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       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

            Wednesday, June 27, 2001, Vol. 2, Issue 125

                           Headlines


A R G E N T I N A

AEROLINEAS ARGENTINAS: Union Warns Of Flight Suspensions
AEROLINEAS ARGENTINAS: Spain On Lookout For Solvent Buyer
EL SITIO: Schiffrin & Barroway Files Class Action Suit
EL SITIO: Cauley Geller Commences Lawsuit
LAPA: Eurnekian, Investors Agree To Acquire Assets, Debts
TOWER RECORDS: Argentine Ops For Sale, Bankruptcy Looms


B R A Z I L

BANERJ: Banco Central Approves Liquidation Suspension
CELESC: In Talks With Bac Florida Bank Re Restructuring
CVRD: Revises 2001 CAPEX Budget


C H I L E

EDELNOR: Investment Co. Wants Controlling Stake
PSINET: Selling Cash-Draining Chilean Subsidiaries
TELEX-CHILE: Divestiture Clauses Removed From Charter


M E X I C O

AEROMEXICO: Reorganizes U.S. Division, Promotes Two
CINTRA: Wants Information To Be Kept Private
GRUPO IMSA: Losses Mount Due To Illegal Picket Line
HYLSAMEX: May Be Forced To Refinance Unit's Loan
SERFIN: Subsidiary's Merger Appears Ahead Of Schedule


P A N A M A

PYCSA PANAMA: Defaulted Bond May Inflict Investor Losses
PSINET: To Consummate Panamanian Asset Sale


P E R U

ACERSA: Concludes US$22M Debt-Refinancing


U R U G U A Y

PLUNA SA: Needs Capital Injection To Avoid Bankruptcy


V E N E Z U E L A

DIGITEL: Negotiates Additional US$80M Loan

     -  -  -  -  -  

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A R G E N T I N A
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AEROLINEAS ARGENTINAS: Union Warns Of Flight Suspensions
--------------------------------------------------------
Union officials warned debt-laden Aerolineas Argentinas, which in
recent weeks has canceled eight international and four domestic
routes due to its unstable financial situation, may suspend all
its flights, citing security concerns, according to a report in
South American Business News.

"They're justifying the (possible) suspension of operations due
to crew stress, which is absolutely false," pilots' union
spokesman Rogelio Cirigliano stated.

"We received the information; it's not clear if the suspension is
as of today (Monday) or tomorrow (Tuesday). They're claiming
security reasons," announced flight attendants' union treasurer
Gabriel Rodriguez.

Neither the airline's management nor Spain's state holding
company SEPI, which owns more than 90 percent of Aerolineas,
would confirm that flights would be suspended.

Aerolineas is carrying more than $900 million in debt and
estimated operating losses at $600 million a year. Sector
analysts have said it must either be radically restructured or
auctioned off to prevent its closure


AEROLINEAS ARGENTINAS: Spain On Lookout For Solvent Buyer
---------------------------------------------------------
The Spanish state holding company SEPI, which owns 91.2 percent
of Aerolineas Argentinas, announced Monday it is searching for
any "solvent and interested" party which could take the
struggling Argentine airline off its hands by July 21, according
to a report in Agence France Presse.

SEPI requires candidates to present a rescue plan within a month
for the company, which became insolvent on June 21. So far, no
potential buyer has formally approached SEPI. However, the
Peruvian company Aero Continente, which has said publicly that it
would like to take control of Aerolineas Argentinas, did submit a
letter of intent.


EL SITIO: Schiffrin & Barroway Files Class Action Suit
------------------------------------------------------

The following statement was issued today by the law firm of
Schiffrin & Barroway, LLP:

Notice is hereby given that a class action lawsuit was filed in
the United States District Court for the Southern District of New
York, located at 500 Pearl Street, New York, NY 10007, on behalf
of all purchasers of the common stock of El Sitio, Inc. ("El
Sitio" or the "Company") (Nasdaq: LCTO) from December 9, 1999
through December 6, 2000, inclusive (the "Class Period").

The complaint charges El Sitio and certain of its officers and
directors with issuing false and misleading statements concerning
its business and financial condition. Specifically, the complaint
alleges that on or about December 9, 1999, El Sitio commenced an
initial public offering of 8,200,000 of its shares of common
stock at an offering price of $16 per share (the "El Sitio IPO").
In connection therewith, El Sitio filed a registration statement,
which incorporated a prospectus (the "Prospectus"), with the SEC.
Furthermore, the complaint alleges that the Prospectus was
materially false and misleading because it failed to disclose,
among other things, that: (i) Credit Suisse First Boston
Corporation ("Credit Suisse"), Lehman Brothers, Inc. ("Lehman"),
Merrill Lynch, Pierce, Fenner & Smith, Incorporated ("Merrill"),
Salomon Smith Barney, Inc. ("Smith Barney") and BancBoston
Robertson Stephens, Inc. ("Robertson Stephens"), had solicited
and received excessive and undisclosed commissions from certain
investors in exchange for which Credit Suisse, Lehman, Merrill,
Smith Barney and Robertson Stephens allocated to those investors
material portions of the restricted number of El Sitio shares
issued in connection with the El Sitio IPO; and (ii) Credit
Suisse, Lehman, Merrill, Smith Barney and Robertson Stephens had
entered into agreements with customers whereby Credit Suisse,
Lehman, Merrill, Smith Barney and Robertson Stephens agreed to
allocate El Sitio shares to those customers in the El Sitio IPO
in exchange for which the customers agreed to purchase additional
El Sitio shares in the aftermarket at pre-determined prices. As
alleged in the complaint, the SEC is investigating underwriting
practices in connection with several other initial public
offerings.

Plaintiff seeks to recover damages on behalf of class members and
is represented by the law firm of Schiffrin & Barroway, LLP, who
has significant experience and expertise prosecuting class
actions on behalf of investors and shareholders.


