/raid1/www/Hosts/bankrupt/TCRLA_Public/021125.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
Monday, November 25, 2002, Vol. 3, Issue 233
Headlines
A R G E N T I N A
ARGENTINE BANKS: Loss Reaches ARS3.06 Bln On Massive Devaluation
ROYAL AHOLD: Counters LatAm Job Cuts Report In Restructuring
CLAXSON INTERACTIVE: Argentine Crisis Pulls Down 3Q02 Results
CLAXSON INTERACTIVE: SkyOnline Acquires Operations of O Site
IFX CORP.: Reports Results for First Quarter Fiscal Year 2003
IRSA: Sells $100M Convertible Bonds to Restructure Bank Debt
* IMF Extends Argentina's SRF Repayment Expectation by One Year
B E R M U D A
TYCO INTERNATIONAL: May Sell US$3.5 Billion in Convertibles
TYCO INTERNATIONAL: Hires New General, Corp., Intn'l Counsel
B R A Z I L
AES SUL: S&P Cuts Ratings On Pending Payment Worries
ESCELSA: Parent Seeks To Complete Restructuring of US Dollar Debt
SAESA: Seeks Shareholders Approval On Planned Capital Increase
VARIG: BNDES Support Doubtful If Control Remains
VARIG: To Reduce Number of Workers By Year-End
VARIG: Announces Network Expansion With Air Canada
C H I L E
COEUR D'ALENE: S&P Ups Ratings On Restructuring; Outlook Neg.
MADECO: May Sell Alusa As Part Of Restructuring Efforts
M E X I C O
CORPORACION DURANGO: Former Paper Unit Files Bankruptcy Appeal
T R I N I D A D & T O B A G O
VERMILION: Selling Trinidad Assets In Reorganization
U R U G U A Y
* S&P Lowers Ratings on Uruguay to 'B-/C'; Outlook Negative
- - - - - - - - - -
=================
A R G E N T I N A
=================
ARGENTINE BANKS: Loss Reaches ARS3.06 Bln On Massive Devaluation
----------------------------------------------------------------
Argentine banks suffered a total of ARS3.06 billion (almost
US$863 million) during the first half of this year, according to
local paper El Cronista. The report cited the extensive
devaluation of the Argentine peso as one of the primary causes of
the loss. Other factors include delayed repayment of funds, and
fund drainage from court rulings on "corralito", or the banking
regulations imposed by the government in December last year.
Among the banks in the country, Banco Hipotecario accrued the
biggest loss, at ARS565.3 million. The next largest loser is
Banco Galicia, reporting ARS118.4 million in the red. Santander
Central Hispano's Banco Rio posted losses of ARS97.5 million.
Banco Frances lost ARS81.7 million, enough to put it on the list
banks who had big-time losses.
Financial sources reveal that about ARS2.2 billion had been
withdrawn from banks his year.
CONTACTS: BANCO GALICIA
Tte. Gral Juan D. Peron 407
1038 Buenos Aires, Argentina
Phone: +54-11-6329-0000
Fax: +54-11-6329-6100
Home Page: http://www.bancogalicia.com.ar
Contacts:
Eduardo J. Escasany, Chairman and Chief Executive
Officer
Sergio Grinenco, Chief Financial Officer
Corporate Communications
Phone: (54 11) 6329 6439
Fax:(54 11) 6329 6000 ext.: 2041
Representative Office:
Buenos Aires
Reconquista 144, piso 17
(1003) Buenos Aires, Argentina
Phone: (54-11) 4343-5200/5303/5162
Fax: (54-11) 4343-6576
New York Branch
300 Park Avenue, 20th Floor
New York, NY 10022
Phone: (1-212) 906-3700
Fax: (1-212) 906-3777
BANCO HIPOTECARIO
Reconquista 101
(1005) - Capital Federal
Buenos Aires
Argentina
Phone: 0800-999-4476
Fax: (54-11) 4347-5278
E-mail: ri@hipotecario.com.ar
Home Page: http://www.e-hipotecario.com.ar
Contact:
Miguel A. Kiguel, Chairman
BANCO RIO
Bartolome Mitre 480
1036 Buenos Aires, Argentina
Phone: +54-14-341-1081-1580
Fax: +54-14-341-1074-1084
Home Page: http://www.bancorio.com.ar
Contacts:
Ana Patricia B. S. de Sautuola y O'Shea, Chairman
Jose L. E. Cristofani, Executive Vice Chairman and CEO
Pablo Caride, Corporate Finance
ROYAL AHOLD: Counters LatAm Job Cuts Report In Restructuring
------------------------------------------------------------
Royal Ahold NV, the world's third-largest retailer, said it will
restructure in Latin America in an attempt to cut costs. However,
the Company denies reports of a planned job cut. Ahold Spokesman
Nick Gale told Reuters that the Company never named regions,
countries, time frames or numbers concerning a job cut.
Earlier, a report from the NRC Handelsblad newspaper indicated
that the Company would cut 1,000 jobs, citing Ahold board member
Theo de Raad. The report also indicated that most of the job cuts
would be in Brazil and Argentina.
This week, Ahold had reduced its earnings forecast for the second
time after a sharp decline in profits. The report cited that he
decline was caused by the devaluation of the local currencies of
Argentina and Brazil.
Gale said that the Company is indeed undergoing a restructuring
process, but he refused to comment on any workforce reductions.
The Company plans to sell underperforming and non-core
businesses.
CONTACT: AHOLD NV
Head Office
3050
Albert Heijnweg1
1507 EH Zaandam
Netherlands
Tel +31 75 6599111
Fax +31 75 6598350
Telex 1 9010
Web http://www.ahold.com
CLAXSON INTERACTIVE: Argentine Crisis Pulls Down 3Q02 Results
-------------------------------------------------------------
Claxson Interactive Group Inc. (Nasdaq: XSON) ("Claxson" or the
"Company") announced financial results for the three and nine-
month periods ended September 30, 2002.
