TCRLA_Public/010823.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

            Thursday, August 23, 2001, Vol. 2, Issue 165



AEROLINEAS ARGENTINAS: Aero Continente Maintains Interest
BANCO DE CORDOBA: Officials To Decide On Bid From BGN
FREDDO: Exxel Anxious To Unload Before Meltdown


EL MUTUN: Comibol Finalizing Qualified Banks Review This Week


CVRD: Signs Partnering Agreement With Baosteel For Iron Ore
CVRD: Sells Stake in Rio Doce Pasha Terminal
CVRD: To Invest $80M In Port Facilities
PSINET: Ceases Brazilian Operations
TRANSBRASIL: Loses One More Plane; Likely To Lose Computers
VARIG: Holds Talks With TAM Over Potential Merger


GENER: Fitch Downgrades Ratings To `BBB'; Rtg Outlook Stable


CAJACOOP: Struggles To Define Future After Restructuring


BUFETE INDUSTRIAL: Steps Up Effort To Regain Financial Health
MAXCOM: Deals With SIM's Decision Against Raising Tarriffs

     - - - - - - - - - - -


Aerolineas Argentinas shareholders' meeting held last Friday
resulted in ratification of a request for protection from
creditors, El Mundo reported Monday. However, the meeting failed
to yield a decision on the sale of the embattled airline. Gabriel
Mocho Rodriguez, from the pilot's union, finds this "troublesome"
as Aerolineas continues to lose its share in the market,
operating just 30 percent of its flights. Rodriguez related that
Judge Martin Silva Garreton ruled the owners of Aerolineas must
normalize operations. According to Rodriguez, the company is not
in compliance on this ruling.

Just recently, the Spanish state holding company SEPI, which
controls majority of Aerolineas Argentinas, announced it is
carefully studying four proposals put forward to acquire the
ailing airline.

AEROLINEAS ARGENTINAS: Aero Continente Maintains Interest
Peruvian airline Aero Continente remains interested in acquiring
Sociedad Estatal de Participaciones Industriales' (SEPI) unit
Aerolineas Argentinas, according to deputy chairperson Lupe
Zevallos Gonzalez, AFX-Europe reported Tuesday. Aero Continente's
proposal includes the assumption of Aerolineas' debt and writing
off $100 million in its assets. SEPI rejected an earlier offer
for Aerolineas from Aero Continente.

BANCO DE CORDOBA: Officials To Decide On Bid From BGN
Cordoba officials were expected to announce Tuesday whether to
accept or reject the sole bid from Argentine bank Banco General
de Negocios (BGN) for Argentina's Banco de la Provincia de
Cordoba, Business News Americas bared in a report. However,
market observers believe that Cordoba will accept BGN's bid for
the bank, which for many years has been a thorn in the side of
Cordoba's government and a drain on public finances. On July 27,
the day after the technical bids were due, BGN reportedly offered
higher than the US$118 million minimum price.

Banco Rio, Banco Galicia and Banco Suquia purchased the bidding
rules, but opted not to submit technical bids by the July 26

FREDDO: Exxel Anxious To Unload Before Meltdown
Grupo Exxel is looking to sell ice cream chain Freddo, which it
acquired three years ago for $82 million, South American Business
Information reported August 14. Freddo posted $10 million in
losses and owes $30 million to Banco de Galicia, Argentina's
largest private bank, along with amounts owed to other creditors.

Banco de Galicia will seek a buyer for Freddo. The bank has
reportedly tapped Munchis, Freddo's rival in the homemade ice
cream business, as well as Nestle and Grupo Bemberg. Freddo has
also been offered to its former owners, Luis Aversa and Juan
Guarracino, for $21 million.

Under Exxel's management, Freddo expanded to 50 stores in
Argentina and Uruguay at one point, but now it only operates 35
ice cream shops.


