Mexican Legal Framework of Business Insolvency - White & Case

taking any action to improve the relative position of a creditor to the detriment of other
participating creditors. They also include similar undertakings from the debtor and other
terms such as a sharing of information and lock-up covenants.
The validity and enforceability of undertakings by creditors refraining from exercising
procedural rights is questionable [CPM 1, 8, 17; CCF 6], and specific performance may be
unavailable [CFPC 421, 423].
The exchange of information raises another legal issue: Mexico does not have a rule
preventing shared information from being used as evidence in a court of law, and
confidentiality agreements may not be strong enough to prevent disclosure of such shared
information as evidence in a judicial process [CFPC 79].
3. Interim Financing
The case where the debtor requires New Money to continue operating during the standstill
period raises the question of how the New Money provider will be recognized in priority over
preexisting creditors. INSOL (2000) takes a very clear position on the issue:
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Where a debtor requires New Money funding, relevant creditors will be concerned that
such New Money will, so far as practicable, be given priority of repayment compared
with other debts in the event of the failure and insolvency of the debtor.
The simplest method of ensuring the priority of repayment for New Money is usually by the
obtaining of security for its repayment over assets of the requisite value. In some cases,
however, negative pledges in favor of third parties or other legal complications will either
prevent the granting of security for New Money or render the benefit which will result from
such security uncertain. While there are various techniques for ameliorating such problems
(e.g., asset purchase arrangements, placing assets into newly formed and “ring-fenced”
borrowing entities and sale and leaseback arrangements) in some cases relevant creditors will
have no option but to fall back on loss-sharing arrangements between themselves designed
to ensure that the New Money will be accorded priority of repayment status (e.g., by agreeing
to “pool” recoveries from any insolvency of the debtor and to apply them in repayment of
the New Money first or, in certain jurisdictions, by the use of subordination agreements).