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

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

            Monday, March 18, 2002, Vol. 3, Issue 54

                           Headlines


A R G E N T I N A

ARGENTINEAN BANKS: Government Plans to Merge Unviable Banks
CAPEX: Foreign, Local Currency Ratings Slide to Default Status
PEREZ COMPANC: Exec Admits Debt Woes; Investors Turn Bearish
PEREZ COMPANC: Analysts See Trouble as Much Debt Comes Due in 02
PEREZ COMPANC: VP Vicente's Speech on Questions Firm's Viability


B E R M U D A

GLOBAL CROSSING: 3rd Buyer Enters Fray, Inviting Others to Join
GLOBAL CROSSING: Grand Jury Asks Ullico Officers to Explain Ties


B R A Z I L

COPEL: To sell BRL500 Million Bonds to pay 1997 Series
GLOBO CABO: BNDES Confirms BRL1 Billion Capital Increase
TELEMAR: S&P Affirms Negative Outlook, Sends Bovespa Tumbling
TELEMAR: Plans BRL650 million Bond Sale to Pay Maturing Debts


C H I L E

EDELNOR: Defies Prediction, Makes US$9.7 million-interest Payout
TELEFONICA CTC: Transport Department to Defend Tariff in Court
TELEFONICA CTC: To Propose CLP1.2 billion Dividend this Year


M E X I C O

GRUPO BITAL: Moody's to Upgrade Ratings Following Cash Injection
GRUPO MEXICO: Solution to Strike Still Eluding Management, Union
HYLSAMEX: Bondholders Approve Payment Extension, Banks to Follow
VITRO: Shareholders Approve US$150 Million Vitromatic Sale


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

ARGENTINEAN BANKS: Government Plans to Merge Unviable Banks
-----------------------------------------------------------
Several state-owned banks will be merged before the second half of
the year as part of the government's effort to overhaul its
battered banking system.

According to AFX News, at least three banks have been identified
as likely to be included in the initial list of banks. A detailed
acounting of which banks will be merged is expected by April 15.

Citing an unnamed source, Buenos Aires Economico said the agency
tasked to restructure the banking system is planning to merge the
operations of Banco de la Nacion Argentina with Banco de la
Provincia de Buenos Aires and Banco de la Ciudad de Buenos Aires.

In a recent Inter-American Development Bank annual meeting in
Brazil, Treasury Secretary Lisandro Barry, who will head the
agency, said account holders whose money had been frozen have
until April 15 to decide whether to convert these deposits into
new bonds issued by the government.

Mr. Barry said that, at the end of this process, some banks will
be viable while others will not.

The report said Banco de la Ciudad de Buenos Aires and Banco
Nacion have openly rejected the plan, while Banco de la Provincia
de Buenos Aires wants the plan to be studied further.


CAPEX: Foreign, Local Currency Ratings Slide to Default Status
--------------------------------------------------------------
Standard & Poor's has further lowered the foreign currency rating
of power generator Capex to "D" from "SD" and its local currency
rating to "D" from "CC".

According to the ratings agency, the action resulted from the
company's failure to meet a US$2.5 million principal debt payment
on March 11.

The energy firm failed to make the payment on its US$450 million
long-term senior unsecured notes, Business News Americas said last
week.  

The company also delayed its March 11 bondholder's meeting until
Tuesday this week, where the missed payment will be discussed, the
report said.

Argentina's free-floating peso has limited Capex' cash-generation
capacity and negatively affected its dollar-denominated debts, the
report said.

The company still faces uncertainties around the electricity
sector's proposed new pricing system that would allow companies to
recover higher operating costs from the devaluation.
      
Capex generates electricity in the Comahue region in southwest      
Argentina, with six gas-fired units and one steam unit.


PEREZ COMPANC: Exec Admits Debt Woes; Investors Turn Bearish
------------------------------------------------------------
The Argentine equity market pulled down shares of Perez Companc SA
during trading late last week, shortly after the company bared
plans to negotiate as much as US$2.7 billion of debt.

The firm's American depositary receipts fell as much as US$1.48 to
US$7.50, the biggest drop in two years, and recently traded at
US$7.70.  Shares traded in Argentina fell as much as 14.8% to
ARS1.94.

The frantic sellout last week, which slashed 16.5% off the shares,
was triggered by Vice Chairman Oscar Vicente. Mr. Vicente told a
recent gathering of business executives that the firm has had
difficulty meeting its international obligations.

"A company like Perez Companc is unviable in the current
situation," Mr. Vicente was quoted as saying.

Mr. Vicente also said that the devaluation of the Argentinean peso
in January has caused so much effect on its debt burden, which is
94% dollar-denominated.


