/raid1/www/Hosts/bankrupt/TCRLA_Public/021122.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, November 22, 2002, Vol. 3, Issue 232
Headlines
A N T I G U A & B A R B U D A
LIAT: Partner Withdraws From Alliance
A R G E N T I N A
AT&T LAT AM: Goals May Take Back Seat to AT&T's Global Plan
BANCO DE GALICIA: Reports 2Q02 Earnings Ending June 30, 2002
ENDESA: Lobbies For Electricity Rate Hikes
PECOM ENERGIA: Sale Runs The Risk Of Monopoly
* Finance Minister Says Argentina May Be Bankrupt By May 2003
* U.S. Official Says IMF Loan Is Near
B E R M U D A
TYCO INTERNATIONAL: CALPERS Urges Company To Return To US
B O L I V I A
TDE: Requests $30M In Loans, Equity To Fund Debt Refinancing
B R A Z I L
ACESITA: Mulls CST Stake Sale
AES TIETE: CVRD Renews Purchase Commitment
BCP: America Movil May Still Be In The Running
CELPA: Court Orders Payment of Back Salaries
KLABIN: Hopes To Conclude Debt Talks With Banks Next Month
KLABIN: Norske Eyes 50% Stake In Newsprint Venture
NET SERVICOS: To Reduce Costs in 2003 Through Lower IT Spending
C H I L E
TELEFONICA CTC: Ordered To Pay Workers, But Has Other Plans
M E X I C O
AHMSA: Clarifies Issues Surrounding Nov. 7 Meeting
AHMSA: Given Until November 25 To Present Debt Plan
GAM: Gives Up Legal Injunction Against Government
P A R A G U A Y
* Paraguay Central Bank President Resigns
P E R U
WIESE SUDAMERIS: Parent To Launch EUR300M Debt To Equity Swap
U R U G U A Y
BANCO COMERCIAL: No Formal Offers Left On The Table
V E N E Z U E L A
POSVEN: Losses, Worsening Climate Prompts Parent's Withdrawal
- - - - - - - -
=================================
A N T I G U A & B A R B U D A
=================================
LIAT: Partner Withdraws From Alliance
-------------------------------------
Troubled airline LIAT says the lower rating of the airports to
which it flies is responsible for the collapse of the Carib-Sky
alliance with Winair.
A report from the Financial Times revealed that Winair, based in
St Maarten, is entering an agreement with LIAT rival, Caribbean
Star.
LIAT Director for corporate development, David Stuart, said
Winair's decision was based on the Category 1 capability of
Puerto Rico, where Caribbean Star's sister Caribbean Sun is
registered. Stuart clarified that the move was not caused by any
ill feelings between the two carriers, but that Winair was
undergoing restructuring and decided to pursue the most
beneficial route. Starting the first day of December, Caribbean
Star and Winair will likely operate as partner carriers. Winair
has flights to Saba, St Eustatius, St Barths, Anguilla, St Kitts,
Nevis, Tortola, and Dominica.
He added that the Category 2 rating of several regional airports
prevents LIAt from flying its new aircrafts into the United
States market. It also prevents LIAT its partner BWIA from code
sharing with
CONTACT: LIAT Corporate Headquarters
V.C. Bird International Airport,
P.O. Box 819,
St. John's, Antigua West Indies
Tel. 1 (268) 480-5600/1/2/3/4/5/6
Fax: 1 (268) 480-5625
Homepage: http://www.liatairline.com/
Contacts:
Garry Cullen, Chief Executive Officer
David Stuart, Vice President of Marketing
Caribbean Star Airlines
Coolidge Industrial Estate
P.O. Box 1628W,
Airport Road,
St. John's, Antigua West Indies
Tel. 1 (268) 480-2500
Homepage: http://www.flycaribbeanstar.com/
Contact: Paul Moreira - Chief Executive Officer
Sandra Scotland - Director of Marketing
=================
A R G E N T I N A
=================
AT&T LAT AM: Goals May Take Back Seat to AT&T's Global Plan
-----------------------------------------------------------
AT&T Latin America (ATTL) is attempting to become an integrated
communications supplier for corporate clients in Latin America.
In order to see this vision through, the company has several
tasks in front of it: a swift reorganization, improved
coordination with AT&T in the U.S. and Alestra in Mexico, cost
cutting to allow for greater flexibility should price competition
intensify, and an aggressive marketing campaign that further
leverages AT&T``s strong brand image and reputation of
reliability.
Recent information revealing a funding gap cast a shadow on
ATTL``s future, and raised doubts about its corporate parent``s
commitment to support it as an independent venture.
ATTL claims it has the potential to emerge as one of the
survivors in the troubled data communications markets in Latin
America, but AT&T``s global strategy will take precedence,
possibly depriving ATTL of lucrative accounts.
BANCO DE GALICIA: Reports 2Q02 Earnings Ending June 30, 2002
------------------------------------------------------------
Banco de Galicia y Buenos Aires S.A. (the "Bank", Buenos Aires
Stock Exchange: GALI) announced Wednesday its financial results
for the second quarter of FY 2002, ended June 30, 2002.
- The quarter, ended June 30, 2002, showed a Ps.105.1 million
loss while, in accordance with the loss absorption criteria
defined in Argentine Central Bank's Communiqué "A" 3800, and
subject to the final resolution of the shareholders' meeting, net
income for the six-month period ended on the same date was a
Ps.420.2 million loss.
- As of June 30, 2002, the Bank's shareholders' equity amounted
to Ps.2,014.7 million.
- The Bank's liquidity, using a strict definition (cash and due
from banks exclusively), showed a significant improvement during
the quarter to 15.8% of the Bank's total non-restructured
deposits as of June 30, 2002, from 7.7% as of March 31, 2002.
- The allowance for loan losses as a percentage of the non-
accrual loan portfolio increased to 99.7% as of June 30, 2002,
from 63.4% as of March 31, 2002, in the context of a significant
deterioration of the quality of the portfolio of private-sector
loans due to a particularly adverse economic environment during
the period.
- In addition, during the quarter, the Bank established
significant reserves in order to cover the negative shareholders'
equity of its foreign subsidiaries, goodwill amortization, future
restructuring expenses, and contingencies related to its
interests in non-financial businesses.
NET INCOME FOR THE QUARTER ENDED JUNE 30, 2002
The quarter showed a loss of Ps.105.1 million, lower than the
Ps.629.8 million loss (restated in pesos of June 30, 2002)
recorded in the previous quarter. Through its Communiqué "A"
3800, the Argentine Central Bank allowed financial institutions
to anticipate the absorption of the losses recorded during the
present year, with and up to the balances of the shareholders'
equity accounts "Retained Earnings" and "Unrealized Valuation
Difference", with the approval of the Board of Directors and
subject to the final resolution of the annual shareholders'
meeting in this respect. When making use of this option, the Bank
shows a Ps.1,476.1 million profit in the 2ndQ of FY 2002, as a
result of the absorption of losses for Ps.314.7 million with
retained earnings and Ps.1,266.5 million with the balance of the
"Unrealized Valuation Difference Resulting from Compensation of
the Net Foreign Currency Position" account. As mentioned in the
previous quarter press release, this valuation difference
resulted from the 40% increase in the exchange rate which reached
Ps.1.40 per US$1.0 following the change introduced in the
country's foreign exchange regime on January 6, 2002. Through its
Communiqué "A" 3703, the Argentine Central Bank established that
this gain was to be reflected directly in a specific
shareholders' equity account ("Unrealized Valuation Difference
Resulting from Compensation of the Net Foreign Currency
Position"), without being registered in the income statement.
CHANGES IN INFORMATION DISCLOSURE
- As a consequence of the significant and continuous changes in
the regulatory framework, the filing dates prescribed by the
information regime to which financial institutions are subject
experienced successive postponements. Argentine Central Bank's
Communiqué "A" 3800 established November 20, 2002, as the final
date by which to submit the financial statements for the quarter
ended June 30, 2002. In addition, Communiqué "A" 3802 established
that financial statements for the quarters ended September 30,
2002, and December 31, 2002, must be submitted no later than
January 6, 2003, and February 20, 2003, respectively.
- As mentioned in the press release issued on October 22, 2002,
beginning March 31, 2002, the line-by-line consolidation of the
consolidated balance sheet of Banco Galicia Uruguay S.A.
("Galicia Uruguay") has been discontinued.
- Beginning the quarter ended March 31, 2002, the Bank's
consolidated financial statements, shown in pages 16 and 17,
include not only its foreign branches and Tarjetas Regionales
S.A., but also the following companies: Galicia Valores S.A.
