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/raid1/www/Hosts/bankrupt/TCRLA_Public/020228.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, February 28, 2002, Vol. 3, Issue 42 Headlines A R G E N T I N A BANCO GALICIA: Execs Take Roadshow to US, Europe for Funding BHN: S&P Drops Mortgage Trust Bonds Ratings Ratings to Default B E R M U D A GLOBAL CROSSING: Announces Executive Changes GLOBAL CROSSING: May Face Charges Under Anti-Racketeering Law GLOBAL CROSSING: Analysts, Experts Question Real Asset Values B R A Z I L EMBRAER: In Talks With Chinese Firm Over Plane Venture ENRON: Petrobras Seeks Protection On Future Stake Acquisitions SHARP DO BRASIL: Surprised By Judge's Bankruptcy Declaration TRANSBRASIL: Infraero Re-Assuming Airport Control In March VESPER: Vesper Portatil Sees Suspension Due To Allegations C O L O M B I A TELECOM: Wants Extra Time In Collective Contract Negotiations TELECOM: To Issue Bonds Worth US$300 Mln In 2H02 M E X I C O AHMSA: Commission Established To Probe Financial State GRUPO DINA: Delisting From Mexico City Stock Exchange GRUPO MEXICO: Seeks CFC Approval On Rail Unit Merger With Carso VITRO SA: Whirlpool Releases Anticipated Cost Of Agreement VITRO: Q4, FY01 Results Show Stabilization, Improvement - - - - - - - - - - ================= A R G E N T I N A ================= BANCO GALICIA: Execs Take Roadshow to US, Europe for Funding ------------------------------------------------------------ Banco de Galicia y Buenos Aires executives traveled to the United States and Europe in order to find partners who are willing to invest capital in the cash-strapped financial institution. "Bank executives are negotiating the capitalization with top line banking institutions in New York, Miami, Frankfurt, Milan and Madrid," revealed an unnamed official. With 260 branches across Argentina, Galicia's deposits have fallen by ARS1.2 billion, or a fifth of its total, since December as the country defaulted on US$95 billion of bonds and devalued the peso. The bank lost ARS2.1 billion of deposits between early July and November, according to central bank documents. Galicia has now turned to private creditors for help after the government refused its bailout proposal. Among the creditors that are being asked to swap loans into Galicia shares to bail out the bank are J.P. Morgan Chase & Co. and Standard Chartered Plc. Galicia executives were also expected to meet with other creditor banks, including Barclays Plc, Banco Santander Central Hispano SA and Banco Bilbao Vizcaya Argentaria SA. CONTACTS: BANCO DE GALICIA Y BUENOS AIRES Teniente General Juan D. Per>n 456, Piso 3 1038 Buenos Aires, Argentina Phone: +54-11-4343-7528 J.P. MORGAN CHASE & CO. 270 Park Avenue New York, NY 10017 Phone: (212) 270-6000 Fax: (212) 270-1648 Contacts: William B. Harrison, Jr., Chairman/CEO/ Chairman of the Exec.Com. William H. McDavid, Legal William J. Moran, Audit STANDARD CHARTERED PLC 1 Aldermanbury Sq. London EC2V 7SB, United Kingdom Phone: +44-20-7280-7500 Fax: +44-20-7280-7791 http://www.standardchartered.com Contacts: Patrick J. Gillam, Chairman Mervyn Davis, Group Chief Executive Peter N. Kenny, Group Executive Director Finance, Corporate Treasury, Taxation, Corporate Governance in the UK BHN: S&P Drops Mortgage Trust Bonds Ratings Ratings to Default -------------------------------------------------------------- Standard & Poor's lowered Tuesday BHN II Mortgage Trust's class A1 and A2 bonds series 1997-1 ratings to 'D' from double-'C'. These rating actions are based on the "pesification" of the monthly U.S. dollar-denominated payments due on the bonds at a one-to-one parity rate. This pesification is in accordance with Article 3 of Presidential Decree 214/2002 (issued on Feb. 3, 2002). Standard & Poor's views this provision as a material change in the original terms of the debt obligation, as it mandates a change of currency, a change of interest rate, and a potential lengthening of the final maturity. All of these factors indicate a worsening of terms for investors. As Standard & Poor's stated in its January 4, 2002 press release, the ratings on BHN II Mortgage Trust's mortgage transaction might be affected by the enormous policy uncertainties resulting from Argentina's continuing economic, financial, and political crisis, including the uncertain outcome of the monetary framework. The devaluation announced on January 6, 2002, that resulted in larger portfolio credit losses and increased delinquency indicators, together with the compulsory pesification of both the underlying assets and the debt obligations, were the catalysts for the final outcome of this transaction. BHN II Mortgage Trust's senior bonds are supported by subordination (provided by junior bonds and certificates of participation), a liquidity reserve fund, and the revenue spread that exists between the interest received on the mortgages and interest that is payable on the securities. The bonds were structured to increase the level of subordination over time. However, despite the initial strong supports and credit performance over the past four years, the transaction could not withstand the actions of the sovereign in recent months. Standard & Poor's will closely follow the credit performance of these bonds and will assign a new rating reflecting their new terms and conditions, once the bondholders meet with the trustee to establish them. For more information, please contact the following analysts: Juan De Mollein and Jorge Solari, Structured Finance, Buenos Aires; and Diane Audino, Structured Finance, New York. CONTACT: STANDARD & POOR'S RATINGS SERVICES Juan Pablo De Mollein, Buenos Aires, +54-114-891-2113 Jorge Solari, Buenos Aires, +54-114-891-2114 Diane Audino, New York, +1-212-438-2388 ============= B E R M U D A ============= GLOBAL CROSSING: Announces Executive Changes -------------------------------------------- Global Crossing announced Tuesday the appointment of Carl Grivner as chief operating officer and Anthony Christie as senior vice president of product management. Grivner, who had been serving as executive vice president of global operations, will oversee sales and marketing for enterprise and carrier customers, product management and global operations. He will continue to report directly to John Legere, chief executive officer of Global Crossing. Christie will be responsible for the development, deployment and on-going