/raid1/www/Hosts/bankrupt/TCRLA

/raid1/www/Hosts/bankrupt/TCRLA_Public/010928.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 Friday, September 28, 2001, Vol. 2, Issue 190 Headlines A R G E N T I N A CAVAS DE SANTA MARIA: Goes Into Bankruptcy Proceedings B O L I V I A LAB: Huge Debt Leads To Suspension Of Flights B R A Z I L ALPARGATAS: Postpones Middle East Export Plans, Anticipates War CVRD: Acquires BELEM For $25 Million EMBRATEL PARTICIPACOES: Dismissing 4.7% Of Workers To Cut Costs MOULINEX SA: Court Likely To Extend Bid Submission Deadline C H I L E GENER: S&P Affirms BBB- Ratings; Off Watch, Outlook Stable LANCHILE S.A.: Monthly Traffic Up In August 2001 E C U A D O R FILANBANCO: To Begin Selling Off Property, Assets In Auction M E X I C O BANCRECER: Fitch Affirms Banco Mercantil's Ratings BANCRECER: S&P Likely To Downgrade Banorte's Credit Ratings BANCRECER: IPAB Deems Banorte's Offer Best Option HYLSAMEX: Likely To Default On Debt Payments Next Year V E N E Z U E L A POSVEN: Looking To Get Rid Of Union Leaders - - - - - - - - - - - ================= A R G E N T I N A ================= CAVAS DE SANTA MARIA: Goes Into Bankruptcy Proceedings ------------------------------------------------------ Another casualty in the nation's ongoing economic crisis, Argentina's second-largest winery Cavas de Santa Maria has entered bankruptcy proceedings, according to an EFE report Wednesday edition. The Argentine winery, which specializes in economy wines, has asked for a creditor's meeting but has not yet revealed the size of its debt. The company is owned by a consortium of Argentine investors and France's Bernard Taillard. With the Argentine economy mired in a three-year recession, the national wine industry is suffering from a steep decline in domestic wine consumption, which increased exports have been unable to offset. ============= B O L I V I A ============= LAB: Huge Debt Leads To Suspension Of Flights --------------------------------------------- Officials of the Bolivian airline Linea Aerea de Bolivia (LAB) announced that flights to a number of overseas destinations are temporarily suspended, EFE reported Wednesday. LAB, partially controlled by Brazil's VASP airline since 1996, is facing a dire economic situation with a $50-million debt and three of its nine aircraft grounded with mechanical problems, according to Public Relations Advisor Alfonso Valcarcel. The changes, which went into effect Wednesday, are primarily the result of the company's financial difficulties. But Valcarcel added, "there exists a strong relationship between the local crisis and the effects of the attacks," against the United States. LAB has had to cut "the losses from the low-revenue producing flights and bolster its domestic flight schedule, prioritizing our most notable commodity, the Brazilian passenger," the advisor noted. The company said the decision would not include job eliminations, as they will increase the main route flights in Bolivia, which combine the cities of La Paz, Cochabamba and Santa Cruz. =========== B R A Z I L =========== ALPARGATAS: Postpones Middle East Export Plans, Anticipates War --------------------------------------------------------------- Predictions that war may break out in the Middle East has prompted the Alpargatas shoe company to postpone its plans to begin exporting to Saudi Arabia and the United Arab Emirates, Valor Economico reported Tuesday. The company had been negotiating with local distributors, but concern over the safety of its negotiators was a consideration in the current political climate. Alpargatas believes that there is a potential for sales of between US$350 million - US$450 million per year in the region. The company also has more advanced negotiations in progress in Turkey and Israel, which promise sales of between US$400 million - US$600 million. Last year, the company exported R$21 million. TCR-LA earlier reported that the textile and footwear conglomerate Alpargatas SA, along with its business units, is facing a total of 96 various bankruptcy charges in local commercial courts. CVRD: Acquires BELEM For $25 Million ------------------------------------ Companhia Vale do Rio Doce (NYSE: RIOpr)(CVRD) announces that it has acquired 99.99% of Belem - Administracoes e Participacoes Ltda. (Belem), while its wholly-owned subsidiary Docepar S.A. acquired the remaining 0.01%. Belem is a Brazilian privately held company, previously owned by Bethlehem Steel Corporation (Bethlehem) and Bethlehem Steel International Corporation (Bethlehem International), a US steel making group. Belem is a holding company and its owns a 9.9% stake on Empreendimentos Brasileiros de Mineracao S.A. (EBM). This interest does not grant to Belem the right of appointing members to EBM's governing bodies. EBM is a Brazilian privately held company, controlled by Caemi Mineracao e Metalurgia S.A. EBM holds 51% of the capital of Mineracoes Brasileiras Reunidas S.A. (MBR). MBR is a Brazilian privately held company and an iron ore producer. The value of this