/raid1/www/Hosts/bankrupt/TCRLA_Public/020419.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, April 19, 2002, Vol. 3, Issue 77
Headlines
A R G E N T I N A
BANCO GENERAL: S&P Lowers Credit Grade to "D" Due to Suspension
EDENOR: Government's Current Policy Could Mean Huge Losses Ahead
B E R M U D A
FLAG TELECOM: Tyco May Write Down US$100 million On Bankruptcy
FLAG TELECOM: Affiliates Filing Separate Bankruptcy Petitions
FLAG TELECOM: Largest Unsecured Creditors Listed in Filings
FLAG TELECOM: General Counsel Kees van Ophem Explains Condition
FLAG TELECOM: Moves Court To Commence Bermuda Proceedings
B R A Z I L
BCP: US Parent to Upgrade Service Only After Resolving Default
EMBRAER: To Sign Joint Manufacturing Deal with Chinese Partner
C H I L E
WACKENHUT CORPORATION: To Absorb Huge Loss Due to Unit's Failure
C O L O M B I A
PAZ DEL RIO: Chief Says Japanese Solution Still Two Years Away
M E X I C O
GRUPO MEXICO: Regulator to Veto Ferromex-Ferrosur Merger
GRUPO MEXICO: Finally Resolves Salary Disputes, Ends Strike
ICONSA: Follows Parent Bufete Industrial to Bankruptcy Court
P E R U
EDELNOR: Privatization Body to Sell Remaining State Shares in May
V E N E Z U E L A
BANCO INDUSTRIAL: Governent Stops Hemorrhage With VEB125 Billion
- - - - - - - - - -
=================
A R G E N T I N A
=================
BANCO GENERAL: S&P Lowers Credit Grade to "D" Due to Suspension
---------------------------------------------------------------
Banco General de Negocios is now rated "D" by Standard & Poor's
after seeking a 120-day suspension of operations from the
Argentine Central Bank.
According to Business News Americas, the new rating applies to
the bank's local and foreign currency long-term and short-term
counterparty credit grade. They were previously rated "SD."
The report says the bank sought the suspension in order to
restructure its business amidst the turmoil in the Argentine
economy. The request was granted on April 12.
The ratings agency placed the bank on selective default a few
months ago after the government imposed deposit restrictions and
capital controls on Argentine banks in December last year, the
paper says.
Meanwhile, the bank is also facing a probe on allegations that it
acted as a conduit to funneling funds out of the country.
Managers of the bank are reportedly under scrutiny right now for
their role in the alleged transaction.
EDENOR: Government's Current Policy Could Mean Huge Losses Ahead
----------------------------------------------------------------
Power distributor Edenor has asked the Argentine commission in
charge of renegotiating contracts to redefine the new tariffs and
regulations currently being imposed by the government under its
economic emergency framework.
According to El Cronista, the company has complained that, since
the devaluation of the peso, it has absorbed some ARS1 billion
worth of losses. The Electricite de France-controlled firm
estimates annual losses of ARS400 million and cash deficit of
ARS1 billion should the condition in the country and the tariff
levels remain unchanged.
=============
B E R M U D A
=============
FLAG TELECOM: Tyco May Write Down US$100 million On Bankruptcy
--------------------------------------------------------------
Tyco International, the third-largest shareholder of bankrupt
Flag Telecom, is expected to write-down at least US$100 million
in investments, analysts told Dow Jones Newswires.
In an interview with the news conduit, Hedge-fund manager Doug
Kass said he expects Tyco to lose US$100 million worth of
investments due to the collapse of the network services provider.
Salomon Smith Barney analyst Jeffrey Sprague, however, says he
expects Tyco to actually write-off only US$10 million from its
balance sheet as it had continually marked down the asset as
Flag's share price declined in the market. But he estimates
total loss to be US$110 million.
Mr. Sprague says "the failure of another subsea player further
calls into question the carrying value of Tycom on Tyco's books."
He said Tyco may partially write down the carrying value of its
Tycom Ltd. unit, which stood at US$2.7 billion at the end of the
first quarter. But even if Tyco writes down 100% of the carrying
value, Tyco's balance sheet would remain well within the cap
covenants of its bank lines, he said.
