Corporación GEO in over $4.5 Billion Restructuring

March 20, 2014

Cleary Gottlieb is representing Corporación GEO in connection with the restructuring of over $4.5 billion of indebtedness, consisting of a Pre-packaged restructuring plan or plan de reestructura previo implemented through a concurso mercantil proceeding filed by Corporación GEO and 15 of its subsidiaries on March 20, 2014. This is the first restructuring to be filed in Mexico through a pre-packaged bankruptcy proceeding since the recent amendment to the Ley de Concursos Mercantiles effective in January 2014. Other major Mexican homebuilders (Homex and Urbi) are also in the process of restructuring their indebtedness, however GEO is the first homebuilder to reach the pre-pack filing milestone. The proposed reorganization would be one of the largest debt-for-equity restructurings in Mexico’s history, whereby the creditors and potential new investors may get a majority of equity and control, and the first to contemplate debtor-in-possession financing and/or asset sales to keep operations going while the concurso mercantil proceeding is pending.

The restructuring negotiations started in April 2013 with several stakeholders. The ad hoc committee of banks represents the majority of GEO´s bank creditors, and is comprised of major banking institutions in Mexico, including HSBC, Banorte, BBVA Bancomer, Banamex, Inbursa and Santander. The supporting group of holders or managers for holders of certain unsecured bonds, as the case may be represents approximately 38.5%of GEO´s aggregate $700 million high yield unsecured bonds, and is comprised of major financial and investments institutions in the U.S., UK, and Latin America, such as Ashmore, Luxor and TCW.

On March 20, 2014, GEO entered into a plan support agreement with creditors representing at least 50% of the aggregate principal amount of the consolidated indebtedness of Geo and its filing subsidiaries (each, a “PSA”), which provides the general terms upon which the restructuring would be effected. Concurrently with the entry into the PSAs, GEO entered into other related agreements, including a letter of intent with certain Noteholders, which provides such holders a possibility to backstop the Rights Offering.

The terms of the Pre-packaged Plan, PSA, and related agreements contemplate, among other unique features, that (i) existing equity in GEO will be diluted, subject to pre-emptive rights available under applicable Mexican law, (ii) equity in reorganized GEO will be distributed 88% to unsecured creditors, 8% to existing equity holders, and 4% to existing management, and, after its distribution, holders of GEO’s reorganized equity will be entitled to participate pro rata in a rights offering to raise up to Ps. 4.75 billion of new equity capital in reorganized GEO, (iii) upon receipt of, and the opportunity to diligence, the business plan and other financial information, certain Noteholders will have an exclusive opportunity to provide a commitment to backstop the Rights Offering, (iv) the relevant members of the Bank Group will resume funding under specified existing revolving credit lines and bridge facilities used by GEO to fund construction and development of its housing projects upon receipt of certain financial assurances and appropriate approvals under applicable Mexican law permitting GEO to repay amounts outstanding thereunder, (v) pursuant to an agreement reached between GEO and the Mexican Ministry of Finance, all intercompany claims against GEO and/or any of its direct and indirect subsidiaries and controlled affiliates, have been placed into a trust and, in accordance with the governing trust agreement, will be voted to accept a restructuring plan proposed in any subsequent concurso proceeding only if such plan is also accepted by the requisite majority of third-party claims, and (vi) proceeds from asset sales, DIP Financing and certain other liquidity facilities will be made available to GEO upon receipt of appropriate approvals under applicable Mexican law.

Founded in 1973, GEO was the largest Mexican-based home builder by volume before its financial troubles.