/raid1/www/Hosts/bankrupt/TCRLA

/raid1/www/Hosts/bankrupt/TCRLA_Public/010810.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 Friday, August 10, 2001, Vol. 2, Issue 156 Headlines A R G E N T I N A FARGO SA: Misses $1.5M Loan Payment To Deutsche Bank FARGO SA: No Longer In Talks With Bimbo On Potential Partnership B R A Z I L BANCO ECONOMICO: Statement On Control, Restructuring of COPENE CESP: S&P Affirms 'B+' Rating; Off Watch; Outlook Stable EMBRATEL: Remains In Tariff War Against Intelig VARIG: Plans To Offer New Night Flights To Restore Profitability C H I L E EL SITIO: Board Approves 1:10 Reverse Split On Common Stock STARMEDIA: Faces Possible Nasdaq De-Listing STARMEDIA: Wolf Haldenstein, et al Commences Class Action Suit E C U A D O R FILANBANCO: Ecuador To Pay Back Deposits In Govt. Bonds M E X I C O ABC-NACO INC.: 2Q01 Results; Quarterly Loss From Restructuring AHMSA: Judge Delays Sentence Against Officers GAM: Crisis Deepens After Debt Restructure Fails GRUPO DINA: Errors, Bad Admin Strategies Triggered Problems MINERA AUTLAN: To Shut Down Teziutlan Plant Permanently P A R A G U A Y PETROPAR: To Define Oil Refinery Strategy Within The Month P E R U AERO CONTINENETE: Chilean Supreme Court Appoints Special Judge V E N E Z U E L A SIVENSA: Orinoco Advances With Debt-Restructuring Talks - - - - - - - - - - - ================= A R G E N T I N A ================= FARGO SA: Misses $1.5M Loan Payment To Deutsche Bank ---------------------------------------------------- Argentina's biggest bread maker, Fargo SA, defaulted on a $1.5- million loan payment to Deutsche Bank AG, Bloomberg reported Wednesday. The bread maker, which also has $120 million of bonds due 2008, missed the payment as investors grow increasingly concerned that the Argentine government may default on $130 billion of debt or be forced to devalue the peso to pull the country out of recession. Fargo missed a payment on a $30-million loan and is now renegotiating terms, affirmed S&P, which cut the company's local and foreign-currency credit ratings to "SD," selective default, from "B-." The credit agency said it expects "the parties involved will reach an agreement in the coming weeks." Parent company Exxel said it would cover payments on its bonds but hopes to avoid making payments on the Deutsche Bank loan this year. "We are negotiating with Deutsche to reschedule the debt so that we don't have to pay anything this year," said Jorge Demaria, vice president of Exxel. "I can't imagine that any Argentine company isn't trying to reschedule its debt at the moment." Fargo, which employs about 1,500 workers, has had to cut prices by an annual average of 5 percent for each of the last two years, to cope with the recession and increased competition, S&P said. The shrinking margins have made it more difficult for Fargo to service its debt. In May, Fargo said that first-quarter net sales fell 1.7 percent to 33.8 million pesos, as packaged bread sales fell 5.5 percent. FARGO SA: No Longer In Talks With Bimbo On Potential Partnership ---------------------------------------------------------------- Negotiations on a potential partnership between Fargo, the Argentinean bread company, and Bimbo, the largest food company of Mexico, have stalled, Bloomberg said Wednesday in a report. "They're dragging their feet now," said Jorge Demaria, vice president of Exxel, Fargo's parent company. Bimbo said it's no longer in talks. The Exxel Group, presided by Juan Navarro, is being badly affected by the Argentinean recession. The Exxel acquired Fargo 4 years ago. This bread company had a turnover of US$151 million and made pre-tax profits of US$34 million in 2000. =========== B R A Z I L =========== BANCO ECONOMICO: Statement On Control, Restructuring of COPENE -------------------------------------------------------------- The following text was published by the Mariani Group and the Odebrecht Group, shareholders of COPENE - Petroquimica do Nordeste S.A. (NYSE: PNE; BOVESPA: CPNE5), in respect of the change of control of the Company described therein and the restructuring of the Brazilian petrochemical sector. COPENE - Petroquimica do Nordeste neither expresses nor implies any opinion on, or endorsement of, any of the content thereof, and reports it pursuant to this Form 6-K for information purposes only. The Mariani Group and the Odebrecht Group, through Nova Camacari Participacoes S.A., were the winners in the auction of the assets of the so called "Ativos Economico S/A Empreendimentos" ("ESAE"), carried out in the city of Sao Paulo on July 25, 2001, becoming controllers of Norquisa which, in turn, controls COPENE. BACKGROUND In order to improve the value of the ESAE Assets, the Central Bank, as Liquidator of the Banco Economico, structured a process that contemplated the sale, together with the sale of the ESAE Assets, of a block of assets, including the