Plagued by nearly US$2.6 billion in debt, Flag collapsed Friday
before the U.S. Bankruptcy Court for the Southern District of New
York. The Company sought protection from creditors under Chapter
11 of the U.S. Bankruptcy Code.
Based in Bermuda, Flag had US$3.3 billion of assets as of March
31, 2002.
Contact: FLAG Telecom Holdings Limited
41 Cedar Ave.
Hamilton HM 12, Bermuda
Telephone (441) 296-0909
http://www.flagtelecom.com
FLAG TELECOM: Affiliates Filing Separate Bankruptcy Petitions
-------------------------------------------------------------
-------- -------------
Case No. Debtor Entity
-------- -------------
02-11732 FLAG Telecom Holdings Limited
02-11733 FLAG Atlantic Limited
02-11734 FLAG Atlantic Holdings Limited
02-11735 FLAG Limited
02-11736 FLAG Pacific USA Limited
Petition Date: April 12, 2002
U.S. Bankruptcy Court: United States Bankruptcy Court
Southern District of New York
Alexander Hamilton Custom House
One Bowling Green, 5th Floor
New York, New York 10004-1408
Telephone (212) 668-2870
Bankruptcy Judge: The Honorable Allan L. Gropper
Debtors' U.S.
Bankruptcy Counsel: Conor D. Reilly, Esq.
Janet M. Weiss, Esq.
M. Natasha Labovitz, Esq.
Craig A. Bruens, Esq.
Paul H. Guillotte, Esq.
Sarah K. Larcombe, Esq.
Joseph Furst, Esq.
GIBSON, DUNN & CRUTCHER LLP
200 Park Avenue
New York, NY 10166
Telephone (212) 351-4000
Fax (212) 351-4035
Debtors' Bermudian
Insolvency Counsel: APPLEBY, SPURLING & KEMPE
Cedar House
41 Cedar Avenue
P.O. Box HM 1179
Hamilton HM EX, Bermuda
Telephone (441) 295-2244
Members of the
Prepetition FTHL
11-5/8% Noteholders'
Committee: Varde Partners, Inc.
Elliot Associates
Cerberus Capital Partners
Salomon Smith Barney
York Capital
Redwood Capital Management, LLC
Counsel to the
Prepetition FTHL
11-5/8% Noteholders'
Committee: Kasowitz, Benson, Torres & Friedman
Members of the
Prepetition
FLAG Limited
8-1/4% Noteholders'
Committee: Goldman Sachs
Pacific Life
Eaton Vance
Greenwich Capital
Hartford Financial Services Group, Inc.
Offitbank
Pimco
PPM America, Inc.
Putnam Investments
Saloman Brothers
Trust Company of the West
Wellington Management
Counsel to the
Prepetition
FLAG Limited
8-1/4% Noteholders'
Committee: Akin, Gump & Strauss, Hauer & Feld L.L.P.
Financial Advisor
to the Prepetition
FLAG Limited
8-1/4% Noteholders'
Committee: Chanin Capital Partners
U.S. Trustee: Carolyn S. Schwartz
United States Trustee for Region 2
33 Whitehall Street, Suite 2100
New York, NY 10004
Telephone (212) 510-0500
FLAG TELECOM: Largest Unsecured Creditors Listed in Filings
-----------------------------------------------------------
The following informationg is gathered from Flag Telecom's
document filings with the Bankruptcy Court:
FLAG Telecom Holdings Limited
Bankruptcy Case No. 02-11732
-----------------------------
A. Bondholders
Creditor Nature of Claim Claim Amount
-------- --------------- ------------
The Bank of New York Indenture Trustee $564,000,000
101 Barclay Street for 11.625%
Floor 21 West Senior Dollar and
New York, NY 10286 Senior Euro Notes
Attn: Corporate Trust due 2010
Administration -
Global Finance Unit
York Capital Management 11-5/8% Senior $48,132,000
350 Park Avenue, 4th Floor Notes due
New York, NY 10022 March 2010
Cybill Yee
Tel: 212-651-0500
Fax: 212-651-0501
Colonial Management 11-5/8% Senior $40,000,000
Associates, Inc. Notes due