Sociedad de Bolsa, Galicia Capital Markets S.A., Galicia
Factoring y Leasing S.A., Agro Galicia S.A., Galicia y Buenos
Aires Securities (UK) Ltd. and Tarjetas Regionales S.A.'s
subsidiaries.
- Beginning the quarter ended March 31, 2002, the Bank's
financial statements have been restated for inflation by using
the Wholesale Price Index (IPIM) published by the National Bureau
of Statistics and Census (INDEC), in accordance with Argentine
Central Bank's Communiqué "A" 3702, Resolution No.240/02 of the
Argentine Federation of Professional Councils in Economic
Sciences and Resolution No.415/02 from the National Securities
Commission.
In order to facilitate comparison, prior periods' amounts shown
in the tables and exhibits were restated in constant pesos of
June 30, 2002, by using the Wholesale Price Index (IPIM). The
amounts for the quarter ended March 31, 2002 were restated by
using a coefficient equal to 1.4814, while the coefficient
applied to the previous quarters' amounts was 1.9605.
2nd QUARTER OF FY 2002 RESULTS
The 2nd quarters' loss was mainly a consequence of the
significant provisions established during the period, both for
loan losses and other contingencies. The Bank's operating income
(inflation-adjusted net financial income plus net income from
services) exceeded operating expenses and income for equity
investments showed a profit.
The results from the Compensatory and the Hedge Bonds
corresponding to the Bank's foreign branches and subsidiaries
(New York and Cayman branches, Galicia Uruguay and Galicia Cayman
Ltd.), in accordance with Decree No.2167/02, were recorded under
Financial Income and Financial Expenses. Provisions were set up
against this income for the Bank's interest in and the negative
net worth of the aforementioned subsidiaries. (See "Main changes
in the financial system's regulatory environment subsequent to
the close of the quarter -Compensation to be granted to
Financial Institutions")
INCOME PERFORMANCE
Net financial income recorded a Ps.863.5 million profit, net of
the Ps.482.1 million monetary loss from financial intermediation.
Net financial income for the quarter includes a Ps.1,098.3
million profit from FX quotation differences and premiums,
recorded under the caption "Other" (both income and expenses).
The profit from the foreign currency position during the quarter
was mainly a consequence of the results generated by the
incorporation of the Compensatory Bond (U$230.2 million) and the
Hedge Bond (U$660.5 million) corresponding to the pesified
private-sector assets recorded in the Bank's foreign branches and
subsidiaries. The aforementioned profit, net of the cost of the
advance from the Argentine Central Bank to finance the
subscription of the Hedge Bond, amounted to Ps.2,480 million and
was partially offset by a Ps.1,544.6 million reserve established
to fully provision the Bank's interests in its foreign
subsidiaries and the negative net worth of these subsidiaries.
The remaining Ps.162.9 million profit from FX quotation
differences reflects FX brokerage income and the revaluation of
the Bank's foreign currency position during the quarter.
The remaining net financial income reflects the differential
variation of price indexes, the CER coefficient and interest
rates. In fact, while the IPIM index (which reflects the cost of
the exposure to inflation of a bank's liquid shareholders'
equity) increased at an annualized rate of 193.1% during the
quarter, the annualized average yields on peso-denominated assets
that accrue interest only and peso-denominated assets whose
principal is also adjusted by CER were 18.0% and 76.6%,
respectively, during the same period.
Provisions for loan losses amounted to Ps.746.8 million during
the quarter and the allowance for loan losses as a percentage of
the private-sector loan portfolio reached 20.67%. The high level
of loan loss provisions reflects the deterioration in the quality
of the loan portfolio caused by the deep economic crisis that
affects Argentina and the Bank's decision to attain a high
coverage of its non-accrual loan portfolio with loan loss
reserves.
Net income from services amounted to Ps.19.2 million, showing a
decrease when compared with previous quarters' levels. This
decrease was mainly the result of a U$10 million payment in
connection with structured-note transactions paid off prior to
maturity. Excluding this non-recurrent effect, net income from
services would have amounted to Ps.58.2 million. However, income
from services was also affected by adverse overall conditions for
the financial business during the period, characterized by a
substantial decrease in the level of activity of both the
financial sector and the economy and the fall of service prices
in real terms. These conditions affected, mainly, those services
related to credit cards, deposit accounts, insurance products and
credit.
Administrative expenses, net of the monetary effect related to
such expenses, were Ps.123.0 million. Personnel expenses
experienced a strong decrease when compared with previous'
quarters levels, due to the interruption of the accrual of
variable compensation, the decrease in real wages and a lower
staffing level. Excluding depreciation and amortization expenses,
the remaining administrative expenses also decreased in real
terms.
Income from equity investments for the quarter showed a Ps.392.1
million profit, mainly as a consequence of the reclassification
of the reserve established during the previous quarter to fully
provision the Bank's investment in Galicia Uruguay and Banco
Galicia (Cayman) Ltd., which investment was fully provisioned
during this quarter as explained in the second paragraph of this
section. The profit arising from the above mentioned
reclassification was partially offset by the Ps.126.2 million
loss recorded by the four regional credit-card companies.
Net other income recorded a Ps.568.3 million loss, mainly as a
result of the establishment of reserves for a total of Ps.551.9
million, mainly for contingencies associated with the Bank's
interests in non-financial companies, amortization of goodwill
and future restructuring expenses.
LEVEL OF ACTIVITY
As of June 30, 2002, total assets amounted to Ps.24,055 million
while total loans amounted to Ps.9,563 million. The "Other
Receivables Resulting from Financial Brokerage" account includes
Ps.3,900 million and Ps.4,900 million in Compensatory and Hedge
Bonds, respectively. Of these amounts, Ps.875 million and
Ps.2,510 million, respectively, relate to the compensation of the
pesified private-sector assets recorded in the Bank's foreign
branches and subsidiaries (Decree No.2167/02).
As of June 30, 2002, the Bank's total deposits amounted to
Ps.5,393 million, representing an estimated 4,86% market share
considering deposits in the Argentine market only. It should be
noticed that US$329.6 million of deposits made by Galicia
Uruguay, recorded in the previous quarter as current account
deposits were reclassified as time deposits in the quarter.
Total financial assistance from the Argentine Central Bank for
transitory liquidity support amounted to Ps.4,731 million as of
June 30, 2002. The nominal increase over the previous quarter is
due to the capitalization of interest.
The Bank's debt, originated in the "Galicia Capitalization and
Liquidity Plan", with the Deposit Insurance Fund and the
Fiduciary Fund for the Assistance to Financial Institutions and
Insurance Companies, amounted to Ps.246 million and Ps.151
million, respectively. Both amounts are recorded under "Other
Liabilities-Other". This account also includes the Ps.1,790.3
million advance from the Argentine Central Bank to finance the
subscription of the Hedge Bond, of which Ps.924.7 million relates
to the calculation based on the provisions of Decree No.2167/02.
Total gross loans amounted to Ps.10,723 million as of June 30,
2002, of which Ps.7,110 million were loans to the public sector
and the remaining Ps.3,613 million were loans to the private
sector. The Bank's estimated market share of all loans in the
Argentine financial system was 11.88% as of June 30, 2002.
As of June 30, 2002, the Bank's holdings of government and
corporate securities totaled Ps.1,982 million. This amount mainly
comprises Ps.1,088 million in Letras Externas de la República
Argentina (Argentine Republic External Notes), Ps.494 million in
the 9% National Government Bond Maturing 2002 ("Bono Encaje"),
Ps.247 million in US Treasury Bills and Ps.93 million in the
Fiscal Credit Certificate. This position does not include the
Compensatory and the Hedge Bonds.
Table VII shows the Bank's total exposure to the Argentine
financial and non-financial public sectors. The increase over the
previous quarter balances in the "Other Receivables Resulting
from Financial Brokerage" line reflects the incorporation of the
Compensatory and the Hedge Bonds in accordance with the
provisions of Decree No.2167/02. The other variations are mainly
explained by the differential variation of the CER index and the
exchange rate used to adjust the value of the different public-
sector assets vis-a-vis the IPIM used to restate the different
previous quarters' balances in constant pesos of June 30, 2002.
Equity investments amounted to Ps.114 million, Ps.267 million
lower than the amount reported in the same quarter of the prior
year. This variation is mainly attributable to the losses
recorded by Tarjetas Regionales S.A., Aguas Argentinas S.A.,
Aguas Provinciales de Santa Fe S.A. and Aguas Cordobesas S.A. and
the sale of the Bank's interests in Banco Barclays e Galicia S.A.
As of June 30, 2002, the Bank's had 1.22 million deposit
accounts, 43% lower than in the previous quarter. This decrease
was due to the closing of the accounts denominated in foreign
currency in accordance with the regulatory changes introduced by
the current government to the financial system's business.