transaction is approximately US$ 25 million. CONTACT: Roberto Castello Branco, +55-21-3814-4540, or castello@cvrd.com.br, or Andreia Reis, +55-21-3814-4643, or andreis@cvrd.com.br, or Barbara Geluda, +55-21-3814-4557, or geluda@cvrd.com.br, or Daniela Tinoco, +55-21-3814-4946, or daniela@cvrd.com.br, all of Companhia Vale do Rio Doce EMBRATEL PARTICIPACOES: Dismissing 4.7% Of Workers To Cut Costs --------------------------------------------------------------- Brazilian long-distance telephone company Embratel Participacoes SA, the worst performer in the benchmark Bovespa stock index this year, announced plans to sack 4.7 percent of its total workforce in order to reduce costs, Bloomberg said Wednesday. The company disclosed it would dismiss about 150 people at its call center business in Sao Paulo state and another 450 workers, mainly in Rio de Janeiro state. "Companies are always adjusting their workforce to the needs they have, and in our case we've made the adjustment because of a lack of demand in some services," said Joaquim de Sousa Correia, human resources director at Embratel. Shares in Embratel, controlled by WorldCom Inc., have tumbled 76 percent this year, compared with a 35-percent decline in the Bovespa index, on concern over provisions for bad debts and a increase in its total debt load. For more information on the company's financial statements see: http://www.bankrupt.com/misc/Embratel.doc Contact: Embratel Participacoes S.A. Silvia M.R. Pereira Investor Relations tel: (55 21) 2519-9662 fax: (55 21) 2519-6388 email: invest@embratel.com.br or Wallace Borges Grecco Press Relations tel: (55 21) 2519-7282 fax: (55 21) 2519-8010 email: cmsocial@embratel.net.br MOULINEX SA: Court Likely To Extend Bid Submission Deadline ----------------------------------------------------------- A French commercial court will "probably" extend a deadline for submitting bids for bankrupt French-Italian appliances maker Moulinex-Brandt, according to the president of the court, Jean- Claude Denis, in an AFP report released Wednesday. Tuesday's deadline saw only three bids for the company's parts, the court said. However, the most preferred buyer, Moulinex-Brandt's French rival SEB, denied submitting an offer, saying it had not had enough time to put a bid together. "SEB is a credible buyer. We are kind of left hanging with SEB and we're hoping the group submits a bid. The deadline for offers will probably be pushed back by administrators," Denis said. One of the three to bid for the parts of the company is French property group Fidei. The group stated Tuesday that it had proposed to take over nearly 5,400 jobs, or a little over a quarter of the firm. According to Jean-Frederic Lambert of the Fidei supervisory board, the company had proposed to "take over 5,379 jobs worldwide, 2,940 of them in France." Denis described the other bids that had been received so far as "far-fetched." Moulinex-Brandt has interests in 11 countries from China to Brazil. It had a debt at the end of last year of 766 million euros ($706 million) and filed for bankruptcy on September 7, putting 21,000 jobs at risk. ========= C H I L E ========= GENER: S&P Affirms BBB- Ratings; Off Watch, Outlook Stable ---------------------------------------------------------- Standard & Poor's Wednesday removed the triple-'B'-minus ratings of AES Gener S.A. and its affiliate, Empresa Electrica Guacolda S.A., from CreditWatch with negative implications, where they were placed on Aug. 30, 2001, following the announcement that The AES Corp. (double-'B'/Watch Neg/--) had launched an unsolicited tender offer for 43.2% of the outstanding shares of Compania Anonima Nacional Telefonos de Venezuela (CANTV), Venezuela's only full-service telecommunications company. Gener, which is 98.5% owned by AES Corp., in turn owns 50% of the single-asset generator, Guacolda. Guacolda benefits from managerial and operational support from Gener. The outlooks are now stable. This action reflects a reassessment of Gener's stand-alone creditworthiness, as well as the degree of insulation (between Gener and AES Corp.) provided by structural enhancements. Standard & Poor's has determined that if AES Corp.'s rating was downgraded to double-'B'-minus (the maximum anticipated), Gener's rating could maintain a three-notch separation from that of AES Corp. Gener's rating was reviewed on Aug. 2, 2001, at which time it was revised to triple-'B'-minus/stable, reflecting an analysis of the company and its relationship to AES Corp. At that time, the appointment of an independent director was still pending, and the planned sale of Gener's Argentine assets (as a package to TotalFina Elf S.A., double-'A' issuer credit rating) was delayed and disaggregated into sales of the three, distinct groups. Subsequently, an independent director has been designated, providing a stronger insulatory structure between the two companies. In addition, the sale of Central Puerto and Piedra del Aguila has been consummated, providing net proceeds of US$375 million. These funds were