Equity Department March 2010
1 Financial Center, 13th Floor
Boston, MA
Carl Ericson
Tel: 617-426-3750
Fax: 617-772-3995
Varde Investment Partners LP 11-5/8% Senior $18,600,000
3600 West 80th Street, Suite 425 Notes due
Minneapolis, MN 55419 March 2010
Tel: 952-893-1554
Fax: 952-893-9613
Smith Barney 11-5/8% Senior $7,540,000
Smith Barney Mutual Funds Notes due
333 West 34th Street, 3rd Floor March 2010
John Bianchi
Tel: 800-451-2010
Brinson Advisors, Inc. 11-5/8% Senior $5,500,000
Mitchell Hutchins Funds Notes due
1285 Avenue of the Americas March 2010
New York, NY 10019
Marianne Rossi
Tel: 212-713-2000
Aragon Investments, Ltd 11-5/8% Senior $4,005,000
Chicago, IL 60606-3405
Sutter Real Estate 11-5/8% Senior $4,000,000
San Francisco, CA 94111 Notes due
March 2010
Bank of Montreal 11-5/8% Senior $3,250,000
100 Kings Street West, 3rd Floor Notes due
First Canadian Place March 2010
Toronto Ontario M5X 1H3
Lemuel Seabrook
Redwood Capital Mgmt 11-5/8% Senior $3,000,000
Englewood Cliffs, NJ 07632 Notes due
March 2010
Wells Fargo Capital Markets 11-5/8% Senior $3,000,000
550 California St, FL 14 Notes due
San Francisco, CA 94104 March 2010
Louise Chen
Atlantic Asset Management 11-5/8% Senior $2,500,000
New York, NY 10006 Notes due
1111-5/8% Senior March 2010
HSBC Bank Plc Global 11-5/8% Senior $2,250,000
Investment Services Notes due
England March 2010
Satellite Credit 11-5/8% Senior $2,000,000
Opportunities Fund, Ltd Notes due
Boston, MA 02110-1727 March 2010
Trust Company of the West (TCW) 11-5/8% Senior $2,000,000
865 S Figueroa Notes due
Los Angeles, CA 90071 March 2010
Enterprise Capital Management 11-5/8% Senior $1,450,000
Atlanta, GA 30326 Notes due
March 2010
First Allmerica Financial 11-5/8% Senior $1,250,000
Life Insurance Notes due
New York, NY 10066 March 2010
American Express Financial Corp. 11-5/8% Senior $1,000,000
55440-0534 Notes due
March 2010
Deutsche Banc Securities 11-5/8% Senior $745,000
Notes due
March 2010
USB Warburg LLC 11-5/8% Senior $300,000
677 Washington Blvd 9N Notes due
Stanford, CT 06901 March 2010
Carlos Lede
Tel: 203-719-7644
Fax: 203-719-0795
Afliac Market Value Fund 11-5/8% Senior $250,000
New York, NY 10006 Notes due
1111-5/8% Senior March 2010
B. Trade Creditors
Latham & Watkins Professional $48,642
99 Bishopsgate, LONDON Services
professional
services
Arthur Andersen-UK Trade Debt $22,171
P O Box 125, Nottingham
NG1 2AH, UK
American Stock Transfer & Trust Trade Debt $4,000
40 Wall Street
New York, NY 10005
Tel: 212 936 5100
Appleby, Spurling & Kempe Professional $3,001
Cedar House Services
41 Cedar Avenue
Hamilton, HM12
Bermuda
Tel: 00 1 441 295 2244
Financial Times Trade Debt $2,774
1 Southwark Bridge
London SE1 9HL
Tel: 020 7873 3000
FLAG Atlantic Limited
Bankruptcy Case No. 02-11733
----------------------------
Creditor Nature of Claim Claim Amount
-------- --------------- ------------
Tycom Trade Debt $1,737,288
Building A
60 Columbia Turnpike
Morristown, NJ 07960
Dresdner Bank Bank Debt $247,402
75 Wall Street
New York NY 10005-2889
Skadden, Arps, Slate, Professional $6,473
Meagher & Flom Services
919 Third Avenue
New York, NY 10022-3897
Hobbs Group L.L.C. Trade Debt $6,000
P.O. Box 13535
Accounts Receivable Dept
Newark, NJ 07188-0535
Tel: 203-351-5600
Appleby, Spurling & Kempe Professional $5,710
Cedar House Services
41 Cedar Avenue
Hamilton, HM12 Bermuda
