/raid1/www/Hosts/bankrupt/TCRLA_Public/020913.mbx
T R O U B L E D C O M P A N Y R E P O R T E R
L A T I N A M E R I C A
Friday, September 13, 2002, Vol. 3, Issue 182
Headlines
A R G E N T I N A
ARGENTINE BANKS: Bankers Squirm Over New Plan To Lift Freeze
EDERSA: Parent Renegotiates Debt With Chilean Bank
INTESABCI: Argentine Unit Not Closing Branches
B E R M U D A
MUTUAL RISK: US Subsidiaries Head For Liquidation
B O L I V I A
ENRON: Expects Aid From IDB for Bolivian Project
B R A Z I L
BRADESCO: To Place BRL1.2 B In Debentures This Year
COSIPA: CVM On Usiminas' Side In Battle Against Minority Owners
ELETROPAULO METROPOLITANA: Clancy Named New CEO
EMBRATEL: Shares Up On Parent's Plan To Replace CEO
MRS LOGISTICA/COSIPA: Finalizing Rail Investments
C H I L E
AES GENER: Feller Rate Confirms Debt, Equity Ratings
ENERSIS: Moody's Cuts Ratings On Debt Concerns
SILICA NETWORKS: Shareholders Keen On Selling Control
M E X I C O
AVANTEL: Citigroup Makes First Step To Resolve Ownership
CFE: Draws Seven For El Cajon Hydro Project Bidding
GRUPO TMM: TFM Signs New $250M Bank Facility Agreement
IUSACELL: Analysts Doubt Shareholders' Commitment
PEGASO: Concludes Merger With Telefonica Moviles
P A R A G U A Y
COPACO: Expects To Settle Interconnection Debts By Year-End
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A R G E N T I N A
=================
ARGENTINE BANKS: Bankers Squirm Over New Plan To Lift Freeze
------------------------------------------------------------
A plan unveiled Tuesday evening by Economy Minister Roberto
Lavagna to partially ease banking curbs has spurred apprehensions
from bankers, reports the AP. Lavagna revealed a plan Tuesday
allowing Argentines to withdraw up to US$1,940 from higher-rate,
longer-term accounts, known as "term deposits" as of Oct 1. Banks
will also let savers withdraw up as much as $2,770 from their
term deposits.
Lavagna said the new measures would let 60% of funds in term
deposits be removed from the banking freeze, which was introduced
in December in an effort to stem a run on deposits. Lavagna also
offered savers the chance to swap the deposits that will remain
frozen in the banking system for 10-year government bonds or
private bank debt -- the second part of a bond-for-deposits swap
begun in July.
Bankers are now worried that Argentines might quickly convert
freed-up pesos into dollars. Such a move would weaken the already
devalued currency, fuel inflation and rattle the nation's still
shaky banks.
"I'm sure the government wants to see what direction Argentines
take with their cash ... if they'll turn to buying dollars or
buying goods," said Jose Barrionuevo, director of Emerging Market
Strategy at Barclays Capital. "Money is going to leave the banks.
The question is where will it go?"
However, the government believes there are economic signs
Argentines won't use the newly-freed money to buy dollars.
First, the currency has held steady at ARS3.60 per dollar for
three months, despite losing 70% of its value between January and
May. Recently introduced exchange controls could firm up that
stability. Second, Argentines have put more money into banks than
they've withdrawn since mid-July.
But Mario Vicens, president of the Argentine Banking Association
said that while the easing of the banking freeze could be the
first step in rebuilding Argentina's financial system, success
hinges on how the government handles other political challenges.
"If things remain calm ... and all the players in the current
situation act responsibly, then this will end successfully,"
Vicens told the local news agency Diarios y Noticias.
EDERSA: Parent Renegotiates Debt With Chilean Bank
--------------------------------------------------
Chilean distributor Saesa has stepped in hoping to rescue its
50%-owned Argentine distribution subsidiary Edersa, which serves
140,000 clients in Rio Negro province. Business News Americas
reports that Edersa owes Chilean bank Banco Santiago US$35
million, which comes due at end-March 2003. Saesa is looking to
extend the due date by at least two years, CEO Jorge Brahm said.
Edersa is managing to cover interest payments, operating costs
and minimum investments with its cash flow. But the company
cannot pay down principal due to the fact that rates are now in
Argentine pesos, while debt remains in dollars.
Despite the imbalance, and Edersa's zero cash-flow contribution
to Saesa's consolidated results over the last five years, Saesa
has decided to stay in Argentina. However, the parent won't be
making any new capital injections.
The remaining 50% of Edersa is owned by Argentine gas transport
company Camuzzi.
INTESABCI: Argentine Unit Not Closing Branches
----------------------------------------------
Sudameris Argentina has no plans to close its branches and said
that ot will continue to operate as usual. The news comes after
its parent, IntesaBCI, indicated in its business plan for the
2003-2005 period that it wants to reduce its exposure to Latin
America.
Early this week, IntesaBCI revealed a plan to exit Latin America
and reduce its exposure to large international corporate clients
as it refocuses on Italy and on its retail business in a bid to
boost profitability.