EL SITIO: Cauley Geller Commences Lawsuit
-----------------------------------------

The Law Firm of Cauley Geller Bowman & Coates, LLP announced
today that a class action has been filed in the United States
District Court for the Southern District of New York on behalf of
purchasers of El Sitio, Inc. (Nasdaq: LCTO) ("El Sitio" or the
"Company") securities during the period between December 9, 1999
and December 6, 2000, inclusive (the "Class Period").

The complaint charges defendants El Sitio, Credit Suisse First
Boston Corporation ("Credit Suisse"), Lehman Brothers, inc.
("Lehman"), Merrill Lynch, Pierce, Fenner & Smith, Incorporated
("Merrill Lynch"), Salomon Smith Barney, Inc. ("Smith Barney"),
BancBoston Robertson Stephens, Inc. ("Robertson Stephens"),
Roberto Cibrian-Campoy, Roberto Viv-Chaneton, Horacio Milberg and
Alfredo Jimenez De Arechaga with violations of Sections 11, 12(a)
(2) and 15 of the Securities Act of 1933 and Section 10(b) of the
Securities Exchange Act of 1934 and Rule 10b-5 promulgated
thereunder. On or about December 9, 1999, El Sitio commenced an
initial public offering of 8.2 million of its shares of common
stock at an offering price of $16 per share (the "El Sitio IPO").
In connection therewith, El Sitio filed a registration statement,
which incorporated a prospectus (the "Prospectus"), with the SEC.
The complaint further alleges that the Prospectus was materially
false and misleading because it failed to disclose, among other
things, that (i) Credit Suisse, Lehman, Merrill Lynch, Smith
Barney and Robertson Stephens had solicited and received
excessive and undisclosed commissions from certain investors in
exchange for which Credit Suisse, Lehman, Merrill Lynch, Smith
Barney and Robertson Stephens allocated to those investors
material portions of the restricted number of El Sitio shares
issued in connection with the El Sitio IPO; and (ii) Credit
Suisse, Lehman, Merrill Lynch, Smith Barney and Robertson
Stephens had entered into agreements with customers whereby
Credit Suisse, Lehman, Merrill Lynch, Smith Barney and Robertson
Stephens agreed to allocate El Sitio shares to those customers in
the El Sitio IPO in exchange for which the customers agreed to
purchase additional El Sitio shares in the aftermarket at pre-
determined prices. As alleged in the complaint, the SEC is
investigating underwriting practices in connection with several
other initial public offerings.


LAPA: Eurnekian, Investors Agree To Acquire Assets, Debts
---------------------------------------------------------
Argentine financier Eduardo Eurnekian and a group of investors
have offered to buy the assets and debts of Argentina's No. 2
airline, Lineas Aereas Privadas Argentinas SA (LAPA). The airline
was recently forced into bankruptcy due to its huge debt load,
Bloomberg reported Monday.

Eurnekian, who owns 30 percent of regional airline Southern
Winds, along with U.S. insurance giant American International
Group Inc. and several local business leaders have made an offer
to purchase the airline, according to Eurnekian's spokesman
Sergio Resumil.

Resumil didn't disclose the value of the transaction, however a
report in daily newspaper La Nacion stated the consortium would
pay $15 million and assume debts of $130 million.

"It's all in the hands of the creditors at the moment and we will
be ready to provide more information in the first half of July,"
said Resumil. "If they approve our offer we will buy the airline
outright."


TOWER RECORDS: Argentine Ops For Sale, Bankruptcy Looms
-------------------------------------------------------
West Sacramento-based chain Tower Records is likely to file for
bankruptcy protection if it fails to restructure weakening
finances in the coming months, revealed New York-based Moody's
Investors Service Inc., The Los Angeles Times reported Saturday.
Despite moves to reduce operating costs and restructure debt,
Tower "may have difficulty demonstrating improvements during the
current weak environment for music product," wrote Moody's
analyst Marie Menendez in a report issued Wednesday.

This year, the company launched restructuring that will result in
the firing of an estimated 250 of its approximately 7,000
employees and close 10 stores in its fiscal quarter ended April
30. Tower is also exiting the book business. Just recently, Tower
announced it has closed all but one of its stand-alone bookstores
and liquidated most of its book inventory.

Tower is retrenching its international operation, which has about
70 stores in 10 countries, negotiating the sale of its operations
in Argentina, Taiwan and Hong Kong. In a regulatory filing, Tower
said it also would close or sell its operations in Canada.

Tower said they had "no present intention" of filing for
bankruptcy. According to Michael Solomon, Tower's president and
CEO, the chain "continues to hold its own and we are encouraged
by a more promising album release schedule starting in June,
which we anticipate will favorably impact sales."

Tower, in a regulatory filing, stated it recently received a one-
year extension on its credit line, but that the amount of money
it could borrow also was reduced, to $225 million from $275
million. Although that's enough to meet the company's current
obligations, the credit line will shrink further in the coming
months, Menendez noted. She downgraded her rating on the
company's ability to repay $110 million in senior notes to Ca, or
highly speculative, from Caa3, or poor.

Tower officials said they are seeking additional financing.



===========
B R A Z I L
===========

BANERJ: Banco Central Approves Liquidation Suspension
-----------------------------------------------------
The Brazilian Banco Central has approved the suspension of the
liquidation of Banerj (Banco do Estado do Rio de Janeiro), South
American Business Information reported Monday. The move will
allow the transfer of the R$1.5 billion in assets from the
institution to the state government of Rio de Janeiro. The assets
will be designated to pay Banerj's debts.