EL MUTUN: Comibol Finalizing Qualified Banks Review This Week
Comibol, Bolivia's state mining company, is optimistic it will be
able to complete the evaluation of banks pre-qualified for a
contract to manage the sale of its El Mutun iron ore deposit this
week, according to company spokesperson Rolando Ibanez in a
Business News Americas report Tuesday edition. Ibanez related
that the company would choose the winner by the end of the month.
The investment banks submitted bids on July 31. However, the
evaluation process has been delayed due to a drop in
international prices, sparking a social crisis in the sector.


CVRD: Signs Partnering Agreement With Baosteel For Iron Ore
According to a company press release, Companhia Vale do Rio Doce
(NYSE: RIOpr)(CVRD), signed today a series of agreements with
Shanghai Baosteel Group Corporation (Baosteel) which consists of
(i) contract for the purchase and sale of shares for the
incorporation of a mining company in Brazil, whose total capital
will be equally divided between CVRD and Baosteel and whose mines
will have a capacity to mine 8 million tons of ore per year; (ii)
shareholders' agreement to rule the relationship between the two
partners regarding the aforementioned mining company; and (iii)
commercial contract for the supply of 6 million tons per year of
iron ore by CVRD to Baosteel for a time period of 20 years.

The implementation of these contracts is subject to a variety of
prior conditions, which the parties estimate will be fulfilled
during October, 2001. Considering the long duration of the
commercial contract, the agreement represents an estimated
revenue of US$2 billion during the said 20 year period for CVRD.

The business relationship between the two companies has been
developing over the last few years. The signing of these
contracts establishes a new benchmark in the deepening of
relations between the largest mining company in Brazil and the
largest steel group of the Peoples Republic of China in a
partnership that should deepen and create new business for CVRD,
such as the combined transport for the purchase of coal and the
sale of iron ore, which will perceptibly reduce the maritime
freight cost of iron ore shipped to China.

CVRD's association with Baosteel, strengthened by the 20 year
commercial contract, demonstrates CVRD's continuing participation
in the Chinese market, consolidating its relevant position on
that market, through long term partnerships for the sale of
Brazilian high quality ore as required by the clients.

CVRD: Sells Stake in Rio Doce Pasha Terminal
Companhia Vale do Rio Doce (CVRD), through its wholly owned
subsidiary Rio Doce Limited, sold on August 17, 2001, its 50
percent stake in the total capital of Rio Doce Pasha Terminal,
L.P. (RDP). The RDP, located in the west coast of the United
States, was sold to The Pasha Group for the amount of US$ 10
million, paid at the consumation of the agreement.

CVRD: To Invest $80M In Port Facilities
CVRD revealed an $80-million investment plan for its port
facilities and rail links in the southeast state of Espirito
Santo, according to an AFX-Europe report Tuesday edition. Half of
the total planned investment will be allotted to the port
terminal of Praia Mole. The Vila Velha port terminal, where the
company intends to specialize in containerization, will received
some $15 million. About $14 million will go to rail link between
Espirito state capital Vitoria and the state of Minas Gerais and
on the Centro Atlantica rail line, with a view to increasing
grain exports. CVRD said it would also invest $4 million to
improve port facilities dedicated to the export of fertilizers
and sodium sulphate.

PSINET: Ceases Brazilian Operations
US Internet provider PSINet decided to close its Brazilian
operations Tuesday after numerous failed attempts to reach an
agreement with investors over the sale of the business, Gazeta
Mercantil Online said in a report.

"We tried to sell the operation, but we did not reach an
agreement," said PSINet Latin America chairman Philippe

PSINet, which has been operating in the country for two years,
investing a total of US$70 million to acquire 11 local access
providers, fired all its 200 local employees and notified its
3,000 corporate clients on Monday morning.

The company filed a chapter 11 petition for protection from
creditors in the US in May due to dwindling cash reserves and
rising losses.

TRANSBRASIL: Loses One More Plane; Likely To Lose Computers
Transbrasil now operates with only seven planes flying and four
more grounded after it lost a Boeing 737 belonging to the CIT
leasing company, according to a report in Valor Economico
released August 17. The plane has been grounded pending
maintenance and will be returned to the US soon. Transbrasil is
facing thirteen legal actions, nine of which are asking for the
return of planes.

