not be registered with the SEC), with those not qualifying compelled to take "Substitute Consideration." The relatively heavy set of last-minute changes underscores the challenges posed by this sort of transaction: a prepackaged Plan with recovery including unregistered securities being offered in respect of a foreign debtor.

The Debtors' revised memorandum in support of Plan confirmation (the "Memorandum"" [Docket No. 138] provides a review of the mechanics and provides creditors with a primer on "QIBs" and "accredited investors" while doing its best to argue that the steps of the long-completed prepack solicitation process (with that documentation clearly not providing creditors with the detail in the amended Plan) should now pass bankruptcy muster. 

In short, the Debtors' "proof-is-in-the-pudding" argument is that creditors holding prepetition notes are (i) either "Qualified Holders" (ie, (a) a "Qualified Institutional Buyer" or (b) an "Accredited Investor or (c) a properly certified "non U.S. Person") or (ii) if a "Non-Qualified Holder," was offered cash in compliance with Regulation 14E of the Exchange Act. 

With securities law issues correctly handled, the Debtors argue, Plan confirmation should follow suit under bankruptcy law: "Accordingly, the Debtors submit that their prepetition solicitation complied with applicable nonbankruptcy law pursuant to sections 4(a)(2) and Regulation S of the Securities Act and Regulation 14E of the Exchange Act, and pursuant to section 1145 of the Bankruptcy Code."

the Memorandum notes: ""As noted above, the Plan provides that, on the Plan Effective Date or as soon as reasonably practicable thereafter, in full and final satisfaction, settlement, release and discharge of and in exchange for each Allowed 7.5% Notes due 2025 Secured Claim or an Allowed Unsecured Notes and Related Party Claim: (i) Qualified Holders⁶² may elect to receive New Notes and USA Holdco LLC Units, as applicable, and (ii) Non-Qualified Holders⁶³ may elect to receive USA Holdco LLC Units, as applicable, but shall not be entitled to receive any New Notes and shall only be entitled to receive the Substitute Consideration in respect thereof. 

The Debtors have not filed with the United States Securities and Exchange Commission (the ‘SEC’) or any other similar agency a registration statement for the New Secured Notes or New Subordinated Notes under the Securities Act of 1933, any other federal laws or any state securities laws. Nor did the Debtors file a registration statement with respect to the Disclosure Statement used to solicit votes to accept or reject the Plan. 

The Debtors respectfully submit that the solicitation of the Plan to Qualified Holders of Senior Secured Notes Claims was in compliance with applicable nonbankruptcy law because the Debtors provided the Disclosure Statement to Holders of Allowed 7.5% Notes due 2025 Secured Claims, Allowed Unsecured Notes and Related Party Claims, and fall within the exemptions from registration provided by section 4(a)(2) and Regulation S of the Securities Act, exempting the Debtors’ prepetition solicitation from the registration requirements otherwise imposed by the Securities Act or any similar rules, regulations or statutes. Section 4(a)(2) exempts from registration “transactions by an issuer not involving any public offering,” and Regulation S exempts from registration “offers and sales outside the United States.” Without limitation, Regulation D, promulgated under the Securities Act to provide guidance on what constitutes a transaction not involving any public offering of securities within the meaning of Section 4(a)(2), provides in Rule 506 that, together with certain other requirements, an offering made to Accredited Investors is deemed to not be a transaction involving any public offering. 

The solicitation of votes from Qualified Holders to accept or reject the Plan is exempt from the registration requirements under Section 5 of the Securities Act and any other applicable U.S. state or local law because either (i) the Plan distributions are being made in a private placement without a public offering pursuant to Section 4(a)(2) of the Securities Act, including that in order to receive such Plan distributions, the Qualified Holder must certify that it is a Qualified Institutional Buyer or Accredited Investor, or (ii) the Plan distribution is being made to a Person who certifies that they are not a 'U.S. Person', the offer or sale of securities to whom is exempt from registration pursuant to Regulation S under the Securities Act. 

Further, to the extent that the solicitation of votes was to a Non-Qualified Holder, such solicitation can be said to have constituted a cash tender offer and complied with Regulation 14E under the Securities Exchange Act of 1934, which requires, among other things that the tender offer be held open for at least twenty (20) business days. As discussed above, the Solicitation Package was distributed on April 9, 2021 and the Original Voting Deadline was May 7, 2021, and was extended to the Voting Deadline of May 18, 2021, giving Holders of Allowed 7.5% Notes due 2025 Secured Claims, Allowed Unsecured Notes and Related Party Claims more than (20) business days during which they could decide to vote to accept or reject the Plan. 