CELESC: In Talks With Bac Florida Bank Re Restructuring
-------------------------------------------------------
Celesc (Centrais Eletricas de Santa Catarina), the Santa Catarina
state electric company, is actively negotiating with Bac Florida
Bank the restructuring of its US$61.2-million debt, South
American Business Information said in a report Monday. The debt,
which is in euro commercial papers, matured on June 14 but Celesc
failed to make the payment on time. Bac Florida Bank, controlled
by Pellas group, has interest to intermediate the operations and
through it, will set up a foothold in Brazil.

According Enio Branco, financial officer of Celesc, the company
expects to sell its 23 percent stake in hydroelectric power
facility Dona Francisca estimated at R$50 million, and its 19
percent stake in Casan (Companhia Catarinense de Aguas e
Saneamento) estimated at R$110 million.


CVRD: Revises 2001 CAPEX Budget
-------------------------------

Companhia Vale do Rio Doce (CVRD) Board of Directors decided to
reduce its capex budget for 2001 by US$ 212 million, from US$
1.057 billion to US$ 845 million. This value does not include
acquisition expenditures. This year, CVRD already spent US$ 566
million with the acquisition of Ferteco.

The cut in capital expenditures was due to four basic factors:

1. Change in expectations related to the real/USD exchange rate
behavior, contributing to a drop in the equivalent USD value of
Brazilian reais denominated expenditures.

2. CVRD managed to obtain cost reductions in some projects.

3. Funds allocated to energy investments were diminished by US$
114 million. This is explained by the elimination of some
projects, with expected rates of return less than CVRD hurdle
rate, and by the expectation that some government auctions of
concessions to build and operate hydroelectric power plants will
be postponed until early 2002. It is worth to stress that this
change does not reflect any reduction in the emphasis given by
CVRD to investments in the generation of electrical energy.

4. An Amount of US$ 7 million that had been originally allocated
to social investments was reclassified as current expenses,
although its destination was maintained.

On the other hand, slight increases in maintenance expenditures,
from US$ 240 million to US$ 244 million, and information
technology, from US$ 24 million to US$ 28 million, were approved.
A US$ 67 million project to expand the production capacity of
potash was approved and it will involve a US$ 3 million
expenditure in 2001.



=========
C H I L E
=========

EDELNOR: Investment Co. Wants Controlling Stake
-----------------------------------------------
Choros Power & Gas SA, a Chilean investment company, announced it
is in talks to buy an 82.3 percent stake in power company Empresa
Electrica del Norte Grande SA (EDELNOR), the money-losing unit of
Atlanta-based Mirant Corp., Bloomberg disclosed Monday. The
shares of Edelnor are worth 11.6 billion pesos ($18.7 million) at
Monday's closing price of 31 pesos per share.

In the January-March period, Edelnor posted its fourth
consecutive quarterly loss as revenue from selling energy dropped
13.5 percent. Edelnor lost 9.8 billion pesos, partly after losing
a contract to supply energy to Escondida, the world's biggest
copper mine.


PSINET: Selling Cash-Draining Chilean Subsidiaries
--------------------------------------------------
While in the process of implementing the shutdown of their
Chilean subsidiaries, U.S.-based PSINet, Inc. received an offer
from the Inversions-Green Island Group and reached an Agreement
to sell these subsidiaries.

On a standalone basis, PSINet's Chilean operations are losing
approximately $250,000 per month and are expected to continue to
lose money if the Debtors continue to operate them. Moreover, the
Chilean Subsidiaries no longer have a useful place in the PSINet
corporate family as a result of the Debtors' efforts to refocuse
their business and divest all of their Latin American businesses.

During the course of their prepetition restructuring efforts, the
Debtors and their professionals explored various financial,
strategic and operational alternatives to stem the losses of the
Chilean Subsidiaries, including sales in parts and as a whole.
The Chilean assets were marketed by Goldman Sachs as part of its
prepetition efforts to sell the Debtors' broader Latin American
business, but generated little interest among prospective buyers.
With no better options available, the Debtors determined at the
end of May 2001 that the Chilean operations ought to be shutdown
promptly in accordance with Chilean law, including possibly the
Chilean equivalent of bankruptcy (the "Windup").

In the course of notifying the major creditors of the Chilean
Subsidiaries of that decision in late May 2001, some prospective
buyers emerged. So the Debtors changed course, pursued these
indications of interest and negotiated with the two most
motivated buyers. This culminated in the proposed sale to the
Inversiones-Green Island Group.

In the Debtors' opinion, pursuing this sale has several
advantages over a Windup. First, the Chilean operations are not
generating enough revenue by themselves to maintain operations
and avoid Windup. Because of Green Island's Credit Support, the
Debtors are able to maintain, at no cost to themselves, the
Chilean Subsidiaries as a going concern for up to 60 days while
the Debtors pursue the Sale. Second, the Sale provides more value
to the PSI Entities than the Windup. Third, officers and
directors of Chilean companies are potentially civilly and
criminally liable when their company becomes insolvent. If the
directors of the Chilean Subsidiaries, who are also key officers
of some of the Debtors, were to face such charges, they would
undoubtedly be distracted from their efforts to reorganize the
Debtors.

The Debtors' Chilean business is comprised of four operating
companies:

* PSINet Chile S.A. ("PSINet Chile");
* ITN S.A.;
* Netup S.A.; and
* Netexpress Servicios Internet Ltda. (collectively, the "Chilean
Operating Companies" and together with Tribeca, the"Chilean
Subsidiaries").

Two of the Debtors: R.G. Investments Delaware, Inc. and PSINet
South America Holdings, Inc., through their wholly-owned Chilean
subsidiary, Inversiones Tribeca S.A., own controlling interests
in these four operating companies.

On June 11, 2001, R.G. Investments Delaware, Inc. and PSINet
South America Holdings, Inc. (the Vendors), together with PSINet,
Inc., became, in their respective capacities, parties to, and
beneficiaries of three agreements that together provide for the
sale of the Debtors' Chilean business to Inversiones Letonia S.A.
and Green Island Business Corporation (collectively "the
Inversiones-Green Island Group").