ASSET QUALITY
As of June 30, 2002, the Bank's non-accrual to total loans ratio
was 10.85%. Considering only the private-sector loan portfolio,
this ratio amounts to 32.19%. The high level of non-accrual loans
reflects the consequences not only of Argentina's prolonged
recession, which significantly deepened during the period, but
also of the different government measures aimed at restructuring
private-sector debts.
The allowance for loan losses as a percentage of total loans
increased to 10.82% as of June 30, 2002, from 2.89% as of June
30, 2001. The coverage of the non-accrual loan portfolio with
allowances for loan losses was 99.74% and the coverage with
guarantees was 51.33%. The combined coverage of non-accrual loans
with allowances and guarantees represented 151.07%.
During the quarter, Ps.42.0 million were charged off against the
allowance for loan losses and a Ps.4.0 million direct charge to
the income statement was recorded for loans deemed uncollectible.
When consolidating the regional credit-card companies, non-
accrual loans as of June 30, 2002, amounted to Ps.1,261 million,
representing 11.61% of total loans. The combined coverage of non-
accrual loans with allowances and guarantees was 142.58%.
In the following table, consolidated asset quality information is
also shown in terms of "total credit". This table does not
include the loan portfolio of the regional credit-card companies.
"Total credit" is defined as loans, certain accounts included in
"Other Receivables Resulting from Financial Brokerage"
representing credit transactions, assets under financial leases,
guarantees granted and unused balances of loans granted.
CAPITALIZATION AND LIQUIDITY
Through its Communiqués "A" 3599 and "A" 3604, the Argentine
Central Bank suspended the presentation by financial institutions
of the information related to the minimum capital requirements,
as a result of the changes that have occurred in the financial
system's situation and activities, which have significantly
affected the variables for the determination of minimum capital
requirements.
As of June 30, 2002, the Bank's liquidity (defined as "Cash and
Due from Banks") represented 39.67% of its transactional deposits
and 15.78% of its total non-restructured deposits. As of March
31, 2001, these ratios were 9.49% and 7.71% respectively.
REGIONAL CREDIT-CARD COMPANIES
Information on the regional credit-card companies is included on
page 15 of this press release. Income from the four regional
credit-card companies in which the Bank holds majority interests
recorded a Ps.126.2 million loss for the quarter. As mentioned in
the previous press release, this was mainly the result of the
negative impact of the devaluation on these companies'
liabilities. It should be mentioned that the balances of
Compensatory and Hedge Bonds previously mentioned in this press
release exclude the pesified assets of these companies.
As of June 30, 2002, total assets of the four regional credit-
card companies amounted to Ps.523.8 million.
Total loans amounted to Ps.372.4 million, total allowances for
loan losses to Ps.41.7 million and the non-accrual loan portfolio
to Ps.97.7 million. As a consequence, the ratio of non-accrual
loans to total loans was 26.24%, with a coverage of non-accrual
loans with allowances of 42.65%.
MAIN CHANGES IN THE FINANCIAL SYSTEM'S REGULATORY ENVIRONMENT
SUBSEQUENT TO THE CLOSE OF THE QUARTER
Public sector debt
On August 28, 2002, Decree No.1579/02 established a voluntary
exchange of all provincial government debt (including debt
instruments that had been tendered in the exchange established by
Decree No.1387/01 for exchange for Secured Loans, which exchange
has not been completed yet) for new national government bonds
secured by 15% of the tax collection proceedings shared by the
federal and the provincial governments. The new bonds will be
peso-denominated, with a 16-year maturity, monthly amortization
beginning March 4, 2005, capital adjustment by the CER
coefficient, a 2% annual interest rate, and will be traded in
securities exchanges in Argentina. This restructuring of
provincial government debt has not been reflected in the Bank's
information as of June 30, 2002.
Deposits and obligations with the public and private sectors
Through Decree No.1836/02 dated September 16, 2002, that was
regulated by Argentine Central Bank Communiqué "A" 3740, the
government established a new exchange of deposits for government
bonds and the repayment of all restructured deposits up to
Ps.7,000 (excluding the CER adjustment) as of May 31, 2002. Banks
were allowed to voluntarily repay all holders of restructured
deposits of up to Ps.10,000 (excluding the CER adjustment). Banco
Galicia decided to offer its customers the latter alternative.
The new exchange contemplates different options for holders of
CEDROs or depositors that might have participated in the previous
exchange of deposits for government bonds implemented by the
government. Holders of CEDROs will be able to voluntarily
exchange their certificates for dollar-denominated bonds maturing
in 2013 (Boden 2013), that will be secured by the financial
institution in which the deposit was made, and/or peso-
denominated "Letras de Plazo Fijo" ("Time Deposit Bills") to be
issued by financial institutions and that include an option
granted by the government to convert into US dollars at the rate
of Ps.1 per each Ps.1.40 adjusted by CER, at each amortization
and coupon due dates, the amounts payable at those dates. The
Time Deposit Bills have the same maturity as the Boden 2013 and
their principal will be adjusted by CER. The period to
participate of the exchange was initially set to expire on
October 30, 2002. The expiration date was subsequently postponed
up to and including December 12, 2002.
In addition Decree No.1836/02 allowed financial institutions to
offer dollar-denominated government bonds maturing in 2006 to
depositors having initiated judicial actions pending resolution,
to recover their deposits.
Legal actions related to the payment of deposits
As of October 31, 2002, court orders received by the Bank
mandating the reimbursement of deposits in their original
currency of denomination or at the free exchange rate amounted to
Ps.12.7 million and US$377.4 million. At that date, in compliance
with such court orders, the Bank had paid the amounts of Ps.490.6
million and US$61.1 million for the reimbursement of deposits in
pesos and foreign currency. As of June 30, 2002, the difference
between the amount paid and the amount resulting from the
conversion into pesos of the dollar balance of the deposit
returned at the Ps.1.40 per US dollar exchange rate recorded in
the "Other Receivables Resulting from Financial Brokerage"
account amounted to Ps.195.5 million.
As of the date of this press release, the Argentine Supreme Court
is expected to rule on certain cases that will set up its final
position regarding the constitutionality of the conversion of
dollar-denominated deposits into pesos and access restrictions
imposed by the government.
Financial institutions have requested from the government that
they be compensated for the losses arising from the payment of
deposits pursuant to judicial actions, as explained above, at the
free market exchange rate, at values higher than the Ps.1.4 per
US dollar established by government regulations for the
conversion of bank assets and liabilities into pesos. As of the
date of this press release, the government has not addressed this
issue.
The Bank has made presentations to the Argentine Central Bank
authorities requesting that attention be provided to this
situation.
Compensation to be granted to financial institutions
For the "asymmetric pesification" and its consequences
As mentioned in the previous press release, Decree No.905/02
provided that the compensation to which a financial institution
was entitled to would be calculated by taking into account the
imbalances generated by the government's pesification measures in
the balance sheet of such financial institution's headquarters
and branches located in Argentina as of December 31, 2001,
limiting the provision of compensation on account of imbalances
generated in the balance sheets of such institution's foreign
branches and subsidiaries and local subsidiaries with
complementary activities, exclusively to the effects of the
conversion into pesos of such foreign branches' and subsidiaries'
investments in Secured Loans. Therefore, the negative impact of
the pesification of the private-sector assets of the Bank's
foreign branches and subsidiaries (New York and Cayman branches
and Galicia Uruguay) and local subsidiaries with complementary
activities (mainly Tarjetas Regionales S.A. and Galicia Capital
Markets S.A.), subject to Argentine Law, remained excluded from
the compensation scope. This generated evident damage to the
Bank's financial condition.
For the Bank, the amount of compensation determined in accordance
with the provisions of Decree No.905/02 amounted to US$787.5
million (Compensatory Bond) and US$618.2 million (Hedge Bond).
These balances were included in the bank's balance sheet as of
March 31, 2002.
On October 28, 2002, the government issued Decree No.2167/02
which modified Article 29 of Decree No.905/02 by incorporating
into the calculation of the compensation amounts the assets and
liabilities recorded in foreign branches and subsidiaries which
were subject to the provisions of Decree No.214/02 and
complementary ones. The Bank estimates that the effect of the
incorporation of such assets into the compensation calculation
would be to increase the amounts of compensation mentioned in the
previous paragraph by US$230.2 million (Compensatory Bond) and
US$660.5 million (Hedge Bond). As of June 30, 2002, the total
compensation amount was recorded under "Other Receivables
Resulting from Financial Brokerage - In Foreign Currency -
Compensation to be Received from the National Government" account
for Ps.8800 million and the advance from the Argentine Central
Bank to finance the subscription of the Hedge Bond was recorded
under the "Other Liabilities Resulting from Financial Brokerage -
In Pesos - Advances for the Subscription of National Government
Bonds in Dollars Libor 2012" account for Ps.1,790.3 million.