Financial Results
Operating profit for the three-month period ended September 30,
2002 was $0.6 million, representing a $2.4 million improvement
from operating loss of $1.8 million for the three month period
ended September 30, 2001. Operating loss for the nine-month
period ended September 30, 2002 was $1.9 million compared to an
operating loss of $3.6 million for the same period of 2001.
Total net revenues for the third quarter of 2002 totaled $18.3
million, a 31% decrease from net revenues of $26.5 million for
the third quarter of 2001. Total net revenues for the nine months
ended September 30, 2002 totaled $56.9 million compared to net
revenues of $79.2 million for the nine months ended September 30,
2001. Claxson's results continued to be negatively affected by
the economic crisis in Argentina and were particularly impacted
by the Argentine devaluation. Net revenues earned in Argentina
for the three months ended September 30, 2002 were 21% of total
net revenues compared to 48% for the same period in 2001. For the
nine months ended September 30, 2002, total net revenues in
Argentina were 22% of total net revenues compared to 47% for the
same period in 2001. During the third quarter of 2002, the
average exchange rate devalued 72% as compared to the same period
in 2001. For the nine-month period ended September 30, 2002, the
average devaluation in Argentina was 66%.
"Having completed our first year of operations, Claxson's
performance continues to improve as a result of an overall
operational and financial restructuring plan which has focused on
aggressively managing operating expenses, and developing new
revenue sources in markets outside of Argentina in an effort to
mitigate the adverse effect of the economic situation in that
market. We believe that this strategy will allow us to maintain
positive operating income in the fourth quarter," said Roberto
Vivo, Chairman and CEO, Claxson. "By having successfully
completed the Imagen Satelital exchange offer in November, we
continue to work towards our long term financial goals of
achieving and sustaining profitability, improving our cash
performance and increasing shareholder value."
Subscriber-based fees for the three-month period ended September
30, 2002 totaled $7.5 million, representing approximately 41% of
total net revenues and a 50% decrease from subscriber-based fees
of $15.0 million for the third quarter of 2001. The decrease is
primarily attributed to the impact of the devaluation of the
Argentine currency of $7.4 million and the decreased demand for
pay-per-view and premium services in the region. Subscriber-based
fees for the nine months ended September 30, 2002 totaled $25.9
million compared to $46.0 million for the same period of 2001.
The decrease attributable to the devaluation of the Argentine
currency represents $20.3 million for the nine- month period.
Advertising revenues for the three-month period ended September
30, 2002 were $6.9 million, representing approximately 38% of
Claxson's total net revenues and a 23% decrease from advertising
revenues of $9.0 million for the third quarter of 2001. This
decrease in advertising revenues was due primarily to a decrease
in pay television advertising of $1.8 million as a result of the
economic crisis in Argentina. Advertising revenues for the nine
months ended September 30, 2002 totaled $21.1 million compared to
$26.6 million for the same period of 2001. The decrease in pay
television advertising for the nine- month period represents $4.6
million of the decrease.
Other revenues for the three-month period ended September 30,
2002 were $3.9 million, which represented a 56% increase over the
$2.5 million for the third quarter of 2001. This increase was
primarily due to increased revenues from the operations of The
Kitchen, Inc., Claxson's Miami-based broadcast and dubbing
facility. Other revenues for the nine months ended September 30,
2002 totaled $10.0 million compared to $6.6 million for the same
period of 2001.
Operating expenses for the three months ended September 30, 2002
were $17.7 million, a decrease of 37% from the $28.3 million in
the third quarter of 2001, due primarily to the rationalization
of programming, a reduction in marketing expenditures,
management's continued efforts to rationalize operations, the
effect of the Argentine devaluation on the expenses of our
Argentine-based subsidiaries, and the discontinuance of the
amortization of goodwill and intangible assets in accordance with
the Statement of Financial Accounting Standards No. 142.
Operating expenses for the nine months ended September 30, 2002
totaled $58.8 million compared to $82.8 million for the same nine
months in 2001.
Net loss for the three months ended September 30, 2002 was $5.5
million ($0.29 per common share), which includes $1.4 million in
foreign exchange losses primarily due to certain U.S. dollar
denominated debt held by Claxson's Argentine subsidiary. The net
loss represented an improvement of $4.5 million over the $10.0
million net loss for the same three months of 2001.
For the nine-month period ended September 30, 2002 net loss was
$162.4 million, which includes a $74.8 million non-cash
impairment charge related to the adoption of Statement of
Financial Accounting Standards No. 142, and $68.2 million in
foreign exchange losses. Amortization expense for the three
months, and nine months ended September 30, 2001 was $2.6
million, and $7.5 million, respectively.
As of September 30, 2002, Claxson had a balance of cash and cash
equivalents of $12.8 million and $103.4 million in debt.
Update on Debt Renegotiation
On November 8, 2002, Claxson completed the exchange offer and
consent solicitation related to its U.S.$80 million outstanding
principal amount of the 11% Senior Notes due 2005 of its
subsidiary, Imagen Satelital S.A. (Old Notes). The Company
received valid tenders from holders representing U.S.$74.5
million of the principal amount of Old Notes, which represents
93.1% of the issue. Accordingly, pursuant to the exchange offer,
the Company issued U.S.$41.3 million of new 8-3/4% Senior Notes
due 2010.
Giving effect to the completion of the exchange offer, the
Company's total debt as of September 30, 2002 would have been
decreased by $11.5 million, from $103.4 million to $91.9 million,
and the stockholders' equity would have been increased to $1.3
million.