The Sale will be accomplished through the transfer to the
Purchasers of certain ownership interests of the Vendors in
Tribeca and Netexpress Servicios Internet Ltda.

The Sale Agreement

(A) With respect to the obligations of the Purchasers, the
material provisions of the Sale Agreement require:

     (1) Purchasers to pay to Vendors, at Closing, in cash,
$149,999.95 on account of the Interests;

     (2) Green Island to pay to PSINet, Inc., at Closing, in cash
$50,000 on account of the Transferred Claims;

     (3) Purchasers to satisfy the liabilities of PSINet, Vendors
and each of their respective affiliates relating to the Holdback
Payments (approximately $1,604,780);

     (4) Purchasers to pay the June, July and August 2001
installments under the Emergia Contract (total $255,000), which
installments are arguably joint and several obligations of PSINet
Argentina and PSINet Chile; and

     (5) Green Island to provide the Chilean Operating Companies
with sufficient funds to keep them operating and to avoid the
Chilean equivalent of bankruptcy (the "Credit Support"). The
foregoing cash and non-cash consideration to the PSI Entities
totals approximately $2.18 million.

     (6) The Purchasers will not receive stalkinghorse
protections; there will be no holdbacks or post-closing
adjustments; and the Vendors will only make minimal, customary
representations and warranties.

(B) With respect to the obligations of the PSI Entities, the
material provisions of the Sale Agreement require:

     (1) Vendors to transfer to Purchasers, pursuant to Sections
363(b) and (f) of the Bankruptcy Code, the Interests free and
clear of all "debts, encumbrances, pledges, security interests,
liens, prohibitions, charges or restrictions of any nature;"

     (2) PSINet to assign to Green Island Business Corporation
all of PSINet's rights as of the Closing with respect to any debt
or liability owed by any of the Chilean Operating Companies to
PSINet or any of its affiliates (excluding the Chilean
Subsidiaries) (the "Transferred Claims"); and

     (3) PSINet Argentina, S.A. ("PSINet Argentina" and one of
PSINet's non-Debtor subsidiaries) to pay all of its and PSINet
Chile's joint and several liabilities due after September 1, 2001
under the Emergia Contract and to provide PSINet Chile with
certain fiber transmission capacity between Buenos Aires and
Miami at no cost until September 1, 2001.

(C) Certain of the agreements comprising the Sale Agreement
specify that they are to be governed by and construed in
accordance with the laws of Chile, and all disputes are to be
settled by an Arbitrator.

(D) The Closing is to occur 5 days an order approving the Sale is
entered and final.

Transfer of Funds

The Sale Agreement provides that the Debtor may specify the bank
account to which Purchaser shall wire the $199,995.95 cash
component of the purchase price (the "Cash Proceeds"). The
Debtors have not yet determined which PSI Entity(ies) to which
this payment will be directed and will inform the Court of this
decision at the Sale Hearing. At this time, the Debtors intend to
direct the Cash Proceeds to one of the Latin American
Subsidiaries.

Prepetition, in the ordinary course of business, the Debtors
provided contributions, credit support and other liquidity to
their wholly-owned foreign subsidiaries. Although doing so
postpetition constitutes transfers of property of the estate to
non-Debtors, the Debtors submit that, for a global business such
as the Debtors', these are ordinary course transfers that are
permitted under Sections 363(c)(1), 1107(a) and 1108 of the
Bankruptcy Code without requiring Court approval.

Even if they are not deemed ordinary course transfers, the
Debtors submit that, when made within the exercise of a debtor's
business judgment, they should be authorized by the Court. The
Debtors submit that a transfer of the Sale Proceeds to one or
more of the Debtors or the Latin American Subsidiaries reflects
the sound exercise of the Debtors' business judgment. The Latin
American Subsidiaries are wholly-owned subsidiaries of the
Debtors, thus, PSINet tells the Court, any transfers which
enhance the value of these subsidiaries to potential purchasers
are transfers that enhance the values of these assets of the
Debtors' estates. The Debtors also submit that, by virtue of
their control over their subsidiaries, they are able to direct
and monitor the use of the funds.

The Debtors expect that the transfers will increase the net
consideration the Debtors will receive from the buyout group that
is now under letter of intent to purchase the Debtors' Latin
America Subsidiaries. First, without the transfers, certain of
the Latin American Subsidiaries might not be able to maintain
their businesses as going concerns until a sale can be
consummated. Second, because the Debtors are selling their
ownership interests in the Latin American Subsidiaries and
because the transfers will be reflected in the Latin American
Subsidiaries' assets and liabilities (either as assets themselves
or on account of a reduction of liabilities) the transfers will
be reflected in the purchase price to be paid the Debtors. With
respect to a purchase by the buyout group, the value added to the
subsidiaries by the transfers will redound to Debtors through the
working capital adjustment to the purchase price. Lastly, a
transfer of the Sale Proceeds is truly a de minimis transfer in
comparison to the value of the Debtors' estates as a whole.

Bidding and Auction

Notwithstanding the Debtors' confidence that the terms of the
Sale Agreement represent fair and reasonable value for the
Chilean Subsidiaries (especially when compared to Windup, which
is the next best alternative), the Debtors are willing to
entertain offers from other interested purchasers before the Sale
Hearing.

Up until 4:00 p.m. Eastern time on July 5, 2001 (the "Bidding
Deadline"), the Debtors will continue to receive and consider any
other offers from qualified buyers to purchase the Chilean
Subsidiaries.

To be considered, all offers must:

(a) be in the form of an executed share purchase agreement,
subject to acceptance by the Debtors and approval of the
Bankruptcy Court;

(b) actually be received by Debtors' counsel, Wilmer, Cutler &
Pickering, on or before the Bidding Deadline; and

(c) be accompanied by a $100,000 earnest money deposit as
security for prospective purchasers' performance of its
obligations.

