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/raid1/www/Hosts/bankrupt/TCRLA_Public/010904.mbx T R O U B L E D C O M P A N Y R E P O R T E R L A T I N A M E R I C A Tuesday, September 04, 2001, Vol. 2, Issue 172 Headlines A N T I G U A & B A R B U D A LIAT LTD.: Sends Home All But 4 Of Its Staff LIAT LTD.: Laments Drastic Employment Measures A R G E N T I N A ACINDAR: To Cut Wages By 10%; Steeling Steel Plant AEROLINEAS ARGENTINAS: Pescarmona Increases Offer CORMINE: To Publish Law Authorizing Assets Sale MUSIMUNDO SA: Files For Creditor Protection B R A Z I L CVRD: Issues Explanatory Note Regarding Recent Events TELESYSTEM INTERNATIONAL: Bondholders Accept Debt Swap Proposal TRANSBRASIL: Recovery Plan On The Way VARIG: Garnering Market Share In Argentine Recession M E X I C O GRUPO DINA: Blames Woes On Strong Peso LTV: Sets New Auction For VP Buildings Tuesday LUZ Y FUERZA: Commercial Margin Drops On High Electricity Prices NATIONAL VISION: No Comment On Recent Stock Activiity PEMEX: Companies To Face Consequences Of Signing Gas Contracts PEMEX: To Re-Launch Refinery June 2002 TANDYCRAFTS: Sells Mexican Plant To Fulfill Debt Obligations N I C A R A G U A ENITEL: Swedish Company Takes 40% Stake P A N A M A PAFCO: Workers End 10-Day Strike V E N E Z U E L A POSVEN: To Lose US$6M Due To Strike - - - - - - - - - - - - =============================== A N T I G U A & B A R B U D A =============================== LIAT LTD.: Sends Home All But 4 Of Its Staff -------------------------------------------- Beleaguered Antigua-based regional airline LIAT LTD. dismissed all but four of its staff, three senior officers and a manager, at its Barbados office, The Barbados Nation reported Thursday. The move is expected to save the debt-ridden carrier about EC$1 million a year. Caribbean Aircraft Handling Company Ltd. is set to take over operations of the 26-year-old airline for now. For the past three years, the carrier has been struggling to operate despite severe cash flow problems. The company experienced great difficulty in March 1999 in meeting its wages bill estimated at about EC$60 million month. A month before that, sources said it only had enough in its coffers to keep it afloat until April. LIAT staffers in Grenada and St Vincent were also handed termination letters last Friday. Sources said, however, the Barbados cuts would be the most substantial savings for the airline. LIAT LTD.: Laments Drastic Employment Measures ---------------------------------------------- Regional carrier LIAT, in a release issued through its public relations agent JER/Porter Novelli, expressed regret about giving out notice to its employees in Barbados, Grenada and St Vincent that they will be laid off at the end of September, The Barbados Nation said in a report. However, the company stated that it was essential the overall viability and future of the company was protected and this could only be achieved through getting the company's cost base down to a competitive level. The release stated that the airline was willing to withdraw the letters if an agreement was reached with the workers' bargaining agents on achieving certain minimal savings targets which have been identified. Agreement has been reached in Dominica and the company said negotiations were continuing in Antigua. However, according to the release, negotiations did not achieve an acceptable agreement in Barbados, Grenada and St Vincent "despite prolonged efforts" - thus the layoffs. ================= A R G E N T I N A ================= ACINDAR: To Cut Wages By 10%; Steeling Steel Plant -------------------------------------------------- Acindar Industria Argentina de Aceros SA plans to cut employee wages 10 percent beginning September until at least December 2003, according to Gustavo Pittaluga, investor relations officer, Bloomberg reported Thursday. The company expects to save $80 million a year from the pay cuts. "At the end of each six months we look at the state of our funds and if possible we will return the money," said Pittaluga about the wage cuts. Acindar, which targets the domestic auto and construction industries, needs to reduce spending as a three-year economic slump decreases sales and widens losses. The company lost $59.1 million in the quarter ended March 31, more than tripling its loss from a year earlier. Pittaluga also announced that Acindar is negotiating the sale of its steel wire manufacturing plant to Belgian wire maker Beckaert Industries. For more information on the company's latest financial statements see : http://www.bankrupt.com/misc/Acindar.pdf AEROLINEAS ARGENTINAS: Pescarmona Increases Offer ------------------------------------------------- Businessman Enrique Pescarmona has submitted a new