Claxson is currently not in compliance with the coverage ratios
required under its Chilean syndicated credit facility, primarily
as a result of the 17% decrease in the value of the Chilean Peso
against the U.S. Dollar in 2001. Failure to comply with the
financial covenants set forth in the Chilean syndicated credit
facility could result in the acceleration of all amounts due and
payable thereunder. Claxson continues to actively negotiate with
the lenders to amend the credit facility to modify this financial
covenant in order to bring it into compliance. Until negotiations
are final, this debt will be classified as short term in the
balance sheet.
Playboy TV International (PTVI)
PTVI and its affiliates incurred net losses of $1.8 million for
the three- month period ended September 30, 2002. Unless PTVI's
financial obligations can be restructured, PTVI will remain
primarily dependent on capital contributions from Claxson to fund
shortfalls. The report of PTVI's independent auditors with
respect to its financial statements for the years ended December
31, 2001 and 2000 include a "going concern" explanatory
paragraph, indicating that PTVI's reliance on capital
contributions from its partners to meet its obligations as they
become due raises substantial doubt as to its ability to continue
as a going concern.
Since January 2002, Claxson has been negotiating a possible
restructuring of the PTVI joint venture to adjust the fixed cost
structure and obligations to Playboy Entertainment Group, Inc due
to PTVI's lower than anticipated revenues. Negotiations are in
progress, however, no assurances can be made that Claxson will be
successful in restructuring the PTVI joint venture. If Claxson
does not reach a successful agreement with Playboy Enterprises,
Inc., Claxson could be required to fund the additional $21.4
million of capital contributions required pursuant to the
operating agreement. If Claxson is not able to fund the
additional capital contributions, Playboy Enterprises, Inc. or
PTVI may seek, among other things, the dilution of Claxson's
membership interest.
Nasdaq Listing Update
On October 9, 2002, Claxson was notified by Nasdaq that the
Company was subject to delisting because of its failure to comply
with Marketplace Rule 4320(e)(2)(B), which requires a minimum of
(i) U.S.$2.5 million stockholders' equity or (ii) a market
capitalization of U.S.$35.0 million or (iii) net income of
U.S.$0.5 million. The Company requested an oral hearing before
the Nasdaq Listing Qualifications Panel to review the
determination reached by the Nasdaq Listing Qualifications
Department, which is scheduled for November 21, 2002. There can
be no assurance the Nasdaq Panel will grant the Company's request
for continued listing. If delisted, the Company would attempt to
have its Class A common stock traded in the over-the-counter
market via the Electronic Bulletin Board.
About Claxson
Claxson (Nasdaq-SCM: XSON) is a multimedia company providing
branded entertainment content targeted to Spanish and Portuguese
speakers around the world. Claxson has a portfolio of popular
entertainment brands that are distributed over multiple platforms
through its assets in pay television, broadcast television, radio
and the Internet. Claxson was formed on September 21, 2001 in a
merger transaction, which combined El Sitio, Inc. and other media
assets contributed by funds affiliated with Hicks, Muse, Tate &
Furst Inc. and members of the Cisneros Group of Companies.
Headquartered in Buenos Aires, Argentina, and Miami Beach,
Florida, Claxson has a presence in all key Ibero-American
countries, including without limitation, Argentina, Mexico,
Chile, Brazil, Spain, Portugal and the United States.
To see financial statements: http://bankrupt.com/misc/Claxson.htm
CONTACT: Press, Alfredo Richard, SVP, Communications
+1-305-894-3588,
Investors, Jose Antonio Ituarte, CFO
+011-5411-4339-3700
URL: http://www.claxson.com
CLAXSON INTERACTIVE: SkyOnline Acquires Operations of O Site
------------------------------------------------------------
Continuing its expansion in Latin America, SkyOnline, Inc.
(http://www.skyonline.net),a telecommunications / value-added
services provider headquartered in the United States, announced
Wednesday that it has acquired the Internet and Data operations
of O Site, a leading ISP in Brazil, from Claxson Interactive
Group, Inc. (Nasdaq: XSON). O Site's ISP operation is one of the
first Internet operations established in Brazil and currently has
over 30,000 Internet customers.
"This transaction confirms our commitment to the Brazilian
market. We look forward to concluding several additional
transactions in Brazil and engaging with local strategic players
to grow and provide additional value to our existing customers,"
commented Richard Estevez, SkyOnline's Vice- President.
The acquisition follows a series of transactions in the region,
including most recently the acquisition of Diveo's operations in
Argentina / Uruguay and SkyOnline's agreement to acquire
Teleglobe's data assets and operations in Latin America.
SkyOnline, through its local subsidiary in Argentina, also
acquired Claxson's ISP operations in Argentina, El Sitio in 2001.
The terms of the transaction were not disclosed.
ABOUT SKYONLINE, INC.
Headquartered in Virginia, U.S.A., SkyOnline, Inc., is an
integrated telecommunications solutions provider. SkyOnline
operates in all of the major markets in Latin America, including
Argentina, Brazil, Colombia, Guatemala, Mexico, Panama, Puerto
Rico, Uruguay and Venezuela. SkyOnline's investors include Suez,
( http://www.suez.com) a global water, energy and services
business with significant operations in Latin America, N.I.T., a
Luxemburg- based private equity fund specializing in Telecom and
Media, and Pequot Capital ( http://www.pequotcap.com), a private
equity fund. SkyOnline's offerings address the growing need for
cost-effective, high-quality data, voice and Internet services.
CONTACT: SKYONLINE, INC.