FOR THE "ASYMMETRIC INDEXATION" AND LEGAL ACTIONS RELATED TO THE
PAYMENT OF DEPOSITS
In addition, financial institutions have requested to the
government that they be compensated for the losses generated to
them by: 1) the payment of deposits pursuant to judicial orders
at the free market exchange rate, which was greater than that
established by the government for conversion into pesos of
included financial institutions' assets and liabilities, and 2)
the adjustment for inflation of included assets and liabilities
by using different coefficients (CER vs. CVS) ("asymmetric
indexation"). As of the date of this press release, the
authorities have not taken any measures to compensate these
issues. As previously mentioned, the Bank has presented several
letters before the Ministry of Finance and the Argentine Central
Bank addressing the need to deal with this situation.
SITUATION OF THE BANK
During 2001, the financial system faced several episodes of
systemic deposit runs as a consequence of the Argentine critical
economic and political situation. At the end of 2001, in the case
of the Bank, the deepening of the economic and political crisis
led to a drop in deposits which caused a lack of liquidity, that
made it necessary for the Bank to request financial assistance
from the Argentine Central Bank. In order to face this situation,
the Bank submitted to the Argentine Central Bank the plan
described below.
Galicia Liquidity and Capitalization Plan
On March 21, 2002, the Bank submitted to the Argentine Central
Bank the "Galicia Capitalization and Liquidity Plan (the "Plan").
The pillars of the Plan were the immediate restoration of the
Bank's liquidity through the provision of cash in an amount
sufficient to allow the Bank to reimburse a significant portion
of its demand deposits without having to request financial
assistance from the Argentine Central Bank; and a subsequent
significant increase in its capitalization. The Plan also
contemplated the undertaking of negotiations with foreign
creditors in order to restructure the Bank's debt with such
creditors, the orderly wind down of the Bank's operating units
abroad, and the streamlining of the Bank's organization and
administrative expenses in order to adapt its operations to a
level of activity that is lower than that experienced in the
recent past. The Plan included the temporary exemption from
compliance with certain technical ratios and the reduction of the
charges or fines arising from any non-compliance incurred or to
be incurred, before implementing the Plan and during its
implementation, pursuant to the provisions of Law 21,526
(Financial Institutions Law). The Plan was approved, by the Board
of Directors of the Argentine Central Bank, on May 3, 2002,
through its Resolution No.281.
Liquidity
As explained in the previous press release, initially the
improvement in the Bank's liquidity was a result of:
The securitization (and/or sale) of the Bank's mortgage and
commercial loan portfolio for a total amount of Ps.400 million,
through the transfer of loans to, or the creation of trusts
subscribed by, domestic financial institutions during April 2002.
A loan from the Deposit Insurance Fund ("Fondo de Garantía de los
Depósitos") for the US dollar amount equivalent to Ps.200 million
at the exchange rate prevailing on the day prior to that of the
disbursement (US$ 64.5 million), with a five-year term and an
interest rate equal to the 180-day LIBOR rate plus 300 basis
points.
A loan from the Fiduciary Fund for the Assistance to Financial
Institutions and Insurance Companies ("Fondo Fiduciario de
Asistencia a Entidades Financieras y de Seguros") for the US
dollar amount equivalent to Ps.100 million at the exchange rate
prevailing on the day prior to that of the disbursement (US$32.3
million), with a three-year term and an interest rate equivalent
to the 180-day LIBOR plus 400 basis points, with a floor of
8.07%.
In addition, a Ps.574 million loan from the Bank Liquidity Fund
("Fondo de Liquidez Bancaria") was restructured by extending its
maturity to three years. This loan was canceled after the
implementation of the Plan, by means of an advance from the
Argentine Central Bank.
After the initial infusion of cash, and in the context of the
renegotiation of its external debt, between the implementation of
the Plan and the date of this press release, the Bank has rebuilt
and stabilized its liquidity position without requiring any
financial assistance from the Argentine Central Bank.
New York Branch and representative offices abroad
The redefinition of the Bank's operating units abroad included
the "New York Branch Restructuring Plan", which was submitted to
the US Treasury's Office of the Comptroller of the Currency
("OCC") on March 22, 2002. This plan contemplated the voluntary
and orderly wind down of the New York Branch affairs and its
ultimate closing, after 1) the payment of the New York Branch's
small deposits; 2) the restructuring of its third party
liabilities (a restructuring that included, among others, at the
creditors' election, a less than par-for-par alternative) which
included the offer to exchange the New York Branch's existing
notes (two issuances of US$100 million each) for new notes
(negotiable obligations) issued by the Head Office in Argentina;
and 3) the transfer to the Head Office in Argentina of the
restructured debt. As of March 31, 2002, the New York Branch had
third party liabilities totaling approximately US$331 million, of
which approximately US$311 million were restructured during the
months of June and July 2002. Approximately 98% in aggregate
outstanding principal amount of the New York Branch existing
notes were validly tendered and exchanged for the new notes
issued by the Head Office in two simultaneous exchange offers.
The New York Branch is currently being wound down and the Bank's
representative offices in Sao Paulo (Brazil) and London (UK) have
already been closed.
Capitalization
The increase in the Bank's capitalization has not happened yet,
and will take place within the framework of the restructuring of
the Bank's debt with foreign creditors. The Plan contemplates, as
an integral part of the renegotiation of this debt, the addition
of basic and/or complementary capital through the subscription by
such creditors of ordinary shares or subordinated debt, whether
or not convertible into ordinary shares, at the option of the
participants.
Restructuring of the Head Office and the Cayman Branch debt
On June 12, 2002, the Bank announced the restructuring of all of
the debt with foreign creditors of the Bank's Head Office in
Argentina, which includes US$200 million in principal amount of
negotiable obligations maturing in 2003. At the same time, the
Bank announced that it had hired an international investment bank
as advisor in the process.
With respect to the restructuring of the Head Office's and the
Cayman Branch's foreign debt, the Bank has formally began
negotiations with a steering committee that was recently
established by the Bank's largest creditors. The Bank is
currently progressing in the restructuring process and the
definition of a repayment proposal.
The restructuring of the Bank's external debt is a complex
process due to the amount, number of creditors and variety of
debt instruments involved. In addition, the process is
complicated by the uncertainty prevailing in Argentina in the
political, economic and regulatory fields. This uncertainty has
been especially detrimental for the financial system, that was
particularly affected by the economic policy of the current
administration, which administration hasn't been able to provide
an integral solution to the financial system's problems. (See
"Main changes in the financial system's regulatory environment
subsequent to the close of the quarter - Compensation to be
granted to financial institutions")
BANCO GALICIA URUGUAY S.A. AND BANCO DE GALICIA (CAYMAN) LTD.
GALICIA URUGUAY
The developments in Argentina, and most importantly the
establishment of access restrictions to deposits in December
2001, resulted in the deterioration of the public's confidence in
Argentine banks and impacted negatively on depositors' confidence
in Galicia Uruguay, prompting a massive run on Galicia Uruguay's
deposits beginning in mid-December.
On February 6, 2002, Galicia Uruguay submitted a letter to the
Central Bank of Uruguay in order to i) communicate its situation
of temporary lack of liquidity, which prevented it from
continuing to face the withdrawal of deposits; ii) request
financial assistance in order to preserve its ability to
reimburse all of its deposits in an orderly manner and face the
withdrawals, substantially caused by the developments that had
occurred in Argentina; or iii) request from that entity the
authorization to temporarily suspend its activities.
On February 13, 2002, the Central Bank of Uruguay resolved to
appoint an intervenor to oversee Galicia Uruguay's management and
authorized the total suspension of its activities for a 90-day
period, which was extended subsequently for an additional 60-day
period. On June 10, 2002, Galicia Uruguay submitted to the
Central Bank of Uruguay a proposal to restructure its
liabilities. The proposal consisted of an initial cash payment in
dollars equivalent to 3% of the credit balance of each creditor
and, for the remaining balances and, at the creditors election, a
time deposit or negotiable obligations issued by Galicia Uruguay,
both maturing on September 2011, with principal amortization in
nine annual installments (the first two for the 15% of the
remaining balance and the following ones for 10% of such balance)
and a 2% annual interest rate. On June 18, 2002, the Central Bank
of Uruguay informed the Bank that it would not oppose any
restructuring solution that the Bank would agree with Galicia
Uruguay's depositors, subject to the proposal being accepted by
at least 75% of the depositors. This percentage coincides with
the minimum required by the Uruguayan Law to validate an
extrajudicial agreement. On June 20, 2002, the Bank informed the
Central Bank of Uruguay that it was offering a pledge of Galicia
Uruguay's commercial loan portfolio as guarantee of the
restructuring proposal presented on June 10, 2002.