Meanwhile, IntesaBCI unit Banco Sudameris also said it is not
considering withdrawing from the Uruguayan market. In a
statement, the bank said that Sudameris' operations in the
smaller Latin American countries, such as Uruguay, Paraguay,
Colombia, Panama and Chile, will be individually reviewed in
order to optimize their contribution to the IntesaBCI group.
CONTACT: IntesaBci
Investor Relations:
Piazza della Scala, 6
20121 - Milano
Fax: (39) 02 8850 2587
E-mail: investorelations@intesabci.it
Contacts:
Andrea Tamagnini, Tel: (39) 02 8850 3180
Marco Delfrate, Tel: (39) 02 8850 2622
Cristina Paltrinieri, Tel: (39) 02 8850 3571
Carla De Alberti, Tel: (39) 02 8850 3159
Giorgio Grossi, Tel: (39) 02 8850 3189
Anna Gervasoni, Tel: (39) 02 8850 3466
Maria Vittoria Buscicchio, Tel: (39) 02 8850 7114
Manuela Banfi, Tel: (39) 02 8850 3273
BANCO WIESE SUDAMERIS
Dionisio Derteano, 102 Esquina con Miguel Seminario
Lima 27, Peru
Phone: +51-1-211-6000
Fax: +51-1-440-7945
Website: http://www.bws.com.pe
Luis F. Wiese de Osma, Chairman
Eugenio Bertini, CEO
Carlos Palacios Rey, President, Executive Committee
=============
B E R M U D A
=============
MUTUAL RISK: US Subsidiaries Head For Liquidation
-------------------------------------------------
Legion Insurance Co. and Villanova Insurance Co., the U.S.
insurance subsidiaries of Hamilton, Bermuda-based Mutual Risk
Management, could be liquidated should The Commonwealth Court
grant a request filed Aug. 29 by Pennsylvania regulators.
Earlier this year, the state insurance commissioner took control
of Legion and Villanova, collectively known as the Legion Group.
Villanova and Legion have US$1.3 billion in stated assets and had
US$494 million in liquid assets at the beginning of the year but
US$317 million of that was tied up in reinsurance recoverables
that the group hadn't yet collected. The precarious position
became even more problematic for the companies as turmoil hit the
global reinsurance market in the wake of Sept. 11, 2001.
In May, after posting a US$99.2 million net loss in 2001, Mutual
Risk Management said it has reached an agreement in principle to
restructure its senior debt. The Hamilton, Bermuda-based
company's US$235 million of debt consists of about US$131 million
under the company's credit facility and US$104 million to holders
of the company's 9 3/8% debentures, Mutual Risk Management said.
The restructuring is proposed to be made through a "scheme of
arrangement" under Bermuda law.
In April, Bermuda authorities placed Mutual Risk Management under
review, the company said in its 10-K filing with the U.S.
Securities and Exchange Commission. The company's stock was also
delisted from the New York Stock Exchange because it was trading
at less than US$1 a share.
=============
B O L I V I A
=============
ENRON: Expects Aid From IDB for Bolivian Project
------------------------------------------------
The Inter-American Development Bank could extend as much as
US$170 million loan to Enron for its expansion project in Bolivia
pending conclusion of a review by the IDB's credit committee.
The loan, according to Bloomberg, would be welcome relief for
Enron as it is considering selling its one-quarter share in the
Bolivian pipeline company, Transredes SA, to help pay its
creditors. Enron defended the financing.
"While there may be some financial interest for the estate of
Enron, there is also a tremendous public interest for Bolivia" in
getting aid to expand the gas pipelines, said John Ambler, an
Enron spokesman. The investment will aid one of Latin America's
poorest nations, where per capita income is $990.
Enron, which filed Chapter 11 bankruptcy in December, said last
month it's considering selling its stake in the company if it
gets an offer "consistent with its value," Ambler said.
Royal Dutch Petroleum Co., pension funds and private investors
own the rest of Transredes. A spokesman for Royal Dutch Petroleum
said the company has started a review of "all commercial options"
regarding its stake in Transredes.
===========
B R A Z I L
===========
BRADESCO: To Place BRL1.2 B In Debentures This Year
---------------------------------------------------
Bradesco, one of Brazil's largest banks with more than 2,600
banking branches throughout the country, is planning to sell as
much as BRL1.2 billion in debentures this year as concern eases
that the government may default, according to Valor Economico
newspaper.
Banks and investors have limited credit to companies and the
government this year on concern Brazil's next president may boost
spending and the chance of a default on BRL1.1 trillion of debt.
Banks have cut lending to Brazil by about US$5 billion in 12
months to roughly US$18 billion, the central bank recently said.
Early last month, analysts suggested that Bradesco faces a great
risk in the event that South America's largest economy defaults
because more than a quarter of Bradesco's assets are tied up in
state debt.
The bank also is the biggest lender to the government after
state-owned Banco do Brasil. Bradesco's government debt holdings,
which totaled BRL31.9 billion at the end of March, were almost
three times those of Banco Itau SA, which after Bradesco is the
largest Brazilian bank not owned by the state. Itau had a total
of BRL11.3 billion of state bonds, representing about 14% of
assets.