used to extinguish the US$400 million acquisition financing of Gener by AES. TotalFina Elf has an option to purchase the remaining assets, Termo Andes/Inter Andes, by Nov. 1, 2001. While Standard & Poor's would view this transaction positively, the completion of this sale has no impact on the rating. OUTLOOK: STABLE AES Gener S.A.'s stable outlook reflects expectations of strengthening financial ratios. Funds from operations (FFO) interest coverage and FFO to debt are expected to exceed 2.5 times (x) and 11%, respectively, over the next several years. Per its bylaws, Gener is prohibited from upstreaming cash to AES, via an intermediate holding company, if it fails to meet an interest coverage test. Guacolda's stable outlook recognizes its exposure to mounting margin pressures from gas-fired generation, and a possible interconnection between the Central Interconnected System (SIC) and the Integrated System of the Great North (SING). As contracts mature and are renegotiated, pricing is anticipated to be less favorable. However, Guacolda is expected to maintain a high level of contract cover, aided by the EMEC contract, which is an all-requirements contract, meaning that Guacolda will serve EMEC<180>s growing demand through 2015. CONTACT: Standard & Poor's, New York Cheryl E Richer, 212/438-2084 Lidia Polakovic, Buenos Aires (54) 114-891-2130 LANCHILE S.A.: Monthly Traffic Up In August 2001 ------------------------------------------------ In a company press release, Lan Chile S.A., ("LanChile" or "the Company") (NYSE: LFL) Chile's largest domestic and international airline, reported its preliminary August monthly and accumulated traffic statistics and punctuality indicators. The Company reported that its system passenger traffic for August increased 24.5% while capacity increased 27.6%. As a result, the Company's load factor decreased 1.7 points to 67.9%. International passenger traffic for August increased 19.1%, while international passenger capacity increased 25.7%. Accordingly, the international passenger load factor for the month decreased 3.8 points to 69.2%. Domestic passenger traffic for August increased 46.8% as capacity increased 34.0%. Accordingly, the domestic load factor for the month increased 5.6 points to 63.8%. Cargo capacity for August decreased 1.1% while cargo traffic as measured in RTKs decreased 6.6%. The reduction in international cargo traffic resulted from weaker demand in major markets especially on southbound routes between the United States and Argentina as well as Brazil. In addition, for the month of August, 74.5% of the Company's total flights left on time, based on a fifteen-minute standard (considering all departures leaving up to fifteen minutes of the scheduled departure time as "on time"). This represented a 13.4 point decrease when compared to August 2000 and was a result of a pilot-induced slowdown in anticipation of the LanChile pilot union contract negations scheduled to begin October 15, 2001. CONTACT: Chile: Alejandro de la Fuente - Chief Financial Officer Daniel Jones - djones@lanchile.cl Lan Chile S.A. Tel: (562) 565-2538 / 6812 or New York: Maria Barona, mbarona@i-advize.com Blanca Hirani, bhirani@i-advize.com i-advize Corporate Communications, Inc. Tel: (212) 343-9519 / (212) 406-3690 ============= E C U A D O R ============= FILANBANCO: To Begin Selling Off Property, Assets In Auction ------------------------------------------------------------ Ecuadorian bank Filanbanco will start next Saturday the process of selling-off assets through an auction that will take place in Quito, reported El Commercio Monday. The bank is going to sell 52 properties. Filanbanco is analyzing the possibility of selling off its portfolio on September 30 or October 2. After the Quito auction, Filanbanco will continue selling off real properties early in October in Guayaquil (161 units). The 213 assets, which the bank will put on the auction block, are worth US$23.7 million. Ecuador closed Filanbanco, the country's largest bank with $1.2 billion in assets, after its operations became unsustainable due to growing losses and overdue loans. The bank, founded in 1908, was taken over by the government in 1998 to avert its collapse in the wake of a severe financial crisis. =========== M E X I C O =========== BANCRECER: Fitch Affirms Banco Mercantil's Ratings -------------------------------------------------- Fitch, the international rating agency, has affirmed Banco Mercantil del Norte's (Banorte) ratings at long-term `BB+' (Rating Outlook Positive), short-term `B' foreign currency ratings, long-term `BBB-', short-term `F3' local currency ratings, individual `C/D' and support `4T' ratings. This follows the announcement by the Instituto para la Proteccion al Ahorro Bancario (IPAB), Mexico's deposit guarantee fund, that Bancrecer has been auctioned-off to Banorte. While the only other bidder, Canadian-owned Scotiabank Inverlat, pulled out of the auction process, Banorte offered MXP$1,650 million (roughly US$174 million) for 100%-ownership of