Richard Estevez, Vice-President of SkyOnline, Inc.,
+1-571-633-6435
URL: http://www.skyonline.net
IFX CORP.: Reports Results for First Quarter Fiscal Year 2003
-------------------------------------------------------------
IFX Corporation (Nasdaq: FUTR)("IFX")( www.ifxcorp.com) reported
its net loss increased to $5.3 million for the three-month period
ended September 30, 2002 from $4.0 million for the three-month
period ended September 30, 2001. Revenues from dedicated line
services increased by $0.6 million to $3.3 million for the first
quarter of fiscal 2003 as compared to $2.7 million for the same
period during fiscal 2002 as a result of the Company's continued
focus on corporate clients. Overall revenues decreased from $6.4
million in the first quarter of fiscal 2002 to $5.6 million for
the first quarter of fiscal 2003. The overall decrease in
revenues is due primarily to decreases in sales to related
parties and dial-up revenues.
IFX's gross profit for the three-month period ended September 30,
2002 was $2.8 million, compared to $2.9 million for the three-
month period ended September 30, 2001. As a percentage of
revenue, gross profit increased to 49.3% for the three-month
period ended September 30, 2002, compared to 45.0% for the three-
month period ended September 30, 2001. General and administrative
expenses decreased 19.5 percent to $5.2 million for the three-
month period ended September 30, 2002 as compared with $6.4
million for the three-month period ended September 30, 2001. As a
percentage of total revenues, general and administrative expenses
decreased 8.1 percentage points to 92.8% for the three-month
period ended September 30, 2002 from 100.9% for the three-month
period ended September 30, 2001.
Shares of IFX's common stock are currently listed on the NASDAQ
SmallCap Market. On October 17, 2002, NASDAQ notified IFX that it
is not in compliance with Marketplace Rule 4310(c)(2)(B), which
requires IFX to have a minimum of $2,000,000 in net tangible
assets or $2,500,000 in stockholders' equity or a market
capitalization of $35,000,000 or $500,000 of net income for the
most recently completed fiscal year or two of the three most
recently completed fiscal years. The NASDAQ staff is reviewing
IFX's eligibility for continued listing on the NASDAQ SmallCap
Market and requested that IFX provide a specific plan to achieve
compliance with the listing requirements. IFX provided a response
to NASDAQ on October 31, 2002, requesting the opportunity to
provide NASDAQ with a further update at a later date. If trading
of IFX's common stock were to be suspended or IFX's shares were
delisted from the NASDAQ system, it would be much more difficult
to dispose of our common stock or obtain accurate quotations as
to the price of the securities. This could also make it more
difficult to obtain financing in the future. The independent
auditors' report with respect to IFX's audited consolidated
financial statements for the fiscal year ended June 30, 2002
contained an explanatory paragraph relating to IFX's ability to
continue as a going concern. Although IFX raised $4.0 million in
September and October 2002 through the issuance of convertible
promissory notes, the Company can provide no assurances that it
will be able to continue raising funds on acceptable terms, or at
all, and the Company's inability to raise sufficient funds in the
future would affect its ability to meet its working capital
needs, satisfy capital and operating lease obligations and would
cause the Company to eliminate capital expenditures.
Selected information from IFX's unaudited condensed consolidated
statements of operations for the three-month periods ended
September 30, 2002 and 2001 follows:
Three Months Ended September 30, 1Q02
Vs
2002 2001 1Q01
(unaudited) (unaudited)
REVENUES:
Dedicated line services $3,263,800 $2,686,200 22%
Dial-up services 332,400 1,109,000 (70%)
Web hosting and design
services 207,300 284,700 (27%)
Sales to related party 1,515,800 1,994,800 (24%)
Other 271,200 312,300 (13%)
Total revenues 5,590,500 6,387,000 (12%)
Cost of revenues 2,834,700 3,513,900 (19%)
Gross profit 2,755,800 2,873,100 (4%)
OPERATING EXPENSES:
General and administrative 5,186,700 6,446,100 (20%)
Sales and marketing 293,000 425,200 (31%)
Depreciation and
amortization 1,654,900 3,555,400 (53%)
Total operating expenses 7,134,600 10,426,700 (32%)
Operating loss from
continuing operations (4,378,800) (7,553,600) (42%)
OTHER INCOME (EXPENSE):
Interest income 9,400 61,900 (85%)
Interest expense (164,300) (596,700) (72%)
Gain on sale of investments -- 4,451,900 (100%)
Equity in net loss of
investee (148,500) (239,500) (38%)
Deferred gain on sale of
subsidiary 22,900 --
Loss on sale of capital
leased asset (370,800) --
Other, net (323,700) (41,900) 673%
Total other income
(expense), net (975,000) 3,635,700 (127%)
Loss from continuing
operations before income
taxes (5,353,800) (3,917,900) 37%
Income tax benefit
(provision) 26,100 (18,200) (243%)
Loss from continuing
operations (5,327,700) (3,936,100) 35%
Income (loss) from
discontinued operations,
net of
income taxes 48,400 (34,500) (240%)
Net loss $(5,279,300) $(3,970,600) 33%
IFX Corporation operates a pan-regional Internet protocol (IP)
network that was established through a series of acquisitions and
start-up operations the Company initiated. It operates networks
in Argentina, Brazil, Chile, Colombia, Mexico, Panama, Uruguay,
Venezuela and the United States. IFX also operates networks in El
Salvador, Honduras, Guatemala and Nicaragua, which it plans to
sell or otherwise dispose of during 2003. The Company offers
services in four basic portfolios, IFX Dedicated Connectivity,
IFX Dial-up, IFX Co-location and IFX Web Hosting, all of which
are offered to small to medium-sized businesses, multi-national
corporations, Internet service providers (ISPs) and
telecommunications carriers with operations and/or customers in
Latin America. The Company operates a region-wide Latin American
IP-based network that provides customers with a reliable data
transmission path to the Internet.
CONTACT: IFX CORPORATION
Joel Eidelstein
President
Tel: (305) 512-1100
IRSA: Sells $100M Convertible Bonds to Restructure Bank Debt
------------------------------------------------------------
IRSA Inversiones y Representaciones SA, an Argentine real estate
company and shopping mall operator, sold its entire US$100
million offer of convertible bonds maturing in 2007 and yielding
8%, reports Bloomberg.