management of the company's product and services suite, reporting to Grivner. "We're putting Carl into position to help us meet our financial targets while we conserve resources by bringing three key functions -- sales and marketing, product management and global operations -- under one leader," Legere said. "Carl will enhance the day-to-day operations for the company, and Anthony will concentrate on the products and services offered over our global fiber optic network, allowing me to drive our overall strategic restructuring and manage crucial communications." Grivner has many years of operational experience and expertise. He has served as president of Global Crossing Europe, Middle East and Africa and as COO for Global Crossing North America. Prior to joining Global Crossing, Grivner was president and chief executive officer of WorldPort Communications. He is a former chief executive of operations in the Western Hemisphere for Cable & Wireless, and former president and CEO for Advanced Fiber Communications (AFC). Earlier in his career he held various positions with Ameritech and IBM. Grivner has a B.A. from Lycoming College. Christie joined Global Crossing as senior vice president of global strategy and business integration from Asia Global Crossing after a successful two years during which he supported the initial public offering (IPO) and shaped and drove strategy and business development activities as well as spearheading all of the joint venture, alliance relationships and partner capacity purchases in Asia. Christie has a rich background in telecommunications general management. Before he came to Asia Global Crossing, he spent 16 years at AT&T. He held multiple positions including general manager and network vice president at AT&T Solutions, sales vice president of business markets, regional managing director of international operations for Asia, and numerous other assignments in product management, marketing and sales. His education includes a B.S. from Drexel University, M.B.A. from the University of New Haven and an M.S. from M.I.T. On January 28, 2002, Global Crossing and certain of its affiliates (excluding Asia Global Crossing and its subsidiaries) commenced Chapter 11 cases in the United States Bankruptcy Court for the Southern District of New York and coordinated proceedings in the Supreme Court of Bermuda. CONTACT: PRESS: John Schmidt, +1-973-410-8466, Email: john.schmidt@globalcrossing.com Tisha Kresler, +1-973-410-8666, Email: tisha.kresler@globalcrossing.com ANALYSTS/INVESTORS: Ken Simril, +1-310-385-5200 Email: investors@globalcrossing.com GLOBAL CROSSING: May Face Charges Under Anti-Racketeering Law ------------------------------------------------------------- Roy Olofson, a former vice president of finance at Global Crossing, may sue the bankrupt telecommunications company under anti-racketeering laws in an effort to prove that an inside conspiracy to commit fraud cost him his job, reports AFX. According Olofson's lawyer, Brian Lysaght, his client is considering a claim under the Racketeer Influenced and Corrupt Organizations Act. Lysaght deemed the move unusual but said that it is necessary, as Olofson will have trouble recovering damages if he sues the Company itself. Any awards are expected to be minimized because Olofson would be another creditor of a company with liabilities of US12 billion. Olofson, through his attorneys, has alleged that Global Crossing used "sham" swaps of network capacity with other carriers to inflate its revenue, misleading Wall Street and investors. He said he was fired for raising concerns. The lawsuit will be filed with the US District Court for the Central District of California. GLOBAL CROSSING: Analysts, Experts Question Real Asset Values ------------------------------------------------------------- Global Crossing Ltd., which listed US$22 billion in assets when it filed for bankruptcy protection last month, may be valued at only US$1 billion - US$2 billion, an article released by the Wall Street Journal revealed. The telecommunications industry, as a whole, is reeling from a brutal re-evaluation of its corporate worth. In this scenario, a number of industry analysts and experts are questioning what the actual value of the Bermuda-based company is, and some of them are arriving at five to 10 cents on the dollar. A big reason is the capacity glut that resulted when firms rushed into the field, spending billions of dollars to build millions of miles of fiber-optic connections that remain largely unused. "For the network itself, the network has little value because there is so much of it everywhere," says Susan Kalla, an analyst at Friedman Billings & Ramsey in New York. Kalla points out that while the Company has business customers that have value, the network itself costs a considerable amount to operate because it is expensive to maintain. Global Crossing spokesman John Schmidt rejects a valuation of US$1 billion - US$2 billion. According to him, it is much higher than that if for no other reason than its 2000 revenue was US$3.7 billion, excluding swaps of fiber capacity. "We have more than 85,000 customers," Schmidt added. Certainly, the only financed offer on the table for Global Crossing's assets -- the $750 million bid for a 79% stake in Global Crossing by Singapore Technologies Telemedia Pte. and Hutchison Whampoa Ltd. -- reflects that. That deal implies Global Crossing has an enterprise value of US$1.3 billion. =========== B R A Z I L =========== EMBRAER: In Talks With Chinese Firm Over Plane Venture ------------------------------------------------------ Empresa Brasileira de Aeronautica SA (Embraer), the fourth- largest aircraft builder, is in talks with AVIC II, a Chinese state-run aerospace company. The negotiations center around propsals to assemble 30- to 70-seat aircraft, make parts and transfer technology to China, reports Bloomberg. Frederico Curado, the Company's executive vice president for airline sales, expects a decision over the matter to come this year. According to Embraer's estimates, China will account for half the 500 regional jetliner sales in Asia during the next decade as the domestic aviation industry expands. China is using that market clout to nudge suppliers to transfer jetmaking technology to its own aerospace companies, including linking a planned sale of 30 Embraer jetliners to the outcome of production-sharing