In addition, section 1145 of the Bankruptcy Code exempts 'the offer or sale under a plan of a security of the debtor, of an affiliate participating in a joint plan with the debtor, or of a successor to the debtor under the plan—(A) in exchange for a claim against, an interest in, or a claim for an administrative expense in the case concerning, the debtor or such affiliate; or (B) principally in such exchange and partly for cash or property' from both the registration requirements of section 5 of the Securities Act and the registration and qualification requirements of state securities laws. Accordingly, the Debtors submit that their prepetition solicitation complied with applicable nonbankruptcy law pursuant to sections 4(a)(2) and Regulation S of the Securities Act and Regulation 14E of the Exchange Act, and pursuant to section 1145 of the Bankruptcy Code."

⁶²A Qualified Holder is a Holder of an Allowed 7.5% Notes due 2025 Secured Claim or an Allowed Unsecured Notes and Related Party Claim who provides either one of the following two certifications (the “Certification”): (1) a certification that it is certification that it is a “U.S. Person” as defined in Rule 902(k) under the Securities Act, and is either a “Qualified Institutional Buyer” as such term is defined in Rule 144A under the Securities Act or an “accredited investor” as defined in Regulation D under the Securities Act, and it acknowledges that it will be receiving “restricted securities” within the meaning of Rule 144 under the Securities Act; or (2) a certification that it is not a “U.S. Person” as defined in Rule 902(k) under the Securities Act and is qualified to participate in acquiring New Secured Notes and New Subordinated Notes, as applicable, in accordance with the laws of its jurisdiction of location or residence. See Plan at Section 6.5(a).

⁶³A Non-Qualified Holder is any Holder of an Allowed 7.5% Notes due 2025 Secured Claim or an Allowed Unsecured Notes and Related Party Claim that is not a Qualified Holder or that fails to provide either of the two certifications above in order to qualify as a Qualified Holder. See Plan at Section 6.5(a).

The following is an amended summary of classes, claims, voting rights and expected recoveries (defined terms are as defined in the Plan and/or Disclosure Statement, additions in blue and deletions in red, see also the recovery analysis and liquidation analysis below):

• Class 1 (“Other Secured Claims”) is unimpaired, deemed to accept and not entitled to vote on the Plan. The estimated recovery is 100%.
• Class 2 (“Other Priority Claims”) is unimpaired, deemed to accept and not entitled to vote on the Plan. The estimated recovery is 100%.
• Class 3 (“Prepetition Bank Financing Claims”) is unimpaired, deemed to accept and not entitled to vote on the Plan. The estimated recovery is 100%.
• Class 4 (“7.5% Notes due 2025 Secured Claims”) is impaired and entitled to vote on the Plan. The aggregate amount of claims is $409,300,000 and the estimated recovery is 95.6% – 112.7%. On the Plan Effective Date (or as soon as practicable thereafter), in full and final satisfaction, settlement, release, and discharge of and exchange for each Allowed 7.5% Notes due 2025 Secured Claim, each holder of an Allowed 7.5% Notes due 2025 Secured Claim:

1. if such Holder is not a Cash-Out Electing Holder (a “Non-Cash-Out Electing Holder”), (i) if such Holder is a Qualified Holder, $0.56046 in principal amount of New Junior Tranche Secured Notes for each $1.00 of Allowed 7.5% Notes due 2025 Secured Claims held by such Holder, (ii) if such Holder is a Qualified Holder, $0.19789 in principal amount of New Subordinated Notes for each $1.00 of Allowed 7.5% Notes due 2025 Secured Claims held by such Holder, and (iii) its Pro Rata Share (based on the proportion that such Non-Cash-Out Electing Holder’s Allowed 7.5% Notes due 2025 Secured Claims bears to the sum of all Allowed 7.5% Notes due 2025 Secured Claims held by all Non-Cash-Out Electing Holders) of 100.0% of the USA Holdco LLC Units; or
2. if such Holder of an Allowed 7.5% Notes due 2025 Secured Claim has affirmatively made a Plan Election on its Letter of Transmittal through ATOP on or prior to the Distribution Election Deadline to receive a Cash-Out Distribution (a “Cash-Out Electing Holder”), Cash in an aggregate amount equal to 18.6833% of such Holder’s Allowed 7.5% Notes due 2025 Secured Claim (a “Cash-Out Distribution”) and such Holder shall be deemed to have waived any distribution under the Plan under Class 5 on account of its Allowed 7.5% Notes due 2025 Unsecured Deficiency Claims. For the avoidance of doubt, Qualified Holders and Non-Qualified Holders of Allowed 7.5% Notes due 2025 Secured Claims may elect to receive a Cash-Out Distribution. For the avoidance of doubt,QualifiedHolders and Non-Qualified Holders of Allowed 7.5% Notes due 2025 Secured Claims may elect to receive a Cash-Out Distribution. 