Bradesco's government bonds are valued at about 3.2 times its
shareholder's equity, or total assets minus liabilities, compared
with 1.4 times shareholders equity for Itau.
Bradesco ended second-quarter 2002 with a profit of BRL479
million (US$159.4 million), or 33 centavos per 1,000 shares, down
from BRL621.6 million, or 43 centavos a share a year earlier. The
result was higher than the BRL448 million profit predicted in a
Bloomberg survey of the estimates of five analysts. Some
investors say Bradesco's US$567-million purchase of Banco
Mercantil de Sao Paulo SA in January may depress profit.
CONTACT: BANCO BRADESCO S.A.
Jean Philippe Leroy
Technical Director of Investor Relations
Tel: (11) 3684-9229
E-mail: 4260.jean@bradesco.com.br
Bernardo Garcia
Executive Manager of Investor Relations
Tel: (11) 3684-9302
E-mail: 4260.bernardo@bradesco.com.br
COSIPA: CVM On Usiminas' Side In Battle Against Minority Owners
---------------------------------------------------------------
Belo Horizonte-based flat steel maker Usiminas wins the first
round of battle against the minority shareholders of Sao Paulo-
based flat steel maker Cosipa. Usiminas is the largest
shareholder in Cosipa. Citing business daily Gazeta Mercantil,
Business News Americas reports that Brazil's federal securities
watchdog CVM rejected a complaint filed by Cosipa minority
shareholders against Usiminas' attempts to increase its stake in
the Company.
Cosipa is currently restructuring, a process which includes the
Company's sale of BRL900 million (currently US$300 million) in
convertible debentures and Usiminas assumption of BRL1.1 billion
(US$366 million) of the Sao Paulo-based mill's debts. With these
liabilities, Usiminas had credits to underwrite the debentures
and, when these are converted into shares, will end up with 93%
of the total capital of Cosipa.
Minority shareholders opted not to exercise their preference
rights to acquire the debentures. The convertible titles were
issued at BRL0.25 (US$0.08), or a premium of 177% over the market
price of Cosipa's shares.
CVM considered that the subscription price offered was just, and
dismissed a request by the minority shareholders for a public
tender offer. The entire operation is expected to be completed by
year-end, but Cosipa's minority shareholders have not given up
the fight.
Last week, their lawyers appealed the CVM ruling saying minority
shareholders were not in an equal position to Usiminas to adhere
to the subscription and, again, requested a public tender offer
for their minority stakes.
Cosipa slipped into the red in the second-quarter this year after
the value of the dollar rose by 22.4% versus the local currency,
the real, between April and June. The company registered a net
loss of BRL345 million (currently US$111 million) for the second-
quarter this year, compared to a net profit of BRL4 million for
the same-period 2001.
Financial losses jumped six fold to BRL594 million (US$192
million) for the second quarter 2002 against the figure posted in
the same year-ago period. EBITDA inched up less than 2% to BR120
million (US$39 million) in the same quarterly comparison, but
ebitda margins fell from 25.8% to 21.2%. Net operating revenues
during the quarter grew 23% to just over BRL566 million (US$183
million) from the same period in the previous year. With new
equipment increasing capacity, sales volumes rose 30% to 871,000t
in the same period.
Cosipa's production capacity has jumped from 2.5Mt/y to 4.5Mt/y
this year. With the completion of a US$1.1-billion investment
program, Cosipa expects to be operating at full capacity from
4Q02 onward.
Fabio Zagatti, a steel analyst with HSBC bank, told Business News
Americas that he predicts Cosipa will end this year with an
accumulated loss of BRL185 million (US$60 million).
Cosipa manufactures cold- and hot-rolled steel sheets, as well as
heavy plates and slabs. It sells its products internationally to
auto, home appliance, and pipe manufacturers, with most exports
going to North and Central America, South American countries,
Europe, and Asia and Oceania. The Company also runs its own
domestic port terminal for receiving raw materials used in steel
production and for exporting steel products. Usiminas owns 49.8%
of Cosipa's voting shares.
CONTACT: Avenida do Cafe, 277
Torre B, 8 e 9 andar
Vila Guarani
04311-000 Sao Paulo, Brazil
Phone: +55-11-5070-8800
Fax: +55-11-5070-8863
URL: http://www.cosipa.com.br
ELETROPAULO METROPOLITANA: Clancy Named New CEO
------------------------------------------------
Eletropaulo Metropolitana SA, the Brazilian unit of U.S.-based
AES Corp., has a new chief executive officer in the person of
Steven P. Clancy. An Eletropaulo e-mail statement reports that
Clancy, the former CEO of AES's unit in Venezuela, replaces Mark
Fitzpatrick, who was named vice president for Latin America and
the Caribbean. Fitzpatrick filled the position of Paul Hanrahan,
who was named chief executive of AES in June.
