TCRLA_Public/010906.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, September 06, 2001, Vol. 2, Issue 174



BANCO DE BALCARCE: Irregularities Discovered, Ops Suspended
FREDDO: Largest Creditor Likely To Become Owner


CONSTRAN: To Make Late Payment On Eurobond Interest Sept. 10
CVRD: Porto Estrela Power Plant Now Operational
DAIMLERCHRYSLER: Quits Southern Brazilian Operations
INEPAR: Inks New Accord With Debenture Holders
TRANSBRASIL: Turnaround Plan Came Too Late, Analysts Said


ELECTROCOSTA/ELECTRICARIBE: Fenosa Committed Despite Problems


DOMINICANA AIRLINE: Aeropostal To Operate State Airline


CINTRA: Stalled Privatization Has Negative Impact On Aeromexico
IASA: Volkswagen Strike Forces Land Sales To Make Payments
LANCER ORTHODONTICS: Announces YE Results, Reorganizing Plant
LTV CORP.: U.S. Court Approves VP Buildings Sale


ENITEL: Legal Challenges Won't Reverse Privatization


AEROPERU: Peru Sues Aeromexico For Fraudulent Mismanagement

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BANCO DE BALCARCE: Irregularities Discovered, Ops Suspended
The operations of Banco de Balcarce SA were suspended late
Monday. At the end of last year, the Argentinean bank had assets
totaling 48.7 million pesos and deposits of 22.9 million pesos,
the central bank revealed in an AFX-Europe report. In a
statement, the central bank said that the closure followed the
"detection of irregularities, whose responsibility was
acknowledged by the chairman of the board."

Law court intervention in Banco de Balcarce's management has been
requested and penal charges filed. Deposits will be refunded
starting Sept 10, either through transfers to other financial
institutions or with funds from the bank deposit guarantee fund
SEDESA, the central bank added.

FREDDO: Largest Creditor Likely To Become Owner
Sources in the financial sector predicted that Banco Galicia,
Argentina's largest private bank, is likely to become the new
owner of the Freddo ice cream shops chain, La Nacion reported
Friday. Freddo, which posted $10 million in losses, owes $30
million to Banco Galicia in addition to amounts owed to other

Banco Galicia was in charge of the company's sale but was
unsuccessful in finding a buyer. The bank does not own Freddo
yet, but its transfer will be decided soon.

Rumors continue to circulate in the market that Grupo Exxel,
which acquired Freddo three years ago for $82 million, intends to
sell it back to its founder-owners, Luis Aversa and Juan
Guarracino, for $21 million. Under the group's management, Freddo
expanded to 50 stores in Argentina and Uruguay at one point, but
it currently only operates 35 locations.


CONSTRAN: To Make Late Payment On Eurobond Interest Sept. 10
Brazilian construction company Constran SA will either collect
debts owed to it or raise cash from the related units of its
founder and guarantor in order to make a $2.3 million Eurobond
interest late payment on September 10, Bloomberg reported
Tuesday. Constran missed an 8.46 percent semi-annual interest
payment due Aug. 26 on $62 million of bonds, revealed Poshio
Shibuya. Mr. Shibuya was hired by Grupo Itamarati, the
controlling entity of Constran, to help organize the group's

"This is a temporary problem caused by the currency's decline,
and I plan to use my full grace period," Shibuya said. "We have
the cash, and will pay." Paying on time was complicated by the
need to pay employees and suppliers and maintain operations,
Shibuya said.

Constran has a grace period on the coupon payment until Sept. 10.
The sale of sugar on the futures market and the collection of
payments for completed construction work are seen as the possible
sources of cash.

The five-year bonds -- which pay an increasingly higher interest
as they come closer to their 2003 maturity, are guaranteed by
Olacyr Francisco de Moraes, 70, the Itamarati group's founder.
The bonds are secured by shares of Ferronorte, a Brazilian
railroad in which Itamarati now has a 16 percent stake.

The value of the railroad shares in escrow, though, is now less
than 90 percent of the total debt and Constran has failed to
deposit new guarantees, according to a note posted on the
Euroclear system from a unit of J.P. Morgan Chase & Co., the
bond's trustee.

The shares are worth more than the trustee suggests and believes
the issue of the security will be resolved shortly, Shibuya said.