participations of other companies in Norquisa, thus forming the so called "Grupo Protocolo" ("Protocol Group"). It then announced two auctions for the sale of the package of participations, in December 2000 and March of 2001, both frustrated. The Odebrecht and Mariani Groups, as large investors in the Northeastern Center (Camacari and Alagoas), had a greater interest that the difficulties that inhibited the development of COPENE be overcome, and for this reason decided to contribute decisively to a solution. With this aim, the Odebrecht and Mariani Groups presented a Purchase Proposal of the so called ESAE Assets to the Central Bank, which led the Central Bank to call a third auction, which was held successfully on July 25th. THE 3RD AUCTION The 3rd Auction had as its objective the sale of 100% of the ESAE Assets for the minimum price of R$785 million. The winner of the 3rd Auction, upon buying ESAE, obligated itself to respect the following rights of joint sale ("tag along") of the remaining constituents of the Protocol Group and of the Conepar shareholders agreement: ------------------------------------------------------- Assets % Total Capital ESAE (1) 100.00 ------------------------------------------------------- Rights of Joint Sale (tag along) Intercapital (1)(2) 100.00 Conepar shares (2) 11.76 Proppet 100.00 Copene shares 0.60 Norquisa shares 13.79 Norquisa shares 13.84 ------------------------------------------------------- (1) ESAE and Intercapital hold, respectively, 56.31% and 31.92% of total Conepar capital. (2) Minimum values calculated proportionately to the ESAE value. ------------------------------------------------------- Owner Minimum Value (R$1,000) Banco Economico 785,000 ------------------------------------------------------- Nova Odequi / Pronor / CBP 444,880 BNDESPAR 183,997 Nova Odequi / Nitrocarbono 23,535 Nova Odequi 8,127 Trikem 183,604 Pronor 184,138 ------------------------------------------------------- DESCRIPTION OF THE ASSETS ACQUIRED Declared winner of the 3rd Auction and having exercised the subsequent rights of joint sale, Nova Camacari became holder of all the common shares issued by Conepar - Companhia Nordeste de Participacoes, and of Proppet S.A. Conepar holds the control (66.67% of voting capital) of Polialden Pertoquimica S.A. and an important participation of 31% in the capital of Politeno S.A. Industria e Comercio, both second generation operational companies, producers of thermoplastic resins. Trikem exercised its right of joint sale against Odebrecht Quimica, by signing a contract option for the sale of 16.03% of the voting capital of Norquisa, which will be exercised within the 120 day contractual period. Within the context of the 3rd Auction, Odebrecht Quimica acquired 23.69% of the common shares of Norquisa, held indirectly by Polialden, for R$242 million - proportionate value resulting from the exercise of the joint sale of Trikem and Pronor - thus consolidating the control of Norquisa, with the Mariani Group. The participation of the two Groups in the Norquisa voting capital is now 55.78%. Norquisa holds 58.41% of the voting capital of COPENE. Still in the context of the 3rd Auction, Nova Camacari acquired, as a result of the exercise of the joint sale, 31.92% of Conepar capital, held indirectly by the Odebrecht and Mariani Groups, and 11.76% held by BNDESPAR, now holding 100% of Conepar capital. Furthermore, by the exercise of the joint right of sale held by companies controlled by the Odebrecht and Mariani Groups, Nova Camacari acquired 100% of the capital of Proppet. With prior authorization of the Board of Administration, after the 3rd Auction, COPENE acquired Nova Camacari, assuming assets acquired in the context of the Auction - ESAE, Intercapital, direct participation of BNDESPAR in Conepar and Proppet - as well as respective loans, for the amount of R$1,417.5 million. The Development of the Petrochemical Sector The restructuring of the Northeastern Center, started with the success of the 3rd Auction, is a milestone for the development of national petrochemistry, as it will permit: - The immediate resumption of the modernization and growth of the Northeastern Center; - The reduction of its operational and fiscal costs, with the elimination of one link in the productive chain through integration of an important segment of the second generation companies of the Northeastern Center into COPENE; - Open the way for new investments, such as the expansion of the installed capacity in the production of Polyethylenes, Polypropylene, Styrene, PVC, and PET; - As a result of gains in scale, accelerate investments in technology to assure full dominion of, and capacity to develop the technologies used; - Align the interests of all COPENE shareholders and of the second generation companies related to it, under a single results center. The outcome of the process that is