PEREZ COMPANC: Analysts See Trouble as Much Debt Comes Due in 02
----------------------------------------------------------------
Industry observers say Perez Companc could be facing more
difficulty than what they want the public to believe, as a
substantial part of the Company's debt matures this year.

Research analyst Rafael Ber believes the devaluation of the
Argentinean peso in January, which the company primarily blames
for its present woes, is simply a convenient but generic excuse.

"This problem is one [that] many firms in Argentina share, but
Perez Companc has a lot of debt coming due this year," Mr. Ber
told Reuters.

According to Mr. Ber, some US$1.1 billion of the company's US$3.35
billion total debt will come due this year.  The devaluation of
the peso, which has shed 59% since January, only complicates the
matter.

In a recent seminar, Perez Companc Vice President Oscar Vicente
admitted that the company would not rule out canceling debt by
exchanging shares or accepting cash from investors for a stake in
the firm.

To underscore the effects of the devaluation, Mr. Vicente said: "I
have half or less of the pesos I need to buy the dollars I have to
pay.  A group like Perez Companc is not viable in this situation."

Industry observers say this year could be very tough for the
company, which recently admitted a fourth quarter loss of ARS146
million compared to a ARS57 million profit, largely due to the
steep currency devaluation


PEREZ COMPANC: VP Vicente's Speech on Questions Firm's Viability
----------------------------------------------------------------
Below is an excerpt of Vice President Oscar Vicente's address to a
recent gathering of business executives at the Catholic
University, where he outlined the company's strategy.  This quote
was extracted from a Bloomberg report:

"There was a decision by the government to turn all dollar debts
into pesos at one-to-one.  But none of the big companies were
consulted.

"So when you hear that this is one of the groups that benefits
most from switching dollars into pesos, it's absolutely the
opposite.  We have 94% of our debt in dollars and only six percent
in pesos.  That means I have half of the pesos to pay my dollar
debt.

"This is what happens to all companies with income in pesos and
debts in dollars. It's happening to all the international
companies.

"Today the problem is that we have to find a solution to the
problem of our income in pesos.

"We could try to get the same amount of pesos to buy dollars,
transfer all our investments, or do a type of exchange with the
dollar.  That's impossible, so we are going to have to transfer
some [of our financing costs into prices] and refinance foreign
debt.  A company like Perez Companc is unviable in this current
situation.

"If we can't go with the government to the international banks to
see whether we can function in this country, and if we become
incapable of meeting our commitments in the international markets,
then we can't exist any more.

"With tariffs at one-to-one and debt at 2.4 pesos to the dollar
it's unviable. But I don't believe the government will let the
tariffs stay at one-to-one and make us pay 2.4 in the market. It
would give us half the amount in pesos to buy our dollars and
that's unviable.

"This will affect all companies, so there has to be some
correction and that will be difficult. But we've been in this
country 56 years and have no plans to leave.

"All the companies we have stakes in, like Transener, TGS and
Edesur rely on imports to function. So if we want to pay and the
government won't give us dollars to pay for the imports, this is
what's unviable, though I don't think that will happen."


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B E R M U D A
=============

GLOBAL CROSSING: 3rd Buyer Enters Fray, Inviting Others to Join
---------------------------------------------------------------
Another bidder for Global Crossing surfaced last week, bringing to
three the present number of interested buyers in the erstwhile
telecom network giant.

According to Dow Jones Newswires, Fiber Optek Interconnect Corp.
announced last week that it is presently talking with a leading
institutional lender in preparation for a bid for the company.

"Global Crossing has significant value as an operating entity.  We
believe any offer from us will be beneficial to the existing
shareholders, bondholders and creditors, and will preserve Global
Crossing as a going concern," Fiber Optek President Michael S.
Pascazi said in a prepared statement.

In justifying his company's bid, Mr. Pascazi said he believes the
slump in telecoms spending is over and that broadband demand and
Internet use, along with computer and wireless sales "all point to
significant opportunities for Global Crossing."

Mr. Pascazi, who did not reveal the identity of the institutional
lender his company is talking with, said he is willing to welcome
other investors who wish to join his bid.

Terms and conditions for any bid, including Fiber Optek's, will be
known Tuesday next week, when the bankruptcy court in New York
resumes proceedings.

Currently, there are two other bids officially tabled in the
court: that of Los Angeles-based buyout fund Platinum and Equity
and the original joint bid of Hutchison Whampoa Ltd and ST
Telemedia Pte Ltd.

Global Crossing, which is now under Chapter 11 protection, values
its assets at $22 billion.