In another blow to the airline, Unisys is demanding the return of
all computers, software and mainframes used by the carrier to
coordinate its passenger reservation system.

VARIG: Holds Talks With TAM Over Potential Merger
Seeking to merge with a competitor, Transportes Aereos Regionais
SA (TAM) held merger talks this month with financially-troubled
Viacao Aerea Riograndense (VARIG), Bloomberg revealed Tuesday.
The country's carriers continue to struggle trying to overturn
losses. The proposed airline that resulting from the potential
merger would carry about 30 million passengers a year, gain
ground in the neighboring Argentine market and compete against
the largest international airlines on its routes.

Brazilian airlines have suffered losses as dollar-linked jet fuel
prices have soared since 1999 and the real currency weakened 23
percent this year against the U.S. dollar.


GENER: Fitch Downgrades Ratings To `BBB'; Rtg Outlook Stable
Fitch has downgraded the foreign and local currency ratings of
AES Gener S.A. (Gener) to `BBB' from `BBB+' and removed the
ratings from Rating Watch Evolving.

The ratings of Gener were placed on Rating Watch Evolving prior
to its sale to the AES Corporation (AES), which occurred in
December 2000. Gener is rated higher than its parent, AES (Fitch
rated `BB+'), but to minimize associated credit risk the company
has developed a structure to insulate Gener's credit quality from
that of AES.

In December 2000 and January 2001, AES acquired a combined 96.5%
of Gener via purchases on the Santiago stock exchange and an
exchange of ADRs for common stock, for a total of $1.35 billion.
Following the acquisition, new management has embarked on a
strategy to primarily focus on thermal generation in Chile and
divest many of its international investments and stakes in ports
and other non-core assets. Fitch's ratings incorporate the
expectation that the company will complete the divestiture of a
majority of its non-core assets and that the company will be
primarily, if not exclusively, operating in the Chilean
electricity market.

The acquisition by AES and the sale of these non-core assets is
positive as it reduces the company's exposure to higher risk,
lower-earning investments and should allow the company to operate
more efficiently and decisively in the lower-risk Chilean
sovereign environment. The company has also reduced headcount and
is in the process of identifying additional opportunities for
efficiency improvements in accordance with AES benchmarks.
Despite these improvements, current credit protection measures
are low for the category but are expected to improve to levels
reflective of the `BBB' rating in the near term and as a result
of the announced restructuring.

Gener has an agreement to sell its Argentine investments to
TotalFinaElf for approximately $658 million. Other international
investments will likely be sold as well or transferred to other
AES-affiliated companies. The company will sell or transfer to a
related entity all of its other non-core, non-Chilean assets and
use the proceeds to upstream associated dividends to AES to help
finance its acquisition of Gener. The company has identified
approximately $566 million (book value) of non-core assets to
divest in addition to the Argentine assets expected to be sold to

Gener completed the sale of its 63.9% stake in Central Puerto to
TotalFinaElf for $255 million in August 2001. Gener expects to
complete the sale of HPDA in September and, possibly, TermoAndes
and InterAndes in November. However, it is possible that
TotalFinaElf may no longer be interested in TermoAndes and
InterAndes. Should TermoAndes and InterAndes not be sold, the
ongoing financial consolidation and operation of these assets
should not immediately result in further deterioration of Gener's

Gener has established certain mechanisms and covenants to
insulate its creditors from AES and create a stand-alone entity
from a credit perspective. The structure seeks to prevent the
transfer of assets from Gener to AES and reduce the company's
exposure to a potential US bankruptcy of AES. The ring-fencing
enhancements are positive and include:

  --  Financial covenants restricting cash distributions based on
      interest coverage test (2.4 times (x)) or confirmation that
      the company won't be downgraded below investment grade;

  --  An independent director will be given the right to vote
      approximately two-thirds of the outstanding shares of Gener
      in connection with any changes to the bylaws regarding
      financial covenants or reorganizations.