now beginning should be an integrated company that will exert a leadership position in the thermoplastics market, not only in Brazil, but in all Latin America. Only large companies, holders of technology and internationally competitive, will be able to survive in the global market and face the strong competition that acts within and outside our borders. Adding value to COPENE by the synergistic benefits and good corporative management practices that they impart, Petrobras Quimica S.A. - Petroquisa, and the Petros and Previ Foundations, COPENE's principal minority shareholders, have signed with the Odebrecht and Mariani Groups, Memoranda of Understanding for the execution of a COPENE Shareholders Agreement. Consequently, COPENE will be a company of a scale that will guarantee its competitiveness and vocation of a truly open capital company, that will permit access to capital markets to finance its growth. The Odebrecht and Mariani Groups undertake the following commitments before the companies and institutions that participate in the restructuring process, their shareholders, and other capital market agents: - In order to assure the absence of conflicts of interests, the petrochemical assets of the Odebrecht and Mariani Groups will be opportunely integrated into COPENE, and the operations for such will be object of broad publicity. The elimination of potential conflicts of interests was the objective of understandings with Petroquisa and the Petros and Previ Foundations, and will be implemented as soon as possible. - All the assets belonging to the Odebrecht Groups (namely Odebrecht Quimica-OPP Quimica and their participations in Trikem and Copesul), the Mariani Group (Nitrocarbono), or third parties, to be integrated into COPENE, will be the object of independent appraisal by a first line investment bank. - The resulting company will be managed by modern corporate governance principles and its managers will make every effort to rank it, as soon as possible, in the Level 1 segment of companies, as defined in Resolution 2829 of the National Monetary Council (CMN). - Going beyond the requirements of Resolution 2829 of the CMN for companies ranked in Level 2, the right of joint sale (tag along) of their respective participations, shall be assured to all COPENE shareholders of common and preferred shares, in the hypothesis of the sale of the controlling interest in COPENE. - The principles of "open books" (full disclosure), established in Resolution 2829, shall be practiced as of this moment. - Priority attention will be given to the entities that regulate capital markets and that protect free competition, such as CVM - Brazilian Securities Commission, CADE - Economic Defense Administrative Council, and the Specialized Secretariats of the Ministries of the Economy and of Justice (SAE and SDE), in order to assure the timely availability of all information necessary to evaluate and deliberate the operations that must follow this first step. - Equal attention will be rendered to the SEC - Securities Exchange Commission of the United States, where COPENE securities are already traded. CESP: S&P Affirms 'B+' Rating; Off Watch; Outlook Stable -------------------------------------------------------- Standard & Poor's--Aug. 8, 2001--Standard & Poor's on Wednesday affirmed its single-'B'-plus rating on Companhia Energetica de Sao Paulo (CESP). The rating has been removed from CreditWatch with developing implications where it was placed (concurrent with its initial rating assignment) on March 7, 2001, due to its previously expected, imminent privatization. The outlook is stable. The rating reflects the stand-alone credit profile of CESP, including the near-term financial uncertainties caused by mandated power rationing and attendant loss of revenues. In addition, CESP's rating reflects the following: -- CESP has a high nominal debt service burden. -- High foreign currency exposure, which could hurt earnings-- CESP is exposed to the fluctuating value of the real, in which it derives its earnings; however, 81% of its debt is in foreign currencies (and the company has no hedging policy in place). As a result of both the high debt load and high use of foreign currency, funds from operations interest coverage was low at 1.1 times for the fiscal year-ending Dec. 31, 2000. -- Fundamental uncertainties about the energy regulatory regime in Brazil--Current low water conditions have resulted in an energy shortage, which may result in additional financial stress for CESP, a state-owned large generator, despite the fact that the state of Sao Paulo has not asked CESP to modify its rates or undertake additional investment to help ameliorate the impact of the energy crisis. If distribution companies exercise "Annex 5" of their initial contracts, generators (including CESP) would have to pay distributors in cash for nearly 5% of their