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/raid1/www/Hosts/bankrupt/TCRLA_Public/010306.mbx T R O U B L E D C O M P A N Y R E P O R T E R L A T I N A M E R I C A Tuesday, March 6, 2001, Vol. 2, Issue 45 Headlines A R G E N T I N A EDENOR: EDF Acquires Control Of Electricity Distributor B O L I V I A COTEL: Superintendence Prolongs Intervention For Another 3 Months B R A Z I L BANESPA: Anticipates Reporting US$1.3B Loss In 4Q00 CESP: Brazilian Court Lifts Injunction Blocking Reservoir Filling CESP: EDP Awaits Terms Of Privatization CHRYSLER: To Phase Out Campo Largo Plant COPEL: 4Q00 Results To Be Released By Mid March COPENE: Bidding Invitation To Be Published Later This Week C O L O M B I A COLOMBIANA DE TEJIDOS: Company Profile M E X I C O CHRYSLER: To Dismiss 2,700 Employees CINTRA: Sell-off Seen Delayed Until Year-End GRUPO DESC: S&P Affirms Lowered Ratings BANCO INVERLAT: IPAB To Decide Which Shareholders Remain XEROX CORPORATION: Another Shareholder Lawsuit Filed P A R A G U A Y ANTELCO: Paraguayan Government Delays Sale To November - - - - - - - - - - ================= A R G E N T I N A ================= EDENOR: EDF Acquires Control Of Electricity Distributor ------------------------------------------------------- Electricite de France (EDF) became the majority shareholder of the company when it acquired the shares of Endesa and Repsol-YPF in electricity distributor company Edenor, South American Business Information said Friday. The recent move will increase EDF's ownership from 31 percent to more than 80 percent in Edenor. Consequently, EDF will start providing added value services to industries, hotels and hospitals and will be in charge of the maintenance and administration of their electricity installations. The company will also provide Internet access through electrical wires through a commercial division called EDF Global Solution. Edenor is the largest electric distribution company in Argentina in terms of customers served and sales volume. The company has had a 95-year exclusive concession since September 1992 to distribute electricity in the northwestern half of the greater Buenos Aires area and the northern portion of the city of Buenos Aires. ============= B O L I V I A ============= COTEL: Superintendence Prolongs Intervention For Another 3 Months ----------------------------------------------------------------- According to a South American Business Information report Friday, the Bolivian telecoms Superintendence has decided to extend its intervention in Cotel, the country's largest fixed line operator, for another 3 months. The company, which has debts amounting to US$32 million, has been looking for a strategic equity partner to ensure its future. Early last month, the auction of a controlling stake in the line operator was abandoned when none of the 15 registered bidders presented an offer. The Bolivian government will reportedly launch another round of international tender offer for Cotel. =========== B R A Z I L =========== BANESPA: Anticipates Reporting US$1.3B Loss In 4Q00 --------------------------------------------------- Formerly state-run Banespa may be reporting a US$1.3-billion net loss for the fourth quarter of 2000, Antonio Klapfka, a banking analyst at ABN Amro Securities Brasil, said in a Business News Americas report Friday edition. Klapfka revealed that US$1.17 billion of which would come from higher provisioning and an expected restructuring charge in the wake of Spanish group Banco Santander Central Hispano's (BSCH) November acquisition of Banespa. Several analysts are in doubt whether BSCH will ever see a healthy return on its investment when it paid nearly four times the minimum bid price of US$940 million for the acquisition of Banespa. Previously, TCR-LA reported that the Brazilian Supreme Justice Court (STJ) issued a final ruling preventing Banespa from keeping the Sao Paulo state government's court accounts. CESP: Brazilian Court Lifts Injunction Blocking Reservoir Filling ----------------------------------------------------------------- The privatization process of Cia. Energetica de Sao Paulo (Cesp) can now be resumed after the Brazilian high court lifted an injunction that prevented the utility from filling a reservoir at the company's Sergio Motta hydroelectric plant. The decision was announced in a Bloomberg report released Friday. The final ruling issued by Judge Paulo Costa Leite of the Brazilian Superior Justice is a key condition for what could be the world's biggest privatization sale likely to happen next month. Concern about filling the reservoir with water was the primary reason the six bidders withdrew from the sale of CESP in December. A lower court had ruled the company didn't have the proper environmental permits to fill the reservoir, which is needed to expand output of electricity by 20 percent. The six original interested bidders were U.S.