Tel: 00 1 441 295 2244
Simmons & Simmons Professional $283
21 Wilson Street Services
London EC2M 2TX UK
Barclays Bank plc Bank Debt Unliquidated
222 Broadway
New York NY
FLAG Atlantic Holdings Limited
Bankruptcy Case No. 02-11734
------------------------------
Creditor Nature of Claim Claim Amount
-------- --------------- ------------
Slaughter & May Professional $789
35 Basinghall Street
London EC2V 5DB
UK
Tel: 020 7600 1200
FLAG Limited
Bankruptcy Case No. 02-11735
----------------------------
A. Bondholders
Creditor Nature of Claim Claim Amount
-------- --------------- ------------
IBJ Schroder Bank & Trust Company Indenture Trustee $430,000,000
One State Street for 8-1/4%
New York, NY 10004 Senior Notes
Attn: Corporate Trust due 2008
Administration
Vanguard Group 8-1/4% Senior $56,630,000
Fixed Income Notes due
100 Vanguard Blvd January 2008
Karen Hogan
Tel: 610-669-1000
Fax: 610-407-2807
Jackson National Life 8-1/4% Senior $41,200,000
Jackson Natl Life Ins Co of NY Notes due
1 Corporate Way January 2008
Robert Fritts
Tel: 517-381-5500
PPM America, Inc. 8-1/4% Senior $32,800,000
Equity Investments Notes due
225 West Wacker Drive-1200 January 2008
Marvin Lutz
Tel: 312-634-2553
Fax: 312-634-0055
JoAnne Bianco
Tel: 312-634-2500
Fax:312-634-0906
Pimco Advisors 8-1/4% Senior $17,991,000
PIMCO Funds Notes due
P.O. Box 6430 January 2008
840 Newport Center Drive
Benjamin Trotsly
Tel: 800-426-0107
New York Life Insurance Equity 8-1/4% Senior $16,400,000
51 Madison Avenue-203 Notes due
Karen Beyer January 2008
Tel: 212-576-6194
Fax: 212-448-1711
Putnam Advisory Global 8-1/4% Senior $15,695,000
Fundamental Research Notes due
1 Post Office Square January 2008
John Boselli
Tel: 617-760-8461
Fax: 617-760-1375
UBS Warburg LLC 8-1/4% Senior $15,000,000
100 Liverpool Street Notes due
John Campbell January 2008
Tel: 0207 567 2939
Fax: 0207 567 2064
Appaloosa Investment L.P. 8-1/4% Senior $12,405,000
Notes due
January 2008
Lincoln National Life 8-1/4% Senior $12,000,000
915 South Clinton Street Notes due
Mail Stop 8A-02 January 2008
Jon Boscia
Tel: 219-455-2000
Fax: 219-455-1729
Palomino Fund Ltd 8-1/4% Senior $10,870,000
Notes due
January 2008
Eaton Vance Management Inc 8-1/4% Senior $10,650,000
Equity Research &
Investments
255 State Street
Michael Weilheimer
Tel: 617-482-8260
Fax: 617-542-7410
American Home Assurance 8-1/4% Senior $10,000,000
AIG Tower 1-2-4 Notes due
Kinshi-Cho January 2008
Yasuo Goto
Tel: 3-5619-3084
Fax: 3-5619-3153
Unumprovident Corporation 8-1/4% Senior $10,000,000
Notes due
January 2008
Perry Capital 8-1/4% Senior $9,949,000
599 Lexington Avenue, 36th Floor Notes due
New York, NY January 2008
Nat Klipper
Tel: 212-583-4000
Fax: 212-583-4099
Trust Company of the West (TCW) 8-1/4% Senior $9,000,000
400 South Hope Street, 3rd Floor Notes due
Richard Pool January 2008
Tel: 212-553-9865
Fax: 212-553-9880
Offit 8-1/4% Senior $8,000,000
520 Madison Avenue, 27th Floor Notes due
New York, NY January 2008
William Charlton
Tel: 212-350-3776
Fax: 212-371-7687
Provident Life 8-1/4% Senior $8,000,000
1 Fountain Square Notes due
Vicki Corbett January 2008
Tel: 423-755-1373
Deutsche Banc Securities 8-1/4% Senior $6,705,000
Notes due
January 2008
Marathon Asset Management LLC 8-1/4% Senior $6,200,000
230 Park Avenue, 7th Floor Notes due
Andrew Rabinowitz January 2008
Tel: 212-499-1350