• Class 5 (“Unsecured Notes and Related Party Claims”) is impaired and entitled to vote on the Plan. The aggregate amount of claims is (i) $111,796,081 million of 7.5% Notes due 2025 Unsecured Deficiency Claims, (ii) $9,858,106 of 7.5% Notes due 2021 Claims, (iii) $23,205,373 of 8.25% Notes due 2021 Claims, (iv) $2,664,771 of 6.75% Notes due 2023 Claims, plus in each case for the Claims described in sub-clauses (ii) through (iv) any accrued and unpaid interest on the respective series of notes through the Petition Date. The Minvest Loan Claim shall be Allowed in the amount of $1,643,500, plus accrued and unpaid interest, if any, and the Share Purchase Agreement Claim shall be Allowed in the amount of $300,000, and the estimated recovery is 19.4%. On the Plan Effective Date, the Unsecured Notes Claims shall be Allowed in the following amounts: (i) $111,796,081 of 7.5% Notes due 2025 Unsecured Deficiency Claims, (ii) $9,858,106 of 7.5% Notes due 2021 Claims, (iii) $23,205,373 of 8.25% Notes due 2021 Claims, (iv) $2,664,771 of 6.75% Notes due 2023 Claims which, in each case, for the Claims described in subclauses (i) through (iv) includes the aggregate principal amount of such Claims and any accrued and unpaid interest through the Petition Date. The Minvest Loan Claim shall be Allowed in the amount of $1,643,500, and the Share Purchase Agreement Claim shall be Allowed in the amount of $300,000.

On the Plan Effective Date (or as soon as practicable thereafter), in full and final satisfaction, settlement, release, discharge of and exchange for each Allowed Unsecured Notes and Related Party Claim, each Holder of an Allowed Unsecured Notes and Related Party Claim shall, subject to Sections 6.4 and 6.5 of the Plan, be entitled to  receive:

1. if such Holder is not a New Junior Tranche Secured Notes Substituting Creditor, and is a Qualified Holder, $0.1939 in principal amount of the New Junior Tranche Secured Notes for each $1.00 of Allowed Unsecured Notes and Related Party Claims held by such Holder; or
2. if such Holder (i) voted to accept the Plan and (ii) affirmatively elects on its Letter of Transmittalon or prior to the Distribution Election Deadline to receive such Holder’s New Junior Tranche Secured Notes Substitute Distribution (a “New Junior Tranche Secured Notes Substituting Creditor”):    
   1. $0.1939 in Cash for each $1.00 of Allowed Unsecured Notes and Related Party Claims held by such New Junior Tranche Secured Notes Substituting Creditor subject to a total aggregate cap on all Cash distributions payable to all electing New Junior Tranche Secured Notes Substituting Creditors of $3,000,000 (the “Cash Distribution Cap”); provided, that, to the extent the total Allowed Unsecured Notes and Related Party Claims held by all New Junior Tranche Secured Notes Substituting Creditors would result in Cash distributions under this clause exceeding the Cash Distribution Cap, the Disbursing Agent shall allocate the Cash distributions not exceeding the Cash Distribution Cap proportionally among the Allowed Unsecured Notes and Related Party Claims held by the New Junior Tranche Secured Notes Substituting Creditors (based on the proportion that each such New Junior Tranche Secured Notes Substituting Creditor’s Allowed Unsecured Notes and Related Party Claim bears to the sum of all Allowed Unsecured Notes and Related Party Claims held by all New Junior Tranche Secured Notes Substituting Creditors); and
   2. (A) if the Holder is a Qualified Holder, $0.1939 in aggregate principal amount of New Junior Tranche Secured Notes for each $1.00 of Allowed Unsecured Notes and Related Party Claims for which no Cash distribution was made pursuant to clause 3.2(e)(3)(B)(i) due to the Cash Distribution Cap; or (B) if the Holder is not a Qualified Holder, such Holder’s share of the Substitute Consideration for each $1.00 of Allowed Unsecured Notes and Related Party Claims for which no Cash distribution was made pursuant to clause 3.2(e)(3)(B)(i) due to the Cash Distribution Cap (together, (i) and (ii), a “New Junior Tranche Secured Notes Substitute Distribution”).

