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

            Friday, September 21, 2001, Vol. 2, Issue 185



MUSIMUNDO: Computer Crash Closes All Branches Temporarily


INEPAR: Outlines Strategy To Restore Profitability
LIGHT: To Sell $550M In Bonds To Parent To Pay Off Debt
PAO DE ACUCAR: Registers 5.8% Drop In Same-Store Sales In August


LANCHILE: Assures Passengers of Commitment to Safety and Security


AEROMEXICO/MEXICANA: Carranza Urges Airlines To Reconsider Cuts
AHMSA: Inks Debt-Restructuring Deal With Creditors


SIDOR: Calls For Tariff Hikes On Imported Steel
SIVENSA: Expects To Refinance $250M In Debt By Year End

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Spanish state holding company SEPI said that the sale of
Argentine airline Aerolineas Argentinas will go ahead as planned
despite last week's terrorist attacks in the U.S., according to a
report Wednesday in The Wall Street Journal. SEPI's recent
announcement comes amid reports that the ailing airline's sale
has become more difficult as the four prospective buyers could
revise their offers taking into account that Aerolineas has 20
percent of its business in the U.S.

"There's no change of the procedure. The talks with the bidders
continue as normal," a SEPI spokesman said, adding a decision on
the future of the indebted airline is still expected by the end
of September or beginning of October.

SEPI has already received offers for Aerolineas Argentinas from
three consortiums and a fund. They are:

- a Spanish-Argentine group led by Spanish travel group Viajes
Marsans, which owns charter airline Airplus Argentina. Marsans
has ties with Scandinavian Airline Systems AB (S.SAI) through its
joint ownership of Spanair.

- an Argentine group headed by former Aerolineas Argentina's
Chief Executive Officer Juan Carlos Pellegrini who ran the
airline for 10 years from 1983 to 1993.

- ClickNest, which is backed by Argentine industrial group Grupo
Pescarmona and the Asset Management Group.

- a U.S. investment fund not named by SEPI for confidentiality

MUSIMUNDO: Computer Crash Closes All Branches Temporarily
The 95 branches of the record chain Musimundo had to be closed
because all their computer systems went down, El Cronista
reported Tuesday. These branches will be reopened soon, according
to the chain's controller, The Exxel Group, although there are
rumors that this could be the beginning of the end of Musimundo.

The company had to call in the receivers a couple of weeks ago.
In terms of turnover, Musimundo was the primary revenue
generating company of the Exxel group in 2000. The company now
carries debt of over US$200 million. Musimundo's Chilean
creditors are now calling for a foreclosure on the company. EMI
Chile, to which Musimundo owes US$57 million, has requested the
Argentine company's foreclosure in the 30th Civil Court in
Santiago. Warner Chile, on the other hand, is looking for a
judicial settlement with Musimundo.

Exxel acquired 100 percent of the chain in 1998 paying US$230
million. Since then has, Exxel has invested another US$86 million
in the expansion of its branches.


INEPAR: Outlines Strategy To Restore Profitability
Inepar group's construction unit, Inepar SA Industria e
Construcao, will define its latest strategy to resume profitable
operations within the next four months, according to a Gazeta
Mercantil Online report Wednesday edition. The strategy,
according to the company's new chairman, Roberto Procopio Lima
Neto, involves the renegotiation of R$350 million in debt.
Negotiations between primary shareholder Atilano Oms Sobrinho and
pension fund minority shareholders have been going on for more
than a year.

The company is currently waiting on a supply of funds from the
pension funds Previ (Banco do Brasil), Petros (Petrobras),
Centrus (Banco Central) and Aerus (air transportation companies).
Inepar's creditor banks, HSBC and Barclay's, will renegotiate the
debt in exchange for interests.

LIGHT: To Sell $550M In Bonds To Parent To Pay Off Debt
Brazilian utility Light Servicos de Eletricidade SA plans to sell
$550 million worth of subordinated bonds maturing in six months
to its parent company EDF International in order to refinance
debts, Bloomberg reported Wednesday. In a statement to the Sao
Paulo Stock Exchange, Light disclosed that the bonds would yield
9.96 percent annually.

"This financing is aimed at providing Light with funds to meet
its short-term obligations, whose average cost is 13.5 percent a
year," the company said in a statement.

According to Carlos Eduardo Alves, a power utility analyst at UBS
Warburg in Rio de Janeiro, Light has about $450 million in debt
coming due this year.

EDF will have the option to exchange the bonds for new stock in
Light, the statement said. If EDF exercises the option, shares
will be diluted by about 50 percent, said Oswaldo Telles, a power
utility analyst at Banco Bilbao Vizcaya Argentaria SA in Sao
Paulo. About 11 percent of shares in Light are publicly traded.