talks. The US$500-million sale "is absolutely tied to the policy that the Chinese government is trying to develop," which is to participate in the global regional jet market, Curado said. In addition, Embraer is considering the possibility of building regional jetliners in China, importing some of the parts, Curado said. The talks also involve minimizing the risk of the project. Embraer won't consider taking less than a half stake in any aircraft-making venture, he said. The company hasn't said which partner it might join, although Brazilian news reports have cited Heilongjiang province-based Hafei Aviation Industry Co. as the likely partner. Embraer's preferred shares on Tuesday had their biggest drop in more than four months, falling 6.4 percent to BRL13.19. CONTACTS: EMBRAER Bob Sharp, Press office mgr. bob.sharp@embraer.com.br OR Wagner Gonzalez, Press officer wagner.gonzalez@embraer.com.br Phone +55 12 3945 1311 Fax + 55 12 3945 2411 ENRON: Petrobras Seeks Protection On Future Stake Acquisitions -------------------------------------------------------------- The Brazilian state owned oil and gas company Petrobras wants additional guarantees in order to disburse the US$240 million for the acquisition of Enron's stakes in Brazil for fear of termination of the business by the creditors of the bankrupt US energy trader. Petrobras is looking to buy Enron's 25.3 percent of shares in CEG and 33.7 percent of shares in CEG Rio. Petrobras already owns a 25 percent stake in CEG Rio. Petrobras President Francsico Gros said earlier that the gas company is examining all the legal ramifications of proceeding with this purchase. The company's lawyers are working to ensure that Petrobras cannot be liable for any future lawsuits from disgruntled Enron shareholders should it purchase shares in the two companies. Petrobras is also targeting other assets held by Enron in Latin America as the gas pipelines in Bolivia and Argentina and gas distributing companies in Brazil. CONTACTS: Mark Palmer of Enron Corp., +1-713-853-4738 Enron Corp. Investor Relations Dept. P.O. Box 1188, Suite 4926B Houston, TX 77251-1188 (713) 853-3956 Email: investor-relations@enron.com Enron Corp. Public Relations Dept. P.O. Box 1188, Suite 4712 Houston, TX 77251-1188 (713) 853-5670 SHARP DO BRASIL: Surprised By Judge's Bankruptcy Declaration --------------------------------------------------------------- Sharp do Brasil said it was taken aback by the sudden declaration of its bankruptcy by a judge in Manaus, adding that it is studying the matter, reports South American Business Information. The judge's declaration is expected to cause confusion in parallel bankruptcy proceedings involving Sharp do Brasil and Sharp S.A., which has been tied up in a Sao Paulo court since March 2000. Current expectations are there might be a long, drawn out legal battle over which judge will be responsible for dealing with the claims for various creditors. The Company also received a decision last December, which impeded it from undertaking a planned restructuring. The Manaus bankruptcy claim was originally initiated by the Laboratorio de Analises Clinicas' Dr. Costa Curta, to whom Sharp owes BRL10,000. TRANSBRASIL: Infraero Re-Assuming Airport Control In March ---------------------------------------------------------- Brazilian state airport management company Infraero is expected to begin March taking back control of the areas in airports used by Transbrasil airline. Infraero will start with the operational areas, such as check-in counters, which will be redistributed to other airlines. Then it will proceed with the hangars, which is a more complicated operation, as these contain goods belonging to the airline. Transbrasil is likely to present a legal challenge to this. These actions come after Transbrasil, which owes BRL115 million to Infraero, failed to meet the legal requirements related to meeting this debt. Transbrasil also owes BRL35 million to its employees in back wages and has promised to present a plan for payment of this to the government by March 20, as part of a wider plan to begin operations again. Recently, the country's Finance Ministry decided to freeze the assets of the grounded carrier Transbrasil, in a move that would probably steer the airline towards bankruptcy. The ministry made its decision as part of an attempt to recover the BRL342 million (US$141.3 million) it is owed by Brazil's fourth-largest carrier. Transbrasil was grounded December 3, when its fuel suppliers refused to extend further credit to cover its bills. Since 1999, Transbrasil has posted losses of BRL365.5 million (US$151 million). The airline has a debt of more than BRL1 billion (US$413 million). ONTACT: Antonio Celso Cipriani, CFO Rua Geral Pantaleao Telles, No. 4, Jardim Aeroporto 04355-040 Sao Paulo, Brazil Phone: +55-11-533-7111 Fax: +55-11-543-9083 VESPER: Vesper Portatil Sees Suspension Due To Allegations ---------------------------------------------------------- Anatel (Agencia Nacional de Telecomunicacoes) may be forced to suspend Vesper Portatil, a product launched by Vesper in November 2001, due to accusations launched by other companies, reports O Estado de Sao Paulo. Telesp Celular claimed that Vesper Portatil, a product that allows the acquisition of fixed phone line on mobile equipment, enables its use outside a cell area by as much as .5 to 4 KM. The controversy surrounding the issue began because Vesper is licensed to operate in the fixed communication sector, but not on mobile networks. Besides the accusation filed by Telesp Celular based on a study by CPqD, Anatel revealed there are other accusations against the system. The product marked the return of Vesper to the residential market after losses of US$1.1 billion. Its shareholders Qualcomm and VeloCom have injected US$346 million in the Company. By late 2001, Vesper Portatil subscribers totaled 550,000 in the 17 states it operates. =============== C O L O M B I A =============== TELECOM: Wants Extra Time In Collective Contract Negotiations ------------------------------------------------------------- Colombia's state-owned telco Telecom is awaiting employees' response to its request for an extension to collective contract negotiations, Business News Americas reports. According to Telecom spokesman Carlos Obregon, if employees do not accept an extension the issue will go to an arbitration tribunal. Telecom