"It's an encouraging sale, but it's a risky bet," said Rafael
Ber, analyst at Argentine Research. "Real estate has upside but
you still need a normal economy and we are far away from that."
IRSA said part of the proceeds would be used to complete a debt
restructuring agreement with banks. The Company said it would pay
creditors US$13 million in cash and US$15 million in convertible
bonds. As part of the debt restructuring accord, banks would
extend maturities on the rest of the Company's $150 million debt,
the Company said.
In a statement sent to the Buenos Aires Stock Exchange, the
Company
IRSA said US$77.4 million of the sale was acquired by
shareholders. Raymond James Argentina Sociedad de Bolsa, an
affiliate of Raymond James Financial Inc., was the subscription
agent.
IRSA is Argentina's leading property development firm with major
holdings in downtown Buenos Aires and a controlling interest in
leading shopping center developer Alto Palermo S.A.
CONTACT: Irsa Inversiones y Representaciones SA
Head Office
Piso1
Bolivar 108
Buenos Aires
Argentina C1066AAD
Tel +54 11 4323 7555
Fax +54 11 4323 7597
Web http://www.irsa.com.ar/
Contacts:
Eduardo Sergio Elsztain, Executive Chairman
M. Marcelo Mindlin, Executive Vice Chairman
Atty Saul Zang, Vice Chairman
* IMF Extends Argentina's SRF Repayment Expectation by One Year
---------------------------------------------------------------
The Executive Board of the International Monetary Fund (IMF)
approved Thursday a request from Argentina to extend by one year
the repayment expectation of SDR 105.9 million (about US$ 141
million) which arises on November 22, 2002 under the Supplemental
Reserve Facility (SRF).
The IMF approved financing for Argentina under the SRF as part of
a stand-by arrangement on January 12, 2001 (see Press Release No.
01/3) to ease a short-term financing constraint. Repayment of an
SRF is normally expected in two installments made at one year and
at 1½ years after the SRF disbursement, the latter installment of
which, in the case of the disbursement made to Argentina on May
23, 2001, would be on November 22, 2002. A borrower may request
an extension of up to one year of the expected repayment period
under the SRF. An extension can be granted if repayment would
cause undue hardship and provided the borrower is taking actions
to strengthen its balance of payments. At the end of the
extension the country is obligated to repay the SRF financing.
In commenting on Thursday's decision by the IMF Executive Board,
Shigemitsu Sugisaki, Deputy Managing Director and Acting
Chairman, said:
"Executive Directors agreed to the Argentine authorities' request
for an extension of the repurchase expectation of SDR 105.9
million that arises on November 22 under the Supplemental Reserve
Facility. Directors recognized that the economic and social
situation in Argentina remained difficult and that the shifting
of the SRF disbursement to an obligations basis would signal
again the Fund's commitment to help Argentina. Directors were
concerned that it had not been possible so far to reach agreement
on an economic program that could be supported by the Fund. They
noted that progress had been made in some areas toward
formulating such a program, but also that there remained a number
of important issues still to be resolved. Directors expressed the
hope that understandings on the open issues could soon be
reached.
"Directors regretted Argentina's decision to fall into arrears
with the World Bank and called for speedy normalization of the
arrears to the World Bank," Mr. Sugisaki said.
CONTACT: IMF EXTERNAL RELATIONS DEPARTMENT
Public Affairs
Tel: 202-623-7300
Fax: 202-623-6278
Media Relations
Tel: 202-623-7100
Fax: 202-623-6772
=============
B E R M U D A
=============
TYCO INTERNATIONAL: May Sell US$3.5 Billion in Convertibles
-----------------------------------------------------------
Tyco International Ltd plans to sell securities convertible into
company stock, according to Reuters News, citing an unnamed
source close to the Company. The source also said that the
Company hired Goldman Sachs & Co., J.P. Morgan Chase & Co. and
Salomon Smith Barney to arrange the convertible sale. However,
none of the three banks have given their comments on the issue.
According to the report, the Company has to raise US$3.5 billion
to avoid a cash crunch as a large percentage of its liabilities
mature next year. Aside from its financial obligations, the sale
would also help boost investor confidence, after stocks declined
on after news of the corporate scandal involving top Tyco
executives broke out. The sale is also expected to help restore
the Company's client-grade investor rating from Moody's.
Former chief executive Dennis Kozlowski and ex-finance chief Mark
Swartz were charged of grand larceny and enterprise corruption.
Both are currently out on bail.
The report indicated that the Company faces a number of debts
maturing next year. It also has to prepare for US$2.3 billion
convertible bonds, which the Company may be forced to buy back.
Tyco has US$4.17 billion of debts due on the first quarter of
next year, $750 million matures on the second quarter, US$1.1
billion on the third and another US$3.8 billion on the fourth.
Shares of Tyco International went up by 7.2 percent to US$17.58
at the closing of the New York Stock Exchange on Tuesday.
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
TYCO INTERNATIONAL: Hires New General, Corp., Intn'l Counsel
------------------------------------------------------------
Tyco International Ltd. (NYSE: TYC, BSX: TYC, LSE: TYI) announced
Thursday that Timothy E. Flanigan has been appointed General
Counsel, Corporate and International Law, for the Company. Mr.
Flanigan will be responsible for corporate and international
legal functions for Tyco, including corporate governance and
compliance programs. He will report to Tyco General Counsel
William B. Lytton.