offer for Sociedad Estatal de Participaciones Industriales unit Aerolineas Argentinas, according to a report in AFX-Europe Friday. Pescarmona has reportedly traveled to Madrid to increase its offer for the carrier, despite the opposition of his advisers. On Aug 16, SEPI shortlisted Clicknest, a consortium controlled by Pescarmona and the Asset Management group, along with three other candidates in the bidding process for its Aerolineas Argentinas unit. Recent reports indicate that Pescarmona's consortium is now thought to include a new partner, Hugo Bunge, who replaces Horacio Rosemblum. In a related report, unnamed SEPI senior sources said that SEPI's new chairman, Ignacio Ruiz-Jarabo, has decided to postpone the sale of Aerolineas until after mid-October -- that is, after the congressional elections in Argentina. CORMINE: To Publish Law Authorizing Assets Sale ----------------------------------------------- Provincial mining chief Martin Palacios last week expected the release of the law authorizing the sale of the Cormine state mineral company in the federal register equivalent, Business News Americas revealed in a report. According to Palacios, the move would pave the way for the consultant handling the process to make its presentation, including methods to sell the company's assets, to provincial authorities on September 7. Once the law is published, the consultant will evaluate Cormine's assets, basically 107 mineral properties, and prepare bidding rules for their auction. The whole process is expected to take two to three months, Palacios added. The properties include both metallic and industrial mineral deposits, all of which the province hopes to sell to the private sector so that Cormine can be closed down permanently. MUSIMUNDO SA: Files For Creditor Protection ------------------------------------------- Argentine music retailer Musimundo SA, which is controlled by the Exxel Group buyout firm, filed for creditor protection after sales dropped 50 percent and new financing dried up, Bloomberg reported Thursday. Musimundo's drop in sales, "combined with the lack of credit and high interest rates, prevents the company from meeting its short- term debt obligations," said Musimundo President Jorge De Maria. "We've been hit terribly by pirating too, which has increased with the recession." Musimundo sells compact discs, tapes and electronics equipment. The company reportedly has $195 million of debt, of which $112 million is held by a group of banks led by Citigroup Inc.'s Citibank, Banco de Galicia y Buenos Aires SA, Banco Bozano Simonsen SA, and Societe Generale. The bankruptcy filing marks the second time in less than a month that a unit of Exxel has been unable to pay its debts. With the economy in recession and borrowing rates high, even Exxel -- which raised $5.5 billion in the past 10 years from such U.S. institutions as the Ford Foundation and J.P. Morgan Chase & Co. - - finds it difficult to attract financing. =========== B R A Z I L =========== CVRD: Issues Explanatory Note Regarding Recent Events ----------------------------------------------------- Companhia Vale do Rio Doce - CVRD, in view of the contents of a press notice concerning the issuance of an opinion by the Secretary of Economic Rights indicative of supposed anti-competitive practices by the company, which charges are at once repudiated, wishes to inform the public of the following: 1. The judgment of market conduct issues is the exclusive jurisdiction of the Administrative Council for Economic Defense - CADE, which has administrative autonomy to definitively decide based on the facts brought to the suit. 2. After regular publication of the SDE opinion, CVRD will express itself in the records, especially because it is an eminently technical issue, to avoid polemics of a different nature. 3. In any event, it is necessary to immediately clarify that the company denies the inappropriate accusations contained in the SDE opinion should that opinion in fact contain the terms indicated by the press. 