In addition to the mechanisms created by Gener, creditors of
Gener benefit from existing Chilean laws. Chilean Law limits the
consolidation of Chilean assets in the case of US shareholder
bankruptcy and also imposes personal liability of Gener officers
in protecting interest of all shareholders. Chilean courts have
exclusive jurisdiction over Chilean assets of a company domiciled
in Chile.

Credit protection measures are expected to improve over the next
year as the company is relieved of the financial burden of its
international investments and benefits from the constructive
regulatory environment and contracted sales prices in Chile.
EBITDA-to-Interest ratios, which were below 2x in 2000, are
expected to increase to above 3x by 2002, which is incorporated
into Fitch's rating.

At year-end 2000, Gener had a leveraged consolidated balance
sheet with total debt-to-capital of 54%. Gener's Colombian
subsidiary, Chivor, has a substantial ($352 million) debt
maturity in December 2001 which is expected to be refinanced with
a local bond issuance and bank debt. Following the debt
refinancing at Chivor, the asset is expected to be transferred to
an AES affiliate at fair market value. Thereafter, Gener's debt
service profile is manageable until 2005 when the company's $477
million convertible bond matures and in 2006 when the $200
million Yankee bond matures. Going forward, leverage is expected
to decline as the company sells additional non-core assets and
repays debt.

Longer term, debt levels may fluctuate to support the company's
expansion program, most immediately represented by the
development of a new combined cycle generating plant in the SIC
planned for completion by 2004-05. In general, improved projected
profitability, supported by a constructive regulatory regime,
should provide additional opportunities to improve cash flow and
reduce leverage.

Dividends will be a minimum of 30% of net income, as required by
law, unless there are asset divestitures. For example, the
company declared and paid an extraordinary dividend of $50
million in July and proposed a dividend of $161 million for
September to be funded with proceeds from the sale of the
Argentine assets.


CAJACOOP: Struggles To Define Future After Restructuring
Nearly four years have passed since Colombia's Caja Popular
Cooperativa (Cajacoop), once one of the largest entities in the
cooperative savings bank sector, operated under government-
imposed administration, South American Business Information
reported Monday. At this point, however, its future still remains
uncertain. While the company did manage to streamline operations
-- turning 120 branches in 16 Colombian `departamentos' into 50
in 3 regions while trimming down workforce from 680 to 400 -- it
has had less success with its loan portfolio. One possibility
currently under consideration is transfering (without liquidating
Cajacoop) the company's assets and portfolio to another new


BUFETE INDUSTRIAL: Steps Up Effort To Regain Financial Health
Mexican construction company Bufete Industrial has designed a
strategy it hopes will lead the company back to its former glory,
Mexican financial daily El Economista reported Tuesday. The
strategy includes restructuring $480 million of debt, which is
expected to be completed before the end of the year. Close to
$160 million will be kept as short-term debt, and $240 million
will be financed under longer terms. The strategy also calls for
signing a contract with Petroleos Mexicanos (Pemex) to build the
first private-sector petrochemical complex. According to company
sources, the company's strategy will be "to capitalize the
company with work."

MAXCOM: Deals With SIM's Decision Against Raising Tarriffs
Maxcom Telecomunicaciones, S.A. de C.V., a facilities-based
telecommunications provider, encountered disappointment when the
Sociedad Internet de Mexico (SIM) denied the possibility of
raising tariffs for Internet connection, Mexican financial daily
El Economista reported Monday. The SIM is dubious that such a
move might form a barrier to the federal government's e-Mexico
project as well as constituting a form of price-fixing.

Maxcom, along with other local-service telephone operators,
recently called for an increase in tariffs base on its claim that
internet calls were far exceeding the normal time of a local
telephone call.

Meanwhile, the e-business division of PriceWaterhouseCoopers
believes Mexico should concentrate on modernizing telephony
networks, not on raising prices.

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.

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