"We don't agree with their interpretation, and don't believe this
will put us in default," he said. If the security issue isn't
resolved, bondholders might be able to demand immediate repayment
of the bond, the trustee said in the Euroclear note.

According to Ricardo Simone, head of debt capital markets at
Banco Cidade in Sao Paulo, the bonds on which payment was missed
were themselves sold to restructure previous Constran debt as De
Moraes reorganized his holdings.

CVRD: Porto Estrela Power Plant Now Operational
Companhia Vale do Rio Doce (NYSE: RIOpr - news; CVRD) announced
Tuesday that Porto Estrela Hydroeletric Power Plant has begun

The plant, with an installed capacity of 112 MW, is located on
the Santo Antonio river, state of Minas Gerais, Brazil. CVRD owns
33.33% of the plant, and its energy take is being dedicated to
supplying the needs of the Tubarao Complex, state of Espirito
Santo, Brazil. CVRD's investment in the project is estimated to
be US$19.5 million.

DAIMLERCHRYSLER: Quits Southern Brazilian Operations
The Daimler Chrysler group will close its plant in the southern
Brazilian state of Parana as part of its $4 billion turnaround
plan, which included 26,000 job cuts worldwide, Reuters reported
Tuesday. The initial decision to suspend production at the Campo
Largo plant, which was built under a government subsidy program,
was made in January.

"What was studied was whether it would return (to operation) or
not, and the decision was it would not," a company spokesman said
in Sao Paulo, adding that the firm would release more details on
the shutdown later.

Daimler Chrysler's director for South America, Ben van Schaik,
has already advised Parana Gov. Jaime Lerner of the imminent
closure of the company's plant. Consequently, 250 workers, who
were employed on a temporary basis since April, when production
was halted on the Dakota pickup truck, will be dismissed.

INEPAR: Inks New Accord With Debenture Holders
Inepar group said it has struck a new deal with its
debentureholders who were waiting for the redemption of R$8.6
million that should have been paid in February. The payment was a
result of the second issuance portion of R$35 million made in
1996, Gazeta Mercantil reported Monday. The largest creditors,
which include Santander, BB Distribuidora de Titulos e Valores
Mobiliarios, Fator and BNDES (Banco Nacional de Desenvolvimento
Economico e Social), accepted the payment in four installments.
Inepar said it would advance the settlement of R$8.6 million if
it concludes the new issuance of R$270 million in financing.

TRANSBRASIL: Turnaround Plan Came Too Late, Analysts Said
A wide-range restructuring plan put forth by Brazil's fourth-
largest airline Transbrasil is a step in the right direction, but
one that should have been made ages ago, according to analysts,
Reuters said in a report.

"I think it's an interesting development, but whether it will be
too late or not is another matter," said Mauricio Levi, an
analyst at airline specialists Fama Investimentos.

Just recently, the heavily indebted struggling airline announced
a turnaround plan that will see 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

According to Transbrasil President Antonio Celso Cipriani, the
plan would allow the company, which has reportedly had trouble
paying its staff and covering jet leasing costs, to post
operating profits in less than two months.

"Firing a third of employees is very painful but they obviously
are doing what they have to survive," said Robert Booth of Miami-
based Aviation Management Services consultancy.

But while Transbrasil's plan showed the airline was finally doing
what it could to get out from under its $350 million debt load,
analysts warned the move was overdue.

"In terms of cost-cutting, it's a good move," Levi said. "But
they should have made the move one year or a year and a half


ELECTROCOSTA/ELECTRICARIBE: Fenosa Committed Despite Problems
Spanish power company Union Fenosa is not walking out on
Colombian distributors Electrocosta and Electricaribe, according
to an unnamed Fenosa source, Business News Americas reported
Tuesday. The announcement came in response to recent market
rumors that the Spanish company would simply hand the companies
back to the government and walk away from a bad deal because of
the extensive problems it has encountered at the two Caribbean
coast distributors.

"The problems we have had with these two distributors is not a
reason to abandon them or think about divesting in Colombia,
especially now the first steps on the road to solving the
problems have been taken," the source said.

Electrocosta and Electricaribe face massive losses for non-
payment of consumers' subsidies by the government, non-payment by
local and departmental authorities and thousands of illegal
connections in land invasions. According to the distributors,
these losses add up to more than US$280 million, or some US$35
million per month in the eight months that Fenosa has owned the

"There have been numerous meetings between representatives from
both distributors, national authorities, departments,
municipalities and regulatory bodies, in which we are negotiating
and seeking solutions to the problems," the source said. Fenosa
is placing its hopes in new regulations the Colombian government
is due to announce in September.