4. As for the declaration in the media that such an opinion could serve as an element in judging the CVRD privatization suit, the company is surprised at that reference to the extent that the issue has already been the object of a definitive decision by the competent body, which decision the public and the authorities are fully aware of since it was published in the official press. CVRD prefers to trust in respect for the constitutional principle of the incontestability of res judicata, a guarantee that is a rule of law. CVRD reiterates its ethical commitment to the laws in effect and the best practices of business conduct, firmly rejecting extemporaneous and disproven accusations on technical grounds. The company will methodically keep its shareholders and the public in general duly and clearly informed regarding this matter. For further information, contact: Roberto Castello Branco: castello@cvrd.com.br +55-21-3814-4540 Andreia Reis: andreis@cvrd.com.br +55-21-3814-4643 Barbara Geluda: geluda@cvrd.com.br +55-21-3814-4557 Daniela Tinoco: daniela@cvrd.com.br +55-21-3814-4946 TELESYSTEM INTERNATIONAL: Bondholders Accept Debt Swap Proposal --------------------------------------------------------------- Telesystem International Wireless Inc., which operates mobile- phone networks in Europe and Brazil, offered to give investors $245 million of new notes and cash in exchange for $547 million in existing bonds, Bloomberg reported Friday. According to the company, the offer, including a consent fee, is equivalent to about 45 cents on the dollar. Since the exchange won't involve any stock, it lets Chairman Sirois, the biggest shareholder, cut Telesystems's debt without having to dilute his investment firm's 18 percent stake in the Montreal-based company. Bondholders who don't participate would be stuck with securities that probably will be more difficult to sell after the exchange. "You get paid out at a discount but you have no choice," said Mike Labanowich, who holds Telesystem bonds in a C$120 million ($77.5 million) high-yield fund he runs at StrategicNova Inc. in Toronto. Under the offer, due to close Sept. 7, the bondholders will get $50 million in cash and $195 million in new, 14 percent notes due 2003 for $380 million of 13.25 percent bonds and $167 million of 10.5 percent bonds due in 2007, the offer document says. The new notes will be senior to the bonds, meaning they'll get paid out first if Telesystem goes bankrupt. Terms of the new notes don't, however, give a group of holders the right to force Telesystem into bankruptcy under certain conditions, as the bonds do. "If your bonds outstanding are going to put you out of business, you either go out of business or you take action," said Marcus Jones, a Moody's Investors Service analyst who closely-monitors the company. Telesystem made it more attractive for bondholders to tender early by offering a "consent fee" of $20 for every $1,000 in bonds pledged by Aug. 21. Several bondholders said they're backing the exchange because they fear Telesystem would default on its bonds if they refused. Fidelity Investments, the biggest U.S. mutual-fund manager, was among the top holders of Telesystem bonds as of December. Fidelity spokeswoman Sophie Launay declined to say if it plans to participate in the debt swap. Doug Knight, a fund manager at Deans Knight Capital Management in Vancouver who holds Telesystem bonds, said he would have preferred swapping for shares instead of losing more than 50 cents on the dollar and objects to the elimination of the forced- bankruptcy clause. To see company's latest financial statements: http://www.bankrupt.com/misc/Telesystem.pdf For further information, contact: Telesystem International Wireless Inc. BENOIT FORCIER Tel: 514/673-8468 E-mail: bforcier@tiw.ca OR Telesystem International Wireless Inc. MARK BOUTET Tel: 514/673-8406 e-mail: mboutet@tiw.ca OR Telesystem International Wireless Inc. ANDRE GAUTHIER Tel: 514/673-8493 Email: agauthier@tiw.ca Website: www.tiw.ca TRANSBRASIL: Recovery Plan On The Way ------------------------------------- Brazil's fourth-largest airline Transbrasil is expected to implement its turnaround plan soon, Broward Daily Business Review reported Thursday. Part of its plan is the dismissal of one-third of employees, selling and leasing back of three aircraft, and the transfer of its hub from Sao Paulo's Cumbica international airport to the domestic Congonhas airport, which is closer to the capital. Airline president Celso Cipriani believes that the move will yield operating profits within two months and cut overhead by more than one-third. Cipriani said a large concentration of Brazil's business travel clientele is located near Congonhas. The plan has been approved by Brazil's Civil Aviation Department but lacks the approval of Infraero, one of the airline's largest creditors. The airline has been losing money this year, and the company's debt is estimated at $350 million. VARIG: Garnering Market Share In Argentine Recession ---------------------------------------------------- Brazilian airline Varig is said to have benefited from the Argentine economic crisis, EFE reported August 28. According to airline executives, Varig is overtaking troubled Aerolineas Argentinas. "We are becoming a company for Argentines, who prefer Varig for traveling to destinations worldwide," Varig's manager in Argentina, Roberto de Oliveira Luiz, remarked. Aerolineas Argentinas stopped