began talks with its employees' union USTC February 5 with an aim of modifying the collective contract to eliminate certain benefits and streamline operations. The Company needs to maximize its revenues so that it is better prepared to pay off its COP4.5 trillion (US$1.9 billion) labor liability. However, talks have proved fruitless after reaching the initial deadline on February 24, Obregon said. The government has set up a fund and currently has pension provisions totaling COP1.5 trillion pesos, which should cover monthly payments of COP20 billion pesos starting in March, Telecom chairman Hernan Roman said earlier this year. TELECOM: To Issue Bonds Worth US$300 Mln In 2H02 ------------------------------------------------ Colombian finance ministry's public credit director Juan Mario Laserna announced that state-owned telco Telecom is expected to issue bonds worth US$300 million in the second half of this year, reports Reuters. The Company will be issuing the bonds to cover its share of the costs incurred by joint ventures with foreign equipment vendors. The issue would be dependent on the vendors' acceptance of terms proposed by Telecom in January, based on the government's December offer to allow Telecom to take out US$600 million in debt if it can renegotiate the contracts. The JV agreements - with Ericsson, Nortel Networks, Alcatel, Siemens, Teleconsorcio, Itochu and NEC - date back as far as 1993, and relate to the installation, operation and transfer of 1.5 million fixed lines. Vendors installed the lines under a revenue sharing agreement with Telecom, and were guaranteed a certain rate of return if revenues did not meet projections. However, Colombia's weak economy caused revenues to fall short of expectations, saddling Telecom with US$1.56 billion in liabilities under the terms of the joint venture contracts. Telecom provides long distance, local and Internet services. =========== M E X I C O =========== AHMSA: Commission Established To Probe Financial State ------------------------------------------------------ Altos Hornos de Mexico SA (AHMSA) will welcome an interdisciplinary commission this week, which will be set up to investigate and analyze the financial state of the debt-laden iron and steel company. According to a report released by Business News Americas, the commission will collect, analyze and act on financial information about the Company, and incorporate the findings into developing a strategy for the Monclova region's economic development, which depends heavily on AHMSA. The commission will be made up of representatives from Mexico's economy and finance ministries, the Coahuila state government, local (Monclova, Coahuila) business chamber, and the municipal governments of Monclova and Frontera, according to the report. AHMSA has been protected for more than two-and-a-half years by a suspension of payments order - a kind of bankruptcy protection - and has accrued debts of more than US$1.85 billion. Despite the Company's financial situation, it remains operative and is one of Mexico's largest steel producers, as well as operating coal and iron ore mines. GRUPO DINA: Delisting From Mexico City Stock Exchange ----------------------------------------------------- Mexican truck maker Grupo Dina is going to leave the Mexico City Stock Exchange (BMV) at the end of March, says Mexico City daily el Economista. The bourse confirmed it received Dina's request to begin the process of leaving the market, and is waiting for approval from the National Banking and Securities Commission (CNBV). Dina is now bankrupt and doesn't have options to renegotiate its liabilities due to the international crisis in the automotive industry. The Company has been facing a series of troubles -- first the 1995 crisis, then the cancellation of the West Star Trucks contract, and the impossibility of paying the US$6.5 million in current interest on a US$163-million bond due in 2004. Nevertheless, Dina executives say all of these would have been "bearable" if it were not for the worldwide economic slowdown and the crisis in Argentina, which has dashed any hopes for recovery. GRUPO MEXICO: Seeks CFC Approval On Rail Unit Merger With Carso --------------------------------------------------------------- Grupo Mexico has asked the Mexican antitrust agency Federal Competition Commission (CFC) to approve a proposed share merger between its rail unit Ferromex and conglomerate Grupo Carso SA's (E.GCP) rail unit Ferrosur. The proposal has been questioned by competitor Transportacion Ferroviaria Mexicana SA (TFM), a unit of Grupo TMM SA (TMML), which operates the Northeast railway in association with Kansas City Southern Industries Inc. (KSU). According to TMM, the merger of the Southeast and Pacific North railways violates rules set down when the government privatized the country's railroads in the latter half of the 1990s. Sources close to the CFC have said the merger could result in unfair competition for TFM. However, Grupo Mexico argued that the proposal is for "a share transaction, not a merger," and therefore allowed under the privatization rules. Additionally, Grupo Mexico said the restriction on concession holders to own no more than 5 percent of other privatized railway concerns was in effect for the privatization process, but no longer applies. "Ferromex and Ferrosur will continue to own the concessions granted for rail service," Grupo Mexico said. The proposal calls for Carso's mining unit Empresas Frisco and sister company, venture capital fund Sinca Inbursa, to take a 20 percent stake in Grupo Mexico's railways holding company Infraestructura y Transportes Mexico SA, in exchange for their controlling stake in Ferrosur. The holding company would also consolidate Grupo Mexico's 74 percent stake in Ferromex. CONTACTS: German Larrea Mota-Velasco, Chairman and CEO Avenida Baja California 200, Colonia Roma Sur 06760 M,xico, D.F., Mexico Phone: +52-5-264-7775 Fax: +52-5-264-7769 C.P. Hector Garcia De Quevedo Topete, Corporate Dir. Av. Baja California No. 200, Colonia Roma Sur C.P. 06760 MEXICO, D.F. Phone: 55-64-70 66 ext 7238 Fax: 55-64-3714 UNDERWRITER: ING BARRINGS Corporate communication and public relations: C.P. HECTOR GARCIA DE QUEVEDO TOPETE CORPORATE DIRECTOR AV. BAJA CALIFORNIA No. 200 Colonia ROMA SUR C.P. 06760 MEXICO, D.F. Tel: 55-64-70 66 ext 7238 Fax: 55-64-3714 moram@gmexico.com.mx VITRO SA: Whirlpool Releases