Bancrecer, which was accepted by IPAB. Bancrecer, a bank that had been taken over by the authorities in 1997 after encountering severe asset quality and capital problems, has a network of 755 branches, 967 ATMs, 6,613 employees, and around 1.7 million accounts. Although it has nationwide coverage, it benefits from a particularly strong presence in the Northwest of Mexico and some central and southern states (including Mexico City). Provided that the relevant approvals by Mexican financial authorities are obtained, which Fitch expects to be the case, the merger of Bancrecer (MXP$68.6 billion in assets) into Banorte (MXP$97.6 billion) will create Mexico's third largest financial institution, with a market share by total deposits of approximately 13%. For Banorte, apart from the price paid (0.66 times book value), the main attractiveness in this acquisition was to complement its geographical coverage, which is still limited in certain regions in Mexico. In addition, Banorte should be able to achieve the necessary economies of scale to compete with its larger peers and expects the integration to bring cost reductions of MXP$1.4 billion to be realised in a period of two years. Moreover, while Banorte estimates that over half of Bancrecer's deposit base of MXP$57.4 billion is in the form of cheap and stable retail deposits, the costs of those linked to money markets could decline as the market incorporates the strength of the new ownership structure. Lastly, it is of note that Bancrecer is being acquired clean of past-due loans (although published statements show a small amount of MXP$128 million, or 1.4% of total lending, excluding IPAB notes; these are 542% covered by loan loss reserves). However, although Fitch considers that there are no immediate negative implications to Banorte's ratings deriving from this acquisition, there are a number of issues that will be monitored closely in the next few months, namely: --The impact of the acquisition on the institution's capital ratios. Banorte has stated that the acquisition will be done mainly through current cash holdings, dividends obtained from subsidiaries and outstanding subordinated debt, among others. While Banorte's capital to risk-weighted assets ratio of 15.6%, computed according to the stricter 2003 capital rules, should experience a decline given the size of the assets acquired, this should be limited give that IPAB notes (67% of Bancrecer's assets) are zero-weighted for the calculation of the capital to risk-weighted assets ratio; --The increased exposure to lower-yielding IPAB in the form of notes and direct lending, which will amount to MXP$92.8 billion (56% of combined total assets). Although lending to IPAB is relatively risk-free and carries low administration costs, this not only increases concentration risk but also translates into lower net interest margins and the bank's profitability may be pressured in the future by the increasingly competitive environment. In addition, there is the risk of prepayment, although Fitch considers this to be relatively low in the medium-term due to the favourable rate being paid by IPAB; --While there are major challenges in terms of integrating such a large institution into Banorte, management has a proven track record in dealing effectively with acquisitions. However, estimated costs of integration of MXP$1 billion in a period of two years, which include the costs of organisational restructuring, branch equipment and corporate image, may have a negative impact on Banorte's already perfectible cost efficiency; --Perhaps less importantly, inevitably there will be a number of overlapped customers and there may be a loss of a portion of its customer base. In an environment where lending in real terms has been declining, it will become increasingly important to be able not only to maintain current business volumes but to grow in order to support profitability and efficiency. Banorte was Mexico's sixth largest commercial bank in terms of total assets at end-June 2001 with a 6.6% market share. It is part of Grupo Financiero Banorte (GFNorte), itself owned by a group of Monterrey-based Mexican investors. GFNorte has subsidiaries involved in insurance, pension fund management (Afore), annuities (the three in conjunction with Assicurazioni Generali, the Italian-based insurance group that owns 49% of their operations), stock broking, leasing, factoring, warehousing and banking. While GFNorte previously had three separate banks, it restructured its activities in 2000 so that traditional banking is now carried out by Banorte while recoveries and mutual and pension fund management were left at Bancen. Banpais had been merged into Banorte in 2000. GFNorte's banking business (which comprises Banorte and Bancen but excludes the Afore) accounted for 96% of the group's total assets at end-June 2001 while contributing 91% of net income in the first half of the year. CONTACT: Fitch New York: Gustavo Lopez, 212/908-0853 or Peter Shaw, 212/908-0553 or Monterrey: Aurelio Cavazos, +528-335-7179 