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/raid1/www/Hosts/bankrupt/TCRLA_Public/020822.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, August 22, 2002, Vol. 3, Issue 166 Headlines A R G E N T I N A IMPSAT FIBER: Unsecured Creditors Hire Paul Weiss as Counsel IMPSAT FIBER: Seeking Approval to Retain Delloite & Touche SCOTIABANK QUILMES: Parent Makes Official Exit TELEFONICA DE ARGENTINA: Fitch Assigns 'CC' Ratings Over Concern TELEFONICA DE ARGENTINA/TELECOM: Seeking Rate Adjustments B E R M U D A TYCO INTERNATIONAL: More Board Members Stepping Down B R A Z I L BRAZILIAN COMPANIES: Authorities To Meet Wall Street Bankers CAUIA: Moody's Cuts Foreign Currency Debt Rating To B2 CEMIG: Fails To Auction Power In The Absence of Bidders CODESP: Puts Eight Properties Up For Rent To Increase Revenues CSN: Weak Real, Exchange Amortization Hinder 2Q, 1H02 Results CSN: Moody's Cuts Foreign Currency Ratings; Outlook Rating Neg. ELETROPAULO METROPOLITANA: Obtains 2-Day Extension Of Debt Talks ELETROPAULO METROPOLITANA: Counting On Govt. To Avert Default MRS LOGISTICA: Poor 2Q02 Earnings Won't Affect Ratings C H I L E ENERSIS: Spanish Parent Denies Rumors It Is Mulling Closure E C U A D O R TRANSELECTRIC: Ecuador Offers For Sale To Find Profitability M E X I C O CFE: To Complete Power Upgrade By the End of the Year GRUPO MEXICO: Likely To Issue New Debt, Clean Up Unit's Finances SEPOMEX/TELECOMM: Restructuring Now Ongoing VITRO: CEO Reiterates Financial Discipline P A R A G U A Y ANDE: Deals With $5M/Month Deficit P A N A M A TOKYO MITSUBISHI: Regulator Puts Unit In Voluntary Liquidation T R I N I D A D & T O B A G O BWIA: Chairman Warns Of More Losses For the Rest of the Year - - - - - - - - - - ================= A R G E N T I N A ================= IMPSAT FIBER: Unsecured Creditors Hire Paul Weiss as Counsel ------------------------------------------------------------ According to official documents, the U.S. Bankruptcy Court for the Southern District of New York approved the sought authority of the Official Committee of Unsecured Creditors of Impsat Fiber Networks, Inc. to employ Paul, Weiss, Rifkind, Wharton & Garrison as counsel, nunc pro tunc to July 1, 2002. The Creditors Committee expects Paul Weiss to: a) represent and advise the Creditors Committee in its communications with the Debtor, the Office of the United States Trustee, any other official committees, individual creditors and other parties in interest, with respect to the administration of the chapter 11 case; b) conduct such review as the Creditors Committee may require concerning the acts, conduct, assets, liabilities, and financial condition of the Debtor, the operation of the Debtor's business, any causes of action belonging to the Debtor's estate or creditors and any other matter of significance to the Creditors Committee which may be relevant to the chapter 11 case; c) represent and advise the Creditors Committee in connection with the formulation, negotiation and confirmation of a chapter 11 plan for the Debtor; d) advise the Creditors Committee with respect to its rights and obligations under the Bankruptcy Code and the Bankruptcy Rules; e) advise, assist and represent the Creditors Committee in the performance of its duties and the exercise of its powers under the Bankruptcy Code and the Bankruptcy Rules; f) prepare applications, motions and other papers for filing in the chapter 11 case and in any related proceedings; g) advise the Creditors Committee with respect to retaining a financial advisor and other professionals, as needed, and assist such advisor and other professionals as necessary; and h) perform such other legal services as may be required by the Creditors Committee in the chapter 11 case and in any related proceedings. Paul, Weiss will seek compensation from the Debtor's estate for services rendered to the Creditors Committee based on its customary hourly rates: Andrew N. Rosenberg Bankruptcy Partner $540 per hour Valerie Demont Corporate Associate $455 per hour Brendan D. O'Neill Bankruptcy Associate $420 per hour Impsat Fiber, a provider of broadband Internet, data, and voice services in Latin America, filed for chapter 11 protection on June 11, 2002. Anthony D. Boccanfuso, Esq., and Michael J. Canning, Esq. at Arnold & Porter represent the Debtor in its restructuring efforts. When the Company filed for protection from its creditors, it listed $667,189,368 in total assets and $1,334,732,793 in total debts. To see Financial Statement: http://bankrupt.com/misc/IMPSAT.htm CONTACT: IMPSAT Fiber Networks, Inc. Home Page: http://www.impsat.com Hector Alonso Gonzalo Alende Serra Phone: 54.11.5170.3700 PAUL, WEISS, RIFKIND, WHARTON & GARRISON (New York) 1285 Avenue of the Americas New York, NY 10019-6064 Phone 212-373-3000 Fax 212-757-3990 (Washington DC Office) 1615 L Street, NW Washington, DC 20036-5694 Phone 202-223-7300 Fax 202-223-7420 Email: mailbox@paulweiss.com DEBTORS' COUNSEL: Anthony D. Boccanfuso, Esq. Michael J. Canning, Esq. Arnold & Porter 399 Park Avenue New York, New York 10022 (212) 715-1315 Fax : (212) 715-1399 IMPSAT FIBER: Seeking Approval to Retain Delloite & Touche ---------------------------------------------------------- Impsat Fiber Networks, Inc. is requesting authority from the U.S. Bankruptcy Court for the Southern District of New York to employ Deloitte & Touche as auditors, accountants, tax and bankruptcy consultants, nunc pro tunc to June 11, 2002 for the necessary auditing, accounting and tax and bankruptcy consulting services. According to documents filed with the court, the professional services that Deloitte will provide to the Debtor are: i) Assist the Debtor in its compliance with the financial reporting requirements under the Guidelines issued by the United States Trustee; ii) Advise and assist the Debtor in matters to improve operating performance of its working capital management; iii) Consult with the Debtor's management in connection with financial matters relating to the ongoing activities of the Debtor in relation to the bankruptcy proceedings; iv) Work on behalf of the Debtor with any accountants and other financial consultants for committees and other creditor groups; v) Provide assistance with the analysis and reconciliation of claims; vi) Confer with the Debtor on the Debtor's preparation of financial projections and submissions to parties-in- interest; vii) Analyze cash flow information and recommend ways to improve cash flow; viii) Provide comments on the Debtor's business plan and recommend improvements, as appropriate; ix) Assist with analyses of potential sales of various assets of the Debtor, if any; x) Perform an audit and/or quarterly reviews of the consolidated financial statements of the Debtor and its affiliates and assist in the preparation and review of Forms 10-K and 10-Q and other filings as may be required by the Securities and Exchange Commission; xi) Provide tax services including assistance regarding the preparation and review of the Debtor's Federal and State tax returns, and provide assistance in connection with tax aspects of the reorganization process including maximizing preservation of NOL carryforwards, analyzing alternative tax elections and other related matters; and xii) Assist with such other matters as management or counsel to the Debtor may request from time to time, and as agreed to by Deloitte. Deloitte's hourly rates are: Level Range of Rates ----- -------------- Partners, Directors & Principals $450 to $620 Senior Managers $350 to $500 Managers $275 to $460 Senior Consultants $175 to $340 Consultants $125 to $195 Paraprofessionals $ 75 Impsat Fiber, a provider of broadband Internet, data, and voice services in Latin America, filed for chapter 11 protection on June 11, 2002. Anthony D. Boccanfuso, Esq., and Michael J. Canning, Esq. at Arnold & Porter represent the Debtor in its restructuring efforts. When the Company filed for protection from its creditors, it listed $667,189,368 in total assets and $1,334,732,793 in total debts. CONTACT: Deloitte & Touche 1633 Broadway New York, NY 10019-6754 Phone: 212-492-4000 Fax: 212-492-4111 http://www.deloitte.com SCOTIABANK QUILMES: Parent Makes Official Exit ---------------------------------------------- Bank of Nova Scotia, Canada's No. 4 largest bank, obtained clearance from the Argentine central bank to pull out of the recession-plagued country. The decision comes after the central bank revoked the banking license of the Canadian bank's local unit, Scotiabank Quilmes, and approved a plan to turn over the local bank's 91 branches to Banco Macro SA and Banco