Anticipated Cost Of Agreement ---------------------------------------------------------- In an official company press release, Whirlpool Corporation (NYSE:WHR) released Tuesday the anticipated transaction cost of its recently announced agreement in principle with Vitro, S.A., to acquire Vitro's stake in Vitromatic S.A. de C.V., an appliance manufacturing and distribution joint venture in Mexico. Pending due diligence and regulatory approvals, Whirlpool expects to purchase Vitro's stake in Vitromatic for $150 million in cash and will assume 100 percent of the joint venture's existing $220 million debt. Whirlpool, which holds 49 percent interest in the joint venture, intends to purchase Vitro's remaining 51 percent interest. Vitromatic is the second largest appliance manufacturer in Mexico with 34 percent of the market. The business produces annual sales of more than $600 million and is expected to be accretive to Whirlpool's earnings beginning in the second half of 2002. Whirlpool expects the Vitromatic business to become a strategic extension of its North American business, allowing the company to directly serve Mexico's growing domestic market and expand export opportunities in Central and Latin America. Headquartered in Monterrey, Vitromatic has five production facilities and employs approximately 6,000 people. Vitromatic manufactures ranges, refrigerators and laundry equipment for domestic and export markets under the Whirlpool, Acros, Supermatic and Crolls brand names. Vitromatic also serves as the exclusive Mexican distributor for a full line of Whirlpool, KitchenAid and Roper products built in the United States. Whirlpool Corporation is the world's leading manufacturer and marketer of major home appliances. Headquartered in Benton Harbor, the company manufactures in 13 countries and markets products under 11 major brand names in more than 170 countries. Additional information about the company can be found on the Internet at www.whirlpoolcorp.com. CONTACT: WHIRLPOOL CORPORATION Media: Tom Kline, 616/923-3738 Email: thomas--e--kline@email.whirlpool.com Financial: Thomas Filstrup, 616/923-3189 Email: thomas--c--filstrup@email.whirlpool.com VITRO: Q4, FY01 Results Show Stabilization, Improvement ------------------------------------------------------- - Consolidated net sales maintained a positive trend in dollar terms reaching a record number of US$3 billion, rising YoY by 6.7% for the quarter and 5.1% for the year, driven by the performance of Flat Glass, Glass Containers and Acros Whirlpool - Net income increased YoY for the quarter, in dollar terms, from US$6 million to US$38 million - Total outstanding debt reduced QoQ by US$38 million, and YoY by US$58 million to US$1,576 million - EBITDA remained strong, exceeding US$500 million for the fifth consecutive year, and reaching US$513 million, although decreased YoY in dollar terms by 12.0% for the quarter and by 8.1% for the year, as a result of the slowdown of the economies in the U.S.A. and Mexico aggravated with the September 11 events - Consolidated net sales for the year reached a record number of US$3 billion, representing a 5.1% YoY increase in dollar terms, and for the quarter reached US$783 million, representing an increase of 6.7% in dollar terms, compared with US$734 million for the fourth quarter of 2000. Flat Glass, Glass Containers and Acros Whirlpool were the main drivers of the Company's sales performance for the year and quarter. - The Company posted net income of US$38 million for the quarter, which included charges for approximately US$7 million related to severance payments and the sale and write off of certain assets, and a total financing gain of US$18 million due mainly to a non- cash exchange gain. Net majority income reached US$23 million during the quarter. - During the fourth quarter debt was reduced by US$38 million by achieving various internal savings and using, solely, internally generated funds. The Company met all the maturities of short-term euro commercial paper that came between the months of September and January, which was not renewed. As of this date, the Company has no commercial paper outstanding. - EBITDA remained strong, exceeding US$500 million for the fifth consecutive year, and reaching US$513 million. However, for the quarter declined YoY by 12.0% in dollar terms, and by 8.1% for the year. The decrease was the result of pricing measures taken to strengthen market participation in certain businesses, which were significantly affected by the slowdown in demand in the U.S. and Mexican economies, aggravated as a result of the September 11 events. The impossibility of absorbing the cost of certain dollar denominated materials, notwithstanding important internal cost reduction measures also affected EBITDA. The strength of the peso continued to affect the competitiveness of the Company's exports while favoring imports into the domestic market. Lower production levels, as a result of reduced demand, resulted in a lower fixed cost absorption. All figures provided in this communication are in accordance with Generally Accepted Accounting Principles in Mexico. All figures are presented in constant Mexican pesos as of December 31, 2001. Dollar figures are in nominal US dollars and are obtained by dividing nominal pesos for each month by the applicable exchange rate as of the end of that month. Vitro, S.A. de C.V. (NYSE: VTO and BMV: VITROA), through its subsidiary companies, is a major participant in four distinct businesses: flat glass, glass containers, household products and glassware. Vitro's subsidiaries serve multiple product markets, including construction and automotive glass, wine, liquor, cosmetics, pharmaceutical, food and beverage glass containers, household appliances, fiberglass, plastic and aluminum containers, and glassware for commercial, industrial and consumer uses. Founded in 1909, Monterrey, Mexico-based Vitro has joint ventures with 10 major world-class manufacturers that provide its subsidiaries with access to international markets, distribution channels and state-of-the-art technology. Vitro's subsidiaries do business throughout the Americas, with facilities and distribution centers in seven countries, and export products to more than 70 countries. DETAILED FINANCIAL INFORMATION FOLLOWS: Consolidated Results Sales The positive YoY sales performance in U.S. dollar terms for the year and the