On July 22, 2002, Standard & Poor's ("S&P") rated as "D" (and
"uyD" in the Uruguayan local scale) to Galicia Uruguay's
counterparty credit quality and deposits. Likewise, S&P announced
that the senior and subordinated medium-term notes to be issued
as part of Galicia Uruguay's restructuring plan would be rated
"CC" and "C", respectively.
The proposal was accepted by 7,067 account holders representing
more than US$930 million in deposits over a total of US$1,176
million held in 12,271 accounts. Measured in terms of balances,
this represents a percentage of acceptance of more than 79%.
On August 26, 2002, the Judge in charge of the Court of
Montevideo that oversees the case, accepted the steps taken by
Galicia Uruguay in reaching an extrajudicial agreement and
granted it a provisional moratorium that will extend until the
end of the process. In addition, the Central Bank of Uruguay was
designated by the Court to verify that the legal majority has
been obtained in the agreement. Such verification was
satisfactorily concluded. As of the date of this press release,
and in accordance with the provisions of Uruguayan Law, Galicia
Uruguay has made public the restructuring proposal that serves as
the basis of the agreement.
Banco Galicia (Cayman) Ltd.
Galicia Uruguay's situation has affected its subsidiary Banco
Galicia (Cayman) Ltd. As a consequence, on July 19, 2002, at the
request of said subsidiary, the Cayman Islands authorities have
designated a provisional liquidator in order to allow a voluntary
debt restructuring agreement to be reached between this
subsidiary and its creditors. The restructuring of the
liabilities of Banco Galicia (Cayman) Ltd., is currently in
progress. This subsidiary will present, in due time, to the
relevant authorities the proposal to be made to creditors. This
proposal can only be made once the agreement with the creditors
of Galicia Uruguay is closed.
IMPACT OF DECREE NO.214/02 AND COMPLEMENTARY ONES
The devaluation in Argentina and the mandatory "asymmetric
pesification" of a portion of Galicia Uruguay's loans that were
denominated in US dollars but subject to Argentine Law, have
materially and adversely affected Galicia Uruguay's financial
condition. As already mentioned, this impairment was caused by
the fact that Decree No.905/02 excluded from the calculation of
the amounts of Compensatory and Hedge Bonds to which the Bank was
entitled the pesified private-sector assets held by the Bank's
controlled companies with complementary activities and its
foreign branches and subsidiaries. Subsequently, Decree
No.2176/02 has complemented the compensation calculation, by
including in such calculation the assets held by foreign
subsidiaries subject to the pesification established by Decree
No.214/02. (See "Main changes in the financial system's
regulatory environment subsequent to the close of the quarter -
Compensation to be granted to financial institutions")
In this context, the Bank has entered into an agreement with
Galicia Uruguay whereby the Bank has agreed to take such
necessary action in order to, in certain circumstances and with
the prior consent of the Argentine Central Bank, make
contributions to Galicia Uruguay that may be required to permit
Galicia Uruguay to repay all of its restructured deposits. Such
agreement was subsequently amended by both parties to clarify
that the direct and indirect legal effects resulting from the
representations and obligations set forth in such agreement and
the enforceability of the rights assumed thereunder are subject
to the prior restoration of the economic condition of the Bank
and the repayment in full of any financial assistance provided by
the Argentine Central Bank to the Bank. These foregoing
circumstances are mentioned in Article 52 of Resolution No.281 of
the Argentine Central Bank. In addition, as a result of the
intervention by the Uruguayan Central Bank of Galicia Uruguay,
audited financial statements prepared in accordance with
Argentine accounting rules are not available for Galicia Uruguay.
For the foregoing reasons and in complying with the Plan, the
Bank decided to fully provision its investment in Galicia Uruguay
and its subsidiary Banco Galicia (Cayman) Ltd. for the amounts
recorded in its books as of December 31, 2001. Likewise, and for
as long as the above mentioned circumstances remain, the Bank
deemed it appropriate to discontinue the valuation of these
subsidiaries in accordance with the equity method and
consolidation of both subsidiaries' financial statements with
those of the Bank. In addition, and in accordance with unaudited
information, the Bank has established a reserve, under the
liability account "Provisions - Other Contingencies", for
Ps.1,021.8 million equivalent to the estimated negative
consolidated shareholders' equity of the two subsidiaries as of
June 30, 2002.
Within the context described, it is the Bank's intention to
continue the operations of its Uruguayan subsidiary.
Business development
During the quarter ended June 30, 2002, the economic crisis
affecting Argentina intensified, as did its impact on the
financial system. GDP contracted by 13.6% as compared with the
same quarter of the previous year, unemployment peaked to 21.5%,
wholesale inflation reached a 184.69% annualized rate, and at
quarter end the exchange rate had reached Ps.3.80 per US dollar
and the system's average peso-denominated time deposit interest
rate 58.71%. The adverse effects of the macroeconomic scenario on
the level of activity and the asset quality of the financial
system were most significant. At the same time, this scenario was
characterized by increased distorsions among the variables that
determine financial institutions' net financial income (asset
yields, rate of inflation and exchange rate) and the dimension of
the non-compensated losses of financial institutions (repayment
of deposits at the free exchange rate and asymmetric indexation).
However, beginning in the third quarter of 2002, certain
macroeconomic indicators related to the economy's level of
activity have begun to stabilize and others began showing some
improvement (tax collection, for instance). In addition, by means
of controls on the FX market, the sterilization of excess
monetary supply and the sale of FX, the Argentine Central Bank
succeeded in stabilizing the nominal exchange rate in the third
quarter of 2002, resulting in certain stability in domestic
prices. Likewise, total deposits in the Argentine financial
system grew by Ps.3,240 million between July 1 and October 31,
2002, while the system's average peso-denominated time deposit
interest rate reached 25.06% in the latter date.
Beginning in the middle of the second quarter and with more
emphasis in the third quarter of 2002, the Bank made significant
progress in the implementation of the Plan, and succeeded in
improving and stabilizing its liquidity position after the
initial increase tied to the Plan, significantly progressing in
the orderly winding down of its operating units abroad,
especially in the case of its New York branch, and the
restructuring of Galicia Uruguay's liabilities. The Bank has also
initiated the process of restructuring the Head Office's debt.
In this context, the improvement in the Bank's liquid position
was achieved by means of a strong emphasis on credit recovery
initiatives, a sustained cash flow associated to the credit
portfolio with periodic payment and a progressive increase in
deposits beginning in the third quarter of 2002. As a result of
the latter, the Bank decided to offer depositors, in the context
of the provisions of Decree No.1836/02, as previously explained,
the repayment of their CEDROs and Boden for amounts up to
Ps.10,000, higher than the mandatory amount of Ps.7,000
established by said Decree. The period for the exchange
established by Decree No.1836/02 has nor expired yet.
In addition, within the Plan's measures, the Bank has made
significant progress in the reworking and streamlining of its
organizational structure and reduction of its administrative
expenses in order to adapt to a context that has radically
changed. For this, as of the date of this press release, the Bank
has reduced its branch network by more than 40 branches, through
mergers, from the number at June 30, 2002, and the Galicia Ahora
service centers network has subsequently been fully absorbed by
the Bank's branch network. In addition, all rental contracts, and
contracts with suppliers of systems and communication services
have been renegotiated. The number of employees has also been
adjusted further, especially in those central areas related to
businesses which are not expected to recover in the short term.
Even though in the present environment cost reduction is an
essential component of the Bank's strategy, concurrently the Bank
is proactively facing the challenge of successfully adapting to
the new environment for the financial business. The developments
that took place in Argentina since December 2001 have
significantly impaired the financial system's ability to act
directly as an intermediary between the public's savings and the
supply of credit. This situation is not expected to change in the
short term. For this reason, the Bank is concentrating its
efforts in the provision of transactional financial services such
as the management of means of payment (with emphasis in
electronic means of payment, debit cards and its transactional
"on-line" capacity), the supply of banking accounts and deposit
raising associated with customers' transactional needs, credit
card activities, the provision of foreign trade services and the
buying and selling of foreign currency and local governments'
bonds domestically used as currency. Even if these developments
have had negative consequences on the financial system, they have
also fostered the use by the population of traditional banking
services and alternative channels. In addition, the increase in
the Bank's liquidity has allowed it to resume, within the current
applicable regulations, certain credit activities, which are
focused exclusively in the corporate segment
The Bank has put in place several initiatives aimed at increasing
its income from services and its deposit base at the same time.
