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       T R O U B L E D   C O M P A N Y   R E P O R T E R

                   L A T I N   A M E R I C A

            Friday, September 14, 2001, Vol. 2, Issue 180

                           Headlines

* A R G E N T I N A *

TOWER RECORDS: S&P Lowers Ratings on Parent; Warns Default

* B O L I V I A *

EL MUTUN: Anticipates Sale to Come by Year's End

* B R A Z I L *

AES URUGUAIANA: Teeters on Edge of Bankruptcy
TELEMAR: Trading of Three Units Suspended Pending Announcement
TELEMAR: Gets Minority Shareholders' Backing on Plan
TRANSBRASIL: Pegasus Brings Case to Appeals Court
TRANSBRASIL: To Be Excluded From Refis
TRANSBRASIL/VARIG: Likely to Face Fines For Over Price-Fixing

* C H I L E *

GS INDUSTRIES: To Resume Production of Steel Grinding Media in
U.S.

* C O L O M B I A *

AVIANCA/ACES: To Reprogram Routes, Flights

* M E X I C O *

GUILFORD MILLS: Announces Closing of Cobleskill, NY Facility
ICA: Readies For Another Asset Sale
MEXICANA: Union Warns of Strike If Salary Demands Not Met
SAVIA: ING Groep to Pay $180M For Remaining Shares in Subsidiary
UNEFON: Best Mobile Telephony Option in the Country


=================
A R G E N T I N A
=================

TOWER RECORDS: S&P Lowers Ratings on Parent; Warns Default
----------------------------------------------------------
Standard & Poor's (S&P) last week downgraded its rating on Tower
Records parent company, MTS Inc., and warned that the company
could default on its debt repayments, The New York Post reported
Tuesday.

The banks are requiring Tower to search for new sources of
capital to replace those providing its revolving line of credit,
whose availability falls to $100 million by December. Debts are
costing the company $1 million a month in interest.
  
S&P Director of Corporate Ratings Diane Shand, who lowered the
rating from "B-" to "CCC", said that the problem was it is not
clear whether Tower has sorted out its next move with the banks.
The company has to reduce its debt of $202 million to $100
million by the end of November.
  
"If Tower is not in compliance with the bank agreement, the bank
may prohibit them from making their interest payment, because the
bank gets priority," said Shand. "A triple-C rating means we
think there is a chance of a default."

However, Tower spokeswoman Louise Solomon denied the company was
in financial trouble. "We are completely on target with our
current paydown schedule and are neither in default of our bank
or bond covenants."

Solomon disproved rumors that the bank syndicate had installed
its own financial officers in corporate headquarters, but said,
"I can confirm that Tower has engaged the services of a
restructuring officer, a Tower-paid consultant."
  
She added that the cost-cutting "includes the sale of Tower
operations in Taiwan, Hong Kong and Argentina and their
conversion to franchises. In addition, we have scaled back our
book business, which has proved a successful strategy to reduce
costs without sacrificing profits.
  

=============
B O L I V I A
=============

EL MUTUN: Anticipates Sale to Come by Year's End
------------------------------------------------
Bolivia's state mining company Comibol is likely to select within
two weeks an investment bank, which will take charge of the
tender of the El Mutun iron ore deposit, according to Carlos
Romero, the director of the company's URM mining restructuring
unit. In a Business News Americas report released Wednesday,
Romero revealed that after the selection process, two months of
studies will follow, hence, the prediction that the tender for
the deposit will be held by year-end. Romero added that he could
not disclose the names of the five participating banks until
there is a decision from the World Bank.

URM, which was responsible for pre-qualifying the banks, expects
the winner to devise a definitive plan to transfer El Mutun to
the private sector. The bank's proposed strategy will then be
presented to the Bolivian government's National Economic Policy
Council (Conape), to be followed by the submission of bids.

El Mutun is one of the world's largest iron deposits, with
resources estimated at 40Bt.


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

AES URUGUAIANA: Teeters on Edge of Bankruptcy
---------------------------------------------
Gas-powered thermoelectric plant in Rio Grande do Sul, AES
Uruguaiana, is in a pre-bankruptcy stage, according to a report
in Valor Economico Wednesday. This is reportedly due to
limitations in the electrical energy distribution system, which
prevents the plant to operate at its full 600MW capacity. It has
been producing around 500MW since it went online in December
2000. Instability in the electrical system has resulted to
numerous shutdowns for maintenance.

The company is also behind in payments of US$7 million with its
gas supplier TGN (Transportadora Gas del Norte) and is attempting
to renegotiate this debt. It has frozen three other projects and
is asking for a financial backing of nearly US$445 million from
its parent company, AES Corporation in the US.