contracted energy commitments (assured energy) per an Annex 5 calculation. These weaknesses are offset by the following strengths: -- CESP's generation sources are in good condition and have strong availability rates. Prior to the energy crisis, CESP had always generated more than its designated assured energy. -- A very tight energy market meaning that, over the near term, CESP has a very strong market for its energy. Brazil, in which more than 90% of its installed capacity is hydroelectric, is experiencing a low-water year. -- CESP participates in a risk-sharing mechanism (relocation of energy mechanism-MRE) with all the other hydro plants in the nation to minimize the risk of poor hydro conditions occurring in any one hydrological basin. All of CESP's generating plants are hydroelectric, and four stations generating 98% of CESP's energy are located either within or near the Parana River. While this mechanism has worked well in the past, transmission interconnections are insufficient to import energy to the southeast region, which is facing a severe water shortage. Currently, CESP provides power to the greater Sao Paulo metropolitan area through its sales to four distribution companies. Growth in electricity demand is high, as the city and its environs continue to industrialize. In a liberalized market, CESP will sell power to the entire south-southeastern market of Brazil, which is still the most developed and rapidly growing area in the country. OUTLOOK: STABLE The outlook reflects the indefinite postponement of privatization by CESP's 74% owner (53% economic interest), the state of Sao Paulo, as a result of Brazil's energy crisis. It also reflects concerns regarding CESP's financial health due to current rationing, and a potential continuation of rationing in 2002. In addition, the weakening of the real further exacerbates CESP's ability to service debt. However, Standard & Poor's expects a reasonable resolution of the implementation of Annex 5, and potential easing of stringent rationing requirements in 2002 given interregional transmission upgrades, emergency power additions, and hopefully, a return to normal rainfall. As initial contracts expire, beginning in 2003, they will be replaced with free market contracts and/or spot market sales expected to be at more favorable rates. EMBRATEL: Remains In Tariff War Against Intelig ----------------------------------------------- Embratel reduced the price of calls to the United Kingdom and Japan to R$0.07, while Intelig slashed to R$0.06 per minute to the same countries. The two phone services carriers continue in their war over tariffs, Jornal do Commercio reported Tuesday. The countries were chosen as they represent 10 percent of the overall international calls in Brazil. Embratel controls almost 90 percent of the domestic international calls market, estimated at R$1 billion per year. The company has been posting losses for two quarters prompting Worldcom, the company which acquired it in 1998, to exclude it from its consolidated balance sheets. VARIG: Plans To Offer New Night Flights To Restore Profitability ---------------------------------------------------------------- In a bid to boost its profitability, Brazilian air transportation company Varig is intending to offer new night flights, Gazeta Mercantil reported Tuesday. Varig has been hit by a drop in both domestic and international air travel in Brazil this year, as well as a significant decline in the local currency and higher interest rates and jet fuel costs. Although the company is attempting to cut costs, results beyond those already realized in a similar restructuring effort in 1999 may be difficult to achieve. Varig's management has completed a refinancing of some short-term debt and may derive some additional relief from the sale of a stake in its cargo transport business, but financial flexibility nonetheless remains limited. ========= C H I L E ========= EL SITIO: Board Approves 1:10 Reverse Split On Common Stock ----------------------------------------------------------- El Sitio, Inc. (Nasdaq: LCTO) announced Wednesday that its Board of Directors has approved a 1-for-10 reverse share split for its common shares. The split will be effective on August 22, 2001. Shareholder approval of the split is not required. The reverse share split is being undertaken in an effort to enable El Sitio to comply with the minimum share price requirements of The Nasdaq National Market and to preserve the listing of El Sitio's common shares. El Sitio expects to receive a delisting notice from the Nasdaq next week because the minimum bid price for its common shares has continued to be below the required $1.00 per share. However, prior to actual delisting, El Sitio understands that it will have an opportunity to appeal and anticipates that the reverse share split will bring its common shares back into compliance