-based firms Duke Energy Corp., AES Corp. and Southern Energy Co., and Portugal's Electricidade de Portugal, France's Electricite de France and Spain's Endesa. In January Sao Paulo energy secretary Mauro Arce said Belgium's Tractebel and Brazilian group VBC made up of Votorantim, Bradesco bank and Camargo Correa may also bid for the company. CESP: EDP Awaits Terms Of Privatization --------------------------------------- Electricidade de Portugal (EDP) will not make a decision whether to bid in the sale of the power firm CESP until Brazil sets terms for the company's delayed privatization, a spokesman from the Portuguese utility said in a Reuters report Friday edition. "EDP continues to observe developments and if CESP should be put up for sale again, we will study the situation just like other situations we are studying in Brazil," the spokesman said. EDP was one of the six original interested bidders, alongside U.S.-based firms Duke Energy Corp, AES Corp and Southern Energy Co, and France's Electricite de France and Spain's Endesa. CHRYSLER: To Phase Out Campo Largo Plant ---------------------------------------- Chrysler will be phasing out its Campo Largo plant, located at the state of Parana in Brazil, South American Business Information reported Friday. The company currently operates with 11.5 percent of its installed capacity at Parana, with daily production of 28 Dodge Dakota pickup trucks. Early last month, the company announced plans to halt the production of the trucks and would produce a new vehicle to replace it. However, its plan to produce a new vehicle at the Campo Largo plant suffered a setback as it had to comply with the Brazilian motor vehicles legislation. The law stipulates that the truck maker should comply with the same nationalization level foreseen for Dakota, 50 percent until the end of 2001 and 60 percent until December 2002. COPEL: 4Q00 Results To Be Released By Mid March ----------------------------------------------- Brazil's Parana state integrated power company Copel (Companhia Paranaense de Energia) is expected to release its 2000 fourth quarter results by mid March, according to a South American Business Information report Friday. Copel, which would probably go on the auction block in November of the current year, may report a 21 percent reduction of net profit to R$133 million, analysts said. Between January and September 2000, the company posted R$288.6 million in net profits. Its preferred stock soared by 4.2 percent when it announced a 94-percent increase in profits in the third quarter of 2000. Copel is likely to be privatized as a whole - distribution, generation and transmission - which is a further incentive for investors. All the financial resources obtained from the sale of the company will not be used to pay debts. Instead proceeds will be invested in education, health, security, transport and generating projects, in compliance with the 1998 law regarding the use of funds obtained from such a sale. COPENE: Bidding Invitation To Be Published Later This Week ---------------------------------------------------------- Brazilian central bank's (BC) director of Public Finances, Carlos Eduardo de Freitas announced the invitation to bid for shares of petrochemical company Copene should be published by the end of this week, Brazil Financial Wire reported Friday. The shares to be sold are owned by Odebrecht, Conepar and Mariani. Freitas informed that the company data room should be open for about 15 days. He also added that the only party interested in buying the controlling stake in Copene so far, is the Ultra group. "But that doesn't mean other parties won't express an interest," he stressed, reemphasizing that the shares would probably only be sold at the end of the month. =============== C O L O M B I A =============== COLOMBIANA DE TEJIDOS: Company Profile -------------------------------------- Name: Colombiana de Tejidos S.A. (Coltejer) CRA. 42 # 54A - 161 Autopista Sur Itagui, Colombia (57) 3731133 Website: http://www.coltejer.com.co/ SIC: Textile Mill Products (2200) Assets: $792.6 million Liabilities: $568.3 million Type of Business: Coltejer was founded by Alexander Echavarria on October 22, 1907, Coltejer annually processes 30,000 tons of fiber cotton, polyester, linen and nylon) in 186,776 bobbins and produces 100 million square meters of fabric in 1,305 looms. Trigger Event: In view of its incapacity to meet the volume of debt, interest rates, and other conditions of remuneration, specially the repayment structure of the same, a Reorganization Agreement was executed in favor of the company with the purpose of maintaining it as