Mr. Flanigan was most recently Deputy Counsel and Deputy
Assistant to President George W. Bush. Prior to serving on the
current President's staff, Mr. Flanigan was a partner with the
international law firm of White & Case LLP. Earlier Mr. Flanigan
served as Assistant Attorney General for the Office of Legal
Counsel at the U.S. Department of Justice. In this role, he was a
principal legal advisor for then-President George Bush, the
Attorney General and the heads of executive branch agencies.
From 1985 to 1986 he served as senior law clerk to the late Chief
Justice Warren E. Burger and is the author of the forthcoming
authorized biography of Chief Justice Burger.
Mr. Lytton said, "Tim Flanigan is representative of the
outstanding talent we are attracting to this Company. He has an
impeccable reputation for integrity and is highly respected for
his counseling skills. Tim will bring important leadership as we
build our legal staff and we are very pleased to welcome him as
the newest member of the Tyco management team."
Mr. Flanigan said, "Tyco is moving forward with plans to enhance
the company's business performance while instilling the best
practices of corporate governance and ethics from top to bottom.
I am very excited about working with Bill Lytton and the other
executives at Tyco who are dedicated to assembling a world-class
business organization."
Mr. Flanigan holds an undergraduate degree from Brigham Young
University and a law degree from the University of Virginia. He
currently resides in Great Falls, Virginia, with his wife and
children.
ABOUT TYCO INTERNATIONAL LTD.
Tyco International Ltd. is a diversified manufacturing and
service company. Tyco is the world's largest manufacturer and
servicer of electrical and electronic components; the world's
largest designer, manufacturer, installer and servicer of
undersea telecommunications systems; the world's largest
manufacturer, installer and provider of fire protection systems
and electronic security services and the world's largest
manufacturer of specialty valves. Tyco also holds strong
leadership positions in medical device products, and plastics and
adhesives. Tyco operates in more than 100 countries and had
fiscal 2002 revenues from continuing operations of approximately
$36 billion.
===========
B R A Z I L
===========
AES SUL: S&P Cuts Ratings On Pending Payment Worries
----------------------------------------------------
Doubts on Brazilian distributor AES SUL's ability to make
payments on a maturing debenture issue brought the Company's
credit rating a step closer to default. According to a Business
News Americas report, credit rating agency Standard & Poor's
(S&P) downgraded Thursday the local currency ratings of AES Sul
to brCC from brCCC. The outlook is negative.
S&P analyst Marcelo Costa is concerned that AES Sul might not be
able make payments on a US$18 million series of debentures due
Dec. 2. According to the analyst, if AES Sul cannot make the
payment on that date it will move into selective default.
Last week, AES Sul delayed renegotiations until November 29, the
last working day before the issue is due. AES Sul wants to delay
repayment of principal by one year and has offered a slightly
higher interest rate as well as 1.25% one-off bonus, Costa said.
AES Sul expects to honor interest payments on the debentures.
Altogether, there are US$53.5 million in debentures outstanding,
which, according to the existing timetable, must be paid in three
installments: December 2002, and June and December 2003.
Local newspapers have it that US-based BankBoston is leading the
renegotiations on behalf of the creditors, which also include
Unibanco, WestLB and Bank of America.
Costa said S&P is also concerned about AES Sul's ability to make
payments in 2003, including a syndicated loan.
AES Sul has total debts of about US$100 million coming due in
2003, namely the two installments on the debentures (US$36mn) and
two amortizations on the syndicated loan, totaling US$64mn to be
paid in the first half of the year.
The Company's cash flow for the year is expected to be US$68
million.
ESCELSA: Parent Seeks To Complete Restructuring of US Dollar Debt
-----------------------------------------------------------------
As part of an effort to help lighten up the US-dollar debt load
of its Brazilian affiliates, Portugal's state power company
Electricidade de Portugal (EDP) moved to complete the
restructuring of one of its local subsidiary, the distributor
Escelsa.
According to Business News Americas, EDP launched Thursday a cash
tender offer and consent solicitation for US$279 million of
senior notes issued by Escelsa. The 10% senior notes fall due
2007. EDP already owns US$152 million of the senior notes.
The consent solicitation expires 5:00pm New York time December 5
while the tender offer expires at 11:59pm New York time on
December 19. European investment bank UBS Warburg is acting as
the dealer manager.
Through the Iven holding, EDP owns a 52.27% controlling stake in
Escelsa, which in turn owns a 55.4% controlling interest in Mato
Grosso do Sul distributor Enersul.
The tender will help Escelsa increase its operational and
financial flexibility by removing existing commitments associated
with the outstanding notes, which may be important for the
company to face the current regulatory challenges of the
Brazilian electricity sector, EDP said.
Due to the steep devaluation of the [Brazilian] real against the
US dollar experienced during 2001 and 2002, EDP's consolidated
results have been influenced by the negative contribution from
its Brazilian affiliates still holding US dollar liabilities, the
company said.
In order to deal with this problem, EDP restructured the US
dollar debt of another Brazilian subsidiary, Bandeirante, in
early 2002. And now, besides looking to complete the
restructuring of Escelsa, it also wants to complete the
restructuring of Enersul.
CONTACT: ESPIRITO SANTO POWER PLANTS S/A - ESCELSA
Paulo Roberto Zibetti Jorge
Investors Relations Coordinator
Phone: 55-27-3321-9135
Fax: 55-27-3321-9149
E-mail: zibetti@escelsa.com.br
Curtis Smith
Thomson Financial
Phone: 55-11-3838-0887 ext. 215
E-mail: curtis.Smith@thomsonir.com.br
URL: http://www.escelsa.com.br
SAESA: Seeks Shareholders Approval On Planned Capital Increase
--------------------------------------------------------------
As part of a refinancing program designed to pay a US$150 million
loan due April 4, next year, Chilean distribution holding Saesa
Group will launch a capital increase of CLP27.3 billion
(US$39.2mn) for distributor Saesa and US$2 million for fellow
distributor Frontel.