with Nasdaq's bid price requirements. As previously disclosed, El Sitio has signed a definitive agreement to merge with Ibero American Media Partners, a combination that will form Claxson Interactive Group. The merger will be completed on the basis of the number of El Sitio common shares outstanding after the reverse share split, which will not change the percentage ownership interest in Claxson to be held by El Sitio's shareholders. STARMEDIA: Faces Possible Nasdaq De-Listing ------------------------------------------- Michael Simpson, an analyst at Lehman Brothers, Inc., slashed his prediction for StarMedia Network Inc.'s share price by three quarters, Bloomberg reported Wednesday. If the stock reaches his forecast, the Internet company will still face possible de- listing by the Nasdaq Stock Market. Simpson expects StarMedia shares to rise to 80 cents in the next 12 months, down from his previous forecast of $3. Nasdaq-traded companies, whose shares fall below $1 for 30 consecutive days, receive a notice from the market that they will be de-listed unless the stock rebounds in the next 90 days. Unless StarMedia gets a buyer, a cash infusion, or has a significant recovery in its business, there's little chance the shares will rise above $1 soon, Simpson said. That means the stock may soon trade through the over-the-counter market, in the so-called "pink sheets". "What's kept this stock in the market is the retail investor," Simpson said. "If they go to the pink sheets, even the (individual investors) are going to cut their losses." StarMedia said it was being hurt by the economic crisis in Argentina, the economic slowdown in the United States, and the slump in advertising spending. It said it was unlikely to achieve its goal of breaking even in the fourth quarter. STARMEDIA: Wolf Haldenstein, et al Commences Class Action Suit -------------------------------------------------------------- Wolf Haldenstein Adler Freeman & Herz LLP has filed a class action lawsuit in the United States District Court for the Southern District of New York, on behalf of purchasers of StarMedia Network, Inc. ("StarMedia" or the "Company") (Nasdaq: STRM) securities between May 25, 1999 and December 6, 2000, inclusive, against defendants StarMedia, certain of its officers and directors, and its underwriters. The complaint alleges that defendants violated the federal securities laws by issuing and selling StarMedia common stock pursuant to the May 25, 1999 IPO without disclosing to investors that some of the underwriters in the offering, including the lead underwriters, had solicited and received excessive and undisclosed commissions from certain investors. Specifically, the complaint alleges that in exchange for the excessive commissions, defendants allocated StarMedia shares to customers at the IPO price. To receive the allocations (i.e., the ability to purchase shares) at the IPO price, the underwriters' brokerage customers had to agree to purchase additional shares in the aftermarket at progressively higher prices. The requirement that customers make additional purchases at progressively higher prices as the price of StarMedia stock rocketed upward (a practice known on Wall Street as "laddering") was intended to (and did) drive StarMedia's share price up to artificially high levels. This artificial price inflation enabled both the underwriters and their customers to reap enormous profits by buying stock at the IPO price and then selling it later for a profit at inflated aftermarket prices. ============= E C U A D O R ============= FILANBANCO: Ecuador To Pay Back Deposits In Govt. Bonds ------------------------------------------------------- Ecuador will pay back in government bonds deposits over $10,000 held at Filanbanco SA, which it closed last month after operations became unsustainable due to growing losses and overdue loans, according to a report Wednesday in Bloomberg. Finance Minister Jorge Gallardo disclosed that deposits of more than $10,000, which total $199 million, will be placed in a trust fund. Of that, $155 million will be backed by government bonds and the remaining $44 million by other assets of the bank. Gallardo, however, warned that depositors would not receive their funds immediately. =========== M E X I C O =========== ABC-NACO INC.: 2Q01 Results; Quarterly Loss From Restructuring -------------------------------------------------------------- ABC-NACO Inc. (ABCR) announced Wednesday its financial results for the 2nd quarter and six months ended June 30, 2001. For the second quarter of 2001, ABC-NACO reported a net loss of $24.5 million, or $1.27 per share, which includes a significant restructuring charge. This compares to net income of $0.2 million in the prior year quarter. Net sales from continuing operations for the quarter declined 27.5% from the prior year quarter to $97.4 million, primarily due to