• Class 6 (“General Unsecured Claims”) is unimpaired, deemed to accept and not entitled to vote on the Plan. The estimated recovery is 100%.
• Class7 (“Intercompany Claims”) is unimpaired/impaired, deemed to accept/reject and not entitled to vote on the Plan. The estimated recovery is 100%.
• Class 8 (“Existing Equity Interests Other Than in Gildemeister”) is unimpaired/impaired, deemed to accept/reject and not entitled to vote on the Plan. The estimated recovery is 100%.
• Class 9 (“Existing Equity Interests in Gildemeister”) is impaired, deemed to reject and not entitled to vote on the Plan. The estimated recovery is N/A.

Liquidation Analysis and Recovery Analysis (see Exhibit D of Disclosure Statement for notes [Docket No. 94] and Debtor-by-Debtor breakdown)

About the Debtors

The Disclosure Statement provides: "Automotores Gildemeister SpA ('Gildemeister' and together with its Debtor and non-Debtor affiliates, the 'Company') is a privately held company (sociedad por acciones or stock corporation) founded in 1986 as a limited liability company, which was transformed into a sociedad anonima in 1988 and later into a sociedad por acciones in 2016. Minvest S.A., a sociedad anónima organized under the laws of Chile, is the controlling shareholder of Gildemeister and owns 100.0% of the common stock of Gildemeister. Ricardo Lessmann, the President and Chief Executive Officer of Gildemeister, is also a shareholder of Minvest S.A. All of Gildemeister’s direct and indirect subsidiaries are wholly-owned, other than for a nominal share owned by an affiliate of Automotores Gildemeister SpA to comply with Chilean and Peruvian corporate law. Automotores Gildemeister SpA includes the company’s Chilean new and used vehicle sales and aftermarket business. All of Gildemeister’s Chilean subsdiaries are Debtors in these proceedings. Gildemeister´s other direct subsidiaries which are Debtors in these proceedings include Fonedar S.A., Lodinem S.A., and Camur S.A. in Uruguay and Bramont Montadora Industrial e Comercial de Vehiculos S.A. in Brazil. Bramont S.A. was the sole importer of Mahindra in Brazil until 2016.

Gildemeister’s non-Debtor subsidiaries include Automotores Gildemeister Peru S.A., which conducts Gildemeister’s Peruvian vehicle sales. Automotores Gildemeister Peru S.A. has two subsidiaries, Manasa Peru S.A., which has concessions and supply agreements for the importation and distribution of a number of different vehicle brands in Peru, including Volvo Cars Overseas Corporation and Land Rover Exports Ltd., and Motor Mundo S.A., which has concessions and supply agreements for the importation and distribution of a number of vehicle brands in Peru, including Mahindra and Shenyang Brilliance (Jinbei). Other non-Debtor affiliates include Gildemeister Costa Rica S.A. and Inmobiliaria Los Seis CR ILS S.A. in Costa Rica.

Sociedad Comercial de Ecovalor S.A. ('Ecovalor'), Sociedad de Créditos Automotrices S.A. ('Amicar') and Sociedad Comercial e Inmobiliaria Autoshopping S.A. ('Autoshopping') are companies based in Chile, which are 50% joint ventures between Gildemeister and Derco Inversiones.

For operational purposes, the Company has divided its business into two main categories: (i) the vehicle business, the Company’s core activity, which mainly consists of importing, distributing and selling new vehicles (primarily Hyundai), providing maintenance and repair services and selling associated parts, selling used vehicles and brokering insurance and financing services, and (ii) the third-party after-market accessories business, under which the Company sells vehicle accessories, although this business was wound down in 2020.

Corporate Structure Chart

Read more Bankruptcy News