Fax: 212-499-1385
AIG Life 8-1/4% Senior $6,000,000
AIG Life Insurance Co. Notes due
Post Office Box 667 January 2008
John Oehmke
Tel: 302-594-2000
A. Trade Creditors
Freshfields Bruckhaus Deringer Professional $82,070
65 Fleet Street Services
London EC4Y 1HS
UK
Tel: 0207 936 4000
Arthur Andersen & Co. (Bda) Professional $61,130
Victoria Hall Services
Accounts Receivable Dept
11 Victoria Street
Hamilton HM 11
Bermuda
Arthur Andersen (Malaysia) Professional $57,996
P.O. Box 11040 Services
Accounts Receivable Dept
Kuala Lumpur 50734
MALAYSIA
Tel: 03-255-7000
Agilent Technologies UK Ltd Trade Debt $43,547
Eskdale Road
Winnersh Triangle
Wokingham
Berkshire RG41 5DZ UK
Tel: 020 7868 9208
Hobbs Group Trade Debt $12,587
P.O. Box 13535
Accounts Receivable Dept
Newark, NJ 07188-0535
Tel: 203-351-5600
FLAG TELECOM: General Counsel Kees van Ophem Explains Condition
---------------------------------------------------------------
FLAG's Troubles & Woes
Kees van Ophem, FLAG's Secretary and General Counsel since
October 2001, relates how the Company finds itself at the steps
of the Bankruptcy Court:
FLAG's troubles stem from a dramatic change in the economic
climate generally, and an even more dramatic shift in the
environment for telecommunications companies. This shift has
imposed severe financial challenges on the telecommunications
industry in general and, in particular, FLAG's competitors,
customers and potential customers, and, due to dramatically lower
capital expenditure budgets, FLAG itself. Overcapacity for
bandwidth in some regions and lower than anticipated demand have
led to dramatic declines in bandwidth prices, the unavailability
of new capital, and chapter 11 filings by companies in virtually
every sector of the telecommunications industry.
The Turnaround Plan
In light of the current economic climate, FLAG Telecom has
focused its business strategy on preserving capital and reducing
costs by: serving the core backbone needs of large telecom and
Internet companies, focusing on regions where FLAG has a
competitive advantage, and increasing the revenue generating
capacity of the FLAG Telecom global network by expanding the
number and scope of bundled services available to its customers.
With this business plan in hand, the Debtors began negotiations
with their principal creditors to restructure their bank, bond
and trade debt.
The Chapter 11 Scenario
In connection with these negotiations, Mr. van Ophem relates, the
Debtors concluded that the commencement of these chapter 11 cases
was in the best interests of all stakeholders because it would be
difficult, outside of reorganization proceedings for the Debtors,
to effect the contemplated restructuring. The Debtors continue to
believe that FLAG Telecom's core businesses, taken as a whole,
are viable, and believe that continued operation of activated
networks, completion and lighting of additional near term revenue
producing segments, and continued development of FLAG Telecom's
servicing abilities are each capable of producing significant
future revenue streams. Meanwhile, the Debtors believe that the
current unsettled telecommunications market is not a favorable
environment for liquidation. Consequently, the Debtors believe
that reorganization of their core businesses will generate
substantially more value than other business options.