the significantly lower level of new freight car building in North America. The loss from operations of continuing businesses in the 2nd quarter was $20.7 million compared to operating income of $3.3 million in the prior year quarter. The following factors are the major reasons for the significant decline in profitability between the two quarters: -- A $36.9 million decrease in sales -- Lower selling prices due to competitive pressures and product mix -- The $9.2 million of restructuring costs recorded in this year's second quarter for the downsizing of the Company's cost structure -- The cost of maintaining idled facilities -- The labor work stoppage at the Sahagun, Mexico facility Offsetting these negative factors was a favorable change in selling, general and administrative costs of $2.7 million. EBITDA was a negative $12.7 million for the 2nd quarter. Included, however, were approximately $12.0 million of costs associated with the restructuring charge, idled facilities and the Sahagun work stoppage. Debt was reduced by $17.8 million in the 2nd quarter and $31.0 million in the first six months of 2001. Sales for the Company's Rail Products Group, which sells primarily to the new freight car and locomotive markets, were lower than the prior year quarter by $31.3 million, or 43.9%, and accounted for almost 85% of the quarter's total net sales decrease. The sales decline is due in large part to the significantly lower level of new freight cars and locomotives being built and the Company's decision during the 1st quarter of 2001 to indefinitely idle its wheel manufacturing plant in Calera, Alabama. The previously announced labor work stoppage at the Sahagun, Mexico plant, which started on May 30, 2001 and is continuing, resulted in lower sales of approximately $3.0 million. Revenues of the Rail Services Group, which sells wheel mounting services and other railcar repair and maintenance products, were lower by $5.6 million, or 14.6%, from the prior year quarter due primarily to lower sales of wheelsets to manufacturers of new freight cars. The Track Products Group's sales were lower by $3.2 million, or 10.9%, from the prior year quarter primarily due to lower volumes of track repair activity. A further reason for the decline in sales was the sale of the Company's former Rail Systems Division in the 1st quarter of 2001, which had sales of $5.1 million in the 2nd quarter of the prior year. Vaughn W. Makary, President and CEO of ABC-NACO stated, "Recently, we have completed a significant financial restructuring, reduced debt by $31.0 million, closed, idled, or sold eleven facilities, and reduced over 30% our salaried employees. Unfortunately, ABC-NACO has been suffering from the same severe, market downturn as many of our customers and other suppliers in the rail industry. Recently released statistics have shown that the 2nd quarter was the worst quarter for order input (3,460 freights cars) in over 10 years and the worst for new car deliveries (9,056 freight cars) in nearly 10 years. To put this downturn in perspective, total new car deliveries for the calendar years 2000, 1999 and 1998 were 55,791, 74,222 and 75,686, respectively." The gross profit from continuing operations for the 2nd quarter was a loss of $1.3 million compared to a profit of $16.8 million in the same quarter of the prior year. The results for this quarter were dramatically affected by the lower sales described previously and the competitive pressure upon selling prices and the margin on a number of the Company's products. In addition, the low order volume and the results of inventory reductions did not allow the Company to absorb all of its fixed costs. Another factor is that the current order product mix is comprised of a lower percentage of the higher margin items than in the prior year quarter. The Company has closed or temporary idled a number of facilities in order to reduce costs. The cost of maintaining idled facilities (amounting to approximately $3.0 million of cost of goods sold in the 2nd quarter) is substantially less, in aggregate, than operating all facilities at low sales levels. In addition, the work stoppage at the Sahagun, Mexico facility had a negative effect on gross profit of about $1.5 million for the quarter due to lower sales, unabsorbed fixed costs and the costs to relocate production. Selling, general and administrative expenses from continuing operations were $10.8 million compared to $13.5 million in the prior year quarter. The decrease of $2.7 million, or 19.7%, was a result of a significant reduction in personnel leading to decreased payroll and related costs plus a sizeable reduction in other controllable expenses. Somewhat offsetting this achievement were approximately $0.6 million of costs for consultants, advisors and others involved in the financing transactions that were completed in this quarter. Interest