DOMINICANA AIRLINE: Aeropostal To Operate State Airline
The Venezuelan airline Aeropostal emerged as the successful
winner in the tender to operate Dominicana Airline (CDA), the
Dominican state airline that has been grounded for over 10 years,
DR1 Daily News reported Tuesday. Aeropostal reportedly plans to
invest US$10.6 million and make available for Dominicana three
DC9-31s with capacity for 112 passengers each.

According to Ronny Pineda, the regional manager for Aeropostal
based in Santo Domingo, they expect to fly from Las Americas,
Puerto Plata, La Romana, and Punta Cana airports to points in
Latin America, the Caribbean, Europe, the United States and Asia.
Aeropostal reportedly had billings of US$207 million last year
and carried over 2 million passengers. This year the company has
plans to expand its services to Cancun, Mexico City and Madrid.


CINTRA: Stalled Privatization Has Negative Impact On Aeromexico
The much-delayed privatization of state holding company Cintra
has brought unfavorable effects to Aeromexico, one of the two
airlines it controls, El Financiero reported Monday.

Aeromexico has had its tariffs reduced and passengers numbers are
down. To counter these challenges, it is now offering new
products and services as well as aiming to renew its fleet of 70
planes (most leased) once its future is assured. This year, the
company has retired three DC-9s and taken on three McDonnel-
Douglas planes of an average age of 11, compared to 30 in the
case of the DCs. Aeromexico is also launching the new Mexico
City-Monterrey route as a shuttle service. In addition to the
recent changes, Aeromexico has invested on airport improvements
in Mexico City (US$5 million) and Monterrey, Tijuana and
Guadalajara (another US$5 million).

The Mexican carrier received US$10 million in 2000 from Internet
sales. It recently started up a code-shared flight with Alitalia
on the route Mexico City-New York-Rome.

IASA: Volkswagen Strike Forces Land Sales To Make Payments
The strike at Volkswagen AG's plant is forcing Mexican auto-parts
maker Industria Automotriz SA (Iasa) to sell land in order to
raise cash, which will be used to pay debts over the next year,
Bloomberg reported Tuesday. Iasa Finance Director Juan Antonio
Trevino announced that the company would seek noteholders'
approval at a meeting on Monday to sell the land for 13.5 million
pesos ($1.5 million).

The Volkswagen strike "affected us deeply," Trevino said.

Last year, Volkswagen accounted for 54 percent of Iasa's 473
million pesos in sales.

Iasa's cash crunch should be lifted once the Volkswagen strike is
resolved, Trevino said.

"Right now, the land is the only asset being prepared" for sale,
according to the executive. The property was used as a guarantee
for the debt, which requires noteholders to approve the sale. The
company already has a buyer for the land, but declined to say who
it is.

Iasa has paid 60 million pesos of the 140 million in notes,
Trevino said. The company's last payment on the debt is due on
December 2004. The sale of the land will cover amortizations of
about 3.4 million pesos over the next four quarters beginning
this month, he said.

LANCER ORTHODONTICS: Announces YE Results, Reorganizing Plant
Lancer Orthodontics, Inc. (OTC Bulletin Board: LANZ) announced
Friday that its fiscal year ended May 31, 2001 was a turnaround
year for the Company. In addition to reporting an increase in net
sales in 2001 and profitability for the last two quarters of the
fiscal year, Lancer also announced it has initiated a number of
programs designed to increase sales and lower costs.

Lancer reported a loss of $116,859 in fiscal 2001, vs. a loss of
$296,985 in fiscal 2000. Net sales increased $277,091, or 5%, in
fiscal 2001 over fiscal 2000. Net sales for fiscal year 2001 were
$5,927,603, compared to $5,650,512 in 2000. Led by strong sales
in Europe, international net sales increased $391,485, or 16%,
from $2,517,780 in 2000 to $2,909,265 in 2001. Lancer's domestic
net sales decreased $114,394, or 4%, from $3,132,732 in 2000 to
$3,018,338 in 2001.