Comafi SA, two local banking minnows. According to a Bloomberg report, Banco Comafi SA will take charge of 53 branches with ARS300 million (US$83 million) of deposits and 780 employees. Banco Macro SA on the other hand, received 36 branches with ARS170 million of deposits and 420 employees. The plan will require ARS190 million from the nation's Deposit Insurance Fund and ARS50 million from another government fund earmarked for failed banks, Bloomberg reports, citing Buenos Aires daily InfoBAE. The reports didn't say how Scotiabank Quilmes would repay its remaining liabilities, such as its bonds and inter- bank loans. The Central Bank earlier this year suspended Scotiabank Quilmes after shareholders decided to abandon the troubled financial sector. Scotiabank Quilmes was Argentina's 12th-largest bank, with some ARS2.7 billion (US$733.7 million) in assets. CONTACT: SCOTIABANK QUILMES Alan Macdonald Chief Executive Officer Phone: (54-11) 4338-8000 Fax: (54-11) 4338-8033 Mail: 6th Floor Gral. J.D. Peron 564 (C1038AAL) Buenos Aires Roy D. Scott Vice-President and Managing Director, Latin America Phone: (54-11) 4394-8726 Fax: (54-11) 4328-1901 Mail: P.O. Box 3955 C1000WBN Correo Central Buenos Aires, Argentina E-mail: scotiarep@sinectis.com.ar TELEFONICA DE ARGENTINA: Fitch Assigns 'CC' Ratings Over Concern ---------------------------------------------------------------- Fitch Ratings has assigned 'CC' foreign currency and international-scale local currency ratings to the senior unsecured debt of Telefonica de Argentina S.A. (TAR) and to the holding company, Compania Internacional de Telecomunicaciones (Cointel). The ratings for TAR and Cointel are both on Negative Rating Watch. The ratings apply to TAR's outstanding US $71.4 million notes due July 2006 that were recently exchanged. The ratings reflect TAR and Cointel's declining capacity to meet financial commitments. The companies are being severely affected by Argentina's deepening recession, the impact of devaluation on its debt, the suspension of tariff adjustments and the tariff pesofication. The foregoing items have dramatically impacted the financial condition of TAR, due to the imbalance between its peso revenues and its debt, which is largely denominated in foreign currencies. Meanwhile Cointel, which controls 64.8% of TAR and whose only revenue source are dividends received from TAR, is exposed to the same risks faced by the operating company. The ratings also reflect the operational and financial support historically provided by parent, Telefonica S.A., TAR and Cointel have approximately US $898 million and US $70 million of short- term intercompany debt with Telefonica Internacional (TISA), affiliate of Telefonica S.A., respectively. Despite the short- term intercompany loans, maturities are expected to rollover indefinitely as it is highly unlikely that TAR and Cointel would be able to find alternatives to take out the intercompany loans and upstream cash to Telefonica. For the foreseeable future, Fitch does not expect Telefonica S.A. to provide additional funding to its Argentine investments. Fitch has not differentiated between the debt ratings of the operating company and holding company because of the controlling stakes held indirectly and directly by Telefonica S.A. in both entities. A default at either the operating or holding company levels may compromise Telefonica S.A.'s ownership stake in its Argentine units. Therefore, it is currently unlikely that Telefonica S.A. would be more inclined to allow one unit to default over another. Absent substantial further declines in the US$/Arg Peso exchange rate, TAR should be able to satisfy its operating and financial commitments over the near term, including enough cash generation to service Cointel's interest expense during 2002. Recently, TAR was largely successful in exchanging its July 1, 2002 US $100 million maturity. TAR offered a cash payment of up to US $15 million of principal and an extended maturity of July 1, 2006 (with a put in 2004 subject to certain conditions) for the balance with an identical 9.875% coupon. Approximately 84% of noteholders accepted the terms and roughly 16% declined and received full payment. As a result, Telefonica issued new bonds for US $71.4 million. TAR's recent bond exchange implies a degree of present value loss, therefore, Fitch considers it a distressed debt exchange and would have rated the exchange 'DD' at the time for thirty days. Since the exchange, near term refinancing risk has declined; TAR's other debt maturities (non-intercompany) include: a US $300 million senior unsecured note due November 2004 and a US $368.5 million senior unsecured note due May 2008. Although, the company's ability to refinance these bullet maturities is highly uncertain and will ultimately depend on the pace in which the sovereign crisis and regulatory issues are resolved, and to the extent liquidity returns to Argentina. Cointel has two issuances: a US $225 million issuance due August 2004 and an Arg$175 million issuance due August 2004, with associated annual interest payments of US $19.9 million and Arg$18.2 million, respectively. Prior to the peso devaluation, TAR benefited from its incumbent local exchange status in southern Argentina, which allowed the company to better withstand competitive pressures than competitive local exchange carriers (CLECs), interexchange carriers (IXCs), wireless operators and broadband providers. In a completely liberalized market with several operators authorized to provide local exchange service, TAR is better positioned than most operators due to a built out network in its traditional footprint, allowing TAR to curtail capital expenditures and preserve cash vis-a-vis other operators. TAR has a leading position in fixed-line telecommunications managing 55% of total lines in services in Argentina. TAR has implemented cost reduction measures in response to the crisis. But absent an improvement in the current macroeconomic situation and a new tariff agreement, the cash flow value will decline as inflation and devaluation deepen. Telefonica Argentina S.A. provides local exchange, long distance, residential Internet access and directory publishing services. Until October 1999, the company was the exclusive provider of telecommunications services in southern Argentina and controlled nearly two-third of the Buenos Aires metropolitan area market. Telefonica Argentina is now allowed to provide telecommunication services to northern Argentina, where Telecom Argentina Stet France Telecom S.A. is the incumbent operator. After a series of transactions, Telefonica S.A. indirectly controls 98% of TAR. During 2001, Telefonica S.A. provided US$2.0 billion of intercompany loans to its Argentine affiliates, which demonstrated shareholder support. However, the heightened sovereign and regulatory risks may hinder shareholder support going forward. Cointel is an intermediate holding company originally created to acquire a controlling stake in TAR. Cointel controls 64.8% of TAR. Meanwhile, Telefonica S.A., indirectly controls the remaining 33.1% of TAR, through Telefonica Internacional (TISA) and Telefonica Internacional Holding B.V. CONTACT: FITCH RATINGS Dolores Teran Phone: +011-541-14-327-2444 Randy Alvarado Phone: 312/368-3117 TELEFONICA DE ARGENTINA/TELECOM: Seeking Rate Adjustments --------------------------------------------------------- Telefonica de Argentina (NYSE: TAR) and Telecom (NYSE: TEO) asked Argentina's economy ministry to authorize emergency rate adjustments to compensate for post-devaluation price inflation, Business News Americas reports. Furthermore, both companies are proposing a system that would provide automatic rate adjustments that consider inflation. Argentina's inflation has grown 34.7% in 2002 following the devaluation of the country's currency early this year. The government has set down a period for some 60 public services companies in Argentina to file adjustment requests. The companies have until August 20 to submit their proposals. Telcom has pushed for a 29% increase for average residential consumers, while maintaining rates for low-income and retired customers. Upon approval by the economy ministry, the adjustments sought by operators and other utilities will tentatively take effect in October. CONTACT: TELEFONICA DE ARGENTINA Tucuman 1, 18th Floor, 1049 Buenos Aires, Argentina Phone: (212) 688-6840 Home Page: http://www.telefonica.com.ar Contacts: Carlos Fernandez-Prida Mendez Nunez, Chairman Paul Burton Savoldelli, Vice Chairman Fernando Raul Borio, Secretary TELECOM ARGENTINA STET - FRANCE TELECOM SA (TELECOM) Alicia Moreau de Justo 50, 10th Floor Capital Federal (1107) Repoblica Argentina Phone: +54 11 4968 4000 Home Page: http://www.telecom.com.ar Contacts: Alberto J. Ricciardi, Chief Financial Officer Elvira Lazzati, Finance Director Pedro Insussarry, Investor Relations Manager Phone: (5411) 4968-3626/3627 Fax: (5411) 4313-5842/3109 Email: inversores@intersrv.telecom.com ============= B E R M U D A ============= TYCO INTERNATIONAL: More Board Members Stepping Down ---------------------------------------------------- Two other board members will join British businessman Michael Ashcroft as he steps down from Tyco's 11-member board, Associated Press reports citing a source. Directors John Fort and James Pasman Jr. sided with Ashcroft who suggested the move in order to restore investor confidence in the conglomerate haunted by misdeeds of the old administration. Ashcroft proposed that the nine board members who served during the term of ex-top official Dennis Kozlowski, either declare they won't bid for another term in March, or resign before the elections came. The two other members remaining are the conglomerate's new chief executive officer Edward Breen, and new director John Krol. Tyco refused to make comment on the issue; spokesman Gary Holmes, however confirmed that Breen is also considering board changes. One director, W. Peter Slusser was reported to be silent on the matter, while at least two were opposed. The one openly against the move was Wendy Lane, chairwoman of Lane Holdings Inc., who contends the need for "experienced directors to advise the Company," says AP. The conglomerate is currently faced with several investigations about its accounting. It is also holding its own internal investigations on multi-million dollar deals done by Kozlowski that were not revealed to the board. CONTACT: TYCO INTERNATIONAL LTD. (Corporate Offices) The Zurich Centre, Second Floor 90 Pitts Bay Road Pembroke HM 08, Bermuda 441-292-8674 URL: http://www.tyco.com/main/index.jsp =========== B R A Z I L =========== BRAZILIAN COMPANIES: Authorities To Meet Wall Street Bankers ------------------------------------------------------------ Brazilian authorities will negotiate with Wall Street bankers to maintain credit lines to Brazilian companies, Reuter reports citing President Fernando Henrique Cardoso. Finance Minister Minister Pedro Malan and Central Bank President Arminio Fraga are set to travel to New York for the talk next week, the report says. The New York Fed confirmed the meeting of the country's officials with several banks in the United States. Brazilian firms are currently having difficultry obtaining credit lines from private banks due to the uncertainty of the country's presidential election results. Jose Serra, the investors' choice, was behind frontrunner Lula by some 25 percentage points, according to weekend polls. Investors are nervous about the possible installation of a left-leaning candidate, as this might affect economic policy and bring the country to default on its US$250 billion net public debt. The country's bonds and real currency lost some 30 percent this year as leftist candidates Luiz Inacio Lula da Silva and Ciro Gomes, in the polls. The International Monetary Fund has so far provided Brazil with US$30 billion aid this month. Also, according to Reuters, Fitch Ratings noted "that in the last six months, overall trade-related credit lines fell by about US$3 billion to US13 billon." Added to the current difficulties are tightening credit terms, shrinking to between 30 days to three months in some cases. The current conditions stifle export capabilities. The Central Bank recently provided US$2 billion to finance exports. Failure of companies to renew foreign credit lines has pushed the local currency lower, as these companies opted to buy dollars in the local exchange market to pay off maturing debts. Among the international banks having heavy exposure in the country are Citigroup Inc (C), and FleetBoston Financial Corp (FBF). Together, the banks have about US$24 billion investment in Brazil. CAUIA: Moody's Cuts Foreign Currency Debt Rating To B2 ------------------------------------------------------ After downgrading Brazil's foreign currency debt rating to B2 from B1, Moody's Investors Service also downgraded the foreign currency rating of Caiua Servicos de Eletricidade (CAIUA) to B2 from B1. Caiua's B2 rating remains under review for possible downgrade. Moody's placed the following ratings of Caiua under review for possible downgrade: - US$55 million medium term notes (Foreign Currency), B2 - Issuer Rating (Local Currency), Ba3 - Issuer Rating (Brazilian National Scale), A3.br - BRL167 million senior unsecured debentures (Brazilian National Scale), A3.br Moody's was prompted to put these ratings under review for possible downgrade on apprehensions about CAIUA's continuing net losses, difficulties at subsidiaries and investment interests, and on-going market and regulatory pressures affecting the electric sector in Brazil. The review also reflects Moody's concerns about the Company's foreign currency maturities over the short term in light of the uncertain economic environment prevailing in Brazil. CAIUA, a small Sao Paulo State electric distribution company, owns controlling interests in six other Brazilian electric distribution companies, namely CEMAT, CELPA, CELTINS, EEB, CNEE and CFLO. Collectively, the group (called Grupo Rede) distributes electricity to over two million customers in states covering 30% of Brazil. CEMIG: Fails To Auction Power In The Absence of Bidders ------------------------------------------------------- Companhia Energetica de Minas Gerais (CEMIG) was unsuccessful in its plans to auction 600MW after investors shunned the process due to a very high price, reports Business News Americas. Cemig reportedly charged a minimum of 75/MWh for two-year contracts and 78/MWh for four-year contracts. The only silver lining was that the electronic auction platform provided by Banco do Brasil worked fine, Cemig said, and will be used for further auctions later this year. "The prices were very high. We were surprised that after yesterday's auction by Tractebel Energia, where only 32% of the power was placed, that Cemig should choose to set such high prices," said Mateus Aranha Andrade, superintendent of energy trader Delta. "It is hard to calculate what the right price should be," Andrade told Business News Americas. "Each company makes its own calculations." But the fact that Tractebel managed to sell some power at prices slightly below Cemig already provides the market with some reference points, Andrade said. Tractebel sold one-year contracts for 59 reais/MWh, scaleable three-year contracts for 75.5 reais/MWh, and five-year contracts for 75 reais/MWh. CONTACT: COMPANHIA ENERGETICA DE MINAS GERAIS Luiz Fernando Rolla, Investor Relations Phone: + 011-5531-299-3930 Fax: + 011-5531-299-3933 E-mail: lrolla@cemig.com.br CODESP: Puts Eight Properties Up For Rent To Increase Revenues -------------------------------------------------------------- Codesp, the authority of port Santos in Sao Paolo, is offering eight locations totalling 20,000 sq. m for rent in order to increase revenues, Business News Americas reports. The offerings include six locatiosn and a warehouse in the Santos port, as well as another area in the city of Guaruja. The federally-controlled authority was set to be transferred to the Sao Paolo state government, and liquidated as soon as control of the port is handed over to a new public company. The new company will assume payment of Codesp's debt to the federal government for eight years. Codesp has outstanding liabilities of around BRL500 million (US$179 million). Its liabilities have been calculated at BRL370 million (US$132 million) plus a number of court actions that await rulings. Interested companies are required to submit a per-square-meter bid price, as well as plans for the rented area. The deadline of submissions is set until August 20. CONTACT: Companhia Docas do Estado de Sao Paulo (CODESP)(Port Authority) Ave Cons Rodrigues Alves s/n, Macuco, Santos SP 01015-900, Brazil Phone: 55-132-351-611 Fax: 55=132=333=080 Contact: Fernando Lima Barbosa, President CSN: Weak Real, Exchange Amortization Hinder 2Q, 1H02 Results ------------------------------------------------------------- Companhia Sider�rgica Nacional (CSN) (BOVESPA: CSNA3) (NYSE: SID) announced its financial results for the quarter and half year ended June 30, 2002. The Company's unaudited results are presented according to the Brazilian