expense and amortization of deferred financing costs were $7.7 million in the 2nd quarter of 2001 compared to $6.4 million in the prior year quarter. The increase of $1.3 million was largely due to the costs associated with the new and revised financing facilities resulting from transactions completed during the 2nd quarter. The Company sold its Flow and Specialty Products business on May 2, 2001 for an after tax gain of $1.9 million. For the one month period prior to the sale, the business recorded income, after taxes, of $0.1 million compared to $1.6 million for the full quarter of the prior year. The 2001 income tax benefit reported for continuing operations represents the offset to the income tax provision associated with the discontinued operation. The Company continues to meet its obligations by managing the collection of its receivables, reducing inventory levels, significantly reducing capital expenditures and reducing controllable operating expenses as there is a limited amount of unused availability under the Company's primary credit agreement at this point in time. In light of the weak rail market, management is exploring alternatives, which include, among others, one or more transactions of a financing or operating nature or a sale of assets in a further attempt to reduce debt and/or to provide additional cash resources. However, there can be no assurances that any of these alternatives will be successful. The Company is in compliance with the financial covenants under its U.S. senior bank credit agreement at the end of the 2nd quarter. Additionally, pursuant to a 2nd quarter amendment, all financial covenants under its $75 million subordinated notes agreements have been eliminated until 2002. Nonetheless, this debt is reflected in the financial statements as a current liability due to the difficult market conditions facing the Company and their resulting impact on recent and future near term operating results and on loan compliance. Mr. Makary commented, "Rail supply is a cyclical industry and it can turn upward as rapidly as it has slid into today's depressed condition. Our primary emphasis at ABC-NACO is to manage our costs and to focus on maximizing our product and service offerings to our customers. We sincerely appreciate the efforts of our dedicated employees and the loyalty and support of our many fine customers and suppliers. We believe our people, products, services, technology and manufacturing processes are unsurpassed and there is significant long-term value in our businesses." ABC-NACO is one of the world's leading suppliers of technologically advanced products to the rail industry. With four technology centers around the world, ABC-NACO holds pre-eminent market positions in the design, engineering and manufacture of high-performance freight car, locomotive and passenger suspension and coupling systems, wheels and mounted wheel sets. The Company also supplies railroad and transit infrastructure products and services and technology-driven specialty track products. It has offices and facilities in the United States, Canada, Mexico, Scotland, Portugal and China. AHMSA: Judge Delays Sentence Against Officers --------------------------------------------- A Monterrey judge temporarily postponed an August 2 jail sentence against Grupo Acerero del Norte (GAN) executives, President Xavier Autrey and Vice President of Finance Jorge Ancira, Mexico City daily Reforma reported Wednesday. The sentence against the said officers was suspended due to a complaint by the company that the evidence presented to the previous judge was inadequate, according to GAN's legal representative, Fernando Gomez. On July 16, Banco de Bajio brought a penal suit against GAN and the executives, accusing them of misrepresenting information in order to gain a credit of $8.5 million, destined for company Agronitrogenados. GAN is a holding company for Altos Hornos de Mexico (AHMSA). GAM: Crisis Deepens After Debt Restructure Fails ------------------------------------------------ Mexico's second leading producer of sugar Grupo Azucarero Mexico (GAM) failed to restructure a US$145-million debt, which 15 months ago, obliged it to declare a suspension of payments, El Financiero reported Tuesday. The company posted net losses of 133.2 million pesos in the first quarter of this year, far worse than the 55.6-million net loss posted in the same period last year. GAM received total credit of 84.3 million pesos for repayment of cane supplies from Focam, which matured in May 2001. The company has registered advance sales of 66.5 million pesos for sugar and honey produce. GAM's debt of US$145 million, is divided among Bancomext with US$40 million, Inverlat with US$10 million, FIRA with US$12 million, the extinct Fina body with US$4 million, US bondholders with US$70 million, and other small financing operations with US$5 million. Bancomext