The Debtors will then hold an auction for even higher and better
bids (on terms to be provided to participants prior to the
auction) among those persons that have submitted competitive bids
to select the one the Debtors will present to the Court for
approval at the Sale Hearing as the offer they deem to be the
highest and best offer, whether it is from the Inversiones-Green
Island Group or a Superior Buyer.

The Debtors will attempt to deliver the Notice of Sale to all
persons who have expressed to Goldman Sachs, DrKW or the Debtors
an interest in purchasing any of the Debtors' assets in Latin
America, including the Chilean Subsidiaries or their assets. In
addition, the Debtors will publish an advertisement in the Wall
Street Journal (Global Edition) on or about June 26, 2001.

Reservation of Right for Windup

If the Sale to the Inversiones-Green Island Group is not approved
by the Court, the Credit Support provided by Green Island will
terminate, likely leaving the Chilean Subsidiaries without
adequate cash flow to continue operating. Thus, if the Sale is
not approved, the Chilean Subsidiaries will need to promptly
proceed with their Windup. Accordingly, the Debtors reserve their
rights to request the Court to enter an Order without further
notice authorizing the Debtors to cease their Chilean Operations
and windup those affairs.

Although the Debtors believe that the Bankruptcy Code allows them
to pursue a Windup without obtaining approval from this Court, in
an abundance of caution, the Debtors may desire to seek such
approval from the Court at the Sale Hearing.

Sections 1107(a) and 1108 of the Bankruptcy Code authorize a
debtor in possession to continue to operate its business. Section
363(c) of the Bankruptcy Code authorizes a debtor in possession
operating its business pursuant to Section 1108 to use property
of the estate in the ordinary course of business without notice
or a hearing. The Debtors submit that ceasing operations of an
operating business that is losing money, such as the Chilean
operations, is in the ordinary course of business, and is
permitted by Sections 363(c), 1107(a) and 1108 of the Bankruptcy
Code and 28 U.S.C. 959(b), without further application to the
Court.

Even if, arguendo, ceasing operations at an operating facility is
not in the ordinary course of business, Section 363(b) of the
Bankruptcy Code provides that the Debtor, after notice and
hearing, may use, sell, or lease, other than in the ordinary
course of business, property of the estate, and section 554(a) of
the Bankruptcy Code provides that the Debtor, after notice and
hearing, may abandon any property of the estate that is
burdensome to the estate or that is of inconsequential value and
benefit to the estate.

* * *

The Debtors submit that the proposed sale is supported by sound
business judgment, and the Sale Agreement is the product of good
faith, arm's-length negotiations between the Debtors and the
Inversiones-Green Island Group. Moreover, the Debtors do not
propose to adjust any rights of creditors other than to sell the
Interests free and clear of all liens, claims and interests
pursuant to 363(f), and there are no conditions in the Sale
Agreement that predetermine the rights of creditors under a plan.
The Sale Agreement's sole impact is to transform the Debtors'
assets to cash and relieve the estates of significant
liabilities.

The Debtors also represent that the proposed sale should be clear
of liens, claims and interests pursuant to section 363(f) of the
Bankruptcy Code. A sale subject to liens, claims and interests,
the Debtors tell Judge Gerber, will likely result in a lower
purchase price and be of substantially less benefit to the
Debtors' estates. The sale, if consummated, should also be exempt
from Transfer Taxes pursuant to Section 1146(c) of the Bankruptcy
Code, the Debtors represent, because it is essential to the
consummation of a plan and therefore should be deemed to be
"under a plan".

Accordingly, the Debtors seek entry of an order:

(a) authorizing the Sale to the Inversiones-Green Island Group or
such other buyer as the Debtors propose to the Court at the Sale
Hearing that will consummate the Sale for higher and better net
value to the PSI Entities (a "Superior Buyer"),

(b) directing that the Interests be transferred free and clear of
liens, claims, interests and transfer taxes,

(c) approving the Sale Agreement and authorizing all actions
necessary to effectuate the Sale, and

(d) authorizing the Debtors to direct the Cash Proceeds to one or
more of the Debtors and/or Latin American Subsidiaries;

all of the clauses (a) through (d) being subject to a reservation
of rights by the Debtors to request entry of an alternative order
authorizing the Debtors to cease their Chilean operations and
windup those affairs without further notice.

Pursuant to Rule 6004(g) of the Bankruptcy Rules, unless the
court orders otherwise, all orders authorizing the sale of
property pursuant to Section 363 of the Bankruptcy Code are
automatically stayed for 10 days after entry of the order. The
Debtors submit that they need to close this Sale as soon as
possible to secure the benefits of the Sale Agreement. Therefore,
the Debtors reserve their rights to request that the Court
eliminate the 10-day stay period under Bankruptcy Rule 6004(g)
or, in the alternative, if an objection to the Sale is filed,
reduce the stay period to the minimum amount of time needed by
the objecting party to file its appeal in order to permit the
sale to close as provided under the Agreement. (PSINet Bankruptcy
News, Issue No. 4; Bankruptcy Creditors' Service, Inc., 609/392-
0900)


TELEX-CHILE: Divestiture Clauses Removed From Charter
-----------------------------------------------------
Creditors and shareholders of Chilean telecoms holding Telex have
agreed in principal to get rid of the clauses in the company's
charter, which require at least 90 percent of voting shareholders
to approve the divestiture of strategic assets, Business News
Americas reported Monday.

"That point is resolved. The restriction will be lifted because
no one would buy the company with that kind of limitation,"
confirmed Telex chairman Jorge Awad.