GAAP Corporate Law and are stated in Brazilian Reais (R$). The quarterly figures below pertain mostly to the Company's unconsolidated results and all comparisons, unless stated otherwise, are related to the same period of 2001. On June 30, 2002, one U.S. Dollar (US$) was equivalent to R$2.8444. HIGHLIGHTS - Operating Income before financial and equity results grew 11% to R$245 million in the 2Q02, reflecting higher sales volume, higher prices in the domestic market and lower cost of goods sold, on a per tonne basis. - Sales volume in the second quarter 2002 totaled 1.2 million tonnes of finished products and slabs (slabs accounting for 12% of this total), 17% higher than in 2001. In the first half of 2002, sales volume totaled 2.4 million tons (15% of which were slabs), also 17% higher than the same period in 2001. The higher productivity of Blast Furnace #3 (BF#3) following maintenance in the middle of 2001 allowed the Company to export excess slabs that exceeded its rolled-steel production needs. Furthermore, in 2001 there was a reduction in hot rolled exports in preparation for the stoppage of Hot Strip Mill #2 (HSM#2), which began in July 2001. Net sales revenue was 20% higher in 2Q02, totaling R$1.0 billion. Net sales revenue for the first half of 2002 totaled R$1.9 billion, 15% higher than the same period in 2001. - The strong operating performance contributed to EBITDA (Gross Profit - SG&A Expenses + Depreciation and Depletion), of R$412 million, 33% higher than in 2Q01. In the first half of 2002, EBITDA was 20% higher, totaling R$788 million, with consolidated EBITDA totaling R$813 million. - Despite very good operating income before financial and equity results, CSN recorded a net loss of R$210 million (R$2.92 per ADR) in 2Q02, with an accumulated loss of R$407 million (R$5.68 per ADR) for the six-month period. The main reason for this loss was the amortization of deferred exchange-related losses incurred in 1999 and 2001, which totaled R$146 million in 2Q02 and R$475 million in the first half of 2001. Furthermore, the 22.6% depreciation of the Brazilian Real during the first half of 2002 impacted the financial result, despite the Company's currency hedging position, since part of the hedging instruments utilized have a non-linear behavior related to the exchange rate until the due date (Options). For the consolidated figures, CSN had a net loss of R$408 million, compared to a net loss of R$187 million in the first half of 2001. PRODUCTION AND PRODUCTION COSTS In 2Q02, production output totaled 1.3 million tons, almost twice the amount in 2Q01, due to the revamping that began in May 2001 on BF#3, which reduced output to 0.7 million tons. For the first six months of 2002, crude steel output totaled 2.5 million tons, 33% higher than the same period in 2001, while rolled steel production remained flat at 2.3 million tons (production volumes measured at the continuous caster for crude steel, and at the hot strip mill for hot rolled bands - this volume slightly differs from inventory deposits due to normal process losses). Production costs in 2Q02 and first half of 2002 were lower, on a per tonne basis, although affected by the increase in coal prices, due to the annual contract renewal in July 2001 and the higher dollar exchange rate, which was 9% and 13% higher than in 2Q02 and 1H02, respectively. The consumption of outsourced slabs, during the revamping of BF#3, contributed to cost increases in 2001. Total production costs maintained their relative proportions, with the exception of raw materials costs, which in 2001 were impacted by a higher portion of outsourced slabs due to the maintenance of BF#3. In addition, depreciation was R$37 million higher in 2002, reflecting the lower utilization of equipment in 2001 and the start up of two major projects - the revamping of of BF#3 and HSM#2. SALES Sales volume of finished products and slabs totaled 1.2 million tonnes, 17% higher than in 2Q01. This amount includes 137,000 tonnes of exported slabs. In the first six months of 2002, sales volume totaled 2.4 million tons, 17% higher than in 2001 with 328,000 tons of exported slabs. The domestic market accounted for 75% of total sales volume in 2Q02 compared to 86% in the same period of 2001. In the first half of 2002, domestic sales volume accounted for 73% of total sales, compared to 85% in 2001. Higher value-added galvanized steel and tin mill products accounted for 33% of total sales volume in the first half of 2002, compared to 44% last year. Considering only finished products (excluding slab sales, which accounted for 15% of sales volume in 1H02), coated steel products accounted for 39% of total sales volume. CSN's consolidated sales volume was 2.4 million tonnes in the 1st half of 2002, compared to 2.1 million tones last year. The 28 thousand-tonne difference when compared to the Parent Company's sales volume is basically due to sales realized by CISA. In 2002, coated products accounted for 36% of total sales volume in 2002 (42%, excluding slab sales). This difference in sales mix is mainly attributable to the sale of galvanized products by CISA and GalvaSud, the latter being produced from cold rolled steel purchased from CSN. OPERATING RESULTS Net revenues, Cost of Goods Sold & gross margin Net revenues increased 20% to R$1.0 billion in 2Q02. The 17% higher sales volume and 10% higher average prices in the domestic market were responsible for this increase. The average selling price in the export market was 23% lower, due to a higher portion of slab sales, but considering only rolled finished products, average export prices fell only 3%, due to a change in sales mix and countries. Domestic sales accounted for 81% of total sales volume compared to 87% in 2001. In the first half of 2002, net revenues totaled R$1.9 billion, 15% higher than in the previous year, with domestic sales accounting for 82% of total revenues compared to 86% in 1H01. This improvement was due to 17% higher sales volume and 7% higher average prices in the domestic market. Consolidated net revenues totaled R$2.1 billion in the first half, 11% higher than in the same period in 2001. The difference between the Parent Company and the Consolidated figures is due, in part, to the sale of surplus energy in the amount of R$72 million through CSN's subsidiary - CSN Energia. In 2Q02, cost of goods sold (COGS) was 9% higher, totaling R$600 million. Higher sales volume was the main reason behind this increase. Higher depreciation also added R$37 million, but on a per tonne basis, the cost of steel products had a 7% reduction. For the first six months of 2002, COGS totaled R$1,177 million, 12% higher than the previous year, due to higher sales volume and (an increase in depreciation during the period, but COGS, on a per tonne basis, dropped 5%. Consolidated COGS was R$1,305 million, 13% higher than in 1Q01. The gross margin expansion to 40.6% in 2Q02 compared to 34.7% in 2Q01 is due mainly to higher selling prices in the domestic market and to lower per tonne production costs. In the first half of 2002 gross margin was 39.3%, or 1.6 percentage points higher than in 1H01. Consolidated gross margin was in line with that of the Parent Company, at 39.1%. SG&A expenses In 2Q02 SG&A expenses, without depreciation, totaled R$113.3 million, R$51 million higher than in 2Q01. The main reasons for this increase were R$9 million higher distribution expenses (freight and insurance), a function of higher export volume in this quarter, R$11 million in management bonuses distributed (in 2001 distribution was made in the first quarter) and the positive adjustment in provision for doubtful accounts made in 2001 - an impact of R$22 million. The transfer of the provision for the profit sharing program in 2002 to administrative expenses, in the amount of R$7 million, also contributed to this increase, since in 2001 this provision was included in other operating income/expenses. In the first six months of 2002, SG&A expenses totaled R$214 million, 44% higher (or R$65 million) than in 1H01, for the same reasons mentioned above, R$18 million of which was related to distribution expenses, R$25 million to the adjustment to provision for doubtful accounts in 2001 and R$18 million to the inclusion of profit sharing provisions to the SG&A line of the income statement. EBITDA EBITDA in 2Q02 was 33% higher, totaling R$412 million. EBITDA margin (EBITDA/Net revenues) was 40.8%, 4 percentage points higher than in 2Q01. In the first half of 2002, EBITDA totaled R$788 million, 20% higher than the same period in 2001, with an EBITDA