PAO DE ACUCAR: Registers 5.8% Drop In Same-Store Sales In August
Brazilian retailer Cia. Brasileira de Distribuicao Grupo Pao de
Acucar, announced "same-store" sales fell in August as the
country's energy shortage continues to inhibit consumer demand,
Bloomberg reported Wednesday. Excluding revenue from newly
acquired or recently opened stores, net sales fell 5.8 percent in
August compared with the same month a year ago, the company said,
without giving a value for that revenue. Consolidated net sales
for all stores, including those newly acquired, fell 4.8 percent
to 618.8 million reais ($229.3 million), the retailer said.

In May, the company decided to split the operations of Barateiro,
Pao de Acucar, Extra and Eletro in a bid to save R$50 million
within the next 12 months. The company hired the consulting
services firm McKinsey to assist in its strategic planning going


LANCHILE: Assures Passengers of Commitment to Safety and Security
LanChile Airlines (NYSE:LFL) and its affiliate LanPeru have fully
complied with the new security measures and received
certification from the Federal Aviation Administration to resume
operations to and from its U.S. gateways of Miami, New York and
Los Angeles. LanChile was the first South American airline, as
well as one of the first worldwide, to implement the heightened
security directives set forth by the Federal Aviation
Administration following last week's tragedies. LanChile's
departure to Santiago last Friday was the first of a foreign
airline from Miami International Airport.

"On behalf of all of us at LanChile and LanPeru, I would like to
express our most sincere sympathies to all of those affected by
the tragic events that have taken place in the United States,"
said Roberto Bianchi, LanChile's Vice President North/Central
America and Asia. "I would like to assure all of our passengers
and customers that LanChile, who already has an excellent safety
record, is committed to doing everything possible to ensure the
continued safety and security of our passengers."

In addition to its already strict security and safety standards,
following is an overview of the heightened security measures
immediately implemented by LanChile and LanPeru as set forth by
the Federal Aviation Administration:

-- Only ticketed passengers are permitted past security and at
boarding gates.

-- Knives are not permitted in passenger carry-on baggage, or by
passengers or crewmembers for meal services.

-- Additional identification checks and inspection of passengers.

-- Physical searches of carry-on bags.

-- Additional passenger and carry-on baggage searches just prior
to boarding the aircraft.

-- Additional interior and exterior searches and inspections of
each aircraft after servicing and prior to boarding of passengers
for each flight.

Already recognized as the best airline in Latin America, LanChile
is well on its way to achieving its goal of becoming one of the
top 10 airlines in the world. LanChile's vast route network
reaches a large number of destinations throughout the world with
service from 16 U.S. cities, including daily non-stop and direct
flights from its Miami, New York and Los Angeles gateways to
Lima, Santiago, Buenos Aires, Bogota, Caracas, Quito, Guayaquil
and Punta Cana. Passengers traveling with LanChile or LanPeru may
accumulate mileage in American Airlines AAdvantage, LanChile's
LanPass, or any of the oneworld(TM) member frequent flyer

To see company's latest financial statements:

CONTACT:  LanChile Airlines
          Martin Mosley, 305/670-1961        


In a press release Wednesday, Fitch-Chicago announced its rating
changes for Mexican airlines companies: The tragic events that
took place in the United States last week will likely result in
sharp declines in air traffic demand over the next several
months. Since Latin American airlines derive a significant
portion of their revenue stream from international routes to the
United States, the credit quality of the Latin American airline
industry as a whole is expected to come under pressure over the
next several months. As a result, Fitch has placed the corporate
ratings of its rated Latin American airline companies on Rating
Watch Negative.

The following corporate ratings have been placed on Rating Watch

- Lan Chile S.A. `BBB'

- Aerovias de Mexico, S.A. de C.V. (AeroMexico) `BB'

- Compania Mexicana de Aviacion, S.A. de C.V. (Mexicana)`BB'.

Fitch is also reviewing the credit quality of Latin American
securitizations backed by airline ticket receivables. The
following notes have been placed on Rating Watch Negative:

Taca International Airlines Receivables Trust Certificates 1997

Fitch rates three other Latin American securitizations backed by
airline ticket receivables that are further enhanced by surety
bonds provided by CENTRE. While no action has been taken at this
time, these transactions are currently under review given their
reliance on the insurance industry to support the credit ratings.
Please refer to the Sept. 17, 2001 Fitch press release titled
`Insurer/Reinsurer Loss Exposures To U.S. Attacks: Initial
Assessment Of Damage To Financial Positions' for comments on
Fitch's expectations for the industry. The following
securitizations are backed by CENTRE surety bonds:

AeroMexico Receivables US Trust 'AA'. Mexicana Receivables US
Trust 'AA'. Pelican Series 1999 Trust 'AA'.

The disruption of air travel in the United States starting
September 11 affected not only U.S. carriers, but also Latin
American carriers whose international flights to the United
States were cancelled most of the week. Airlines realized
monetary losses each day its international flights were grounded.
Fitch estimates that major Latin American airlines such as Lan
Chile, Aeromexico, Mexicana and TACA each lost between $5-$15
million last week alone as a direct result of cancelled flights.