fourth quarter was mainly driven by the businesses of Flat Glass, Glass Containers and Acros Whirlpool. Similarly to last quarter, sales in peso terms at the Flat Glass business unit remained practically flat YoY, overcoming the pressure that a strong peso puts on prices, increased imports and the decline in demand caused by the slowdown of the U.S. economy and its impact over the Mexican economy. Flat Glass was able to increase sales in dollar terms, among other things as a result of the consolidation of Cristalglass, its European-based subsidiary. Glass Containers showed an increase resulting for the most part from the domestic market, with additional sales especially to beer producers and a general increase in sales of niche products with a better sales mix. At Acros Whirlpool, volume increases in the export markets and added sales of recently launched products, were the main drivers for the growth in sales, partially offsetting price pressures. For Glassware, sales for the quarter decreased YoY, as result of a decline in demand in the retail, institutional and industrial sectors, as a result of the slowdown of the U.S. and Mexican economies. As was announced during IIIQ'01, to improve synergies and further reduce costs, the Diverse Industries unit was integrated into the remaining units; various parts of Diverse Industries are in the process of being sold and the remaining companies will be operated as part of the remaining units. Fiber Glass, which sells to both the construction and auto segment, is now managed by the Flat Glass business unit, the plastic business, that has distribution channels similar to those of Glassware, is now managed under such unit. The remaining businesses are currently reporting to the Glass Containers unit either because of vertical integration or market similarities. EBIT and EBITDA EBITDA has remained strong, and was above US$500 million for the fifth consecutive year, notwithstanding adverse market conditions EBITDA for the year was US$513 million. Despite various internal measures and efforts undertaken to offset adverse circumstances, YoY EBIT and EBITDA declined mainly as a consequence of favorable imports resulting from a strong peso, pricing measures that the Company agreed to absorb to strengthen market participation in certain businesses, vis-a-vis the slowdown in demand aggravated during the IIIQ'01 in the U.S. economy, and impacting the Mexican economy as well. The strength of the peso, which has appreciated YoY by 4.6% for the year plus an annual inflation of 4.4%, continued to affect the competitiveness of the Mexican industry. Also, lower production levels, as a result of a decline in demand, resulted in a lower fixed cost absorption. Additionally, during the quarter the Company incurred certain labor expenses that were paid in lieu of profit sharing to workers, mainly in connection with the realignment of certain businesses, and that, on the other hand, improved the tax planning, therefore resulting in net free cash flow generation, plus improved services to customers and lower administrative costs. These additional expenses amounted to approximately US$10 million for the year. Total Financing Cost Interest expense for the quarter decreased due to a lower weighted average cost of debt, which declined to 8.6% from 10.2% for IVQ'00 as a result primarily of lower market rates, a decrease in the aggregate amount of debt and the Company's liability management strategies. Additionally, the Company has locked-in fixed rates for certain of its floating rate liabilities, through various interest rate cap transactions that amount to US$350 million and that should aid to lower the Company's financing cost in the future. The weighted average cost of debt for fiscal 2000 was 10.3%, while for 2001 it was 9.1%. Currently, debt accruing interest at fixed rates represents 53% of total debt of the Company. Due to the 3.6% appreciation of the peso during IVQ'01, the Company recorded a non-cash exchange gain for the period. Overall, the Company recorded, a total financing gain for the quarter of Ps$171 mill. (US$18 mill.), compared with a total financing cost of Ps$414 mill. (US$41 mill.) for the fourth quarter of last year, when a devaluation of the peso produced a non-cash foreign exchange loss. Taxes The Company has made an effort to improve its tax position, taking different measures to pay taxes more efficiently. As a result of that, taxes plus profit sharing to workers (PSW) for the year declined due to the reorganizations that took place at the end of 2000 and in the last quarter of 2001, within the Glass Containers, Flat Glass and Glassware business units, to improve service to customers and reduce administrative costs. Another factor that contributed to lower taxes & PSW was a reduction in the EBIT base YoY. For the quarter taxes increased YoY due to the recognition of deferred taxes in some of our foreign subsidiaries, and PSW went down as a result of the above- mentioned reorganizations. Net Income Net income for the quarter was Ps$354 mill. (US$38 mill.), compared with Ps$51 mill. (US$6 mill.) during IVQ'00 mainly as a result of a considerable, non-cash, exchange gain. Net majority income for the quarter was Ps$217 mill. (US$23mill.), compared with a net loss of majority interest for IVQ'00 of Ps$70 mill. (US$6 mill.). The Other Income (expense) item for the quarter, included severance payments made in connection with an ongoing reorganization program and non-cash losses in connection with the sale of certain assets and the write-off of obsolete assets. Capital Expenditures In the aggregate, CAPEX for fiscal 2001 was US$100 mill., US$10 mill. less than the aggregate amount of CAPEX for 2000. CAPEX for the year was mainly used for maintenance purposes. CAPEX for the year was between 15% and 20% lower than the originally budgeted US$ 120-130 million as a means to optimize the utilization of the Company's cash flow generation. Financial Position The US$38 million QoQ debt reduction was achieved through various internal savings and using, solely, internally generated funds. The Company met all the maturities of short-term euro commercial paper that came between the months of September and January, which was not renewed. As of this date, the Company has no commercial paper outstanding. The US$58 million debt reduction for the year, along with lower interest rates, coupled