or Alejandro Garcia, +528-335-7179 BANCRECER: S&P Likely To Downgrade Banorte's Credit Ratings ----------------------------------------------------------- Ratings agency Standard and Poor's (S&P) may lower Banorte's credit ratings after it was announced that bank bailout agency IPAB had accepted the bank's exceptionally low bid for Bancrecer, Mexican financial daily El Economista reported Wednesday. According to S&P, the acquisition would lead to risks that might be cause for a reduction of Banorte's credit rating. S&P said Banorte's credit rating was subject to "special review with negative implications," with the argument that the main assets acquired by Banorte through the Bancrecer purchase are long-term IPAB bonds, and that, together with Banorte's IPAB bonds, they will make up a third of the bank's entire loan portfolio. "The banking business is about taking deposits and administering clients, not administering IPAB notes," said S&P analyst Ursula Wilhelm. BANCRECER: IPAB Deems Banorte's Offer Best Option ------------------------------------------------- Mexican bank bailout agency IPAB admitted that the decision to accept Banorte's offer for Bancrecer was difficult, but said that Bancrecer wasn't given away, Mexico City daily El Universal reported Wednesday. According to IPAB head Julio Cesar Mendez, it would have been more expensive to liquidate the bank or cancel the auction. Munoz stated that the bank's sale does not represent a loss, but rather a gain, adding that the price paid was within the reference range set by the financial agent. CINTRA: Allegations On Ex-Minister Unfounded, Says CNBV ------------------------------------------------------- Mexican securities regulator, the National Banking and Securities Commission (CNBV), denied the existence of documents used to accuse former Communications and Transportation Minister Carlos Ruiz Sacristan and his brother Federico Ruiz Sacristan of the acquisition of shares in government controlled airline holding company Cintra, Mexico City daily Reforma reported Wednesday. The CNBV's move came after consulting the records of Casa de Bolsa Bital, the company that allegedly purchased the shares on the brothers' behalf. According to the CNBV, there were no records stored in Bital's systems that match the document that the allegations are based on. The CNBV also examined other securities documents, and found no evidence to suggest that the brothers owned shares in Cintra. The brothers have argued that the document contains false signatures and other inaccurate information. HYLSAMEX: Likely To Default On Debt Payments Next Year ------------------------------------------------------ Analysts at Grupo Financiero Banamex predict that Mexican steel company Hylsamex might not be able to make its debt payments for Jan. 31, 2002, as it does not have enough resources, Mexico City daily Reforma reported Wednesday. The company has two options: to renegotiate its debts with its bankers or to be provided with funding from parent company Alfa, said the analysts. However, risk-averse debt markets will make it increasingly difficult for Hylsamex to refinance its debt. Meanwhile, contracting markets both at home and abroad mean the company will be unable to generate sufficient cash flow to make its debt payments, said Bond Snodgrass, conglomerates analyst with UBS Warburg. Hylsamex's financial problems have caused its shares to lose 87 percent of their value over the past two years. According to Banamex, Hylsamex's HYLSA subsidiary will have $115 million in debt due that it so far has been unable to refinance. ================= V E N E Z U E L A ================= POSVEN: Looking To Get Rid Of Union Leaders ------------------------------------------- Oswaldo Luna, labor relations manager at the Venezuelan hot briquette iron maker Posven, informed that the company's request to fire three of the seven union leaders behind an August 28 strike at the Guayana regional plant has been accepted for processing, Business News Americas reported Wednesday. The company had earlier appealed to the state's Labor Board to dismiss the union leaders for allegedly violating labor laws and causing damage to company property. These union leaders have been suspended until the process is concluded and their future decided, Luna said. "The process has only just begun, and we have to await the due representations and hope it [the request] prospers." Operations at the 1.5Mtpy, Puerto Ordaz-based plant are still suspended pending authorities' decision on the company's request for state prosecutors to conduct an inquiry into incidents surrounding the stoppage. Although the strike lasted only a few hours, workers switched off machinery, which can take days to restart. Evaluating losses from the strike has been slow, and there is still uncertainty as to how the reactors will respond when the plant starts up again. Posven wants guarantees from the workers before allowing them to return to their posts. 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 * * *