GLOBAL CROSSING: Grand Jury Asks Ullico Officers to Explain Ties
----------------------------------------------------------------
Two officers of a labor-owned insurance firm were reportedly
subpoenaed last week by a federal grand jury in Washington
currently looking into the stock transaction of Global Crossing.

According to Dow Jones Newswires, the two officers of Ullico,
formerly known as Union Labor Life Insurance Co., were invited to
shed light on several issues including its close ties with Global
Crossing.

The labor-owned firm was an early and significant investor in the
telecom darling, and had allegedly profited more than US$300
million from its initial US$7.5 million investment in the company.

Among other things, the grand jury has requested information about
how Ullico stock was offered for purchase and sale to Ullico
officers and members of the board.

The report says members of the board of Ullico, including leaders
of two dozen leading trade unions, were authorized under the
company's rules to buy and sell the company's privately held
stock.  That stock sharply increased in value in the late 1990s as
a result of Ullico's profitable investment in Global Crossing.

For its part, the national labor federation AFL-CIO told the news
wire that it has started a separate inquiry into the matter.

"We are taking these matters seriously, and we are actively
looking into them," said Damon Silvers, associate general counsel
of the AFL-CIO.

AFL-CIO officials said they are examining whether a series of
transactions approved by the Ullico board may have provided
unusual benefits for some board members.

Ullico provides insurance and financial services to unions and
their members through a group of subsidiaries.


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

COPEL: To sell BRL500 Million Bonds to pay 1997 Series
------------------------------------------------------
State-owned energy company Cia. Paranaense de Energia plans to
sell BRL500 million local currency bonds to fund a possible early
retirement of its Eurobonds originally due 2005.

According to Bloomberg, the company is anticipating that some
investors might cash in their bonds as early as next month, an
option attached to the 1997 series. If exercised, the option would
cost the company US$14.6 million in interest and US$148.6 million
in principal, the report says.

Banco Itau SA is managing the sale.  Accordingly, BRL200 million
of the bonds will be pegged to the country's benchmark deposit
rate while the balance will be indexed to the IGP-M inflation
index measured by the Rio de Janeiro-based Getulio Vargas
Foundation.

"We want to raise cash to pay off investors, if they opt to retire
their bonds early. If they do not retire all the bonds, we will
use (the cash) to finance investments," a spokesman for Copel told
Bloomberg.

The spokesman said the company plans to spend BRL334 million this
year to modernize and expand its power plants and transmission and
distribution lines.

The bank will buy the bonds if there is not enough demand from
domestic investors, the spokesman said.

The 1997 series raised US$150 million for the company. The
utility's debts currently total BRL1.6 billion.


GLOBO CABO: BNDES Confirms BRL1 Billion Capital Increase
--------------------------------------------------------
National development bank BNDES confirmed last week reports that
it is planning to increase its stakes in cable TV provider Globo
Cabo by converting some of its credit into equity.

The bank, however, clarified that it will not entirely fund the
BRL1 billion cash injection into the cable operator, as previously
reported.  The bank said it will only guarantee BRL284 million of
the amount.

Business News Americas says BNDES will subscribe to a share
increase worth BRL120 million, contribute BRL39 million in new
resources, and convert BRL125 million of Globo Cabo's debt into
equity.  As part of the deal Globo Cabo will repay the bank BRL57
million.

With the equity swap, BNDES will increase its stake in the cable
firm from 4.8% to 7-12%.

The report says Bradespar, controlling shareholder Organizacoes
Globo, local media company RBS and an unnamed Brazilian financial
institution will share the balance of the capital injection.

Meanwhile, the bank dismissed insinuations that the capital
injection was a political decision, devoid of good business sense.

BNDES executive Eduardo Gentil told the paper that the move was
intended to "protect and value investments already made in the
company."

"We did studies and understand it is an excellent investment for
the bank, which will earn money with this stake," he said.

He, however, did not reveal details or rationale of the study nor
when a return on investment is expected, the paper said.

Globo Cabo's debts currently amount BRL1.6 billion.  With the
capital increase, it should be whittled down to BRL800 million,
the paper said.


TELEMAR: S&P Affirms Negative Outlook, Sends Bovespa Tumbling
-------------------------------------------------------------
Ratings agency Standard and Poor's affirmed late last week its
negative outlook on Telemar's debt load, pulling down the Sao
Paulo Stock Exchange benchmark Bovespa as it headed into the
weekend.

Telemar ended Thursday trading 3.3% lower at BRL32.1, but not
without being battered early in the day, following's S&P's
revision of its credit outlook to negative from neutral.

The Bovespa index fell 0.9% lower at 14,117 points Thursday,
ending a two-day winning streak.  Telemar, the country's leading
fixed-line telephone company, accounts for about 12% of trading on
the Bovespa.