margin of 40.6%, among the highest in the world for a steel company. Consolidated EBITDA also grew by 18% and reached R$813 million, with an EBITDA margin of 37.9%. Surplus energy sales, which in the first half of 2001 generated a 50% EBITDA margin, presented a 28% EBITDA margin in 2002, contributing to the decrease in the consolidated margin. The decline in energy sales margin reflects the decrease in prices in the Wholesale Energy Market, since the end of the power rationing. Other operating income (expenses) In 2Q02, the Company recorded a net expense of R$43 million, R$40 million higher than in 2Q01, due mainly to provisions for contingencies and a provision to recognize the unfunded pension liability, which began in January 2002, according to CVM Rule 371/2000. In the first half of 2002, such expenses totaled R$91 million, or R$59 million higher than the same period in 2001 for the reasons mentioned above. Net financial results After the issuance of debentures in the local market, the cost of gross debt was reduced from 7% to 6%, in dollar terms. Including the hedging instruments held against U.S. dollar denominated liabilities, the real cost of debt as per net financial revenues (expenses), including swap contracts, is approximately equal to the Brazilian CDI (Interbank Loan Rate). With the recent appreciation of the U.S. dollar, this policy to protect U.S. dollar denominated liabilities has resulted in lowering the exchange related impact on CSN's financial result. In 2Q02 alone, swap contracts and hedging instruments recorded gains of over R$700 million, what led to a financial income of R$771 million in this quarter and of R$532 million in the first half of 2002. The greater exchange rate variation in 2002 (see Exchange Rate table) negatively impacted the lines of financial expenses and monetary/exchange variation. CSN recorded financial expenses of R$224 million in 2Q02 and R$383 million in 1H02. The line of net monetary/exchange variations though was also impacted by the amortization of the 2001 and 1999 exchange rate deferrals, in the amount of R$146 million and R$475 million, during 2Q02 and first half of 2002, respectively. Exchange Rate Impact Deferral: In relation to the 2001 exchange rate deferral, in the 1st half of 2002, the Company amortized a total of R$416 million, leaving a balance of R$329 million to be amortized by 2004, of which R$96 million will be amortized in the second half of 2002. Regarding the 1999 exchange rate deferral, amortization expenses totaled R$59 million in the first half of 2002, and the outstanding balance of R$48 million will be fully amortized by the end of this year. Equity in results of subsidiaries Equity in results of subsidiaries totaled R$291 million in 2Q02, and R$304 million for the first half of 2002. The increase of R$202 million and R$188 million, respectively, was due mainly to the gain, in reais, in offshore affiliated companies, which have assets denominated in U.S. dollars. Income Tax and Social Contribution In the second quarter of 2002, CSN recorded income tax and social contribution credits totaling R$229 million. The difference of over R$40 million compared to the same period in 2001 is due to the higher pre-tax loss recorded in the period. For the same reason, in the first half of 2002, CSN recorded an income tax credit of R$330 million, a difference of R$36 million compared to 1H01. Net Loss Net loss in the second quarter of 2002 for the Parent Company was R$210 million (R$2.92 per ADR). For the first half of 2002, net loss was R$407 million, (R$5.68 per ADR). Consolidated figures were virtually identical, recording a net loss of R$408 million. CONSOLIDATED NET DEBT CSN's consolidated gross debt on June 30, 2002 was US$2.66 billion, practically the same level as on March 31, 2002. Cash and cash equivalents on June 30, 2002 totaled US$0.86 billion, US$0.22 billion higher than March 31, 2002. The Company's consolidated net debt was US$1.8 billion on June 30, 2002, having decreased US$280 million, due mainly to return on cash investments during the period and cash generation from operations. On August 2, 2002, the Company paid the principal of its 2-year Notes in the amount of US$350 million, with its own cash resources. The only significant loan due until the end of 2002 is a US$140 million USCP in October. The Company is considering ways to refinance this line, but has a comfortable cash level in case it needs to use its own cash resources to meet this payment. CAPITAL EXPENDITURES In 1H02, total CAPEX was R$109 million, with R$30 million being allocated to environmental projects, R$8 million in residual payments for the revamping of BF#3 and HSM#2 and R$71 million toward other projects related to the maintenance of the Volta Redonda mill. Compared to the first half of 2001, investments were R$259 million lower, due to the revamping of BF#3 and HSM#2 in 2001. RECENT EVENTS - In June 2002, the Department of Supplemental Social Security (Secretaria de Previd�ncia Complementar - SPC) approved the refinancing terms for the unfunded liabilities to be amortized for CSN's pension fund (CBS) by the sponsors, which corresponds to approximately 87% of the December 31, 2001 balance. The new agreement calls for the payment of 240 monthly installments, starting on June 28, 2002 - 12 installments of approximately R$900,000 each and the remaining 228 in the amount of approximately R$3 million each), adjusted by the INPC + 6% per annum. The agreement also calls for a possible advance payment of installments in the event of cash needs for the defined benefit plans. Furthermore, eventual debits/credits must be incorporated to the updated liability balance by the sponsors in order to preserve the equilibrium of the plans while maintaining the limits of the amortization schedule outlined in the contract. - In the beginning of July 2002, CSN renewed its annual coal supply contracts, with an average price reduction in U.S. dollars of 8%. This reduction reflects a 4% drop in average coking coal prices and a 15% drop in average PCI coal prices. For coking coal, the reduction reflects strategic changes in the blend of coal utilized in terms of source and quality, and gains from negotiations, partially offset by an 8-13% increase in international prices for coking coal. For PCI coal, the reduction is a result of a 10% drop in international prices, due to favorable climactic conditions, stabilization of the USA energy crisis and the incorporation of new technologies in CSN's blast furnaces. - On July 10, 2002, CSN's Board of Directors approved a proposal to acquire Cia Metalic Nordeste. The proposal will be submitted for approval at a General Shareholders' Meeting to be held of August 29, 2002. Metalic is the first and only company producing two-piece steel beverage cans, whose raw material is tinplate manufactured from special steel exclusively produced by CSN in Brazil. Metalic is currently owned by the Steinbruch family. The price of acquisition is R$108.5 million reais, indexed, as of April 1st, 2002, by the General Market Price Index as disclosed by Funda�ao Get�lio Vargas, plus interest of 12% per year, to be paid in 12 monthly installments, the first being due on September 15, 2002. On March 31, 2002, Metalic had financial obligations in the amount of approximately R$107.0 million reais. Such decision reflects (i) CSN's commercial strategy to open new business alternatives and markets for CSN products (ii) the possibility to raise the return on CSN's investments already made in the Presidente Vargas Steelworks in the modernization of its production lines; and (iii) the interest to aggregate further value to the high value-added products manufactured by CSN. - On July 10, 2002, the Board of Directors approved the appointment of Fernando Perrone as Executive Officer of Infrastructure and Energy. Jos� Paulo de Oliveira Alves, who occupied this post as well as serving as Executive Officer of New Business, will continue his duties in the latter position. Fernando Perrone, previously an Executive of BNDES and President of Infraero, assumed his position of Executive Officer on July 23, 2001. - On July 11, 2002, Joao Ricardo de Siqueira Cavalcanti was appointed as interim President of CBS Previd�ncia (CBS), replacing Luiz Fernando Perdigao de Oliveira, who departed from CSN. Joao Ricardo de Siqueira Cavalcanti will continue to act as Director of Human Resources, which he has occupied since January 2001. - On July 17, 2002, CSN and Corus announced the signing of an agreement in principle on the terms of a proposed merger of the two