source of payment of its debt and avoid its liquidation, under the provisions of Law 550 of December 30, 1999. Coltejer S.A. has suffered economic hardships during the past years due to a decrease in demand for its products; by virtue of the country's difficult economic situation and of other factors that include the opening of the national market, the revaluation of the Colombian Peso, and contraband. Notes: A copy of the company's Reorganization Agreement is posted on their website at http://www.coltejer.com.co/12-02- 01%20GAI%20COLTEJER%20REORGANIZATION%20AGREEMENT%20 v%2020-02-01_.htm ** Editors' Note: "Company Profile" is a new feature of the TCRLA designed to provide relavent context to existing and future company-specific news. Stay tuned as we develop a searchable, central archive location of Profiles for the troubled companies we track. =========== M E X I C O =========== CHRYSLER: To Dismiss 2,700 Employees ------------------------------------ In order to meet its goal of cutting about 5,000 salaried workers and save $2.5 billion over the next three years, Chrysler, the struggling unit of DaimlerChrysler AG will permanently dismiss 2,700 white-collar workers, Reuters reported Friday. The other cuts came from 2,285 salaried workers who took the company's early retirement offer, which expired last week, Jodi Tinson, a spokeswoman from Chrysler, said. The company designed a $3.6-billion plan to shed 26,000 jobs or 20 percent of its total workforce. In addition to the salaried cuts, the company is eliminating 19,500 factory jobs and 1,800 temporary positions. According to Chrysler, each white-collar job cut would cost the company $82,000, while each hourly job cut would cost about $40,000. The automaker anticipates losing between $2 billion and $2.5 billion this year even with the job reductions and a host of other cost-saving measures. CINTRA: Sell-off Seen Delayed Until Year-End -------------------------------------------- The sale of the struggling Mexican airline holding company Cintra, which controls both leading airlines Aeromexico and Mexicana, could be delayed until the end of the year, according to the national transport ministry in a South American Business Information report Friday edition. The Mexican pilots' association, on the other hand, wants the sale to go as quickly as possible since the process is already set in stone. Conventional wisdom holds that the association is generally opposed to the sale process. However, the two groups agree that a new stability is needed so as to compete in the international arena. The national transport ministry will work closely together with IPAB, Mexico's bank bailout and deposits insurance agency, and the treasury to warrant a successful and painless sell-off. GRUPO DESC: S&P Affirms Lowered Ratings --------------------------------------- Standard & Poor's today affirmed its triple-'B'-minus local and double-'B'-plus foreign currency corporate credit ratings on Desc S.A. de C.V. The local currency outlook is stable. The foreign currency outlook is positive. The foreign currency corporate credit rating and outlook mirror those of the United Mexican States. At the same time, Standard & Poor's affirmed the double-'B' plus rating on Dine S.A. de C.V.'s US$150 million guaranteed notes due 2007. Issued in October 1997, the rating assigned to these notes relies heavily on the unconditional guarantee from Desc, and reflects Desc's structural subordination. The ratings reflect the strong market shares and operating profiles of Desc's core business lines, automotive parts and chemicals, and these products' significant export sales. Several strategic associations with international partners provide the company with access to modern technology and facilitate exports; these partners and licensed technologies provide for almost 50% of Desc's operating profit. Desc's moderate financial policies and credit profile are balanced by the cyclical nature of the automotive and chemical industries, by lower-than-expected results from its restructured food business, and by its relatively leveraged real estate operations, the latter clearly the company's most volatile business. Desc's main subsidiaries are: -- Unik S.A. de C.V., the subholding company of its auto parts operations and responsible for 47% and 63% of Desc's sales and EBITDA; and -- Girsa S.A. de C.V., whose chemical and petrochemical products' sales represented 34% of Desc's sales and 23% of its EBITDA during 1999. Desc's food business (still known as Agrobios) increasingly depends on branded packaged products; it provided for an additional 15% of sales but only 7% of Desc's EBITDA, while the real estate operation contributed to the balance (4% of sales and 7% of Desc's consolidated EBITDA) Unik, one of