Management reshuffling takes place while Eletropaulo negotiates
with holders of about US$470 million in debt. The Sao Paulo-based
utility is negotiating to extend payments on US$191 million in
loans that matured last month and another US$280 million due by
year-end. Eletropaulo's corporate debt rating was lowered to
selective default from CC by Standard & Poor's last month.
Brazil's currency has lost 26% against the U.S. dollar this year,
making it more expensive for companies such as Eletropaulo with a
large amount of dollar-denominated debt to repay.
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 and CEO
Dina Dublon, Chief Financial Officer
Geoffrey Boisi, Co-CEO of the Investment Bank
Investor Relations
Phone: (1-212) 270-6000
EMBRATEL: Shares Up On Parent's Plan To Replace CEO
---------------------------------------------------
Preferred shares of Embratel Participacoes SA rose 9 centavos, or
3.6%, to BRL2.62, reports Bloomberg. The stock rose following an
announcement by its controlling shareholder, WorldCom Inc., that
it will replace Chief Executive Officer, John Sidgmore, as the
company seeks to emerge from the biggest bankruptcy in history by
the middle of 2003. Sidgmore took office when Bernard Ebbers
resigned in April.
Embratel reported a second-quarter loss of BRL152.2 million, a
whopping 292% rise over the year-earlier period. A 17.5%-
depreciation in Brazil's currency, the real, was the main villain
as it magnified its overseas debt costs in local terms. But
revenue also dipped and provisions for nonpayment of bills
remained high.
Embratel shares are still the second-worst performing at the
Bovespa index with a 74% year-to-date loss.
CONTACT: EMBRATEL PARTICIPACOES S.A.
Investor Relations
Silvia Pereira
Tel. (55 21) 2519-9662
Fax: (55 21) 2519-6388
Email: Silvia.Pereira@embratel.com.br
invest@embratel.com.br
or
Press Relations:
Helena Duncan/Mariana Palmeira
Tel: (55 21) 2519-3653/3654
Fax: (55 21) 2519-8010
Email: hduncan@embratel.com.br
mpalm@embratel.com.br
MRS LOGISTICA/COSIPA: Finalizing Rail Investments
-------------------------------------------------
Exactly how much MRS Logistica and Sao Paulo-based flat steel
maker Cosipa will each invest in a US$70-million plan remains
unclear. The project is aimed at modernizing a section of track
crossing the Serra do Mar mountain range in Sao Paulo. The two
companies are reportedly still putting the final touches to the
plan.
Modernization of the track will allow for up to 2,000t of
minerals to be transported over the mountainous zone to the Sao
Paulo coast where Cosipa has its steel mill. The investment will
also lower transport costs by 15-20%.
The project is part of MRS's investment strategy to improve the
integration of Santos port with Greater Sao Paulo. Cosipa has
been looking for ways to reduce transport costs of its inputs
that include iron ore and coal produced in Minas Gerais state.
The state government of Sao Paulo is expected to conclude
analyzing the environmental license for the project in four
months' time.
MRS increased its net losses in the second quarter 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.
However, ratings agency S&P continues to warn over concerns about
the Company's debt to capital ratio. S&P 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
=========
C H I L E
=========
AES GENER: Feller Rate Confirms Debt, Equity Ratings
----------------------------------------------------
Credit risk rating agency Feller Rate confirmed the 'A-' rating
of Chilean generator AES Gener's liquidity and bonds, Business
News Americas reports, citing a Feller Rate statement. Moreover,
the agency confirmed the First Class Level 3 rating of AES Gener
stock, with a negative outlook.
The moves mirror AES Gener's slow recovery from its poor
financial situation, which has resulted from its inability to
sell its assets outside of Chile. Proceeds of these sales are
destined to reduce debt.
The rating also accounts for AES Gener's strong position in
Chile's generation market, and its control by the US' AES.
AES Gener has refinanced US$452 million of debt this year,
including agreements with Bank of America, ABN Amro, and its
Colombian subsidiary Chivor's syndicate of banks. But Feller Rate
analyst Gonzalo Oyarce deemed these negotiations insufficient to
assure the Company's liquidity.
"Even though AES renegotiated a US$40 million debt with ABM Amro
Bank, renegotiated its US$82 million syndicated credit with the
Bank of America, and renegotiated its Colombian subsidiary
Chivor's debt for US$330 million after the Company had defaulted
on some payments, AES Gener's financial situation is still
deteriorating," Oyarce said.
Although these gestures have helped to ensure AES Gener's
September cashflow, they are insufficient considering the
Company's debts due 2005 and 2006, respectively, Oyarce
explained.
AES Gener faces a US$500 million payment on convertible bonds due
2005 and US$200 million related to a Yankee bonds issue due 2006.
"The solution for AES Gener could come from its parent company
AES injecting more capital into the Company, or helping its
subsidiary to offer attractive terms to the holders of its US$500
million in negotiable bonds," Oyarce said.