===========
M E X I C O
===========

AEROMEXICO: Reorganizes U.S. Division, Promotes Two
---------------------------------------------------

AeroMexico, Mexico's largest airline, has announced a
restructuring of its U.S. Division.

Tony Batista, the airline's Market Development Manager since
January 2000, has been appointed Manager of Sales and
Distribution USA.  In his new position, Batista will be
responsible for Sales Administration, Alliances, as well as
Product Distribution, including Reservations, Retail and E-
commerce channels.  Matt Strong, formerly AeroMexico's Regional
Manager in Dallas/Ft. Worth, will relocate to the airline's U.S.
Division headquarters in Houston as Manager of National Accounts
USA.  Both will report to Rolf Hoehn, Vice
President U.S. Division.

"I am pleased to announce this new organization for the U.S.
Division, which more closely aligns our sales and marketing
efforts with evolving distribution channels in the airline
industry," Hoehn said.  "The restructuring will enable us to
focus our sales and marketing strategies more efficiently and
effectively in the ever-changing and increasingly competitive
marketplace."

AeroMexico serves 43 cities in Mexico, more than any other
airline, 80 destinations in the United States and Canada --
including the gateway cities of Atlanta, Chicago, Dallas/Ft.
Worth, Houston, Las Vegas, Los Angeles, Miami, New York City,
Ontario, Orlando, Phoenix and San Diego -- and six countries in
Europe and South America.  AeroMexico is a founding member of the
SkyTeam global airline alliance, which provides customers with
extensive worldwide destinations, flights and services.  The
airline's corporate headquarters are in Mexico City and its U.S.
operations are based in Houston.


CINTRA: Wants Information To Be Kept Private
--------------------------------------------
Cintra has been asked by the Mexican chamber of deputies'
communications commission to provide further information
regarding its statements on Aeromexico and Mexicana de Aviacion,
South American Business Information reported Monday. Cintra said
it would comply with the request so long as the information is
kept out of the public eye. This exchange is based on the six-
month, politically-motivated delay in the sale of Cintra, which
the two airlines thought could compromise their activities to the
extent that they would have to close. Cintra posted losses of
over 1 billion pesos in the first quarter of 2001 and its
reserves at the end of 2000 are now down to just 200 million
pesos.


GRUPO IMSA: Losses Mount Due To Illegal Picket Line
---------------------------------------------------
Mexican industrial conglomerate Grupo IMSA has incurred US$10.5
million dollars in losses due to a picket line set up one month
ago at the group's steel-making plant in the northeastern city of
Monclova, Reforma/Infolatina reported Friday. On June 14, IMSA
published an open letter in several newspapers denouncing
individuals responsible for what it described as an illegal
picket line at the plant.

Grupo IMSA head of Human Resources Ruben Dario Rodriguez said the
actions of a group of individuals claiming to represent workers
had caused the company daily losses of US$350,000 dollars,
without considering costs imposed on IMSA clients and suppliers.

"The company has suffered serious and extensive losses, and
employees have been without work for the past 30 days. Suppliers,
the city and its image are all being impacted by the situation,"
Dario said.

IMSA acquired the Monclova plant from former stated-owned
steelmaker Altos Hornos de Mexico in February 1999. The plant
reportedly has been plagued by labor-dispute problems ever since
the acquisition.


HYLSAMEX: May Be Forced To Refinance Unit's Loan
------------------------------------------------
Mexico's Hylsa SA, the main steel unit of Hylsamex SA, could be
forced to take responsibility for the payment of a $13.3-million
loan, which its Venezuelan unit Posven CA defaulted on Tuesday
last week, Bloomberg said in a report Monday.

Posven is a Venezuelan venture among Hylsamex, Korea's Pohang
Iron and Steel Co. and Venezuela's CVG Ferrominera. It borrowed
$266 million from 15 banks in 1997 to build a hot briquette iron-
ore plant. Hylsa owned a 5 percent stake in the plant and
guaranteed that portion of the loan.

The investors involved in the plant claim that Raytheon Co., the
contractor for the project, didn't build the plant according to
specifications, and the plant isn't able to produce to the
standard set by the company. Raytheon, which owns part of the
venture and guaranteed some of the debt, has rejected the claim.

Meanwhile, Hylsamex may also face trouble refinancing part of its
$1.3 billion debt. The company is searching for a partner to buy
a stake in it to raise money to reduce debt.


SERFIN: Subsidiary's Merger Appears Ahead Of Schedule
-----------------------------------------------------
Expectation is rife that the operational merger between Grupo
Financiero Santander Mexicano, the Mexican subsidiary of Spain's
Banco Santander Central Hispano (BSCH), and Grupo Financiero
Serfin, which Santander Mexicano acquired from bank bailout
agency IPAB in May 2000, will be conducted ahead of schedule,
Reforma/Infolatina reported Monday.

The speedy transaction is widely believed to be the result of the
May 17 announcement by U.S.-based Citigroup that it will acquire
Grupo Financiero Banamex Accival, owner of Mexico's second-
largest bank, this year. According to reports, Santander
Mexicano's and Serfin's brokerage, insurance and factoring
operations have already been merged. The payments and computer
systems of the two groups' subsidiary banks currently are in the
process of being integrated.



===========
P A N A M A
===========

PYCSA PANAMA: Defaulted Bond May Inflict Investor Losses
--------------------------------------------------------
Asset-Backed Alert newsletter warned that Credit Suisse First
Boston (CSFB), John Hancock Financial Services Inc. and Loomis
Sayles & Co. are likely to see losses on investments in a
defaulted $126 million bond issue, Bloomberg reported Friday.
CSFB, Hancock and Loomis own the "lion's share" of the
securities. CSFB arranged the bond sale in October 1997, which
are backed by tolls collected from drivers on highways near
Panama City.