the largest independent auto parts producers in Mexico, has strong domestic market shares and significant exports (in excess of 60% of sales). Unik has a number of important partnerships, including Dana Corp. and TRW Inc. Using licensed and proprietary technology, Unik's main lines are relatively high-value-added products. The company has positioned itself within NAFTA as a major supplier of light and medium transmissions. Given this position and low cost status, Standard & Poor's expects no significant deterioration in Unik's operations as a result of the current slowdown in auto sales in the U.S. economy. On the other hand, Girsa's most important product lines are synthetic rubber, phosphates, carbon black, polystyrene, and consumer products such as glue. The company has significant market shares in the domestic market, but its exports (roughly 30% of sales) are also important. Key factors for Girsa's credit profile will be at what pace it will be able to pass-on the higher prices of several of its commodities to its customers, and thus how Girsa gradually improves profitability in those lines whose raw material prices are still depressed. Standard & Poor's expects that Girsa's credit profile will not show a significant change in the next few years, and that several of its products might be near the bottom of their now highly irregular cycles; in the meantime, Girsa's ratings benefit from being part of Desc's business portfolio. In 1999 and 2000, Desc's sales were US$2.4 billion, up from 1998's US$2.2 billion and 1997's US$2.0 billion. The company's EBITDA margin steadily improved to 21% by the end of 1996 from 1994's 15%, as a result of high commodity prices and a cheap Mexican peso. However, this margin declined again to about 15% as of the end of 2000, from 18% in 1999 and 19% in both 1998 and 1997, for several reasons: -- The consolidation of the businesses acquired in 1996-1997; -- The drop in petrochemical prices beginning in 1997; -- The margin reduction created by basic petrochemicals' sudden price rebound since around October 1999, an effect that will last until Girsa is able to reflect such increases in its own products' selling prices; -- The sharp slowdown in retail car sales in the U.S. in November and December 2000, partially offset by January and February sales, which were better than expected; and -- The strength of the Mexican peso (specifically, against the U.S. dollar) since late 1998, which, along with domestic inflation, makes peso-denominated costs more expensive. Accordingly, Desc's EBITDA interest coverage improved to 4.5x, 5.3x, and 5.4x by 1996, 1997, and 1998 (respectively), from about 3.6x in the challenging economic environment of 1995. Afterwards, this ratio declined to 3.9x in 1999 and 3.1x by year-end 2000. The downturn was mainly based on the narrowing of Girsa's conversion spreads since April 2000, the strength of the Mexican peso, and a below average fourth quarter for Unik. As a result of the acquisitions referred above and capital investments realized, Desc's debt to capitalization ratio resulted in only a moderate increase to 43% in 1998 from 36% in 1996. Since then, this ratio has been close to 40%. Similarly, Desc's debt to EBITDA ratio gradually increased to about 2.5x by year- end 1999 from 2.0x in 1996, and by year-end 2000 it increased significantly to 3.5x. Over the next few years, these ratios will show a gradual but steady recovery to the levels shown prior to the slowdown of the petrochemicals and autoparts industries. Higher EBITDA results and earnings retention and cash flows are expected to take sometime to fully recover before they allow for a significant debt reduction (considering that no cash-flow will be destined to re-acquire Desc's shares). Accordingly, it is expected that planned investments will be financed mainly through internally generated resources. However, potential strategic acquisitions could boost leverage ratios, further endangering Desc's credit profile in relation with its current ratings. Desc's currency exposure, relevant to its dollar-denominated debt, is partially mitigated by its significant export sales and dollar-denominated domestic sales. OUTLOOK (LOCAL CURRENCY): STABLE OUTLOOK (FOREIGN CURRENCY): POSITIVE The local currency outlook reflects Desc's competitive challenges, cyclical market conditions, and ongoing investment activities. However, the company's moderate financial policies and strong business position might help to offset the downside risk associated with the current downturn in its most significant industrial activities. The foreign currency outlook reflects the outlook of the United Mexican States. BANCO INVERLAT: IPAB To Decide Which Shareholders Remain -------------------------------------------------------- Mexican