AES Gener is the second largest electricity generation group in
Chile in terms of operating revenue and generating capacity with
an installed capacity of 1,757 MW composed of 1,512 MW of thermal
and 245 MW of hydro generating capacity. The company operates
most of the thermal electric power plants in the country. AES
Gener serves both the Central Interconnection System (SIC) and
Northern Interconnection System (SING) through various
subsidiaries and related companies. Gener is 98.65%-owned by AES.
CONTACT: AES GENER S.A.
Mariano Sanchez Fontecilla 310 Piso 3
Santiago de Chile
Phone: (56-2) 6868900
Fax: (56-2) 6868991
Home Page: www.gener.com
Contact:
Robert Morgan, Chief Executive
Laurence Golborne Riveros, Chief Financial Officer
BANK OF AMERICA - Corporate Headquarters
Bank of America Corporate Center
100 North Tryon Street
Charlotte, North Carolina 28255
Website: www.BankofAmerica.com
Contact: Ken Lewis, Chairman & CEO
ENERSIS: Moody's Cuts Ratings On Debt Concerns
----------------------------------------------
Moody's Investors Service downgraded the ratings of Enersis SA, a
unit of Spain's Endesa, on concern about the Company's
investments in Brazil and Argentina and its US$9.2 billion of
debt.
Moody's downgraded the senior unsecured debt ratings of Enersis
to Baa3 from Baa1 as well as the senior unsecured rating of
Empresa Nacional de Electricidad S.A. (Endesa Chile) to Baa3 from
Baa1. In addition, Moody's downgraded the senior unsecured rating
of Empresa Electrica Pehuenche S.A. (Pehuenche) to Baa3 from
Baa1. The recent actions conclude Moody's review on all three
companies.
The ratings outlook for all of the ratings is stable.
"Overall leverage is still high given the business risk at
Enersis," Moody's said in its report.
The rating reduction, following a cut in ratings by Standard &
Poor's in June, may increase financing costs for Enersis, South
America's second-biggest electricity company.
Revenue at Enersis fell after Argentina defaulted in December,
devalued its currency and froze energy prices the following
month. A weakening currency in Brazil and concern that the
country also might default as well has helped shrink the value of
Enersis shares in half this year.
Moody's also cited cross-default provisions on debt at units of
Enersis when reducing the ratings. In July, Enersis told the U.S.
Securities and Exchange Commission that default on some debt by
its units might trigger early payments on its own obligations.
Based in Santiago, Chile, Enersis is one of the largest
integrated electric utilities in the world. Endesa Chile, an
electric generation company primarily comprised of hydro
facilities, is owned 60% by Enersis. Pehuenche, a 400 MW hydro
facility in Chile is 94% owned by Endesa Chile.
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
MOODY'S INVESTORS SERVICE, New York
Daniel Gates, Managing Director, Corporate Finance
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Robert Johnson, VP - Senior Credit Officer
Corporate Finance
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
SILICA NETWORKS: Shareholders Keen On Selling Control
-----------------------------------------------------
Shareholders of Argentine-Chilean carrier of carriers Silica
Networks can't wait to rid themselves of the loss-making network
operator. Business News Americas reveals that the shareholders,
UK-based National Grid (50%), Chilean local exchange provider
Manquehue Net (30.1%) and bankrupt US telecoms company Williams
Communications (19.9%), signed an agreement in August to turn
over assets to members of the Company's current management.
According to a company source, there is still much work to be
done on the deal. But the shareholders are eager to reach a
definitive agreement soon. The sale involves only the Company's
assets, the source said, adding that current shareholders would
absorb its liabilities.
Silica Networks operates a 4,300km fiber optic network,
connecting Santiago with Buenos Aires.
===========
M E X I C O
===========
AVANTEL: Citigroup Makes First Step To Resolve Ownership
--------------------------------------------------------
US banking giant Citigroup, which has been tangled in a conflict
stemming from its ownership in Mexican telecoms company Avantel,
initiated a move to comply with Mexican law that limits foreign
ownership of fixed line telecoms companies to 49%. Presently,
Avantel is 100% controlled by foreign capital. Citigroup owns 55%
of the Company, while bankrupt US operator WorldCom owns the
remaining 45%.
Citigroup submitted a plan to Mexico's economy ministry whereby
it would surrender, free of charge, 28% of Avantel to the 32,000
local employees of its Mexican banking subsidiary Banamex,
Mexican daily El Financiero reported, citing Banamex corporate
development manager Fernando Quiroz.
Given that Banamex's employees might not necessarily be willing
or able to independently acquire the troubled Avantel, Citigroup
will provide the employees with an extroardinary bond that will
allow them to make the purchase on paper.
Quiroz said the government has given them four months to carry
out the restructuring plan, and Citigroup does not expect it to
be completed before year-end.
When completed, the plan would leave Banamex with 27% of the
Company. Adding WorldCom's 45% stake, 72% of Avantel would still
remain in foreign hands. However, if the two shareholders both
surrender 51% of their stakes, WorldCom would have to offload 23%
of Avantel, proportionally matching the 28% Citigroup proposes to
surrender.
Even so, the ownership situation would remain unresolved as
Avantel would still exceed the law's 49% restriction by 23
percentage points.