with the improvement in the Company's liability management strategies, resulted in interest. coverage of 3.3 times. Financial leverage (Total Debt/EBITDA) stood at 2.97 times, slightly higher than year-end 2000 of 288 times, but that reflects a lower EBITDA. It's worth noting that the debt reduction was achieved notwithstanding the acquisition of Cristalglass and severance payments made in connection with our ongoing corporate reorganization of US$34 million. Debt Profile as of December 31st, 2001 - 57% of debt was long-term. - Average life of debt was 2.7 years. - 50% of debt maturing in the period January '02 - December '02, or approximately US$334 million, is related to trade finance, which the Company regularly renews. - Current maturities of long-term debt include a maturity of US$175 million on May '02 of a bond placed in the international capital markets. - Rate composition of Company's debt: fixed rate = 53%; floating rate and fixed spread = 25%; short-term debt subject to market conditions = 22% Cash Flow Year over year, lower CAPEX and better working capital management, along with lower taxes and dividends paid, resulted in an improvement of net free cash flow generation that offset a lower YoY EBITDA for the quarter. Net free cash flow generated during the quarter was used mainly for debt reduction, severance payments as part of the ongoing corporate reorganization, the settlement of the final equity SWAP transaction that the Company had contracted and a US$33 million increase QoQ in the Balance Sheet's Cash and Cash Equivalent line. As a percentage of sales, working capital investments for IVQ'01 were reduced to 8.92% from 12.6% for IVQ'00. Flat Glass (36% of Sales) Sales Sales of the business unit during the quarter increased 5.9% in dollar terms and remained flat in peso terms as a significant percentage of the business' revenues are denominated in U.S. dollars. On the domestic front the business remained relatively stable, despite pricing pressures from Asian imports, the slowdown of the auto segment and lower sales of fiberglass due to the maintenance given to one of its furnaces. At the same time, some volume previously consumed internally for the auto segment was shifted to the export market, favoring sales in that sector although impacting the sales mix. Foreign subsidiaries increased sales YoY by 11.3% mainly driven by Cristalglass. YoY, volumes for the quarter were flat for both construction and auto segments, although for the year volumes declined by 2.9%, basically due to the slowdown of the auto segment. In 2001, OEM represented 15% of the unit's sales and 6% of the Company's sales. Fiberglass volumes were down by 8.5% due mainly to the above-mentioned shutdown of one of its furnaces to finish major maintenance work and as a result increase capacity. Results of the Flat Glass business for the quarter and the full year include the segment of Fiber Glass, formerly managed within Diverse Industries. In 2001, Fiber Glass represented approximately 5% of the aggregate business unit sales for both the quarter and the year, and 6% for 2000. EBIT and EBITDA Mainly a strong peso that promoted imports and reduced income in peso terms, affected EBIT and EBITDA margins on a YoY basis for the quarter. Also, market conditions have resulted in reduced demand, which has continued to increase price pressures for the Company. On the foreign subsidiaries front, there are still efforts that are being made to bring the former Harding Glass business into the operations efficiency levels of VVP America. Efforts have been made to reduce costs, such as a personnel reduction of 3% in the last quarter. Operating efficiencies have been improved, which has allowed the company to partially compensate for the market slowdown of this last quarter. Further efforts are being made to increase efficiencies and improve the product mix. The unit went at the end of 2000 into a series of reorganizations that benefited the cash flow generation by a better tax planning and at the same time improving sales service toward clients, however, due to such event, during the quarter some labor expenses were incurred in lieu of payment of PSW that also impacted EBIT and EBITDA. The recently integrated fiberglass segment represented approximately 13% of EBIT and 11% of EBITDA for the year. Glass Containers (32% of Sales) Sales Total YoY sales of the Glass Containers business unit increased by 8.7% in dollar terms. The beer, soft drink, wine and cosmetic segments contributed to most of the improvement. Also, focusing in more profitable niche segments paired with more effective marketing to the end consumer has yielded better sales. The export market remained practically flat. Sales from foreign subsidiaries increased as a result of the global strategy of the unit to help cover unattended demand in the south of Mexico and north of Central America, due to lack of capacity at the Mexican plants. Alcali (raw materials), showed a YoY increase in sales as a result of better market conditions for the products that it produces and distributes. The rest of the non-glass segments were affected by the slowdown of the U.S. and Mexican economy. Results of the Glass Containers business unit for the quarter and the full year included the results of the ampoules, capital goods, raw materials and aluminum can segments, formerly managed by Diverse Industries. In 2001, these segments represented 2001 20.3% of net sales, compared with 22.3% for the previous year. For the quarter, the non-glass segments decreased YoY by 10.9%. EBIT and EBITDA The glass segment showed an improvement QoQ of around 110 basis points in its EBITDA margins due to cost efficiency measures and a better sales mix. On an annualized basis, the recently integrated non-glass units represented approximately 14% of EBIT and 16% of EBITDA for the year, compared with 16% of EBIT and 17% of EBITDA for 2000. With the exception of Alcali (raw materials), the rest of the non-glass segments were negatively affected by the strong peso and pressures on prices due to a condition of over-supply for the aluminum can segment and favorable imports that have affected the ampoules segment. Glass Containers underwent at the end of 2000 several reorganizations that benefited the cash flow generation, leaded to a better tax planning and improved service to clients. At the same time, the above-mentioned