Monterrey-based Vitro, S.A.B. de C.V. (NYSE: VTO), starved for cash after reporting losses of approximately US$227 million from derivatives on natural gas, the Mexican peso, and interest rates, has entered into a transaction with Mexican development bank Banco Nacional de Comercio Exterior (Bancomext) in which Vitro transferred the land on which its Monterrey corporate headquarters is located and a building in Tlanepantla to a Mexican trust (fideicomiso) in exchange for an initial payment of US$100 million, according a report in El Financiero. (The trust is probably structured as a fideicomiso de garantia, which is commonly used in secured financing transactions in Mexico.)

The company, which is led by Federico Sada Gonzalez, acknowledged for the first time that it is not in full compliance with its agreements with creditors and that negotiations with creditors are ongoing, a separate El Financiero report said. It also announced that it has contracted private equity firm The Blacksone Group, L.P. (NYSE: BX) to assist with its negotiations with creditors.

Vitro’s director of finance, Enrique Osorio, as quoted in El Financiero, said “with this transaction and the support of The Blackstone Group, and the other measures that we are taking to minimize the effects of the global financial situation, we are demonstrating with facts that the rumors generated by the market in relation to Vitro are not true and we continue working and operating normally to achieve the objectives that we have proposed to acheive for 2008 and the future”.

Mr. Osorio was responding to the comments of certain analysts, who have speculated that Vitro could be forced to file for creditor protection (concurso mercantil) under Mexican law. Whether the US$100 million cash infusion will enable the company to postpone or prevent such an outcome is an open question. Were Vitro to file bankruptcy in Mexico, creditors of Binswanger Glass, a subsidiary of Vitro and the largest glass retailer in the U.S., could be adversely affected.

In late October, Standard & Poor’s Rating Services downgraded Vitro’s long-term credit rating to B- from B on a Global Scale and to MXBB+ from MXBBB- on a National Scale, raising the company’s cost of credit in an already illinquid market.