bank bailout agency IPAB will have to choose which of the 3,000 will remain as minority shareholders in Banco Inverlat, according to a South American Business Information report Friday. Those selected according to certain criteria will receive their pro-rata share of the 9 percent in the new Grupo Financiero Scotiabank Inverlat. IPAB controls 45 percent of Inverlat, 9 percent of which belongs to Inverlat shareholders. Scotiabank of Canada, on the other hand, controls the remaining 55 percent. Inverlat was taken over by government authorities in 1995, who injected nearly $5 billion to clean up the bank's balance sheet. Scotiabank first took a 10 percent stake in Inverlat in 1995 for some $175 million. Then, last November it finished negotiations it had with IPAB raising its stake in Inverlat to a majority 55 percent for a further $40 million. XEROX CORPORATION: Another Shareholder Lawsuit Filed ---------------------------------------------------- The Law Firm of Cauley Geller Bowman & Coates, LLP announced today that it has filed a class action in the United States District Court for the District of Connecticut on behalf of all individuals and institutional investors that purchased the common stock of Xerox Corporation ("Xerox" or the "Company") (NYSE:XRX) between February 15, 1998 and February 6, 2001, inclusive (the "Class Period"). The complaint charges that the Company and certain of its officers and directors violated the federal securities laws by reporting false financial results during the class period and failing to adhere to the standard accounting practices the company claimed to follow. Specifically, the complaint alleges that Xerox improperly recognized revenues from its leasing operations by booking up front those lease payments attributable to future supplies and services, boosted short-term results by overstating the value of future payments from leases originated in developing countries, and failed to write off mounting bad debts and improperly classifying transactions in its Mexico operations, which resulted in $119 million in charges in the second and third quarters of fiscal 2000. On June 16, 2000, Xerox issued a statement about the "irregularities" in Mexico, falsely portraying them as an aberration perpetrated by rogue executives. But on February 6, 2001, a Wall Street Journal article reported allegations of accounting fraud that went far beyond Mexico. Meanwhile, Xerox shares fell from as high as $124 a share during the Class Period to just $4.43 a share, resulting in hundreds of millions of dollars in losses to Class members. The company's accounting practices are now the subject of a Securities and Exchange Commission (SEC) investigation. =============== P A R A G U A Y =============== ANTELCO: Paraguayan Government Delays Sale To November ------------------------------------------------------ The difficulty in contracting an investment bank to recommend the best privatization strategy for the state operator Antelco prompted the Paraguayan government to postpone the sale from September 28 to November. This was announced by government- appointed Antelco manager Oscar Stark in a Business News Americas report published Friday. Morgan Stanley Dean Witter (MSDW) was previously selected to manage Antelco's privatization. However, last month, the U.S.-based investment bank declined the contract citing reasons that the team, which made the proposal for Antelco, was dissolved and its proposal could not be sustained by others. The new selection process will start with a shortlist of Salomon Smith Barney (US); ABN AMRO (Netherlands); Unibanco (Brazil); Credit Agricole Indosuez (France); BBVA (Spain); and Sudameris (Italy). Proposals are due April 2, with the contract to be signed by May 7. S U B S C R I P T I O N I N F O R M A T I O N Troubled Company Reporter Latin American is a daily newsletter co-published by Bankruptcy Creditors' Service, Inc., Trenton, NJ, and Beard Group, Inc., Washington, DC. John D. Resnick, Edem Psamathe P. Alfeche and Janice Mendoza, Editors. Copyright 2001. All rights reserved. ISSN 1529-2746. This material is copyrighted and any commercial use, resale or publication in any form (including e-mail forwarding, electronic re-mailing and photocopying) is strictly prohibited without prior written permission of the publishers. Information contained herein is obtained from sources believed to be reliable, but is not guaranteed. The TCR Latin America subscription rate is $575 per half-year, delivered via e-mail. Additional e-mail subscriptions for members of the same firm for the term of the initial subscription or balance thereof are $25 each. For subscription information, contact Christopher Beard at 301/951-6400. * * * End of Transmission * * *