"Bad debt provisions, operational contingencies and investments
are much larger that we had anticipated," said Milena Zaniboni,
director for corporate ratings at Standard & Poor's in Sao Paulo.

"The outlook was changed because when we made the original rating
we imagined a more conservative scenario for Telemar," Ms.
Zaniboni explained.


TELEMAR: Plans BRL650 million Bond Sale to Pay Maturing Debts
-------------------------------------------------------------
Brazil's largest telephone company Telemar Participacoes SA is
looking again to the bond market, this time to raise money to fund
maturing debts, Bloomberg said late last week.

According to the report, the telecom operator plans to sell three-
year bonds worth BRL650 million, in part to cover a BRL155 million
obligation due to mature next month.  In addition, the company
also needs to prepare for a put option next year on a BRL465
million bond due April 2005.

Some BRL30 million of the proceeds will be spared to fund day-to-
day operations, the company added.

Banco BBA Creditanstalt SA and Banco do Brasil will manage the
debt sale to be priced in coming weeks, the report said.

The new debts will add to Telemars growing liabilities, which
stood at BRL7.7 billion by year-end 2001.  The company admitted
last week that net debt in 2002 will increase by 30% to about
BRL10 billion.

The company, however, clarified that the increase comes mainly
from payments to suppliers and other spending carried over from
2001 into this year.


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

EDELNOR: Defies Prediction, Makes US$9.7 million-interest Payout
----------------------------------------------------------------
Empresa Electrica del Norte Grande SA (Edelnor) announced last
week that it was able to meet its US$9.7 million-interest payment
that came due Friday, contradicting earlier projections that it
couldn't make the payment.

Edelnor Chairman Fernando del Sol told Bloomberg that the firm was
able to raise the money from savings derived from cost-cutting
measures and a recent revenue increase.

According to Mr. del Sol, these cost-cutting measures include the
trimming of its workforce and expenses, like mobile phone calls.

Earlier, both Moody's Investors Service and Fitch Ratings
predicted that the company would likely default on an interest
payment for its US$250 million of 7 3/4 percent bonds due 2006.

Bloomberg says Edelnor has lost money for three years now after
energy prices dropped in northern Chile and the company lost
customers to competitors.

Del Sol, whose investment company F.S. Inversiones Ltd. bought
Edelnor in December, is negotiating with bondholders to
restructure Edelnor's US$340 million in debt to reduce its
financing payments.  Edelnor's debt also includes US$90 million in
10 1/2 percent bonds due 2005.

US-based Mirant Corp. sold F.S. Inversiones its 82.3% stake in
Edelnor in December after trying for three years to find a buyer
for the company.


TELEFONICA CTC: Transport Department to Defend Tariff in Court
--------------------------------------------------------------
Chile's telecommunications ministry said late last week it is
prepared to face Telefonica CTC in court and defend its recent
decision to deny the latter's application for a tariff change.

Telecommunications Minister Javier Etcheberry told El Diario that
the department acted within its powers in rejecting the firm's
request to revise its tariff system.

Mr. Etcheberry said he is not concerned by the US$274 million suit
the company filed early last week.

"We are well convinced that we have acted...within the norms and
our powers," he told El Diario.

The company contends that Decree 187 governing its tariff system
between 1999 and 2004 has resulted in "serious damages" to its
assets.

In its suit, the telecom operator cited several legal and
calculation errors in the government's decree, especially with
regard to investment costs, the omission of costs incurred for the
publication of free telephone guides, the erroneous application of
depreciation principles, and miscalculations related to unpaid
telephone calls originating in its fixed-line network to mobile
telephone numbers.


TELEFONICA CTC: To Propose CLP1.2 billion Dividend this Year
------------------------------------------------------------
Telefonica SA unit Cia de Telecomunicaciones de Chile SA said it
will propose a final dividend of CLP1.29 to A and B shareholders
at the company's AGM to be held on April 5.

The company said the dividend payout is CLP1.233 billion,
equivalent to 30% of the company's net profit.  The final dividend
is payable on May 2 to shareholders on record as of April 25.

The firm said it will maintain a minimum dividend payout of 30% of
net profit this year.


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

GRUPO BITAL: Moody's to Upgrade Ratings Following Cash Injection
----------------------------------------------------------------
Moody's Investors Service announced last week that it has put on
review Banco Internacional S.A.'s (Bital) financial strength
rating of E+ for possible upgrade.

The ratings agency said the move follows the bank's recent
agreement with ING over a US$200 million capital injection in
exchange for a 17.5% stake.