companies. Companhia Sider�rgica Nacional, located in the state of Rio de Janeiro, Brazil, is a steel complex integrated by investments in infrastructure and logistics, that combines in its operation captive mines, an integrated steel mill, service centers, ports and railways. With a total annual production capacity of 5,400,000 tonnes of crude steel and gross revenues of R$4.0 billion reported in 2001, CSN is also the only tin-plate producer in Brazil and one of the five largest tin-plate producers worldwide. To see financial statements: http://bankrupt.com/misc/CSN.pdf CONTACT: Jose Marcos Treiger CSN - Investor Relations General Manager Tel. +55 21 2586 1442 Email: jmtreiger@csn.com.br URL: www.csn.com.br Isabel Viera Thomson Financial Tel. +1 (212) 701-1823 Email: isabel.vieira@tfn.com URL: www.thomsonfinancial.com CSN: Moody's Cuts Foreign Currency Ratings; Outlook Rating Neg. --------------------------------------------------------------- Moody's Investors Service downgraded the foreign currency ratings of CSN Iron S.A. The ratings affected were: (To/From) - 9.125% Eurobonds guaranteed by Companhia Siderurgica Nacional B2 B1 - US$ Senior Implied Rating B2 B1 - US$ Issuer Rating B2 B1 The downgrades came in response to a downgrade of Brazil's long- term foreign currency ceiling to B2 from B1 by Moody's. CSN's B1 global local currency rating and Baa1.br Brazilian National Scale rating were not affected by the downgrade. The outlook for the global local currency rating remains negative. CSN, the largest steel producer in Brazil, and Corus have signed a Heads of Agreement to pursue a business combination. Such a transaction would result in Corus/CSN becoming the fourth largest global steel producer and would combine CSN's direct access to cost competitive iron ore mines and low cost slab production capacity with Corus' processing and upgrading facilities and its marketing channels throughout Europe and the USA. Moody's notes that there remain many details to be negotiated relative to this proposed transaction and that an extended time frame to conclusion of a transaction is likely. The negative outlook for CSN's global local currency rating reflects the dynamics within Brazil, which have caused deterioration in the ability of Brazilian borrowers to access financial markets and tightening of trade credit availability. CSN continued to maintain a substantive cash position at June 30, 2002 of BRL2.4 billion, which included the proceeds of the BRL690 million issue earlier in 2002, Moody's said. The August 2002 maturity of US$350 million in notes was met through use of cash resources. The Company also has a US$140 million commercial paper facility which comes due in October and has indicated that cash resources are available to meet this obligation, if necessary, Moody's added. While CSN currently maintains a comfortable level of cash balances, and is generating positive operating cash flow, Moody's remains concerned that continued tightness in credit availability and possible contraction in domestic sales volumes could diminish CSN's cash cushion and operating cash flow generation. CSN continues however, to have a strong domestic market position, has increased its exports in the second quarter 2002 and continues to benefit from a favorable production cost position. ELETROPAULO METROPOLITANA: Obtains 2-Day Extension Of Debt Talks ---------------------------------------------------------------- AES Corp.'s Brazilian unit Eletropaulo Metropolitana gained another two-day extension to negotiate an agreement with bondholders to rollover US$120 million of commercial paper and US$30 million of debentures, according to Dow Jones Newswires. The original deadline was last Friday but the Brazilian power distributor obtained an extension of two working days. Eletropaulo must have the approval of 80% of the investors to finalize a deal. The US$120 million commercial paper comes due Aug. 21 while the US$30-million debenture comes due Sept. 5. Eletropaulo is also facing another deadline for a US$225-million loan from a syndicate of 11 banks arranged by J.P. Morgan Chase & Co. The loan comes due on Aug. 26. Should Eletropaulo default on its debt, investors are likely to reduce credit line availability to Brazil, where banks are already curtailing lending amid a one-third collapse in bond prices and 26% slide in the currency this year. The declines stem from investor concern that an opposition candidate may win October's presidential election, increase spending and spark a default on the Brazil's BRL1 trillion (US$355 million) in debt. Eletropaulo is scheduled to repay about US$600 million in debt coming due by the end of the year, including the US$225 million- loan syndicated loan. As of June 30, the Company reported BRL237 million in cash on hand. Eletropaulo is the largest electricity distributor in Latin America in terms of revenues, with a sales volume of 32,563 GWh in 2001. Since privatization on April 15, 1998, Eletropaulo has been owned by LightGas, now known as AES ELPA. AES ELPA is 88.21% owned and controlled by AES. AES ELPA owns 77.81% of Eletropaulo's voting shares and 30.97% of total capital. CONTACT: ELETROPAULO METROPOLITANA Avenida Alfredo Egidio de Souza Aranha 100-B, 13 andar 04726-270 San Paulo Brazil Phone: +55-11-548-9461, +55 11 5696 3595 Fax: +55-11-546-1933 URL: http://www.eletropaulo.com.br Contacts: Luiz D. Travesso, Chairman and President Orestes Gonzalves Jr., VP Finance/Investor Relations J.P. MORGAN CHASE & CO. 270 Park Avenue New York, NY 10017 Phone: (212) 270-6000 Fax: (212) 270-1648 Home Page: http://www.jpmorganchase.com/ Contact: William Harrison, Jr., Chairman/Chief Executive Officer Dina Dublon, Chief Financial Officer Geoffrey Boisi, Co-CEO of the Investment Bank Investor Relations Phone: (1-212) 270-6000 ELETROPAULO METROPOLITANA: Counting On Govt. To Avert Default ------------------------------------------------------------- Eletropaulo Metropolitana SA expected to avert default on US$150 million worth of bonds after Brazil's Development Bank BNDES announced earlier Tuesday it would extend loan worth BRL1.125 billion as compensation for losses from power rationing last year. The loan is part of a deal wherein the government agreed to compensate electricity companies for losses due to a rationing program last year. BNDES is the financing agent in the deal, which was signed in December 2001. Some BRL6.2 billion in financing is immediately available, Aneel said Tuesday. AES on the other hand, said that it did not know when the resources would be available because of "old legal questions." Aneel responded saying it doesn't know of any pending legal matters that would prevent Eletropaulo from accessing the funds. MRS LOGISTICA: Poor 2Q02 Earnings Won't Affect Ratings ------------------------------------------------------- Standard and Poor's Ratings Services declared that the lower second quarter results of Brazilian railroad concessionaire MRS will not affect the Company's ratings nor future earnings forecasts. The Company's local currency rating is BB-negative; foreign currency, B+ negative; and Brazilian national scale, brBBB+ stable. S&P banks on the Company's larger cargo volumes this year, dismissing the lower export volumes of iron ore. The increase in cargo volumes was attributed to the expansion of Sao Paulo-based flat steel mill Cosipa and to increasing exports of soy products. MRS was able to maintain EBITDA margins as its operating lines in southeast Brazil was able to increase average rates by around 6% compared to the other quarter. The Company was also able to pre- pay debts in dollars and pay off BRL40 million (US$13 million) in debentures before they matured. The Company's net losses for the second quarter however, increased three times compared to the same period last year: from BRL46 million (US$14.9 million) in 2Q01 to BRL138 million (US$45 million) in 2Q02. Its net revenue, on the other hand, grew 20% to 190mn reais (US$61mn) for the same periods. S&P continues to warn the Company of its debt to capital ratio. The rating agency suggests that shareholders take care of the Company's dollar-denominated liabilities as this could put pressure on MRS in the medium term. MRS's shareholders include steel maker CSN and Usiminas, as well as mining companies MBR and Ferteco. CONTACT: MRS LOGISTICA S.A. Praia de Botafogo, 228/1201-E Rio de Janeiro - RJ, 22359-900 Brazil Phone: 55-21-2559-4600 Fax: 55-21-2552-2635 E-mail: daf@mrs.com.br Home Page: http://www.mrs.com.br Contacts: Julio Cesar Pinto, Chief Financial Officer Phone: (21) 2559 