Citing a local daily El Diario report, Business News Americas
reports that Saesa's shareholders are due to approve the plan in
a meeting to be held December 3.
Under the terms of the US$150-million loan, distributor Saesa
owes the banks US$115 million and Frontel US$35 million. The loan
was originally due October 18, but the deadline was extended to
November 8, and then extended again after Saesa Group scrapped a
US$175-million bond issue at the last minute due to investor
uncertainty.
Saesa Group, however, still plans to issue the bonds before the
April 4 deadline, but for a reduced amount and under different
terms to make the issue more attractive to potential investors.
United States power company PSEG owns Saesa.
CONTACT: SAESA
Gerencia y Administracion Zonal de Osorno
Bulnes 441, Osorno
Telefono: (64) 206400
Fax: (64) 206209 - Casilla: 21 -0
VARIG: BNDES Support Doubtful If Control Remains
------------------------------------------------
Viacao Aerea Rio Grandense SA (Varig) won't get support from the
country's development bank BNDES on its recapitalization plan if
majority shareholders refuse to give up control of the struggling
Brazilian airline, Dow Jones reports, citing BNDES head Eleazar
de Carvalho.
"The BNDES can't approve a recapitalization for Varig with the
current shareholder structure," Carvalho said on the sidelines of
the Latin American Summit of the World Economic Forum here.
According to Carvalho, his institution wouldn't participate in
the management of Varig unless asked to do so by the airline. He
added the BNDES will meet with Varig directors about their final
proposal Nov. 30.
The nonprofit Rubem Berta foundation, which controls 87% of
Varig's stock, has come under attack by critics, who believe that
the shareholder has hampered the management at Brazil's leading
airline.
Varig is working to close a financing deal with the national
development bank and other creditors, like Boeing Co. (BA) and
General Electric Co.'s (GE) aviation leasing unit, to help pay
down its US$900 million debt load and restore financial health.
Reports have put the size of the plan at between BRL1.0 billion
and BRL3.0 billion.
Varig has hired Bain & Co. (X.BAN), KPMG (X.KPM) and the
Brazilian law firm of Machado Meyer and Tavares Paes to assist it
in a restructuring effort slated to conclude in December.
Brazil's national development bank is mediating the talks between
creditors and the company.
In the first half of this year, Varig posted at 1.04 billion real
($1BRL3.50) loss amid rising dollar-denominated operating costs
and greater competitive pressure from upstarts like discount
carrier Gol Transportes Aereos.
CONTACT: VARIG (Viacao Aerea Rio-Grandense, S.A.)
Rua 18 de Novembro No. 800, Sao Joao
90240-040 Porto Alegre,
Rio Grande do Sul, Brazil
Phone: (51) 358-7039/7040
(51) 358-7010/7042
Fax: +55-51-358-7001
Home Page: www.varig.com.br/english/
Contacts:
Dorival Ramos Schultz, EVP Finance and CFO
E-mail: dorival.schultz@varig.com.br
Investor Relations:
Av. Almirante Silvio de Noronha,
n 365-Bloco "B" - s/458 / Centro
Rio de Janeiro, Brazil
KPMG Brazil
Belo Horizonte
Rua Paraba, 1122
13th Floor
30130-918 Belo Horizonte MG
Telephone 55 (31) 3261 5444
Telefax 55 (31) 3261 5151
or
Brasilia
SBS Quadra 2 BL A N 1
Edificio Casa de Sao Paulo SL 502
70078-900 Braslia - DF
Telephone 55 (61) 223 2024
Telefax 55 (61) 224 0473
BAIN & CO
Primary Contact: Wendy Miller
Two Copley Place, Boston, MA 02116
USA
Phone: +1-617-572-2000
Fax: +1-617-572-2461
Email: miles.cook@bain.com
URL: http://www.bain.com
VARIG: To Reduce Number of Workers By Year-End
----------------------------------------------
About 1,800 workers, or 10% of the total workforce of Varig are
to see the end of their employment by year-end, reports
Bloomberg. Varig is slashing the number of its workers to reduce
costs in an attempt to draw investor interest for a plan to raise
US$400 million in equity that will be used to reduce the
airline's US$900-million debt.
"Varig wants to reduce its debt to a level compatible to its cash
generation," said Alberto Fajerman, Varig's vice president for
strategic planning. "We want to become a profitable company."
The plan to reduce the payroll stems from Varig's merger two
months ago of its three operating units, Varig, Rio Sul and
Nordeste.
VARIG: Announces Network Expansion With Air Canada
--------------------------------------------------
VARIG Brazilian airlines and Air Canada are jointly expanding
their networks to offer customers easier access to additional
destinations in North and South America on a codeshare basis.
Effective December 5, 2002, Air Canada's network will grow to
serve Rio de Janeiro, Porto Alegre and Salvador in Brazil as well
as Buenos Aires, Argentina and Santiago, Chile on flights
operated by VARIG. At the same time, VARIG's network will grow to
serve Montréal, Ottawa, Calgary and Vancouver on flights operated
by Air Canada. Schedules are timed to offer convenient
connections to Air Canada-operated non-stop flights between Sao
Paulo and Toronto, offered on a codeshare basis by VARIG.
"Expansion of the Air Canada network to additional markets in
South America in cooperation with our valued Star Alliance
partner, VARIG, is good for our customers because it improves air
access between North and South America while building on our non-
stop service between our respective hubs in Toronto and Sao
Paulo," said Robert Milton, Air Canada's President and Chief
Executive Officer, in Rio at a meeting of Star Alliance chief
executives. "Doing this on a codeshare basis also makes good
business sense because it provides a cost effective way to
maintain service as well as enter new markets during this
challenging economic environment."