Ramirez said Citigroup's move shows that it is committed to
Avantel, but only to a certain extent.
"Giving the money [via the extraordinary bond] to the employees
helps, but I'm not sure they would go so far as to inject cash
into the Company," he said.
Avantel is Mexico's second largest fixed line communications
company, with about 850,000 lines in service. Perhaps as a result
of the uncertainty surrounding its ownership structure and the
WorldCom bankruptcy, Avantel's customer base has declined by 13%
during the last four months, from a high of 980,000 lines in
April.
Credit Suisse First Boston analyst Dan Reingold in May valued
Avantel at US$200 million, reflecting a plunge in the value of
telecommunications stocks in the last two years.
CONTACT: AVANTEL SERVICIOS LOCALES, S.A. (AVANTEL LOCAL)
Reforma No. 265, 6o piso, Col.
Cuauhtemoc, 06500, M,xico, D.F.
Tel: 5242-1004
Fax: 5242-1060
Home Page: www.avantel.com.mx/
WORLDCOM
500 Clinton Center Drive
Clinton, MS 39056
1-877-624-9266
Phone: (601) 460-5600
Fax: (601) 460-8350
E-mail: http://www.worldcom.com/
Contact:
John Sidgmore, President and CEO
CFE: Draws Seven For El Cajon Hydro Project Bidding
---------------------------------------------------
Mexican state power company CFE has sold bidding rules for the
construction of the US$1.07-billion, 750MW El Cajon hydro project
in the Nayarit state to seven companies so far. The buyers,
according to Business News Americas, include Sweden's Skanska,
Italy's Impregilio, Spain's Dragados, Brazil's Camargo Correa,
Argentina's Techint, and Mexican companies Grupo ICA and La
Nacional.
Bids should be presented December 16, economic and technical
offers will be opened 9 January 2003, a final decision is
expected January 16 and contract signing is planned for January
31, 2003. Work is scheduled to begin by 6 February 2003, and the
scheduled completion date is 31 August 2007.
The plant, which will operate with two 375MW vertical Francis
turbines, will serve to regulate flow at Mexico's largest hydro
plant, Aguamilpa, 60km downstream from the proposed El Cajon
site, which in turn is 47km from the city of Tepic on the
Santiago River.
CFE is reported to be currently in need of help to carry out its
investment program in 2011. Industry-wide upgrade is said to be
required in order for the company to meet the MXN560 million
(US$57.6 billion) it needs in the coming decade.
CONTACT: COMISION FEDERAL DE ELECTRICIDAD
Rio Rodano 14, Col. Cuauhtemoc
06598 Mexico, D.F., Mexico
Phone: +52-55-5229-4400
Fax: +52-55-5310-4614
http://www.cfe.gob.mx
Contacts:
Alfredo Elias Ayub, General Director
Arturo Hernandez Alvarez, Director of Operations
Francisco J. Santoyo Vargas, Director of Finance
GRUPO TMM: TFM Signs New $250M Bank Facility Agreement
------------------------------------------------------
Grupo TMM, S.A. de C.V. ("Grupo TMM") (NYSE: TMM and TMM/L) and
Kansas City Southern (NYSE: KSU), owners of the controlling
interest in Grupo Transportacion Ferroviaria Mexicana, S.A. de
C.V. ("Grupo TFM"), announced that TFM S.A. de C.V. ("TFM") has
signed an agreement for a new bank facility in the amount of $250
million to replace the company's existing $310 million commercial
paper program. The new facility consists of a two-year, $122
million commercial paper facility backed by a standby letter of
credit, and a four-year, $128 million loan. The facilities are
being provided by a consortium of banks led by JP Morgan Chase
and Citibank, and the letter of credit is being issued by
Standard Chartered Bank. Funding of both facilities will occur on
September 17, 2002. The remaining portion of the current
commercial paper program, $60 million, will be repaid by TFM at
the funding. Through this new facility, the company will extend
its debt maturity profile and reduce its leverage.
Headquartered in Mexico City, Grupo TMM is the premier Mexican
multimodal transportation company and logistics provider. Through
its branch offices and network of subsidiary companies, Grupo TMM
provides a dynamic combination of ocean and land transportation
services within Mexico. Grupo TMM also has the controlling
interest in TFM, which operates Mexico's Northeast Rail Lines and
carries over 40 percent of the country's rail cargo.
KCS is a transportation holding company that has railroad
investments in the United States, Mexico, and Panama. Its primary
holding is Kansas City Southern Railway. Headquartered in Kansas
City, Missouri, KCS serves customers in the central and south
central regions of the U.S. KCS's rail holdings and investments
are primary components of a NAFTA Railway system that links the
commercial and industrial centers of the United States, Canada,
and Mexico.
