beyondbrics

Grupo Televisa, the world’s largest Spanish-speaking media company, is in the business of producing “telenovelas”, the quintessentially Latin soaps that in recent years have become a formidable export.

But in the last few months, it found itself starring in a real-life one.

The list of characters could hardly have been more compelling: playing alongside the Mexican media colossus was JPMorgan, the US investment bank, the US justice system and, in an irresistible cameo role, Carlos Slim, the Mexican telecoms billionaire and the world’s richest individual.

And like all good “novelas”, the underdog – in this case, Televisa – came out on top. The outcome is noteworthy because it appears to be the first time a judge has come down in favour of a Mexican company in the US against a large US bank. It could even set a potentially important precedent for future cases involving a borrower trying to enforce veto rights as part of a loan agreement.

The plot started early last year when JPMorgan began shopping around to offload a five-year $225m loan it had made in 2007 to Cablevisión, a Televisa-controlled company that offers Mexicans a “triple play” package of television, internet and telephone.

And it thickened when Banco Inbursa, the Mexican bank, expressed interest in taking over the loan. Since Inbursa is the financial arm of Carlos Slim’s business empire, Televisa was concerned that holding the Cablevisión loan would give Mr Slim access to sensitive information regarding a competitor. Cablevisión competes with Telmex, Mr Slim’s fixed-line and internet provider.

In June last year, Cablevisión rejected JPMorgan’s proposed assignment of 90 per cent of the loan to Inbursa. The US bank then entered a so-called “Participation Agreement” with Inbursa for 90 per cent of the loan – a transaction that Televisa insisted breached Cablevisión’s veto rights contained in the original terms of the loan.

JPMorgan declined to comment.

Through a lawsuit filed in the Southern District of New York on December 4, 2009, Cablevisión sought a preliminary and permanent injunction to prevent JP Morgan from transferring any part of the loan to Inbursa.

In January, Judge Rakoff of the court granted Cablevisión’s motion, at the same time finding that JPMorgan’s participation agreement with Inbursa was “an end-run, if not a downright sham”.

JPMorgan appealed that injunction ruling, but it was upheld by the Second Circuit Court of Appeals last month. And, with just days to go before a trial on the merits, the US bank bought back the 90 per cent participation in the Cablevisión loan from Inbursa – not necessarily as an admission of defeat but because it felt the issue was turning out to be more trouble than it was worth.

This week, JPMorgan agreed to a consent order and judgment that prohibits the bank from “selling or otherwise transferring in any form” any part of the Cablevisión loan to a Slim-owned or affiliated company, to any employee of any such company or to any member of Mr Slim’s family.

If you could have asked Televisa’s own scriptwriters to come up with their dream ending, they probably couldn’t have done much better.