TELEMAR: Trading of Three Units Suspended Pending Announcement
--------------------------------------------------------------
The Sao Paulo stock exchange informed that trading in three units
of Brazilian phone company Tele Norte Leste Participacoes SA
(Telemar) were halted pending a news announcement, Bloomberg
reported Wednesday. Shares in Telecomunicacoes do Rio de Janeiro
SA, or Telerj, Telecomunicacoes de Minas Gerais and
Telecomunicacoes da Bahia SA were halted at the request of the
companies until further notice. The announcement reportedly
relates to Telemar's plans to merge all its 15 operating units
under Telerj.

In June, Telemar, the parent of Telerj, announced a plan to merge
its 15 operating units into Telerj to cut costs and increase
trading in Telerj shares.


TELEMAR: Gets Minority Shareholders' Backing on Plan
----------------------------------------------------
Telemar got minority shareholders to agree to a plan to unite its
16 regional operators under the roof of one of those carriers,
Rio de Janeiro-based Telerj, Reuters revealed Wednesday. The new
Telerj will then be launched on the Sao Paulo Stock Exchange
where analysts agree that it could become an enticing new
investment alternative.

"Given the size of the company and the liquidity it generates, it
is going to attract many new investors," said Alvaro dos Santos,
Telemar's chief financial officer.

The new firm will have a net asset value of 11.5 billion reais
($4.3 billion) and 245 billion shares, said Santos. Shares in the
new Telerj are set to start trading on the Bovespa Oct. 24.

Telemar expects the restructuring to bring annual savings of
between 40 million reais ($17 million) and 70 million reais ($30
million) through efficiency gains and tax benefits.


TRANSBRASIL: Pegasus Brings Case to Appeals Court
-------------------------------------------------
Attorneys of Pegasus Aviation of San Francisco were scheduled to
ask Thursday before the 3rd District Court of Appeal to overturn
a Miami-Dade Circuit judge's decision that allowed the troubled
Brazilian airline Transbrasil to fly an impounded plane out of
Miami, Broward Daily Business Review said Tuesday. Pegasus claims
it has every right to repossess its property.
  
"They are using our plane for free, and Pegasus takes umbrage to
that," Scott Hamilton of Pegasus, said.

The judge's decision to let the plane take off came just one
week after he ordered that it be seized and returned to Pegasus.

The $ 40 million jet was impounded at Miami International Airport
on Aug. 8 after Pegasus convinced Judge Steve Levine that
Transbrasil had stopped paying on its lease in February and that
the Brazilian carrier owes it more than $ 20 million in
leasing and maintenance costs.
  
Then, on Aug. 23, at the behest of Transbrasil, Levine held a
lengthy hearing and listened to what both sides had to say.
During the hearing, Levine learned that Pegasus had filed a
similar lawsuit seeking to recover the plane in Brazil and that
on July 8, a Brazilian appellate court ordered Transbrasil be
allowed to continue flight operations. That order is on appeal.
  
The Brazilian court found that Transbrasil had secured the planes
it had leased from Pegasus with real property and that Pegasus
holds a $ 1.6-million security deposit along with more than $ 4
million in maintenance reserves.
  
Levine, in his order to return the plane, reasoned that had
Pegasus' lawyers told him there was a pending action in Brazil,
he would not have issued the order to seize the plane. Levine
then cleared the plane for takeoff.  


TRANSBRASIL: To Be Excluded From Refis
--------------------------------------
The Brazilian Inland Revenue disclosed that the struggling
Brazilian airline Transbrasil is one of the companies, which will
be excluded from the Refis tax debt program, O Globo reported
Wednesday. According to Inland Revenue sources, Transbrasil will
have to pay its tax and social security debts immediately.

The Inland Revenue was expected to announce Wednesday the
exclusion of 11,558 companies from Refis for not paying their
renegotiated debts with the government on time.


TRANSBRASIL/VARIG: Likely to Face Fines For Over Price-Fixing
-------------------------------------------------------------
Claudio Considera, secretary of the finance ministry's antitrust
watchdog, the Seae, announced that an investigation being carried
out by his agency discovered that four Brazilian airlines
coordinated price rises of 10 percent on the Rio de Janeiro-Sao
Paulo route in 1999, AFX Europe said Wednesday.

Among these airlines are financially troubled Varig and
Transbrasil. The other two are Vasp and TAM. According to the
conclusions of the investigation, these four airlines should be
fined for increasing their fares in a concerted way. This is a
serious breach of the competition law, Considera added.

The Seae has also proposed to forbid the use of the First Ticket
Date electronic reservation system. It has already transmitted
its findings to the justice ministry's competition authority, the
SDE. The final decision will be taken by antitrust council CADE.