CONTACT: Grupo TMM Company Contact
Investor Relations
Brad Skinner, 011-525-55-629-8725
brad.skinner@tmm.com.mx
or
TFM Company Contact
Jacinto Marina, 011-525-55-629-8790
jacinto.marina@tmm.com.mx
Leon Ortiz, Treasurer, 011-525-55-447-5870
lortiz@tfm.com.mx
or
KCS Company Contact
Ronald Russ, 816/983-1702
ronald.g.russ@kcsr.com
or
At Dresner Corporate Services
General Investors, Analysts and Media
Kristine Walczak, 312/726-3600
kwalczak@dresnerco.com
IUSACELL: Analysts Doubt Shareholders' Commitment
-------------------------------------------------
Mexican wireless phone operator Grupo Iusacell SA, controlled by
Verizon Communications (VZ) and Vodafone Group PLC (VOD), may
need a cash injection from shareholders to stay afloat.
According to Dow Jones, Bear Stearns estimates that Iusacell will
need to secure about US$100 million next year to survive beyond
2003. Provided that the Company posts better results, the
investment bank thinks Iusacell stands a chance of securing this
financing from its controlling shareholders.
However, not everyone is betting that Iusacell will pull through,
Dow Jones says, noting that credit agencies are bearish, equity
analysts are cautious, and lots of investors have already exited
the stock.
"People tend to think that Iusacell will survive no matter what
because Verizon and Vodafone are its backers. But there are
examples of Verizon writing off companies in Latin America," said
Rene Pimentel, an analyst with Deutsche Bank.
For instance, Verizon's decision to lower its ownership stake in
Argentine operator CTI Holdings to 48% from 65% previously, so
that it would no longer have to consolidate the company in its
financial statements. In addition, Verizon took a US$190-million
charge in the first quarter to write down its CTI investment, and
a US$1.4-billion charge to adjust down the value of its 28.5%
stake in dominant Venezuelan phone operator CA Nacional Telefonos
de Venezuela SA (CANTV).
Vodafone, on the other hand, has already written down the value
of its 34.5% Iusacell stake, for which the company paid US$973.4
million at the start of 2001. Vodafone subscribed to a share
offering by Iusacell later in the year, but opted not to raise
its stake in the carrier. In the same deal, Verizon took the
opportunity to bump its controlling stake in Iusacell up to 39.4%
from 37.2%.
"Iusacell has always been strategically important to Verizon, and
that has not changed," Verizon said in a written response to
questions. But the company didn't say whether it would be willing
to put more money into Iusacell, only that it would consider the
possibility if the need arises.
Meanwhile, analysts expect that the need will arise. Credit
agencies Standard & Poor's and Moody's are less sure of
Iusacell's shareholder support.
PEGASO: Concludes Merger With Telefonica Moviles
------------------------------------------------
Telefonica Moviles (NYSE: TEM; Madrid TEM) and Grupo Pegaso have
completed the integration of the operators of Telefonica Moviles
Mexico, the Mexican subsidiary of Telefonica Moviles, with Pegaso
PCS, the Mexican mobile telephony operator. The combination of
Telefonica Moviles Mexico and Pegaso PCS gives rise to a new
joint entity, in which Telefonica Moviles controls 92% of the
capital stock and Grupo Pegaso the remaining 8%.
With the necessary approvals for the transaction having been
obtained from the Mexican authorities, Telefonica Moviles and
Grupo Pegaso have finalized the agreement announced last May, by
which Telefonica Moviles acquired 65% of the capital of Pegaso
PCS from Sprint Corporation, Leap Wireless and other non-Mexican
financial investors for $87 million in cash. The total value of
Pegaso PCS has been set at $1.360 billion.
Subsequently, and in line with the agreement announced in May,
both parties have carried out a capital increase in Pegaso PCS,
to amortize short-term debt and increase the company's financial
strength. This capital increase has a value of $319 million, of
which Telefonica Moviles has subscribed 65% and Grupo Pegaso, the
remaining 35%.
Following the capital increase, at the end of 2002 Pegaso PCS'
external debt level will be reduced to $615 million.
The operation has been carried out much earlier than was
initially envisaged, since both groups had set the last quarter
of this year as the period for completing all the processes
required to create the new company.
With this operation, Telefonica Moviles becomes Mexico's number
two mobile telephony operator, with more than two million active
managed customers, using the conservative client-counting
criteria applied by Telefonica Moviles.
The integration of Pegaso PCS enables Telefonica Moviles to
extend its presence to the whole of Mexico, which has a market of
over 100 million inhabitants, and to gain immediate access to
Mexico City, the country's most attractive market with a
population of around 20 million. It also strengthens Telefonica
Moviles' mid-term growth and leadership in the Spanish- and
Portuguese-speaking mobile telephony market.
During 2001 Telefonica Moviles acquired four mobile telephony
operators in the north of the country (Bajacel, Movitel, Norcel
and Cedetel), which together had more than 1.2 million active
clients at the end of 2001.
The combined company will have a distribution network comprising
over 3,500 points of sale located in the main Mexican cities, and
will be able to achieve important economies of scale and
synergies in such aspects as handset management, systems and
network development, and services.
About Telefonica S.A.