While the impact of cancelled flights on the cash flow of Latin
American airlines was immediate, a sustained reduction in traffic
demand to and from the United States as well as domestic feeder
traffic holds a larger potential to affect the long term credit
quality of Latin American airlines. International routes to the
United States comprise a significant portion of the revenue base
of Latin American airlines, averaging between one quarter to one
third of revenues.

Because of their high fixed cost structure, airlines are exposed
to sudden reductions in demand. Latin American airlines primarily
utilize leased aircraft to service their route network. Leased
aircraft provide airlines with some flexibility to adjust
capacity over the medium term. However, airlines often do not
have the ability to quickly reduce capacity in an efficient
manner without incurring penalty payments for early lease

In addition to lower demand, passenger per unit revenue could
also erode if airlines decide to stimulate demand with increased
price competition. As a result, the profitability of Latin
American airlines will remain under pressure for the rest of the
year at minimum. While U.S. carriers may offset some of their
losses through some form of government support, Latin American
carriers are more likely to absorb their losses with internal

Even before the events of last week, slowing global economic
growth had begun to cloud the outlook for global air traffic and
cargo demand. At the same time, high fuel costs were pressuring
the profitability margins of the global airline industry. It is
clear that recent events will further weaken the operating
environment. The impact on the rating of each Latin American
airline will depend on the severity of the downturn and on the
financial flexibility that each airline is able to maintain
during this difficult operating environment. Fitch will continue
to monitor the credit quality of its Latin American airline
ratings and will issue further updates as developments unfold.

Contact: Guido Chamorro 1-312-368-5473 or Sam Fox 1-312- 606-
2307, Chicago.

AEROMEXICO/MEXICANA: Carranza Urges Airlines To Reconsider Cuts
Mexico's leading airlines Aeromexico and Mexicana have been asked
not to resort to job cuts to solve problems resulting from last
week's terrorist attacks against the United States, Mexican
financial daily El Economista reported Tuesday. The country's
Labor Minister Carlos Abascal Carranza urged the two airlines to
remain responsible and calm. According to the official, the
airline industry should make greater efforts before arriving at
the stage of layoffs.

Both Aeromexico and Mexicana, on Tuesday announced plans to lay
off workers to offset financial losses they incurred when many of
their flights were canceled in the days following the terrorist
attack last week on the United States.

Aeromexico lost close to $3 million when many of its flights,
normally some 120 a day, were cancelled Tuesday through Friday of
last week. Mexicana, on the other hand, lost some $2.5 million a
day last week, approximately 40 percent of its weekly income.

AHMSA: Inks Debt-Restructuring Deal With Creditors
Giant steelmaker Altos Hornos de Mexico (AHMSA) announced it had
signing a debt-restructuring accord with its creditors, Mexican
financial daily El Economista reported Wednesday. According to
company spokesperson Francisco Orduna, AHMSA has already
delivered its calendar of activities to the U.S. Securities
Exchange Commission (SEC). The restructuring includes the sale of
$180 million in assets and financing $560 million through AHMSA's
creditor banks.

At the same time, a basic agreement to restructure Grupo Acerero
del Norte (GAN), which reportedly has debts of approximately $300
million, has also been reached. The GAN agreement should be
finalized within the next few days.


SIDOR: Calls For Tariff Hikes On Imported Steel
Representatives from the Venezuelan steelmaker Siderurgica del
Orinoco (SIDOR) petitioned the government Wednesday for a
temporary tariff on imported steel similar to hikes imposed by
competing nations such as Mexico, reported EFE. According to
Sidor President Martin Berardi, the tariff hike would be
temporary and would be rescinded once the depressed global steel
market recovers.
"The government should take short-term action, such as raising
import tariffs, just as other nations such as Mexico and the
United States have done, to fight the recession and the unfair
competitive practices of other producers," Berardi said.

Berardi called on the administration of Venezuelan President Hugo
Chavez to take into account other factors, such as unemployment,
caused by unfair business practices.

SIVENSA: Expects To Refinance $250M In Debt By Year's End
Venezuela's largest publicly traded steel company Siderurgica
Venezolana Sivensa will restructure $250 million in debt with its
banks by year-end, according to a report Wednesday in Bloomberg.

"We have already laid down the grounds for an agreement, and we
are in the process of sorting out the documentation," said
Sivensa President and CEO Oscar Machado.

The move is expected to help strengthen Sivensa's finances.

The company renewed debt restructuring talks in January, less
than a year after it refinanced $245.8 million in debt with 16

Sivensa's ability to service its debts has been hampered by
falling prices for steel and hot iron briquettes, which are used
to boost the iron ore content of scrap metal used by mini-mills.

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
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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.

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