4600 (32) 3239 3600 (11) 3648 8401 Fax: (21) 2552 2635 (32) 3239 3609 (11) 3645 2743 E-mail: jfn@mrs.com.br Eduardo Cassinelli, Treasurer Phone: (21) 2559 4630 (32) 3239 3660 Fax: (21) 2559 4631 (32) 3239 3518 E-mail: edu@mrs.com.br ========= C H I L E ========= ENERSIS: Spanish Parent Denies Rumors It Is Mulling Closure ----------------------------------------------------------- Spain's Endesa SA tried to quell rumors that it is planning to buy out minority shares in its Latin American unit and then shut it down. In an AFX report, Endesa executive board member Salvador Montejo said that Endesa uses Enersis as an investment vehicle in Latin America and that it considers the presence of minority shareholders in Enersis as positive as it reduces fallout at times of crisis. Under current circumstances, given the regional crisis, the structure of Enersis is useful to Endesa, Montejo said. With regards to Endesa's plan to buy Enersis assets for up to US$150 million before selling them back to third parties, Montejo said the assets to be bought have not been defined yet. In a previous TCR-LA report, Enersis SA, South America's second- largest energy company, had said it would continue to renegotiate this month the US$500-million debt of its Chilean subsidiaries with local banks. Enersis, which has US$9.3 billion of debt, is already renegotiating part of US$250 million of its Argentine units' debt. Some of the debt is already overdue, said Juan Ignacio Dominguez, the Company's deputy chief executive. The Company also has US$341 million in debt in Brazil and US$561 million in Chile coming due in less than a year. Analysts believe that Enersis' move to refinance maturing debt may lead it to deal with increasing costs and pressure on its earnings this year. Enersis needs to cut spending and costs after revenue fell because of economic slowdowns and declining currencies in Brazil, Argentina and other Latin American countries in which it has investments. Second-quarter revenue at Enersis fell 26% to CLP548.4 billion pesos from CLP745 billion a year ago after currency declines in the countries in which it has businesses. Net income rose 14% to CLP7.7 billion from CLP6.7 billion a year earlier because of one- time gains related to changes in Chilean accounting rules. A bankruptcy or government takeover at the Company's Argentine units Hidroelectrica El Chocon SA and Edesur SA could trigger early repayment of debt by Enersis. Failure to pay debt at the two units wouldn't trigger repayment. A default at Argentine unit Central Costanera SA could trigger early repayment of Enersis' debt, though such a situation isn't expected to happen according to the company's CEO. Central Costanera is already negotiating with lenders, Dominguez said. To see financial statements: http://bankrupt.com/misc/Enersis.pdf CONTACT: ENERSIS Investor Relations: Ricardo Alvial Chief Investments & Risks Officer of Enersis Email: ram@e.enersis.cl Phone: (562) 353-4682 Susana Rey, srm@e.enersis.cl Ximena Rivas, mxra@e.enersis.cl Pablo Lanyi-Grunfeldt, pll@e.enersis.cl ============= E C U A D O R ============= TRANSELECTRIC: Ecuador Offers For Sale To Find Profitability ------------------------------------------------------------ The government of Ecuador offered state transmission company Transelectric for takeover, Business News Americas reports. Authorities are calling for bids in two weeks to find a new operator that will increase the Company's revenues and reduce its liabilities. Transelectric has a negative cash flow and needs some US$300 million in new capitalization. In 2001, the Company earned US$3.5 million per month; its expenses however, cut in US$5.5 million per month. As part of the package, the new owner will assume the Company's planned investment of US$57 million in 2002. Some US$29 million of the amount is set to cover the cost of transmission fees and other operations. The new contractor will also push through with the interconnection project with Colombia, which is set to operate in December, according to state privatization committee Conam. In 1999, Transelectric has 650 miles of 230 Kw transmission lines and 720 miles of 138 Kw transmission lines. CONTACT: TRANSELECTRIC A. Quito - Ecuador Phone: 593-2-2555570/2556461 Fax: 593-2-2529695 E-mail: lruales@transelectric.com.ec =========== M E X I C O =========== CFE: To Complete Power Upgrade By the End of the Year ----------------------------------------------------- Mexico's state power company CFE is poised to conclude in December this year a program aimed at increasing power transmission and distribution capacity in the country's northeast by 33%, reports Business News Americas. With investments of US$133.6 million, CFE began its work program in May of 2001 to tackle the region's power transmission bottleneck, which reached a critical condition in summer 2001. Capacity reserve margins in substations in many northeastern cities were as low as 1.6% in summer 2001, whereas 8% capacity reserve margins indicate emergency situations. Citing a Mexico City daily El Universal report, TCR-LA revealed in its previous edition CFE has resorted to debt and financed investments after it saw a gradual reduction in its physical budget investment since 1990, leaving a gloomy outlook in its financial position. CFE's liabilities, as shown in the figures from the Finance department, reached MXN137.40 billion (US$13.8 billion) by Dec. 31, 2001. Some 86% of this total corresponds to the Deferred Investment Projects in Spending Registers (Pidiregas). CFE director Alfredo Elias Ayub said the problem is that this method of funding is running out and creating enormous pressure for the company. The majority of the CFE's income is being used to pay debts and while long term contracts are transferring the risk of technological obsolescence to the government, which translates into higher operating costs. Figures show that a megawatt hour costs the CFE US$56.13 to produce, while private producers can generate the same amount of electricity for just US$32.01. GRUPO MEXICO: Likely To Issue New Debt, Clean Up Unit's Finances ---------------------------------------------------------------- In an effort to resolve Asarco's finances through the purchase of Asarco's stock in Southern Peru Copper, Grupo Mexico is planning to issue debt for nearly US$500 million through its subsidiary Ferromex, Mexico City daily el Economista reveals. According to company sources, Grupo Mexico would try to negotiate a credit for Ferromex with some banks, but they believe that the Company would still opt to issue debt itself. Grupo Ferroviario Mexicano, holder of Ferromex, has a debt of US$79.5 million and debt expirations of US$7.2 million this year. According to analysts at BCP Securities, the first obstacle, once GM obtains the funds, would be to find the mechanism to channel the resources from Ferromex to Asarco. Analysts said US$500 million would be enough to restructure Asarco's and Grupo Minero Mexico's (Grumin) debt despite the fact that the value of Asarco's 24.2% share in Southern Peru Copper was estimated at US$600 million. CONTACTS: GRUPO MEXICO S.A. DE C.V Avenida Baja California 200, Colonia Roma Sur 06760 Mexico, D.F. Mexico Phone: +52-55-5264-7775 Fax: +52-55-5264-7769 http://www.gmexico.com Contacts: German Larrea Mota-Velasco, Chairman & CEO Xavier Garcia de Quevedo Topete, President & COO SOUTHERN PERU COPPER CORPORATION Ave. Caminos del Inca 171 Urb. Chacarilla del Estanque Santiago de Surco Lima 33, Peru Tel: +51 1 372 1414 Fax: +51 1 372 0238 Home Page: http://www.southernperu.com Contacts: German Larrea Mota-Velasco, Chairman & CEO Oscar Gonzalez Rocha, President & Director General Daniel Tellechea Salido, VP - Finance ASARCO, INC. 2575 E. Camelback Rd., Ste. 500 Phoenix, AZ 85016 Phone: 602-977-6500 Fax: 602-977-6701 Home Page: http://www.asarco.com Contacts: German Larea Mota-Velasco, Chairman & CEO Genaro Larrea Mota-Velasco, President Daniel Tellechea Salido, VP & CFO SEPOMEX/TELECOMM: Restructuring Now Ongoing ------------------------------------------- Mexico's Transport and Communications Secretariat (SCT) revealed that the restructuring of the Mexican Postal Service (Sepomex) and Telecomunicaciones de M�xico (Telecomm) has been initiated. The SCT, relates Mexico City daily el Economista, said that the restructuring is aimed at consolidating both the companies' financial self-sufficiency through the elimination of government subsidies. Under the restructuring, both the companies' losses, which total more than MXN1.1 billion (US$112 million), will be eliminated. Sepomex, as