Why FLAG Filed Now
On April 11, 2002, the Company was informed that the Bank Group
was accelerating the debt owed under the Credit Agreement dated
as of October 8, 1999 (as amended by the First Amendment to
Credit Agreement and Equity Contribution Agreements dated as of
December 14, 1999; the Second Amendment to Credit Agreement dated
as of November 16, 2000; and the Third Amendment to the Credit
Agreement and Forbearance Agreement, dated as of March 25, 2002)
among Flag Atlantic Limited, the banks and other financial
institutions party thereto -- the Lending Consortium is comprised
of: Barclays Bank plc, Dresdner Bank AG, New York and Grand
Cayman Branches, Westdeutsche Landesbank, Girozentrale, New York
Branch, Australia and New Zealand Banking Group Ltd., Bank of
Scotland, City National Bank, Credit Lyonnais, DG Bank Erste Bank
Der Oesterriechischen Sparkassen AG, Gulf International Bank
B.S.C., Bayerische Hypo-Und Vereinsbank, AG, New York Branch, IKB
Deutsche Industriebank AG, Luxembourg Branch, Kbc Finance
Ireland, Landesbank Hessan-Thuringen Girozentrale, Landesbank
Sachen Girozentrale, Mitsubishi Trust & Banking Corp., NIB
Capital Bank, Rabobank International, Raiffeisen Zentralbank,
Osterreich Aktiengesellschaft, Societe Generale, Sumitomo Bank
Limited, and The Royal Bank of Scotland plc. as of March 25, 2002
-- Barclays Bank Plc, as the administrative agent for the
Lenders, Dresdner Bank AG, New York Branch, as the documentation
agent, Westdeutsche Landesbank Girozentrale, New York Branch, as
the syndication agent, and Barclays Capital, as the lead arranger
was accelerated.
Mr. van Ophem explains that the acceleration arguably caused
cross-defaults of the Debtors' institutional bond debt. Although
FTHL is not a borrower or a guarantor under the FLAG Atlantic
Limited facility, Barclays Bank plc froze FTHL's funds on deposit
at Barclays. Further, FTHL held significant funds at a financial
institution that was a lender under the FLAG Atlantic Limited
facility. In response to the acceleration and fear that other
financial institutions party to the FLAG Atlantic Limited bank
facility would similarly freeze funds, FTHL moved approximately
$210,000,000 out of such accounts. The funds were ultimately
moved to FLAG Pacific Holdings Limited -- a non-Debtor and non-
filing entity.
FLAG TELECOM: Moves Court To Commence Bermuda Proceedings
---------------------------------------------------------
Certain debtors that are organized in Bermuda -- FLAG Telecom
Holdings Limited, FLAG Limited, FLAG Pacific USA Limited, FLAG
Atlantic Holdings Limited and FLAG Atlantic Limited -- ask the
Court for authority to commence proceedings in the Supreme Court
of Bermuda, and to apply for the appointment of Joint Provisional
Liquidators in a two-fold approach to:
(1) prevent the seizure of assets or the commencement of any
liquidation proceedings by foreign creditors who do not
honor the automatic stay imposed by the United States
bankruptcy Court, and
(2) facilitate the ultimate restructuring of the Debtors under
Bermuda law.
Conor D. Reilly, Esq., at Gibson, Dunn & Crutcher LLP, tells the
Court that no authorization will be required to commence the
Bermuda proceedings. This is because such proceedings and the
Chapter 11 cases are to be commenced substantially
contemporaneously and because the Bermuda proceedings will,
effectively, be ancillary to the Chapter 11 cases.
As a result of the accelerated filing of the Chapter 11 cases,
the process of filing for commencing the Bermuda proceedings or
selecting Joint Provisional Liquidators will now go forward on a
post-petition basis. Mr. Reilly says the Debtors have determined,
in the exercise of their business judgment, that the commencement
of the Bermuda proceedings is in the best interests of their
businesses, their creditors and their estates.
Mr. Reilly says the Bermuda proceedings foster two significant
goals underlying the Bankruptcy Code: the principle of providing
a forum for restructuring of all of a debtor's debts rather than
allowing self-help remedies by overzealous creditors, and the
principle of facilitating restructuring and reorganization.
===========
B R A Z I L
===========
BCP: US Parent to Upgrade Service Only After Resolving Default
--------------------------------------------------------------
American telecom operator Bellsouth says it plans to only change
the TDMA network of BCP, its Brazilian subsidiary, to a CDMA
platform rather than to GSM, in order to offer 2.5G services.
Citing an O Globo report, Business News Americas says the CDMA
upgrade will also be done in six other countries where it still
operates TDMA networks. Of the company's operations in 11 Latin
American countries, only four so far are using the CDMA platform.
The American parent, however, clarified that the upgrade will be
implemented only after the US$375 million debt default of BCP
shall have been resolved. The company says it is currently in
talks with Brazilian local bank partner Banco Safra to help find
a solution on the matter.
BCP operates in the Sao Paulo area plus six states in the
northeast region.