Pycsa Panama SA, which sold the bonds, failed to make some of the
$7.8 million in bond payments due on June 15, a few weeks after
it started discussions with debt holders on restructuring the
bond issue to make payments, Asset-Backed Alert disclosed. Pycsa,
which missed a payment six months ago, may also miss one in
December unless it can restructure the bond issue, according to
Asset-Backed Alert. Pycsa's parent, Madrid-based Grupo Protecto y
Control, has reportedly said it will not provide capital to shore
up the bond issue.

Pycsa and its investors are discussing lowering the coupon rate
or constructing a $94 million extension that will make the
highway more profitable, possibly through another debt issues.


PSINET: To Consummate Panamanian Asset Sale
-------------------------------------------
U.S.-based PSINet seeks the Court's approval of the sale of their
non-debtor Panamanian Subsidiaries, which was only minutes away
from being closed when the parties concerned learned that the
bankruptcy petitions had been filed and they could no longer
proceed without Court approval. Out of an abundance of caution,
the PSINet also asked the Court to approve a pre-closing
preparation -- the transfer of the Ft. Amador-L.A. IRU from
PSINetworks Company, one of the company's, to PSINet Panama, Inc.
-which took place just hours before the bankruptcy petition was
filed.

The Panamanian Subsidiaries, appraised at $6,330,000 as of May
18, 2001, are losing money and have no place in the Debtors'
business strategy.

On May 31, 2001, two of the Debtors, PSINet and R.G. Investments
Delaware, Inc., a wholly-owned PSINet subsidiary (Seller) on the
one hand, and Ree Panama S.A. on the other hand, entered into a
Stock Purchase Agreement for Ree to purchase from the Seller of
all of the outstanding stock of R.G. Investments Panama, Inc.
(the Company).

R.G. Investments Panama, Inc. is a holding company which owns all
of the outstanding shares of PSINet Panama, Inc., also a
Panamanian entity and non-debtor. Collectively, R.G. Investments
Panama, Inc. and PSINet Panama, Inc. are the "Panamanian
Subsidiaries."

The Company's only assets are its ownership of 100% of the shares
of PSINet Panama, Inc. and certain booked inter-company accounts
receivable from PSINet Panama, Inc. related to purchase
accounting. PSINet Panama, Inc., as a going-concern, was
appraised at $6,330,000 as of May 18, 2001 by Valuation Research
Corporation, an independent, third-party appraiser hired by
PSINet.

The Company's only liabilities are its obligations (guaranteed by
PSINet) to pay over the next 15 months certain purchase price
holdbacks related to the Company's acquisition of two companies:

(i) Sinfonet S.A. on August 13, 1999 from Buyer and certain other
parties and

(ii) Orbinet Telecommunications, Inc. on September 29, 1999 by
which certain of PSINet Panama, Inc.'s present assets were
acquired.

As of May 30, 2001, the Company's unpaid holdback obligation
relating to the Sinfonet acquisition was $5,061,895.89
($4,683,139 plus annual interest at 4.50% from August 13, 1999)
(the "Sinfonet Credit" or the "Sinfonet Holdback").

As of May 30, 2001, the Company's unpaid holdback obligation
relating to the Orbinet acquisition was $573,926.18 ($533,844
plus annual interest at 4.50% from September 29, 1999) (the
"Orbinet Credit" or the "Orbinet Holdback").

The accounts receivable claims against the Panamanian
Subsidiaries that the Debtors will release have a book value of
$4,875,743 as of April 30, 2001, however the Debtors believe they
are of negligible realizable value.

The Stock Purchase Agreement

The material provisions of the Stock Purchase Agreement require
the Buyer to:

(a) pay to Seller, at closing, in cash, a purchase price equal to
the specified Purchase Price of $6,332,399 minus the sum of the
Sinfonet Credit and the Orbinet Credit,

(b) release all claims against, and dismiss with prejudice the
pending actions and proceedings brought by Buyer against, the
Company and PSINet with respect to disputes arising under the
Sinfonet Acquisition Agreement, including a claim for payment of
the Sinfonet Holdback,

(c) cause Company and its affiliates and subsidiaries to release
and discharge PSINet and its affiliates and subsidiaries from any
claims with respect to inter-company accounts with Company and
its affiliates and subsidiaries,

(d) pay the liabilities of PSINet, Seller and Company relating to
the Orbinet Holdback.

Taking into account the value of the credits and releases, the
net cash value of the Sale to the Debtors' estates is
approximately $696,577 as of May 30, 2001.

The Buyer will not receive stalkinghorse protections; there will
be no holdbacks or post-closing adjustments; and the Seller will
only make minimal, customary representations and warranties,
which will survive Closing for eighteen months. The
indemnification obligations of all parties are capped at the
specified Purchase Price of $6,332,399.

Because the parties were only minutes away from closing the Sale
when they learned that the bankruptcy petitions had been filed,
the pre-closing preparations for the Sale have already been
completed, and the parties expect they will be ready to close the
Sale as soon as Court approval is obtained.

Transfer of IRU as Pre-closing Preparation

One such pre-closing preparation is the transfer of an IRU for
bandwidth on fiber owned by Global Crossing USA Inc. between Fort
Amador, Panama and Los Angeles, California (the "Ft. Amador-L.A.
IRU"), the Debtors tell the Court.

The operations of the Panamanian Subsidiaries depend on the Ft.
Amador-L.A. IRU but historically this IRU was not held by by
PSINetworks Company, one of the Debtors. In order to sell the
Panamanian business as a going concern, the Debtors transferred
the Ft. Amador-L.A. IRU to PSINet Panama, Inc. prior to filing
the petitions. The IRU Transfer was accomplished as an assignment
to, and assumption by, PSINet Panama, Inc. of PSINetwork's rights
and obligations with respect to the Ft. Amador-L.A. IRU under a
Capacity Purchase Agreement between PSINetworks Company and
Global Crossing USA Inc. dated December 23, 1999. The IRU
Transfer was made in accordance with the terms of the Capacity
Purchase Agreement.