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

GS INDUSTRIES: To Resume Production of Steel Grinding Media in
U.S.
-----------------------------------------------------------------
--
GS Industries Inc. decided to resume production of steel grinding
media in the United States, a move, which could have an impact on
antitrust litigation now directed against it by both the state of
Utah and Kenneccott Utah Copper Corp., Cahners Business
Information revealed last week in a report.

"We've made the decision were going to manufacture grinding media
in the U.S.," said Mark Essig, president and chief executive
officer of the Charlotte, N.C.,-based mini-mill.

GSI, under pressure from the lawsuit, attempted to find a buyer
last month for the grinding media unit that it purchased late
last year from Nucor Corp., also based in Charlotte. Essig said
at the time that "no one is stepping forward to buy the Nucor
assets at this time," and there had been just "mild interest" by
one unidentified party.

The lawsuit currently is under a standstill agreement' due to
GSI's effort to find a buyer for the assets. GSI currently
is supplying its grinding media customers from plants in Canada
and Chile.

Just recently, Steven P. Ornduff, director of grinding media
sales for GS Technologies, told customers that while the parent
company continued to explore the possible sale of the group,
"plans are now under way to re-establish a manufacturing
facility" in this country, presumably referring to a
possible grinding media site.

For most of this year, GSI has been dealing with the antitrust
lawsuit filed first in the U.S. District Court in Salt Lake City
by Kennecott Utah Copper and the State of Utah, which challenged
what they claim had been GSI's attempt to ship the grinding ball
equipment from Nucor's Brigham City, Utah, operation to
GSI's Chilean facility.

GSI originally intended to transfer the former Nucor equipment to
its GST Steel Co. unit in Kansas City, Mo. But GSI subsequently
filed for Chapter 11 bankruptcy protection from creditors and
said it would close the plant, which led to an allegation by the
state that it was planning to move the equipment to its Moly-Cop
Chile SA subsidiary in South America.

Ornduff acknowledged that while its Chapter 11 status for a time
made the outlook uncertain, "things are going quite well" now and
GSI believed it was in a position to once again produce grinding
balls here. It had gone to "great lengths" to maintain its
domestic market position, bringing in production from Chile and
Canada "at a very small margin," he said.


===============
C O L O M B I A
===============

AVIANCA/ACES: To Reprogram Routes, Flights
------------------------------------------
In an effort to increase the frequency on their more profitable
destinations after a positive few months at work, Colombian
airlines Avianca and Aces are reprogramming routes and flights,
Portafolio reported Tuesday.

Avianca will now be flying five times weekly rather than three
times between Cali-Medellin-New York, 7 times per week from
Bogota to San Jose and 4 times per week between Bogota-Mexico-Los
Angeles. It will be suspending its flight to London as of late
October.

Meanwhile, Aces will now be offering daily return flights between
Pereira-Cartagena and Bucaramanga-Cartagena. It will also add to
flights on the Medellin(Olaya Herrera)-Pereira and Bogota-
Bucaramanga routes as well as its international connection
between Caracas and Bogota to make the route twice-daily.

The two companies are looking to merge as they face increasing
financial pressure without consolidating resources.


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

GUILFORD MILLS: Announces Closing of Cobleskill, NY Facility
------------------------------------------------------------
Guilford Mills, Inc. (NYSE: GFD) announced Monday its intention
to exit the production of stretch knit intimate apparel and
swimwear fabrics and lace as well as home fashions lace in the
Cobleskill, New York operation. The Company will operate the
facility through November 8, 2001 to service remaining orders and
assist in transitioning its customers to new suppliers. The
Company is currently discussing opportunities for the sale and/or
alliance of this operation with other interested parties. Such
discussions may result in the continuing operation of the
facility under new ownership.

The Company had recently consolidated its intimate apparel and
swimwear lace and fabric production into this facility and
reduced fixed costs by closing two other facilities. However,
eroding business conditions have resulted in further sales and
margin declines and increasing uncertainty as to the viability of
the operation. The Company does not expect conditions to improve
in the near term.

The Cobleskill facility employs approximately 500 associates. If
the plant is closed, the Company will assist these employees in
securing new positions either within or outside of Guilford
Mills. The Company will reduce its domestic apparel business
selling and administrative staff by 70%. Corporate staff will
also be affected as certain functions are decentralized to the
non-apparel businesses. Guilford anticipates the fiscal 2001
fourth quarter pretax charge associated with the actions to range
from $ 60 to $ 75 million. The charges are substantially related
to fixed asset and goodwill impairment and therefore are
predominantly non-cash.

Guilford's exit of the Cobleskill plant leaves the Company with
two remaining apparel facilities in the U.S. -- a circular
knitting plant in North Carolina and a printing plant in New
York. In addition, Guilford has two apparel dyeing and finishing
operations in Mexico.