EMBRAER: To Sign Joint Manufacturing Deal with Chinese Partner
--------------------------------------------------------------
Brazilian aircraft maker Empresa Brasileira de Aeronautica SA is
reportedly close to a deal with Chinese counterpart Harbin
Aircraft Manufacturing Co. over a joint production venture in
China.
The primary goal of the project is to jointly design and build
40- to 60-seat regional passenger planes in China, says
Bloomberg. The idea is in line with China's ambition to start
making commercial aircraft with a range of 3,000 km to meet
domestic travel demands.
"China's rapid urbanization and the growth of its tourism
industry means there's a lot of demand here for a smaller,
medium-range aircraft," says Liu Haisheng, in an interview with
Bloomberg.
Mr. Liu, a deputy director of the Economic and Trade Commission
of Heilongjiang, says a Chinese delegation will be in Sao Paolo
in the first week of May to hold more talks with Embraer. He
says Heilongjiang's initial investment to design the jet would be
about US$73 million.
By Embraer's estimates, demand in China will account for half the
500 regional jetliner sales in Asia during the next decade as the
domestic aviation industry expands.
Accordingly, China's market clout has given them substantial
leverage in forcing suppliers to transfer plane technology to its
own aerospace companies. Under this particular deal, the Chinese
government apparently pressured Embraer into agreeing to this
production-sharing project by making it a precondition to an
order for 30 jetliners.
Harbin Aircraft Manufacturing Co. is a unit of AVIC II, a Chinese
state-run aerospace company.
=========
C H I L E
=========
WACKENHUT CORPORATION: To Absorb Huge Loss Due to Unit's Failure
----------------------------------------------------------------
Business service-provider Wackenhut Corp. anticipates a pretax
write-off of US$14 million to US$17 million in the first quarter
arising from the bankruptcy of its affiliated company in Chile.
According to Wackenhut, the charge will include the write-off of
all remaining cash advances, notes receivables and estimated
related expenses. Pretax losses related to the Chilean operations
totaled US$29.2 million during fiscal 2001.
The bankrupty of the Chilean affiliate was "a significant
disappointment," according to President and Chief Executive
Richard Wackenhut in a statement.
The company had tried to restructure the operations of its
Chilean affiliate by attaining majority ownership of the
affiliated company and selling certain non-core businesses in
Chile.
In a press release, Wackenhut said the affiliate is at a
condition where they could no longer generate sufficient cash
either from ongoing operations or the sale of assets to repay
their obligations.
During the first quarter of last year, Wackenhut had a loss of
1.5 million, or 10 cents a share before charges, on revenue of
US$663.5 million.
===============
C O L O M B I A
===============
PAZ DEL RIO: Chief Says Japanese Solution Still Two Years Away
--------------------------------------------------------------
Paz del Rio President Enrique Tobon says the investment proposals
of Japan's Kobe Steel to help resuscitate the bankrupt Colombian
steel-maker could take up to two years to be fully implemented.
In the meantime, he says, the company will try to jumpstart
earlier attempts to share continuous casting facilities with
Hornos Nacionales.
"The decision could be made to renew technical feasibility tests
done with Hornos Nacionales to make best use of their continuous
casting capability, which obviously could be used in our casting
process," Mr. Tobon told Business News Americas.
The Japanese firm plans to pour in new technology in the company,
which is the only steel mill in Latin America that do not have
ladle and continuous casting systems.
Mr. Tobon says pending the completion of the Japanese investment,
the company will try to explore alternatives like operating its
electric furnace. This, however, will depend on market
conditions and the availability of scrap, whose volumes have
fallen sharply on the world market.
He says until a couple of years ago the US was supplying 12
metric tons a year of scrap metal, but today this figure has
dropped to 6 metric tons. The European Union, however, is still
placing 30 metric tons a year on the market.
But even if scraps were available, the electric furnace still
needs repair and a more powerful transformer, he says.
The other alternative to using the electric furnace is buying
steel slabs. This, however, would require rethinking the Kobe
Steel investment plan, Mr. Tobon says.
The paper says the Japanese company is already done with the
third phase of its review on the company's operations. The
recent review dealt with problems related to mining, coking and
sintering, as well as blast furnace and rolling processes.