Telefonica is the leading telecommunications operator in the
Spanish- and Portuguese-speaking world and the second-largest
European operator in terms of stock market capitalization. In
addition, it ranks fourth in the world ranking of value creation
between 1996 and 2000, when it had an average annual increase in
profitability of 43%. Its shares trade on the continuous market
of the Spanish stock exchanges (Madrid, Barcelona, Bilbao and
Valencia) and on stock exchanges in London, Paris, Frankfurt,
Tokyo, New York, Lima, Buenos Aires, and Sao Paulo, as well as on
the London Stock Exchange's SEAQ International.
Telefonica's base of managed clients in fixed-line and mobile
telephony and pay television totalled 73.2 million (total client
base of 78.4 million, with a 15% annual growth) at 31 December
2001, 9.3 million more than at the end of 2000. Another figure
that indicates the company's size is the number of employees,
which at end-December 2001 surpassed 161,500 worldwide.
Telefonica is currently present in 49 countries.
At year-end 2001, the Telefonica Group reported a net profit of
2,106.8 million euros and consolidated revenues amounting to
31,052.6 million euros, a year-on-year increase of 9%.
About Telefonica Moviles
Telefonica Moviles is one of the leading mobile telephony
companies in the world, with a presence in 14 countries, a
potential market of 434 million inhabitants and more than 31.5
million active managed customers at the end of June 2002. During
2001, Telefonica Moviles generated revenues of 8.411 million
euros, EBITDA of 3,333.7 million euros and a net profit of 893
million euros. Telefonica Moviles trades on the Spanish stock
exchanges and on the New York Stock Exchange under the ticker
symbol TEM.
About Grupo Pegaso
Grupo Pegaso, headed by Alejandro Burillo Azcarraga, is a private
group which participates in the Mexican economy through different
companies, one of them being Pegaso PCS. In the area of the
communications media, it is the country's leading producer of
sports content for radio and the largest producer of content for
wireless Internet applications. It owns the most influential
sports daily in Mexico. The group also participates in pay
television and in Internet via cable in different parts of the
country.
In telecommunications, it founded the first 100% digital company
in Mexico and also markets satellite bandwidth in Mexico, and is
involved in the distribution of Internet content through a
satellite platform.
In finance, it is the main shareholder of a financial group that
includes a bank and a stock brokerage company.
In sports, it owns several professional football teams as well as
important rights to sports content. It also participates in
numerous real estate and hotel projects, as well as in different
social and cultural beneficiary programs.
CONTACT: PEGASO PCS, SA OF CV
Stroll of the Tamarinds 400A,
Floor 4, Forests of Hills
Mexico, DF 05120
Phone: (55) 5806,8700
Fax: (55) 5806.9080
E-mail: atencionclientes@pegasopcs.com.mx
Home Page: http://www.pegasopcs.com.mx/
Contact:
Roberta Lopez Negrete
Manager of Strategic Communication
Phone: 261 66 38 Fax: 261 66 98
Email: rlopez@pegasopcs.com.mx
Eduardo Jimenez Urias
Phone: 261 66 34
Fax: 261 66 91
E-mail: ejimenez@pegasopcs.com.mx
TELEFONICA MOVILES, S.A.
Goya 24
28001 Madrid, Spain
Phone: +34-91-423-4004
Fax: +34-91-423-4010
E-mail: webmaster@telefonicamoviles.com
Home Page: http://www.telefonicamoviles.com
Contact:
Maria Garcia-Legaz, Head of Investor Relations
Arantxa San Rom n Wong
Raimundo de los Reyes
Paseo de Recoletos, n 7-9 2Y Planta
28004 Madrid
Phone: +34 914 23 40 27
Fax: +34 914 23 44 12
E-mail: relaciones.inversores@telefonicamoviles
===============
P A R A G U A Y
===============
COPACO: Expects To Settle Interconnection Debts By Year-End
-----------------------------------------------------------
Carlos Ortega, president of Copaco, announced that the Paraguayan
state-owned wireline monopoly plans to settle its interconnection
debts with the country's four mobile operators by end-year,
Business News Americas reports. Copaco, according to Telecel CEO
Ricardo Maiztegui, has already racked up debts of more than
PYG135 billion (US$21.8 million) this year.
The debts in question, Ortega revealed, were accumulated as a
result of "financial engineering," needed to let the Company
continue meeting other commitments. According to Ortega, it the
company is behind on the payment schedule by two months at the
most.
"The delay that exists now will be settled practically by year-
end, [particularly] with [Telecom Argentina's mobile subsidiary]
Nucleo and the others, while Telecel will probably take longer,
into the first months of 2003," he said.
However, the company will not drain its cash reserves just to pay
those debts on time. Ortega cited the recently announced 100-day
reactivation plan, which calls for US$20 million in investments
toward the fixed line network, and obtaining a contract with a
mobile operator that would allow Copaco to launch operations as
an MVNO (Mobile Virtual Network Operator).
"The idea is to maintain a cash flow that lets us carry out the
reactivation plan. We also need to improve service and the firm's
image," he said.
CONTACT: COPACO S.A. (Ex. Antelco) - Paraguay
Phone: 595-21-2192175
595-21-2192010
Fax: 595-21-2192175
E-mail: teleinfo@copaco.com.py
***********
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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