Moody's had earlier said that the bank needs at least US$250
million in order to become adequately capitalized.  With the
capital infusion, coupled by a planned US$70 million rights
offering, the ratings agency believes the requirement has been
adequately satisfied.

"The US$200 million capital injection by ING will help Bital
complete a capitalization program.  This program was undertaken in
order to satisfy an agreement made with the Mexican deposit
guarantee agency (IPAB), in finalizing Bital's acquisition of
Banco del Atlantico," Moody's said in a statement.

This recent agreement with ING is not the first time that the two
have combined resources.  A relationship between the companies was
first formed in 1997 through the formation of a pension fund,
Afore Bital.

Late in 2000, ING acquired Bital's interests in the fund. As of
1998, ING owns a 49% participation in a joint venture with Bital
that allows it to distribute its insurance products through
Bital's branch network.

Bital had total assets of US$12.3 billion and deposits of US$9.9
billion as of September 30, 2001. The bank has 1,350 branches and
offices and is the fourth largest Mexican bank in terms of assets.
Currently, it is one of only two large banks in Mexico that is not
under foreign control.


GRUPO MEXICO: Solution to Strike Still Eluding Management, Union
----------------------------------------------------------------
A strike at Grupo Mexico over pay increase entered into its ninth
day Friday with still no end in sight, Reuters said. A union
official interviewed by the news agency said talks between
management and the National Mining and Metallurgical Union would
likely drag into the weekend.

Union members say the strike could spread to 11 other units that
have yet to agree on a salary scheme for 2002.  At the moment,
only four units, with more than 4,000 workers, have joined the
strike that began two weeks ago.

The four units that have temporarily shut down operations are the
copper mining, smelting and refining facility at La Caridad,
Sonora, and zinc and other operations in Zacatecas, Coahuila and
San Luis Potosi.

Union sources say the impact of the strike in the San Luis Potosi
plant was limited to zinc, lead and silver production, but not
copper, the firm's top income producer.

At the moment, the huge Cananea mining complex, producing copper
concentrates and cathodes, has yet to join the strike.  The unit
has an open pit mine, a concentrator with a processing capacity of
70,000 metric tonnes of ore per day, and two SX-EW plants.

At issue in the tussle is the union's demand to raise salaries by
8-10 percent, higher than the present 5 percent offer of the
company.

The company, however, refuses to budge, saying the "the proposal
[is] a real increase in their earnings, which would be slightly
above the level of inflation recorded last year, and of the level
expected for this year."

Grupo Mexico, struggling to meet debt payments amid low prices for
its base metals, has adopted strict cost-cutting measures in
recent months, including mine closures and extensive layoffs. The
company has operations in Mexico, the United States and South
America.


HYLSAMEX: Bondholders Approve Payment Extension, Banks to Follow
----------------------------------------------------------------
Mexican steelmaker Hylsamex SA announced last week that it had
successfully convinced bondholders to extend the maturity of its
inflation-adjusted debt for two years.

According to company spokesperson Margarita Gutierrez, the
agreement also paved the way for the extension of the firm's
US$627 million of bank loans.

The banks had earlier promised to extend the steelmaker's loan
payments for another two to three years if the company
successfully gets the nod of its bondholders.

In a report, Bloomberg says the bondholders had also agreed to
receive more inflation-adjusted notes in exchange for the MXN14.85
million-interest the company failed to pay last week.

Ms. Gutierrez says Hylsamex's next goal is to convince holders of
US$300 million Eurobonds to extend the maturity of at least half
of the debt.  She says the company wants to extend this obligation
to 2010 from 2007.  

In addition, the company also wants the bondholders to waive a
covenant that prevents it from pledging shares as collateral.  The
waiver is needed for the debt-restructuring agreement with the
banks.

The company's revenue fell 22 percent to MXN11.5 billion last year
as a recession in the U.S. and Mexico hurt demand for steel
products.


VITRO: Shareholders Approve US$150 Million Vitromatic Sale
----------------------------------------------------------
Shareholders of Vitro, the Mexican glass giant, have approved the
planned spin-off of appliance maker Vitromatic, Reuters said late
last week. According to the report, the transaction that will
transfer the company's 51% stake in the appliance maker to US
partner Whirlpool Corporation received approval in a meeting
Thursday.

Vitro will be paid US$150 million in cash for the deal. Whirlpool
will assume 100% of Vitromatic's US$220 million debt.  The
appliance maker is a joint venture of the two companies.

The Mexican firm said it will primarily use the funds to pay down
present debts.  


               ***********


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 Ma. Cristina Canson, Editors.

Copyright 2002.  All rights reserved.  ISSN 1529-2746.

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