Paz del Rio is currently under a form of bankruptcy protection,
the paper says.
===========
M E X I C O
===========
GRUPO MEXICO: Regulator to Veto Ferromex-Ferrosur Merger
--------------------------------------------------------
The Mexican antitrust authority CFC has nixed the planned merger
of railroad operators Ferromex and Ferrosur, a source told
Business News Americas early this week.
According to the CFC insider, the authority sees the combination
as violating the rules and concession ownership limits set when
the industry was privatized in the late 1990s. Current
regulations prohibit any of the country's three major railroad
operators from owning more than 5% stake in either of the other
two, as a means of safeguarding competition.
Ferromex, a unit of Grupo Mexico, operates the network that
connects the Valley of Mexico with northern destinations
including Monterrey, Guadalajara, Torreon, the ports of
Manzanillo and Altamira and the Mexico-US border.
Ferrosur, owned by telecommunications and retail holding giant
Grupo Carso, holds the concession for the key Valley of Mexico-
Coatzacoalcos railroad axis.
The merger would have created a new company to be named ITM,
which will be majority owned by Ferromex, with Grupo Carso
retaining 20% interest.
The regulator will publish its findings next month. The source
says the antitrust office will invoke the antimonopoly law and
kill the merger should it receive clearance from the transport
ministry.
GRUPO MEXICO: Finally Resolves Salary Disputes, Ends Strike
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Grupo Mexico, the world's third largest copper producer, finally
settled the six-week old worker's strike at La Caridad plant in
northwestern Sonora state.
Workers at La Caridad accepted the same 5.25 percent direct wage
increase and 0.5 percent more in benefits that were offered to
strikers at other units.
Workers at four units of Grupo Mexico walked out March 5,
demanding the Company improve its offer of a 5 percent salary
increase to between 8 percent and 10 percent.
Strikes in Zacatecas, San Luis Potosi and Coahuila had already
been settled following agreements in increases in salary and
benefits.
Grupo Mexico, which also operates in the United States and Peru,
said all its units are now working at 100 percent capacity.
ICONSA: Follows Parent Bufete Industrial to Bankruptcy Court
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Mexican engineering and construction concern Grupo Iconsa
(Ingenieros Y Contratistas S.A. De C.V.) confirmed it would file
for bankruptcy protection to restructure its debts.
The company accumulated losses of MXN255 million (US$28 million)
over the past two years as infrastructure sales in Mexico
decreased severely.
In 2001, Iconsa recorded a MXN159.6 million net loss on sales of
MXN748.9 million. The company's total liabilities stood at
MXN675.9 million.
Company officials are planning to meet with creditors as soon as
the bankrupty petition was approved.
Grupo Iconsa is a subsidiary of Mexican construction Bufete
Industrial, which initiated pre-bankruptcy proceedings in late
January this year.
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P E R U
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EDELNOR: Privatization Body to Sell Remaining State Shares in May
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Divestiture of the remaining government stake in Edelnor will
continue next month, as Peru's privatization body Copri plans to
place 110 million shares on the auction block.
Business News Americas says, if the auction goes well, the
remaining 208 million shares will be sold as well. Copri capital
markets manager Alberto Rojas told the paper that the public sale
will happen during the first 10 days of May, depending on
regulator approval.
Last month, Copri grossed US$24 million for selling 110 million
Edelnor shares at 0.76 soles (US$0.22) each, the minimum price
per share set by the body.
Edelnor is the largest private distributor in Peru and serves
almost 4 million people in Lima and the nearby port Callao.
Spain's Endesa acquired 60% of Edelnor in 1994 and controls and
runs the company.
The government still owns 27.1% of the company.
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V E N E Z U E L A
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BANCO INDUSTRIAL: Governent Stops Hemorrhage With VEB125 Billion
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The Venezuelan government has reportedly taken steps to stop the
bleeding at its largest development bank by injecting it with
VEB125 billion cash.
Business News Americas says Banco Industrial de Venezuela
Chairman Jorge Castillo was recently quoted confirming the
report.
The bank booked losses of VEB53 billion last year and already its
loses for the year has amounted to VEB15.6 billion, the paper
says. Mr. Castillo hopes his cost-cutting plan will bring the
bank back into black with a projected profit of VEB3 billion this
year.
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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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