John Emrich, President and Chief Executive Officer, said, "The
growing apparel imports, strong U.S. dollar, and weak economy
have resulted in significant financial losses. These factors,
combined with the tightened credit in the domestic textile
industry, make it impossible for the Company to sustain apparel
dyeing and finishing in the U.S. We believe that we have taken
every reasonable action to make Cobleskill successful.
Unfortunately, we were at such a disadvantage that our efforts
were insufficient. It is deeply regrettable that these current
market conditions were overwhelming and that the Company does not
have the financial resources to continue operating this
magnificent plant until conditions improve."

Mr. Emrich added, "Guilford has always believed it can
effectively compete in the global apparel industry by
manufacturing in Mexico and we intend to continue to dedicate
resources to apparel there. We are exploring apparel alliance
opportunities in Mexico and the CBI region."

Mr. Emrich concluded, "Our strategy to grow our worldwide
automotive and industrial fabrics and our direct-to-retail home
fashions products has not changed. While these segments have also
been affected by the current economic slowdown, our superior
technology and design rank Guilford among the premier suppliers
in each of its markets."

Guilford Mills is an integrated designer and producer of value-
added fabrics using a broad range of technologies. The Company is
one of the largest warp knitters in the world and is a leader in
technological advances in textiles, including microdenier warp
knits and wide width circular knits of cotton blended with
LYCRA(R). Guilford Mills serves a diversified customer base in
the home furnishings, apparel, automotive and industrial markets.
Through its Guilford Home Fashions subsidiary, the company
produces bedding products, window treatments and shower curtains
for the retail market.

CONTACT: Kim A. Thompson
         Chief Financial Officer, Guilford Mills, Inc.
         +1-336-316-4626
         or
         Mark E. Cook
         Treasurer
         +1-336-316-6833, Guilford Mills, Inc.


ICA: Readies For Another Asset Sale
-----------------------------------
ICA, a Mexican construction company led by Bernardo Quintana, is
now getting ready to move up to a higher step in improving its
financial condition, Mexican financial daily El Economista
reported Tuesday. The company, with plans to slash debts from
6.112 billion pesos to 4.5 billion pesos by the end of the month,
will sell 50 percent of its stake in its container terminal in
Veracruz. The said container terminal currently represents annual
revenues of 105 million pesos. ICA recently sold Centro Comercio
de Guanajuato, and is also mulling the sale of some smaller
housing businesses, which could bring in between 500 million and
800 million pesos.


MEXICANA: Union Warns of Strike If Salary Demands Not Met
---------------------------------------------------------
About 1,500 stewards and stewardesses of Mexicana de Aviacion are
demanding a 30-percent salary hike through their union ASSA,
Mexican financial daily El Economista reported Tuesday. Should
the Mexican airline refuse to increase its 5.5 percent offer, the
union warned it would call a strike this weekend.

Mexicana's chief competitor Aeromexico recently awarded a salary
hike of around 16 percent all things considered (the specific
pay-rise totaled 9.5 percent) to its own stewards halfway through
2001 after labor mobilization had cost the airline 13 million
pesos in 2 days.

Mexicana and Aeromexico are both under government-owned holding
company Cintra's control. Late last year, Mexican antitrust
authorities ruled that Cintra should be broken up and sold.


SAVIA: ING Groep to Pay $180M For Remaining Shares in Subsidiary
----------------------------------------------------------------
Dutch financial services company ING Groep NV announced it's
bidding about $180 million for the rest of Savia subsidiary
Seguros Comercial America SA, Bloomberg said Wednesday.
Amsterdam-based ING said it would pay $34.63 per share for the 13
percent of Mexico's largest insurer Comercial America, which it
doesn't already own. According to the report, the offer is 6.4
percent higher than the insurer's closing share price on Aug. 22,
the day the stock last traded.

Last year, ING paid $809 million to Mexico's Savia SA for a 41.5
percent stake in Comercial America, and in June, paid another
$791 million to the holding company for an additional 45 percent
to take control of the insurer. The latest purchase, which needs
to be approved by the Mexican National Bank and Securities
Commission, will bring ING's total payment for the life, health
and property insurer to $1.78 billion.


UNEFON: Best Mobile Telephony Option in the Country
---------------------------------------------------
Due to its service quality and tariffs, which offer 77 percent
savings compared to other local operators, Unefon now believes it
is the best mobile telephony option in Mexico, according to an
Excelsior report released Tuesday.

In a survey on quality, Unefon recorded 69 percent client
approval compared to 41 percent for Iusacell and 55 percent for
Pegaso in Monterrey, Guadalajara, Saltillo and Mexico City. Its
nearest rival, Telcel, posted 60 percent approval. It has also
performed well in Cofetel checks.

                                   ***********

        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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