reorganizations resulted in some extra labor expenses, in lieu of payment of profit sharing to workers, which affected margins during the quarter. Glassware (9% of Vitro's Sales) Sales The decrease in consolidated net sales on a YoY basis continued to be attributable to the decline in demand, both in the U.S. and Mexican economies, for both glass and plastic products. The decline in sales is also attributable to an increase in import products, especially from European and Asian competitors, as a result of a strong peso and the continued decline in import tariffs, which affected revenues in the domestic market. In the export market, sales continued to decline as a result of a slowdown in demand for the hotel, restaurant service, and industrial products (coffee carafes, blenders, etc.). Volumes for IVQ'01 showed an increase of 10% over IIIQ'01, but decreased YoY by 13%. Plastic volumes showed an increase over IIIQ'01 of 5.4%, but decreased YoY by 8.7%. The recently integrated, for management purposes, plastic segment, formerly part of Diverse Industries, represented approximately 21% of Glassware sales for both the quarter and the year 2001. For 2000, it represented 19% of the unit's sales. Glassware's management is focusing on improving returns by renewing and maintaining a constant commitment to improve its line of offered products, improving the sales mix toward niche markets and focusing more on the distribution front. EBIT and EBITDA YoY, IVQ'01 results decreased by 44.0% mainly as a result of lower sales and thus lower fixed cost absorption. The less attractive sales mix due to the decline in demand in the most profitable segments and exports at prices that may not be met in industrialized economies also affected both EBIT and EBITDA margins. Management continues its strategy of maintaining low inventories, in an effort to increase cash flow generation, improving product innovation and client service, and focusing on distribution efforts. Reorganizations made to increase cash flow resulted in some extra labor expenses for the period paid in lieu of PSW, which affected the EBIT and EBITDA generation. The recently integrated plastics segment represented approximately 18% of EBIT and 16.5% of EBITDA for IVQ'01, and 15% for both EBIT and EBITDA for the year. Acros Whirlpool (23% of Sales) Sales During the quarter, demand from the export market for products of this business unit increased in unit terms more that 31%, despite the U.S. economic downturn. The new range platform contributed to most of the increase, followed by the refrigerator segment, since Acros Whirlpool's export models represent a more affordable option for the U.S. consumers. This trend helped offset flat sales shown in the domestic market, which are being affected by low-price imports benefited by the strong peso and a general slowdown in the appliances sector. For the year, volumes increased by 8%, due mainly to the introduction of the new range platform and the certain models within the refrigerator segment. EBIT and EBITDA Profitability continued to be affected mainly by pricing pressures, mostly from Korean imports into the domestic market. The increased participation of dollar denominated sales via exports, helped offset the pressures shown on the domestic front. Management of Acros Whirlpool is focusing on improving the product mix to improve margins, such as refrigerators over nine feet in size, the consolidation of the new range platform, which is likely to result in operating efficiencies, the new refrigerator line to be produced, and a new import model in the washer segment. Recent Key Developments DEBT REFINANCING The Company's internal resources, existing credit facilities coupled with additional facilities being completed, a capital- markets raising exercise in the Mexican domestic market, and proceeds from divestitures, are expected to be used as means to refinance the Company's Yankee Bond that matures in May of 2002. DEBT REDUCTION Debt was reduced by approximately US$58 million for the year to US$1,576 million, notwithstanding significant expenditures resulting from a corporate reorganization (US$34 million) and the acquisition of Cristalglass. Also, efforts have been made to reduce holding company debt. This reflects the Company's desire to improve its financial ratios towards investment grade levels. ACROS WHIRLPOOL The Company announced Tuesday that it has reached an agreement in principle with Whirlpool Corporation, to sell its 51% controlling interest in Acros Whirlpool. The transaction was approved by Whirlpool's and Vitro's boards last week, and still requires approval by the competent authorities and Vitro's shareholders. The transaction, which is expected to be completed during the second quarter of this year, is consistent with Vitro's efforts to concentrate in its core businesses. DIVESTITURE PLAN UPDATE The Company has been negotiating agreements that are near completion, for the sale of two businesses. One transaction should result in the Company receiving applicable proceeds in the near future. A second transaction is currently being negotiated, but requires government approvals that may slowdown completion. Other divestitures are not currently being pursued as aggressively awaiting for better market conditions. Although there can be no assurance that such sales will be completed, Vitro remains committed to divest non-strategic assets. JOIN VENTURE WITH AFG INDUSTRIES The Company has continued the negotiations of the relevant agreements with AFG to convert a glass containers facility in Mexicali into a flat glass production facility. The agreements are expected to be completed shortly and construction is expected to be commenced during the second half of this year. To see financial statements: http://bankrupt.com/misc/Vitro.txt CONTACTS: Investor Relations Vitro S.A. de C.V. Beatriz Martinez, 011 (52) 8863-1258 bemartinez@vto.com or Media Relations: Vitro, S. A. de C.V. Albert Chico, 011 (52) 8863-1335 achico@vto.com or Breakstone & Ruth International Luca Biondolillo, 646/536-7012 Lbiondolillo@breakstoneruth.com or Susan Borinelli, 646/536-7018 Sborinelli@breakstoneruth.com *********** 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, Edem Psamathe P. Alfeche and Fe Ong Va�o, Editors. Copyright 2002. 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 240/629-3300. * * * End of Transmission * * *