"Our domestic sales were somewhat hampered as the reorganization
efforts in the southeast region we put into place in fiscal year
2000 got off to a slower than expected start," said Doug Miller,
Lancer's President & COO. "However, in the first two months of
fiscal year 2002, sales in the southeast region are up 25% over
the same period in the prior year," Miller said.

Despite the year's loss, the 4th and 3rd quarters for fiscal 2001
showed net income of $34,894 and $19,854, respectively. Lancer
also reported that it has put into place several programs that
are expected to lower costs and increase sales. These programs
include the reorganization of the Mexico manufacturing plant in
to a wholly owned subsidiary, called Lancer de Mexico, that is
expected to enable the Company to expand its business
relationships with countries that have favorable trade agreements
with Mexico, and expansion of the U.S. headquarters sales

Lancer Orthodontics (OTC Bulletin Board: LANZ) develops,
manufactures and markets state-of-the-art orthodontic products
such as bands, brackets and buccal tubes worldwide.

LTV CORP.: U.S. Court Approves VP Buildings Sale
The U.S. Bankruptcy Court granted the U.S.-based LTV Corp.'s sale
of its metal building unit to Mexican steelmaker Grupo Imsa,
according to Bloomberg in a report released Tuesday. The court
approved a transaction, which involved the sale of LTV Corp.'s VP
Buildings Inc. to Imsa for an amount of $102 million. VP
Buildings operates 11 plants in North America and has stakes in
three joint ventures in Latin America. The company had sales of
$400 million last year and employs 2,300 people. LTV filed for
bankruptcy protection last year in December after posting losses
over the past two years because of slumping prices and increased
foreign competition.


ENITEL: Legal Challenges Won't Reverse Privatization
Swedish telecommunications operator Telia, which led a consortium
that successfully bid for 40 percent of Nicaragua's state-owned
telephone company, said that legal challenges would not annul the
$83-million sale, the Financial Times revealed Tuesday. Telia
Swedtel VP Anders Noren said too much was at stake for the
impoverished country to reverse the privatization of Enitel.

"We have promises and guarantees from the Nicaraguan government.
The World Bank and International Monetary Fund favored the sale,"
said Mr. Noren. "There is too much at stake in this process for
Nicaragua to reverse it. It has been a clear and transparent

The sale was conducted in Managua, the capital, on Friday
afternoon, hours after an appeals court issued an injunction
banning the sale of 40 percent of the company due to unpaid
taxes. The venue was changed from Mr. Noren's hotel to the
Economy Ministry building less than half an hour before the
scheduled time without journalists being notified.

Managua's mayor, Herty Lewites of the opposition leftwing
Sandinista party, obtained the court order at midday on Friday.
However, Pablo Beteta, Enitel's legal adviser, said the company
won a suspension of the order at 4pm, just before the sale, and
it was therefore legal, even if the court order was confirmed.

Mr. Lewites said he would try to reverse the sale through the


AEROPERU: Peru Sues Aeromexico For Fraudulent Mismanagement
The Peruvian government has filed a suit against Mexican airline
Aerovias de Mexico (Aeromexico) over alleged fraudulent
mismanagement of Aeroperu, Peru's former flagship airline, EFE
reported Tuesday. The suit, which was reportedly filed by Fonafe,
the financing agency for state-owned companies that owns 11.3
percent of the failed Peruvian airline's shares, seeks more than
$16 million in damages.

Aeromexico acquired a 72-percent stake in Aeroperu for $23.1
million in a public offering held March 1, 1993. The Mexican
carrier later reported more than $112 million in accumulated
losses, filed for bankruptcy and grounded the Peruvian carrier.

According to the results of an audit performed by the Comptroller
General's Office at the time of airline's privatization,
Aeroperu's reported losses totaled $2.8 million. Ten months
later, the airline's losses jumped to $31.4 million.

The Comptroller General's Office said loans ostensibly made by
Aerovias de Mexico to Aeroperu went toward paying the debts of
other firms belonging to the Mexican group, "which bankrupted
Aeroperu and benefited Mexican shareholders."

In 1998, Delta Airlines agreed to purchase a 35-percent stake in
the Peruvian airline for $50 million, on the condition that
Aeromexico inject an additional $10 million. However, according
to the lawsuit, Aeromexico failed to fulfill the contract and
spoiled an opportunity to rescue the floundering Peruvian

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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