flying to international destinations in May, and Varig has become the country's leading air carrier for international flights, with 38,000 passengers monthly, up 5 percent over last year's figures. "Despite the crisis, we have a balanced operation here, with no losses," the executive added. =========== M E X I C O =========== GRUPO DINA: Blames Woes On Strong Peso -------------------------------------- Financially-strapped Mexican bus and truck manufacturer Grupo Dina, which last week decided to delist its stock from the Mexican exchange, blamed its precipitous slide on one culprit: the peso, the Financial Times reported Wednesday. Since Dina began building trucks in 1996, inflation has risen 120 percent while currency has appreciated only 20 percent, effectively squeezing profit margins to the bone. "These two factors have been completely negative for the company," said Dina chairman Gamaliel Garca. "If the exchange rate continues as it is, companies that export will either go bankrupt or close." LTV: Sets New Auction For VP Buildings Tuesday ---------------------------------------------- A new auction for LTV Corp.'s VP Buildings Inc. prefab metal division is set for Tuesday after Onex Corp., one of five losing bidders in the auction, won a stay in a U.S. Bankruptcy Court to block the proposed sale of the division to Mexico's Grupo Imsa SA de CV, The Daily Deal reported Wednesday. Onex, a Toronto private equity turn-around specialist, filed an objection to the sale before U.S. Bankruptcy Court Judge William T. Bodoh of the U.S. Bankruptcy Court for the Northern District of Ohio's Eastern Division in Youngstown, Ohio. Judge Bodoh granted Onex's request to change its bid. Shortly after Tuesday's auction, a hearing will be held, said Mark Tomasch, an LTV spokesman. The court action "has to result in a better offer for the company," he said. Judge Bodoh's decision delays LTV's plan to use the proceeds from a VP Buildings sale to repay some of the $700 million debtor-in- possession financing it received in March. LTV filed for Chapter 11 protection from creditors in the Youngstown court Dec. 29. LTV will use the proceeds from the VP Buildings sale to pay back a $50 million loan from New York's Ableco Finance llc and part of a loan from Chase Manhattan Bank. To see company's latest financial statements: http://www.bankrupt.com/misc/LTVCorp.pdf LUZ Y FUERZA: Commercial Margin Drops On High Electricity Prices ---------------------------------------------------------------- Retail electricity utility Luz y Fuerza del Centro (LFC) has seen a decline in its commercial margin, which in 2000 was only 5.1 percent, due to the high prices it is paying to state-owned power utility the Federal Electricity Commission (CFE), Mexican financial daily El Economista reported Thursday. Nearly 95 percent of the company's sales revenues of 20.128 billion pesos went toward the purchase of electricity from the CFE. According to Alfonso Caso, LFC head, the low commercial margin prevents the company from operating efficiently. NATIONAL VISION: No Comment On Recent Stock Activiity ----------------------------------------------------- National Vision, Inc. (Amex: NVI) announced Friday that there have been no material developments in its business and affairs not previously disclosed and that the Company has no comment on the recent trading activity in its common stock. National Vision, Inc. is a national retail optical company, with 503 retail stores across the U.S. and Mexico. National Vision, Inc. operates vision centers in 398 domestic Wal-Mart stores, 55 Fred Meyer stores, 30 Wal-Mart de Mexico stores and 20 stores on military bases throughout the United States. The Company emerged from Chapter 11 of the U.S. Bankruptcy Code on May 31, 2001, and its common stock began trading on the American Stock Exchange (Amex) on August 27, 2001. To see company's latest financial statements: http://www.bankrupt.com/misc/National_Vision.pdf PEMEX: Companies To Face Consequences Of Signing Gas Contracts -------------------------------------------------------------- Over 500 companies, which have signed with state-owned energy company Petroleos Mexicanos (Pemex) for natural gas at 4 dollars per million BTUs as a solution to high prices, are now suffering since gas prices have declined, Mexican financial daily El Economista reported Thursday. The predicted average price for gas in the second half of the year is 2.70 dollars, meaning companies will lose 1.30 dollars per million BTUs. In the first half of 2001, the average price of gas was 5.05 dollars per million BTUs, leading over 500 companies to sign contracts with Pemex to buy gas for over 1 dollar less per million BTUs. The 4-dollar contracts were in