Although the IRU Transfer took place hours before the petitions
were filed, out of an abundance of caution and to provide the
Buyer with reassurance, the Debtors request the Court to approve
the IRU Transfer in conjunction with the Sale.

By this Motion, the Debtors seek entry of an order

(a) authorizing the Sale to Ree or such other buyer as the
Debtors propose to the Court at a hearing on this Motion (the
"Sale Hearing") that will consummate the Sale for higher and
better consideration on substantially the same terms as Ree (a
"Superior Buyer"),

(b) directing that the Shares be transferred free and clear of
liens, claims, interests (including preferences and rights to
acquire Shares) and transfer taxes, and

(c) approving the form of Stock Purchase Agreement and the IRU
Transfer and authorizing all actions necessary to effectuate the
Sale.

Bidding

Notwithstanding the Debtors' willingness to proceed with the
proposed sale to Ree now as on May 31, 2001 when the closing was
cut short on account of the filing of bankruptcy petitions, the
Debtors are willing to entertain offers from other interested
purchasers before the Sale Hearing.

Up until 4:00 p.m. Eastern time on July 5, 2001 (the "Bidding
Deadline"), the Debtors will continue to receive and consider any
other offers from qualified buyers to purchase the Panamanian
Subsidiaries under terms substantially the same as in the Stock
Purchase Agreement.

To be considered, all offers must:

(a) actually be received by Debtors' counsel, Wilmer, Cutler &
Pickering, on or before the Bidding Deadline; and

(b) be accompanied by a $100,000 earnest money deposit as
security for prospective purchasers' performance of its
obligations.

The Debtors will then present to the Court for approval at the
Sale Hearing the highest and best offer, whether it is from Ree
or a Superior Buyer.

The Debtors will attempt to deliver the Notice of Sale to all
persons who have expressed to Goldman Sachs, DrKW or the Debtors
an interest in purchasing any of the Debtors' assets in Latin
America, including the Panamanian Subsidiaries or their assets.

* * *

For similar reasons as for the proposed sale of the Chilean
Subsidiaries, the Debtors submit that there is basis for
approving the sale as requested under the Bankruptcy Code.
Accordingly, the Debtors seek an order from the Court:

(a) authorizing the Debtors to sell their Panamanian subsidiaries
free and clear of liens, claims, interests and transfer taxes to
the highest and best bidder; and

(b) approving the form of Stock Purchase Agreement and a related
IRU under transfer.

The Stock Purchase Agreement requires that closing occur on or
before July 30, 2001. Accordingly, the Debtors reserve their
rights to request that the Court eliminate the 10-day stay period
under Bankruptcy Rule 6004(g) or in the alternative, if an
objection to the Sale is filed, reduce the stay period to the
minimum amount of time needed by the objecting party to file its
appeal in order to permit the sale to close as provided under the
Agreement. (PSINet Bankruptcy News, Issue No. 4; Bankruptcy
Creditors' Service, Inc., 609/392-0900)



=======
P E R U
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ACERSA: Concludes US$22M Debt-Refinancing
-----------------------------------------
Lima-based steel tube maker Acersa, which has been hit by Peru's
sustained recession, has refinanced debts amounting to US$22
million over an eight-year term. The agreement is subject to
final documentation signing, according to general manager Atilio
Encomendero in a Business News Americas report released Monday.
Terms include credit lines to import US$2 million of rolled steel
every quarter.

Besides the recession, delays in the Camisea gas project start-up
have added to the company's woes. Acersa expanded plant capacity
some sevenfold to 250,000tpy in 1997 for US$12 million in
anticipation of the project. Acersa is now working at about 12
percent of capacity - allocating 1,500-2,000tpm to exports and
1,000tpm to the domestic market.

"As can be appreciated, our use of installed capacity is minimal,
but our goal for the next 12 months is to achieve 40,000tpy for
exports and 20,000tpy for the local market," Encomendero said.



=============
U R U G U A Y
=============

PLUNA SA: Needs Capital Injection To Avoid Bankruptcy
-----------------------------------------------------
Varig (Viacao Aerea Rio-Grandense SA) is now negotiating a US$5-
million capital injection in PLUNA SA to prevent the possible
technical bankruptcy of the Uruguayan airline due to accumulated
losses, which have severely reduced its assets, sources close to
the company said in an AFX-Europe report released Thursday.  

According to Fernando Alberti, President of the employees union
of Pluna, the company's crisis was caused by Varig's high
management costs. The Uruguayan airline has debts of US$52
million, of which US$20 million is owed to Varig, and it had a
turnover of around US$60 million in the last year. Varig
anticipated a surplus of US$8 million in its first year of
management, but posted a deficit of US$16 million instead.

The Uruguayan state holds a 48.75 percent stake in PLUNA SA,
while Varig holds 49 percent.



=================
V E N E Z U E L A
=================

DIGITEL: Negotiates Additional US$80M Loan
------------------------------------------
Telecom Italia Mobile (TIM) subsidiary Digitel, which has
recently restructured a US$200-million debt with various
international banks, is negotiating an additional loan of at
least US$80 million to complete the investment the Venezuelan
telecoms operation has planned for a two-year period, South
American Business Information reported Monday.

Digitel also has finance deals, secured through export credit
agencies, with telecoms equipment partners such as Siemens and
Nokia worth US$200 million but available only for purchasing from
said groups. Its deal with Siemens involves an immediate
availability guarantee on the latter's products, necessary since
Venezuela has not always been GSM suppliers' main priority.




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
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Psamathe P. Alfeche and Janice Mendoza, Editors.

Copyright 2001.  All rights reserved.  ISSN 1529-2746.

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