rejected a restructuring proposal in July 2000. GRUPO DINA: Errors, Bad Admin Strategies Triggered Problems ----------------------------------------------------------- Javier Jimenez, an analyst at Bursametrica, said that aside from the financial environment, which has been the main factor in Grupo Dina's collapse, errors and bad administrative strategies also triggered crisis at the company, Mexico City daily Reforma revealed Wednesday. These errors resulted in the company's inability to respond with the speed necessary to avoid the company's current problems, Jimenez said. "Decisions were taken on impulse and with little provision. Dina suffered from the Mexican economic crisis and all that resulted from it, but also lacked flexibility to modify its plans before everything broke up," he said. Dina has announced plans, which are yet to be ratified at an extraordinary shareholders meeting, to close its truck assembly plants, the largest component of the company's business. MINERA AUTLAN: To Shut Down Teziutlan Plant Permanently ------------------------------------------------------- Due to the low demand brought about by the slump in the U.S. economy, mining company Minera Autlan will be closing its Teziutlan plant permanently, Mexico City daily El Universal revealed Wednesday in a report. Consequently, 200 unionized employees will be put out of work. Management will meet with union leaders in the next few days to guarantee employees their severance pay. According to Autlan President Fernando Rivero Larrea, the plant's machinery and ovens will be transferred to the company's Tampico plant. The Teziutlan plant had been in a production freeze since May 1, Rivero disclosed. =============== P A R A G U A Y =============== PETROPAR: To Define Oil Refinery Strategy Within The Month ---------------------------------------------------------- Petropar and the Paraguayan government will define within the next 30 days a strategy for the Vila Elisa oil refinery, which itlans close down after having generated annual losses of US$4 billion, Diario ABC reported August 3, 2001. Petropar has shrugged off the idea of investing in a new refinery, which would have to be built by private investors only. Early this month, Petropar President Genaro Ramon Burro announced that the oil company is officially bankrupt. The company generated losses totaling US$33 million after the state obligated it to sell gasoil at subsidized prices last year leading to its current financial state. ======= P E R U ======= AERO CONTINENETE: Chilean Supreme Court Appoints Special Judge -------------------------------------------------------------- The Supreme Court of Chile appointed a special judge to handle the case of Peruvian airline Aero Continente, EFE reported Wednesday. The Peruvian carrier has been indicted for money laundering. According to officials, although no party had requested it, the Supreme Court justices intervened due to public outcry the case has generated. Judge Victor Montiglio Rezzio of the Santiago Court of Appeals will replace Judge Juan Carlos Urrutia, who had presided over the case since issuing an indictment against the firm based on a complaint filed by the Attorney General's Office. Aero Continente denies the charges, alleging that the case is merely a ruse to take it out of the air-transportation market, and has filed a $1 billion suit against the Chilean government. ================= V E N E Z U E L A ================= SIVENSA: Orinoco Advances With Debt-Restructuring Talks ------------------------------------------------------- Alberto Hassan, president of the Venezuelan hot-briquette iron maker Orinoco Iron, announced that debt restructuring talks between the company and its lenders "are making good headway," Business News Americas reported Wednesday. Puerto Ordaz-based Orinoco Iron is a 50:50 joint venture between the IBH division of Caracas-based iron and steel company Sivensa and Australian mineral house BHP. The company is operating only one of its four production lines because to enter the market with additional capacity "will not benefit prices of the product on the international market," he said. Orinco is conserving cash flow and the line is operating at below its 550,000tpy capacity to avoid unnecessary technical costs. All of its production is sold with closed contracts. "We sell very little on the local market, almost 99% is exported," Hassan said. Orinoco has never operated near its 2.2Mtpy capacity rate due to technical problems since starting-up more than a year ago. It defaulted on a US$16.3 million interest payment earlier this year and BHP has said it will not put any more money into the venture and is prepared to write off an estimated US$410 million. 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 and Edem Psamathe P. Alfeche, 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 * * *