In this effort, the Bank relies on one of the most extended and
diversified distribution platforms of the Argentine financial
system and appropriate information technology investments that
allow it, among others, to operate one of the best electronic
banking services of the country, benefit from a high capacity for
processing transactions, and efficiently use the information in
its data bases. The Bank also relies on a wide product offering,
that is being adapted to the new context and includes new
technology-based services, and modern working methods.
In the present context, one of the main objectives of the Bank is
to increase the coverage of its operating expenses with fee
income. Fee income as a percentage of operating expenses plus
expenses for services (1) increased from approximately 63% in
December 2001 to approximately 70.4% in March 2002 and 75.9% in
June 2002.
It is also worthwhile highlighting the Bank's significant effort
to protect asset quality. The bank established loan loss reserves
for Ps.746.8 million during the quarter, which allowed the
coverage of non-accrual loans with loan loss reserves to increase
to 99.74% from 63.43% as of March 31, 2002. Likewise, provisions
have been established for contingencies related to the Bank's
interests in non-financial businesses, amortization of goodwill,
future estimated restructuring charges and the Bank's interests
in and the negative net worth of foreign branches and
subsidiaries.
To see tables and financial statements:
http://bankrupt.com/misc/Banco_de_Galicia.doc
CONTACT: Banco de Galicia y Buenos Aires S.A.
Phone: (54-11) 6329-6430
Fax: (54-11) 6329-6494
Email: www.e-galicia.com
ENDESA: Lobbies For Electricity Rate Hikes
------------------------------------------
Rafael Miranda, CEO of Endesa, Spain's largest power producer,
urged the Argentine government to implement electricity rate
hikes "as soon as possible," EFE reports.
Speaking at the 4th Annual European Forum on Latin American
Business, Miranda said that the rate hikes are "essential" to
compensate companies for the economy's conversion from dollars to
pesos.
In January, Buenos Aires ended a decade-long policy of
maintaining the peso at par with the dollar, and the Argentine
currency has lost more than two-thirds of its value since then.
Miranda said the peso's plunge has cost Endesa more than US$3
billion.
Endesa controls a big slice of the Argentine market. According to
Miranda, the Company would like to remain in the region and that
an "incipient improvement" was noticeable in the economic
situation in Latin American countries.
PECOM ENERGIA: Sale Runs The Risk Of Monopoly
---------------------------------------------
The imminent sale of Argentine company Pecom Energia's forestry
assets in the Misiones province could create monopoly, according
to local reports.
According to La Nacion, the companies interested in the
acquisition are the Perez Companc family, 2 American investment
funds and the Chilean company Alto Parana (of the Arauco group).
Pecom Energia has 59,800 hectares in the said province, of which
19,800 have been forested with pine trees. San Jorge represents
the main potential of native forestry reserves owned by Pecom
Energia. This portion of the business is valued at least US$40
million.
The investment bank J.P. Morgan is in charge of receiving the
offers for the acquisition of the forestry assets of Pecom
Energia in Misiones, Corrientes and Buenos Aires provinces, which
have an estimated value of US$60 million.
Pecom Energia S.A., a company controlled by Perez Companc S.A.,
is a leading company in an important sector of the Argentine and
Latin American industry, including oil and gas production and
transportation, refining and petrochemicals, electricity
generation, transmission and distribution.
CONTACT: PEREZ COMPANC S.A.
Maipo 1 - Piso 22 - C1084ABA
Buenos Aires, Argentina
Phone: (54-11) 4344-6000
Fax: (54-11) 4344-6315
URL: http://www.pecom.com.ar/
* Finance Minister Says Argentina May Be Bankrupt By May 2003
-------------------------------------------------------------
Argentine Finance Minister Guillermo Neilsen said the country is
facing bankruptcy if it fails to obtain a new loan by May of next
year.
At the World Economic Forum's Latin America Business Summit,
Neilsen said that if the country does not get any grant from
International financial institutions by February, the level of
reserves would plunge and the economy is unmanageable.
The summit focused on how the Argentine economy plunged into
severe crisis after beings a model emerging economy a few years
back.
The country has defaulted on US$805 million in debt payments it
owes to the World Bank.
* U.S. Official Says IMF Loan Is Near
-------------------------------------
The U.S. Undersecretary of State for Economic, Business and
Agricultural affairs said that Argentina would receive aid from
the International Monetary Fund, if the Argentine government
would follow through its pledges to control government spending.
Bloomberg News qouted Larson saying that though Argentina's
default on a US$805 million payment to the IMF was "unfortunate",
but the country must not scuttle talks with the IMF.
The United Stated is the IMf's largest shareholder, which makes
the support of the Bush administration particularly critical.
The IMF said Monday that the agreeement signed by Argentine
provincial governors and some key congress officials may be used
as a basis of a new loan accorsd.
However, analysts believe that the agreement signed lacked
specifics.
=============
B E R M U D A
=============
TYCO INTERNATIONAL: CALPERS Urges Company To Return To US
---------------------------------------------------------
The largest public pension plan in the US asked Tyco
International Incorporated to go US-based.
The California public Employees' Retirement System (Calpers),
which owns about 1.2 million Tyco shares, said that the move to
the United States would make officers and executive accountable
to shareholders for wrongdoings, reports The Bermuda Sun.
Earlier, Calpers Board Member and California state treasurer Phil
Angelides had moved to ban publicly traded U.S. companies that
leave the country.
Other companies urged to move back to the United States are
McDermott International, which is based in Panama, and Ingersoll-
Rand, based in Bermuda.
A number of U.S. companies escape U.S. taxes by incorporating
somewhere else. Tax haven Bermuda is one of the favorites.
CONTACT: TYCO INTERNATIONAL LTD.
Corporate Office
The Zurich Centre, Second Floor
90 Pitts Bay Road
Pembroke HM 08, Bermuda
Phone: 441-292-8674
Home Page: http://www.tyco.com
=============
B O L I V I A
=============
TDE: Requests $30M In Loans, Equity To Fund Debt Refinancing
------------------------------------------------------------
The board of the International Finance Corporation (IFC) is to
consider January 2003 a request of US$30 million in loans and
equity by the Bolivian transmission company Transportadora de
Electricidad (TDE).
Citing the IFC, Business News Americas reports that the funds
will be used to refinance debt and fund its investment program.
The IFC published a revised version of the project summary on
November 12.
The sponsor is Red Electrica Internacional (REI), a wholly owned
subsidiary of Spain's state transmission company Red Electrica de
Espana (REE), established in March 2001, as a vehicle for REE's
international activities.
REI owns 99.9% of TDE's outstanding shares, which it recently
acquired from a consortium led by Union Fenosa.
TDE owns and operates Bolivia's national high-voltage
transmission network. Its investment program aims to improve the
operation of existing facilities, expand the transmission
network, reduce system constraints, improve reliability, enhance
competition between generators for the supply of energy and yield
lower energy costs for end consumers, according to the IFC.
The IFC said its investment would augment the capital structure
of the Company and place it in a better position to raise
additional long-term finance in the future, which would be used
to complete TDE's investment program.
===========
B R A Z I L
===========
ACESITA: Mulls CST Stake Sale
-----------------------------
Belo Horizonte-based steelmaker Acesita is looking to offload its
stake in flat steelmaker CST as part of its efforts to sell
assets outside of its main line of business, stainless and
silicon steel products, in order to reduce debt.
According to news daily Jornal do Brasil, Acesita has contracted
the Swiss Union of Banks to evaluate its interest in CST, which
is based in Vitoria, Espirito Santo state.
Brazilian mining giant CVRD, Japanese steel company Kawasaki
Steel and pension fund Petros, all current CST shareholders, are
interested in the results of the study, the newspaper said.
The three parties are considering a capital injection of up to
BRL800 million (currently US$230mn) into Acesita. Part of these
funds could be obtained by selling their stakes in CST
individually or as a group, the paper said. The result could be a
new ownership configuration for CST.
Acesita owns 44% of CST's common shares and 33% of its
preferential shares for a total stake in the company of 37%. CVRD
has 20% of the common shares and 24% of the preferential stock
for a total of 23%.
CONTACTS: Fabio Abreu Schettino
Financial and Investor Relations Manager
Phone: (55 31) 3235-4241
Adriana L£cia Fernandes
Investor Relations Coordinator
Phone: (55 31) 3235-4270
Flavia Bozzolla Vieira, Analyst
Phone: (55 31) 3235-4235
Web site: www.acesita.com.br
Email: ri@acesita.com.br
AES TIETE: CVRD Renews Purchase Commitment
------------------------------------------
Brazilian mining company CVRD has not lost interest in acquiring
AES Corporation's Sao Paulo unit AES Tiete, despite failure of
initial negotiations.
