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



CAVAS DE SANTA MARIA: Goes Into Bankruptcy Proceedings


LAB: Huge Debt Leads To Suspension Of Flights


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


GENER: S&P Affirms BBB- Ratings; Off Watch, Outlook Stable
LANCHILE S.A.: Monthly Traffic Up In August 2001


FILANBANCO: To Begin Selling Off Property, Assets In Auction


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


POSVEN: Looking To Get Rid Of Union Leaders

     - - - - - - - - - - -


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.


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

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

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.


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
, or Andreia Reis,
          +55-21-3814-4643, or, or
          Barbara Geluda, +55-21-3814-4557, or
, or Daniela Tinoco,
          +55-21-3814-4946, or,
          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:

Contact:  Embratel Participacoes S.A.
          Silvia M.R. Pereira
          Investor Relations
          tel: (55 21) 2519-9662
          fax: (55 21) 2519-6388
          Wallace Borges Grecco
          Press Relations
          tel: (55 21) 2519-7282
          fax: (55 21) 2519-8010

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

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

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.


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

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.


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 -
     Lan Chile S.A.
     Tel: (562) 565-2538 / 6812
     New York:
     Maria Barona,
     Blanca Hirani,
     i-advize Corporate Communications, Inc.
     Tel: (212) 343-9519 / (212) 406-3690


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.


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

--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

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.

          New York:
          Gustavo Lopez, 212/908-0853
          Peter Shaw, 212/908-0553
          Aurelio Cavazos, +528-335-7179
          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

"The banking business is about taking deposits and administering
clients, not administering IPAB notes," said S&P analyst Ursula

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

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.


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

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.

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