part of the new process, has incorporated 1,000 corporate clients and tariffs were increased to counteract the decrease in income. During the first half of the year, sales increased 18% year-on-year. The operating deficit decreased by 66%, while operating costs fell 6%. Telecomm, for its part, has now formed a network of 8 license holders for international transfers of funds, bringing prices down by an average of 40%. Income in the first half of 2002 was 6% higher than the same period of 2001, while operating costs dropped 10% and the operating deficit decreased by 34%. VITRO: CEO Reiterates Financial Discipline ------------------------------------------ Vitro, S.A. de C.V. (NYSE: VTO; BMV: VITRO A) announced that at an internal meeting Tuesday, Federico Sada, Chief Executive Officer of Vitro, reaffirmed the Company's commitment to a strategy put in place in the last few years. The company plans to streamline operations, to focus on the production, manufacturing and distribution of glass products, divest non-core assets and strengthen its financial structure. "We are very pleased with the progress this management team has made since we established the strategy," said Federico Sada. "Divestiture of non-core businesses has allowed us to restructure and to focus on strengthening our primary business and our financial position." Jose Domene, Chief Operating Officer, Claudio Del Valle, Chief Financial Officer, and Francisco Romero, General Counsel head Vitro's management team. Jose Domene, Chief Operating Officer, responsible for the operations of Vitro's three business units: Flat Glass, Glass Containers and Glassware, stated that Vitro will continue to improve its productivity through cost and expense reductions and an increased focus on quality and good service to clients. In addition, Claudio del Valle, Chief Financial Officer, said Vitro will continue to concentrate on divesting non-core assets, and strengthening the financial position using proceeds from the sale of assets and free cash flow to reduce debt and improve financial ratios. At the meeting, Federico Sada also asked Juan Orozco, Vice President of Corporate Finance and Treasury, to continue to work closely with the financial community to communicate Vitro's commitment to continue to create value for the company. Finally, Federico Sada expressed his confidence that the team, which has been implementing Vitro's strategy during the last years, will work with dedication to accomplish the company's goals. Vitro, S.A. de C.V., through its subsidiary companies, is a major participant in three distinct businesses: flat glass, glass containers, and glassware. Vitro's subsidiaries serve multiple product markets, including construction and automotive glass, wine, liquor, cosmetics, pharmaceutical, food and beverage glass containers, fiberglass, plastic and aluminum containers, glassware for commercial, industrial and consumer uses. Founded in 1909, Monterrey, Mexico-based Vitro has joint ventures with 9 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. CONTACT: VITRO, S.A. DE C.V. Financial Community Rodrigo Collada Phone: +52-81-8863-1240, E-mail: rcollada@vitro.com BREAKSTONE & RUTH INTERNATIONAL, FOR VITRO Luca Biondolillo E-mail: Lbiondolillo@breakstoneruth.com Jessica Anderson, E-mail: janderson@breakstoneruth.com Phone: +1-646-536-7012/7002 Home Page: http://www.vitro.com =============== P A R A G U A Y =============== ANDE: Deals With $5M/Month Deficit ---------------------------------- Paraguay's state-owned energy company Ande is hemorrhaging US$5- million/month in cash. In order to combat the problem, the Company downsized its administration department and made proposals to the government on how to face the issues, Business News Americas reports, citing Ande planning director Ernesto Samaniego. "We are in a wartime economy" said Samaniego, adding that average monthly expenses reach US$24 million, of which 80% is dollar- denominated and the rest is in guaranies (local currency). "Even though our monthly income averages US$19 million, as the exchange rate rises, our guarani income grows by less than our monthly dollar payments and so our deficit grows even more", he continued. To counter this situation, the Company plans to increase energy sales from its Acaray hydroelectric plant to Brazilian power company Copel to 150MW from 50MW. "Acaray has an installed capacity of 210MW and we intend to sell Copel 150MW. However, we need to resolve some technical problems because Brazil uses a 60kHz frequency, while we use 50kHz", Samaniego said. =========== P A N A M A =========== TOKYO MITSUBISHI: Regulator Puts Unit In Voluntary Liquidation -------------------------------------------------------------- The Bank of Tokyo Mitsubishi obtained authority from Panama's banking regulator to close its branch in the country. Citing a regulatory source, Business News Americas reports that the closure is part of the Japan-based bank's global restructuring process. According to the source, the bank was prompted to close the branch due to the economic downturn in Latin America and a reduced presence of Japanese company clients in Panama, which is the bank's staple business in the region The banking regulator will place the branch under "voluntary liquidation", which means simply that the bank is paying all its obligations and exiting the market. The Bank of Tokyo Mitsubishi is part of the Mitsubishi Tokyo Financial Group and its Latin American presence consists of representation offices and branches in Argentina, Brazil, Chile, Colombia, Mexico and Venezuela. CONTACT: MITSUBISHI TOKYO FINANCIAL GROUP 10-1 Yurakucho 1-chome, Chiyoda-ku Tokyo 100-0006, Japan Phone: +81-3-3240-8111 Fax: +81-3-3240-8203 URL: http://www.mtfg.co.jp Akio Utsumi, Chairman and Co-CEO Shigemitsu Miki, President and Co-CEO Tadahiko Fujino, Senior Managing Director and CFO ================================= T R I N I D A D & T O B A G O ================================= BWIA: Chairman Warns Of More Losses For the Rest of the Year ------------------------------------------------------------ BWIA Chairman Lawrence Duprey forecast a gloomy outlook for the airline for the remainder of the year considering that there's very slow progress being made in an industrial dispute, with pilots and no recovery in sight from a global decline in travel. Speaking at a media conference called Monday by the airline's board, Duprey said he expects the ailing airline to continue losing money during the rest of the year after posting an US$8.4- million loss in the first half of this year. The airline's board called a media conference mainly to defend the Conrad Aleong-led management team, which has been mandated to restructure the airline to ensure full payment to creditors and that shareholders can be reasonably assured of profit and increasing investment value. The board "hired the executive management team headed by President and CEO Conrad Aleong and we continue to have full confidence in Mr. Aleong and his excellent management team." He said it was the opinion of the board that the management team led by Aleong was the group of people best suited and most capable of surmounting this hurdle. "The demonstrated skills, drive and personal commitment of the members of the team make them uniquely qualified to carry out this crucial mandate for the survival and profitable future of the airline," he added. The Board has pledged its support for the Conrad Aleong-led management team that has come under pressure in recent weeks, as the pilot's action forced flight delays and cancellations. Fleet rationalization is expected to be part of the restructuring plan. But Duprey is also in favor of salary cuts, which he is confident the majority of BWIA staff will accept. Meanwhile, according to a report by the Antigua Sun, two employees at BWIA's Antigua office have been made redundant as part of the airline's restructuring program. General Secretary of the Antigua & Barbuda Workers Union, Keithlyn Smith said after a series of meetings with the management of BWIA, a decision was made that two staffers would be sent home, but not before they received their severance pay and other fringe benefits. CONTACTS: BWIA West Indies Airways Phone: + 868 627 2942 E-mail: mailto:mail@bwee.com Home Page: http://www.bwee.com/ Contacts: Conrad Aleong, President and CEO (Trinidad) Beatrix Carrington, VP Marketing and Sales (Barbados) Paul Schutz, Chief Financial Officer (Trinidad) *********** 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. 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 * * *