response to industry complaints to the federal government that the high cost of gas would drive companies out of business. PEMEX: To Re-Launch Refinery June 2002 -------------------------------------- Petroleos Mexicanos (Pemex) revealed that its Francisco I. Madero refinery is now 86-percent reconfigured and modernized, Mexican financial daily El Economista reported Thursday. The refinery would be re-launched in June next year with production expected to reach 190,000 barrels per day. This Proyecto Madero, which costs US$1.345 billion, will boost processing capacity for Maya crude. It enables more light crude to be exported and reduce petrol imports by 50,000 barrels per day. Pemex revealed that communication between the administration and the contractors forming part of the Pemopro consortium has permitted work delay problems to be resolved. The company now hopes to ensure greater Mexican participation in future tenders. TANDYCRAFTS: Sells Mexican Plant To Fulfill Debt Obligations ------------------------------------------------------------ Picture frame maker Tandycrafts, which filed for Chapter 11 bankruptcy protection in May, announced it has completed the sale of its manufacturing plant in Durango, Mexico, to International Wire Group of St. Louis for $3.7 million, the Associated Press reported Friday. The company said proceeds from the sale would be used to reduce debt. The sale, which included three buildings totaling 158,000 square feet on 27 acres, will allow the company to focus on its remaining frame-making business, according to Leo Taylor, Tandycrafts' senior president of finance. According to a Tandycrafts document filed with the U.S. Securities and Exchange Commission, the sale was approved by the U.S. Bankruptcy Court in Delaware August 21. ================= N I C A R A G U A ================= ENITEL: Swedish Company Takes 40% Stake --------------------------------------- Nicaragua's government on Friday sold its 40-percent stake in state-run telephone company to Swedish telecoms operator Telia (TLIA) in a transaction, which generated $83.1 million, Reuters said in a report. Telia was the only bidder in the auction for the stake in Enitel, though two other telecommunications companies had pre-qualified to participate. Compania de Telecomunicaciones de El Salvador and Mexico's RadioMovil Dipsa had not presented offers due to some unknown reasons. Nicaraguan President Arnoldo Aleman promised international financial organizations he would carry out sale of the telecom stake, which was postponed several times because of low bids and lack of interest. =========== P A N A M A =========== PAFCO: Workers End 10-Day Strike -------------------------------- The 3,200 employees of Puerto Armuelles Fruit Company (Pafco) have ended a 10-day strike that has cost the Chiquita Brands subsidiary $4.5 million, the Associated Press reported Thursday. According to union official Edgar Williams, employees would suggest other ways to persuade the company to reopen three plantations it closed in June, resulting in the transfer of 540 workers to other plantations. Meanhile, the Panamanian government pledged to ensure that the company respect the terms of the current contract, Williams said. However, the union is apprehensive that the transferred workers will end up overcrowding the other plantations and lead to job cuts. Also pending before the company and the union are negotiations for a new labor contract. ================= V E N E Z U E L A ================= POSVEN: To Lose US$6M Due To Strike ----------------------------------- Posven predicted a loss of US$6 million or almost 60,000t of output due to the August 27 strike, Business News Americas reported Friday. The figure corresponds only to lost output and excludes damage to reactors, which is still being evaluated. Although the strike lasted only a few hours, the union shut off temperatures in the reactors, forcing the company to stop them altogether and suspend operations for at least two weeks. "We still cannot say what the cost might be of the damage related to this act of sabotage," said company labor relations manager Oswaldo Luna. The stoppage comes at a time when a number of Venezuelan companies have decided to halt production due to low steel prices on international markets, while Posven faced some ramp-up difficulties at its plant. "The intention is to get things back to normal and improve the quality of the product, in spite of all the economic and technical problems," Luna said. Posven is majority owned by South Korea's Pohang Iron & Steel Corp (Posco) while Mexico's Hylsamex and Venezuela's state heavy industry holding CVG each have around 5 percent. 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 * * *