Gabriel Stoliar, CVRD's planning director said CVRD needs to
invest in power generation to hedge its necessities. He added
that if CVRD can get installed capacity at a cheap price, then it
remains interested.
CVRD is planning to branch out into energy after Brazil went into
the worst energy crisis in the country's history. Aside from
having its own power supply, CVRD plans to sell excess
electricity at a profit to wholesale clients.
The report also mentioned that CVRD might also be interested in
acquiring distributor AES Sul Distribuidora Gaucha de Energia.
US-based AES Corporation is selling its units in Brazil after
dollar denominated debts become too heavy, caused by a 30 percent
drop in the value of the Brazilian currency.
CONTACT: AES CORP
Investor Relations
Kenneth R. Woodcock, 703/522-1315
www.investing@aes.com
CVRD Head Office
Av. Graca Aranha, 26
Castelo
20005-900 Rio de Janiero - RJ
Brazil
Tel +55 21 3814 4645
Fax +55 21 3814 4611
Web http://www.cvrd.com.br
Contact:
Luiz T. Sardinha Ferro, Chairman
BCP: America Movil May Still Be In The Running
----------------------------------------------
Telecom Americas, the Brazilian subsidiary of Mexican-based
regional mobile operator America Movil, has won a PCS license for
the Sao Paulo metro area in a Tuesday auction. Despite that,
local analysts still see America Movil buying Sao Paulo-based
BCP.
Reports have it earlier that America Movil expressed mild
interest in BCP.
In a Business News Americas report, Banco Itau analyst Roberta
Kosaka suggested that Telecom America's purchase of the license
might just be a "Plan B" in case negotiations with BCP collapse.
"Depending on the terms of the acquisition, BCP could be a good
purchase," Kosaka added.
BCP has seen its losses quadruple from a year ago to BRL1.66
billion (US$470mn) for 3Q02, mainly due to the depreciation of
the real against the dollar. But Yankee Group analyst Luis Minoru
believes it could still be an attractive buy due to its 1.68
million subscribers and above-average ARPU.
In March, BCP controlling shareholders BellSouth and local bank
Banco Safra allowed the Company to default on debt of US$375
million. Creditors subsequently took control of the Company's
cash management when it missed a US$1.6-million interest payment
in April.
Local bank creditors in May said they would accept BellSouth's
offer to repay the debts with a discount of US$110 million.
However, BellSouth later retracted the offer and demanded a
US$194 million discount in early June, which the banks rejected,
temporarily ending talks.
CONTACT: BCP S.A.
Rua Fl=rida, 1970 4o andar
Spo Paulo - SP
Tel: 55 11 5509-6428
Fax: 55 11 5509-6257
Home Page: http://www.bcp.com.br
BELLSOUTH CORPORATION
1155 Peachtree St. NE
Atlanta, GA 30309-3610
Phone: 404-249-2000
Fax: 404-249-5599
Home Page: http://www.bellsouth.com/
Contacts:
Investor Relations
Phone (US): 800.241.3419
Fax: 404.249.2060
E-mail: investor@bellsouth.com
BANCO SAFRA
Av. Paulista, 2100 - Spo Paulo
Brazil - 01310-930
Phone: (11) 3175-7575
Home Page: http://www.safra.com.br/ingles/index.asp
Contact: Carlos Alberto Vieira, President
CELPA: Court Orders Payment of Back Salaries
--------------------------------------------
The regional labor tribunal of Para, Brazil ordered state
distributor Celpa to pay workers' salaries that date back to
1987.
Business News Americas reported that the Company is ordered to
pay the 2,600 complainants an average of BRL100,000. The total
amount of payment the Company has to make is about BRL274 million
(US$78 million).
The complaint was filed by former and current employees who claim
their salaries were not adjusted according to the so-called
Bresser economic plan in 1987.
Celpa, which was acquired by Grupo Rede in 1998, said that its
board of directors is yet to meet to decide what course of action
to take.
Celpa representatives say that the Company should pay only one
month's adjustment, which would cost about BRL1.3 million in all.
Earlier reports show that the Company claims it is unable to make
the payments ordered by the court.
However, the unions have presented evidence proving that the
Company has the capability to pay the workers.
According to the report, the Company is under investigation for
allegedly illegal transfer of money to other group companies.
KLABIN: Hopes To Conclude Debt Talks With Banks Next Month
----------------------------------------------------------
Klabin SA, Brazil's No. 1 pulp and paper maker, is looking to
complete next month negotiations over a debt sale aimed at
helping the Company meet next year's obligations after defaulting
on bonds, reports Bloomberg.
Chief Executive Officer Miguel Sampol Pou revealed that the
Company is in talks with up to nine banks, adding that a group of
banks has already committed to buying almost BRL1.1 billion
(US$313 million) in debt.
Klabin, whose net loss tripled in the third quarter, is among the
Brazilian companies that fell behind on debt payments due to lack
of growth, difficulties rescheduling debt and a one-third drop in
the currency this year
The Company said it will sell two series of debentures. One
matures in 2004 and the other in 2005. Klabin defaulted on a
EUR109 million (US$108.3 million) bond Nov. 4.
CONTACT: Ronald Seckelmann, Financial and IR Director
Luiz Marciano Candalaft, IR Manager
Tel: (55 11) 3225-4045
E-mail: marciano@klabin.com.br
Paulo Roberto Esteves
Tel: (55 11) 3848-0887 Extension 205
Email: paulo.esteves@thomsonir.com.br
KLABIN: Norske Eyes 50% Stake In Newsprint Venture
--------------------------------------------------
Klabin revealed that Norske Skogindustrier ASA, the world's
second-largest newsprint maker, agreed to buy Klabin's 50% stake
in a newsprint venture, Bloomberg relates.
Klabin CEO Sampol Pou said he expects the purchase to be complete
by March.
The Company also hopes to sell assets next year worth between
US$250 million and US$300 million, Pou added. He declined to
identify just what the Company plans to unload.
Klabin has BRL1.17 billion of debt coming due this quarter,
including a US$60 million Eurobond maturing next month, company
officials said. About 70% of Klabin's debt currently is linked to
the dollar. The planned transaction would reduce that amount to
about a third.
NET SERVICOS: To Reduce Costs in 2003 Through Lower IT Spending
---------------------------------------------------------------
Brazilian pay TV and broadband services provider Net Servicos de
Comunicacao will be implementing cost cutting measures next year
after seeing its operating costs for the first nine months of
2002 increase to BRL505 million, from BRL457 million in the same
period last year.
Net CFO Leonardo Pereira told analysts during the third quarter
results conference call that the Company expects to reduce costs
by at least US$9.8 million next year, in part through lower IT
spending.
The Company has renegotiated a 60% reduction on the lease of its
Sao Paulo headquarters, saving US$2.5 million a year as of
January 2003, and will cut IT spending by 35% that year for
savings of BRL26 million (US$7.3mn), Pereira said.
Other cost cutting efforts include the implementation of a
programming committee and talks with programmers, which have
already put proposals on the table. Programmer fees are largely
in dollars and because of the real's depreciation Net's
programming costs have grown to 37% of revenues, compared to 30%
of revenues in 1998, Pereira said.
To see financial statements:
http://bankrupt.com/misc/Net_Servicos.pdf
CONTACTS: Marcio Minoru Miyakava
(5511) 5186-2811
minoru@netservicos.com.br
Lu Yuan Fang
(5511) 5186-2637
lfang@netservicos.com.br
=========
C H I L E
=========
TELEFONICA CTC: Ordered To Pay Workers, But Has Other Plans
-----------------------------------------------------------
A labor court in Chile ruked that Telefonica CTC Chile, the
country's largest telco must pay its employees in compliance with
a collective cotract that expired by the end of June this year.
A report from Business News Americas indicated that the Company
could pay as much as CLP7.5 billion.
The money is said to correspond to productivity bonuses and
incentives, due to some 6,900 employees.
CTC has already filed a petition to appeal the ruling. However,
in the event that it loses the appeal, CTC plans to make the
bonus payments, based on the worker's performance.
In a statement to the stock exchange regulator, the Company said
that the total cost would not reach CLP7.5 billion, under the
alternative plan.
According to Sinate, a telecoms union representing CTC workers,
the Company never made the productivity goald for bonuses clear,
prompting the union to sue for maximum compensation.
CONTACT: TELEFONICA CTC CHILE
Avenida Providencia 111, Piso 2
Santiago, Chile
Phone: +56-2-691-2020
Fax: +56-2-691-2392
Homepage: http://www.ctc.cl
Contacts:
Mr. Bruno Philippi, President
Mr. Jacinto Díaz, Vice President
Gisela Escobar, Head of Investor Relations
===========
M E X I C O
===========
AHMSA: Clarifies Issues Surrounding Nov. 7 Meeting
--------------------------------------------------
In a move to clarify issues regarding the shareholders meeting
held Nov. 7, Mexican steelmaker Altos Hornos de Mexico (AHMSA)
issued the following press statement:
"On November 7, Altos Hornos de México held its shareholders
assembly in strict accordance with the law. However, a group of
banks wanting to break the law and having organized an illegal
shareholders assembly at the Hotel Sheraton in Monclova, decided
two hours beforehand to suspend the meeting due to its
illegality, supported by various legal judgments in AHMSA's
favor."
"As can be proven by several domestic journalists, as well as
shareholders' representatives, before 13:00, the time at which
the meeting was to be held, the organizers had left the hotel...
On the day in question, no incident of any kind was recorded as
shown by notary information and people's testimonies. We know
that elements of public security were posted in the hotel's
surroundings as requested of the authorities by organizers of the
illegal and failed meeting."
CONTACT: AHMSA
Prolongacion B. Juarez s/n,
Monclova , Coahuila 25770
Mexico
http://www.ahmsa.com
Phone: +52 86 33 81 72
Fax: +52 86 33 65 66
Contacts:
Alonso Ancira Elizondo, CEO, Vice Chairman, Pres./CEO
Jorge Ancira Elizondo, Chief Financial Officer
Manuel Ancira Elizondo, Chief Operating Officer
AHMSA: Given Until November 25 To Present Debt Plan
---------------------------------------------------
Ahmsa's creditor banks gave the Mexican steelmaker until November
25 to submit a restructuring plan, says Business News Americas.
According to the banks' representative, Ronald Dickins, Ahmsa's
controlling group GAN, Ahmsa chairman Xavier Autrey and its CEO
Alonso Ancira wrote to the creditors asking for such extension.
The banks broke off negotiations with the present board in April
this year, accusing it of not being prepared to implement the
modifications necessary to have a bankruptcy protection order, in
place since May 1999, lifted.
The parties had arrived at a preliminary agreement on Ahmsa's
US$1.85-billion in debt, but the board never ratified the plan.
The agreement required the conversion US$540 million of debt to
equity and the sell-off of non-essential assets worth US$120
million. This would leave Ahmsa with debts of US$1.14 billion,
which would be rescheduled with a final installment payable
September 2009.
Under the plan, the GAN industrial group would have maintained
control of Ahmsa with 50.1% of the firm, the banks would have 40%
and minority shareholders the rest.
"The banks are sticking firmly to the initial plan," Dickins
said.
GAM: Gives Up Legal Injunction Against Government
-------------------------------------------------
In a move it considers a gesture of good faith, Grupo Azucarero
Mexico (GAM), whose debts to various banks totals US$135 million,
gave up on its legal injunction against the Mexican government
for expropriating two of its five sugar mills.
Last year, GAM launched a suit to have the expropriation of its
refineries reversed, on the grounds that its installations did
not match the criteria in the federal government's expropriation
decree.
But just recently, the Company decided to withdraw its decision
in order to help resolve its financial problems and to maintain
the three remaining mills in operation under its control.
Now, with the move, the Company expects that the process of its
being compensated for the expropriations can start. It also
expects to begin repaying its creditors, with priority going to
the government.
===============
P A R A G U A Y
===============
* Paraguay Central Bank President Resigns
-----------------------------------------
Paraguay Central Bank President Raul Vera resigned from his post
Wednesday, saying lawmakers had not done enough to help the
government win a much-needed loan from the International Monetary
Fund.
Vera told reporters that he hopes his successor would have better
ideas to help Paraguay.
The Associated Press reports that Vera's move further weakened
the government led by President Luiz Gonzalez Macchi. The country
is trying hard to recover from the current economic crisis.
The economic turbulence has left the country's currency, the
guarani with 41 percent less its value to the dollar this year.
Macchi has been trying to secure a $200 million emergency aid
from the IMF to help the country overcome budget gaps.
The IMF demands the value added tax be raised to 11 percent from
the current rate of 10 percent.
However, opposition leaders say they will contest such a reform,
adding that the additional earnings would only be used to finance
the political campaigns of the ruling party.
=======
P E R U
=======
WIESE SUDAMERIS: Parent To Launch EUR300M Debt To Equity Swap
-------------------------------------------------------------
IntesaBci SpA, Italy's largest bank, which is seeking to pull out
of Latin America, will exchange EUR300 million (US$301 million)
owed it by its Peruvian unit Banco Wiese Sudameris for new
shares, reports Bloomberg.
Shareholders of the Peruvian unit are to vote on the plan Dec.
16, according to IntesaBci in a statement released by the Italian
stock exchange.
"IntesaBci knew that it was difficult to get the loans back, so
they decided to transform it into equity," said Antonio Ranieri,
a trader at Uniprof in Milan. "It's all part of their plan to
sell the unit, and the costs involved are in line with what was
expected."
Peru's banking and insurance authority revealed that at the end
of August, Banco Wiese had the second-worst ratio of debts that
have past their repayment date of 15 Peruvian banks, at 12.7%.
IntesaBci pumped US$200 million into the bank at the end of 2001
and an additional US$170 million in April in exchange for new
shares.
"It doesn't make a difference," said Philip Corsano, a fund
manager at Uniprof Sim, which oversees EUR250 million in shares,
including IntesaBci. "If they don't recover the loans, it's worth
zero."
Milan-based IntesaBci is looking to sell Latin American units,
including 95%-owned Banco Wiese Sudameris, after posting losses
in four of the last five quarters. It is spending US$150 million
to recapitalize its Argentine arm before it merges with Banco
Patagonia SA, a provincial lender in southern Argentina. The bank
recently scrapped a planned US$1.4 billion sale of its Brazilian
activities to Banco Itau after failing to agree on a price.
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
=============
U R U G U A Y
=============
BANCO COMERCIAL: No Formal Offers Left On The Table
---------------------------------------------------
Suspended Uruguayan bank Banco Comercial is seeing its future
getting dimmer after U.S.-based insurance group AIG and
international investor George Soros balk at an offer for the
bank, reports Business News Americas.
AIG and Soros had offered US$100 million for a majority stake in
the bank, and US$300 million in fresh funds for cash-starved
exporters.
AIG and Soros' decision follows the same move by Brazilian group
Brasilinvest and a consortium of US and European investors,
leaving Banco Comercial without any formal offer.
Banco Comercial together with three other local banks -
Montevideo, Caja Obrera, Banco de Credito - were intervened and
suspended by the government in July and August due to capital and
liquidity problems.
The government has said the most likely solution to re-open the
banks is to merge Banco Comercial with Montevideo and Caja Obrera
to form a new bank, while Banco de Credito would be sold to its
minority shareholder St George.
CONTACT: BANCO COMERCIAL
Cerrito No. 400,
11100 Montevideo
Phone: 960-394/97
Fax: 963-569
Home Page: www.bancocomercial.com.uy/
BANCO DE MONTEVIDEO
Misiones
1399 - Montevideo
Fax: 9162880
E-mail: info@bm.com.uy
Home Page: http://www.bancomontevideo.com.uy
Contact: Sr. Marcelo Pestarino, President
=================
V E N E Z U E L A
=================
POSVEN: Losses, Worsening Climate Prompts Parent's Withdrawal
-------------------------------------------------------------
Posco, the world's second-largest steelmaker, informed the U.S.
Securities and Exchange Commission of its plan to liquidate its
Venezuelan plant, reports Bloomberg.
The Korean steelmaker is closing Posven after booking 57.5
billion won (US$47.44 million) in losses from the operation. The
overseas unit had incurred losses of 160 billion won for Posco
before this year, the company told the Korea Stock Exchange in a
public notice.
Posco also attributed the closure to the worsening business
climate in Venezuela.
The bolivar has fallen 44% this year, while political protests
led companies to cut spending. The economy shrank 9.9% in the
second quarter and unemployment rose to 15.5%.
"Posco has cut away a festering wound," said Lee Young Seog, who
manages about 500 billion won in equities at Dongwon Investment
Trust Management Co. in Seoul. "The company has been gradually
writing off losses from the venture so in some ways it was
inevitable."
Posco and its affiliates own 60% of Posven. Raytheon Co. owns
10%, and other shareholders include Mexico's Hylsamex CA and
Venezuelan state iron ore company CVG Ferrominera.
Posco and its partners started the plant four years ago to take
advantage of the area's ore deposits and cheap power. The plant
employs about 110 people, company officials said.
***********
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 Oona G. Oyangoren, 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
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or balance thereof are $25 each. For subscription information,
contact Christopher Beard at 240/629-3300.
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