"Through this codeshare cooperation, VARIG customers will benefit
from convenient access to cities across Canada via Air Canada's
main hub in Toronto," said Arnim Lore, VARIG's President and
Chief Executive Officer. "The growth in VARIG's partnership with
Air Canada reflects the value that Star Alliance brings while
linking the most important markets in Canada to the most
important markets in the Mercosur economic region, the third-
largest trading zone in the world after the EU and NAFTA."
Celebrating its 75th anniversary in 2002, VARIG is Latin
America's largest airline, with over 700 daily flights to 70
destinations in Brazil and 24 foreign cities. Renowned for its
superior service, VARIG has received numerous awards including
having been named Best Airline in Central and South America by
OAG on multiple occasions.
Montréal-based Air Canada provides scheduled and charter air
transportation for passengers and cargo to more than 150
destinations on five continents. Canada's flag carrier is the
12th largest commercial airline in the world and serves more than
30 million customers annually with a fleet consisting of more
than 300 aircraft. In 2002, Air Canada received the prestigious
OAG (Official Airline Guide) Awards as Best Airline in North
America and Best Frequent Flyer Program for Aeroplan.
=========
C H I L E
=========
COEUR D'ALENE: S&P Ups Ratings On Restructuring; Outlook Neg.
-------------------------------------------------------------
Coeur D'Alene Mines had its corporate credit rating upgraded to
CCC from SD (selective default) by Standard & Poor's following
the conclusion of the US silver and gold mining company's debt
restructuring, as well as S&P's subsequent review. The ratings on
Coeur's 6.375% and 7.25% convertible subordinated debentures were
also raised to CCC from D. The current outlook is negative.
Since launching debt-restructuring efforts, Coeur has reduced its
debt by US$80 million to US$105 million as at September 30 this
year.
"However, refinancing risk is significant, as the Company faces
maturities in January 2004 and October 2005 on portions of the
debt that was not subject to exchange," said S&P credit analyst
Paul Vastola.
Coeur's assets include the Cerro Bayo mine in southern Chile, the
Martha mine in southern Argentina and the San Bartolome project
in Bolivia.
MADECO: May Sell Alusa As Part Of Restructuring Efforts
-------------------------------------------------------
Ailing Chilean copper and aluminum products manufacturer Madeco
is likely to put back on the block its Alusa flexible packaging
unit. The sale would be part of a financial restructuring plan,
Business News Americas reports, citing local newspapers.
The Said group, through the packaging subsidiary Edelpa, is seen
as a prospective bidder for the subsidiary, which produces PVC
and aluminum foil packaging and has operations in Chile,
Argentina and Peru.
Madeco, which is managing debts of US$325 million, would divest
some assets to tackle the situation. Alusa is not a priority but
was earmarked for sale under a previous restructuring plan that
never came off.
Last week, Madeco shareholders approved a US$140-million equity
issue as part of the Company's restructuring process. The planned
issue is the cash-strapped company's second attempt to raise
capital in order to restructure debts.
The first attempt to raise US$90 million in September failed
after only its controlling shareholder, the Luksic group's
Quinenco holding company and its subsidiaries that own 56.5% of
Madeco, took up the offer.
This time round, Quinenco's contribution is expected to bring in
at least US$70 million, supposedly making the offer more
attractive to minority shareholders, including several of Chile's
pension fund managers (AFPs) which own about 11.5% of the
company.
CONTACT: MADECO
Ureta Cox, 930
San Miguel, Santiago, Chile
Phone: 56-2 5201461
Fax: 56-2 5516413
E-mail: mfl@madeco.cl
Home Page: http://www.madeco.cl
Contacts:
Oscar Ruiz-Tagle Humeres, Chairman
Albert Cussen Mackenna, Chief Executive Officer
Investor Relations
Phone: 56-2 5201380
Fax: 56-2 5201545
E-mail: ir@madeco.cl
Subsidiary in Brazil:
FICAP
Av. Cel. Phidias Tavora,
100-Pavuna - Cep 21535-510
Río de Janeiro - RJ, Brasil
Phone: 55 21 33627100
Fax: 55 21 34712921
E-mail: adila@ficap.com.br
Subsidiary in Argentina:
DECKER-INDELQUI
Av. Juan XXIII 3630 (1832) Llavallol,
Buenos Aires, Argentina
Phone: 54-11-4003-0000
Fax: 54-11-4283-0282
E-mail: kramirez@decker-indelqui.com.ar
===========
M E X I C O
===========
CORPORACION DURANGO: Former Paper Unit Files Bankruptcy Appeal
--------------------------------------------------------------
Michael M. Beal, legal counsel for St. Mary's-based Durango-
Georgia Paper Co. will ask a judge to allow the Company to
reorganize its business. Durango-Georgia, the biggest employer in
Camden County is facing Chapter 7 bankruptcy petition filed by
seven timber suppliers, to whom the Company owes a total of
US$300,000.
Knight Ridder Business News quoted Beal saying the Company would
ask the court to allow it to convert the petition to Chapter 11.
Under Chapter 11, the Company keeps its management in place,
reorganize debt, get new financing, and stop creditors from
selling corporate assets, while Chapter 7 lets court appoint
trustee, oversee corporate assets, liquidate holdings, pay
creditors.
The Company would be getting more, under chapter 11.
The legal counsel of the timber suppliers said that they had
anticipated the Company's move.
According to the US bankruptcy court of Georgia in Savannah said
that a hearing hasn't been scheduled.
Aside from the conversion to Chapter 11, the Company also seeks
the court to allow it to pay employees before its creditors. The
Company is yet to pay about one more week of wages.
The Company is asking the court to approve a US$5 million loan
from its former owner, Mexico-based Corporacion Durango S.A. de
C.V., which would allow the plant to continue operations for six
to eight months.
Corporacion Durango, whose stocks fell by 73 percent this year,
had sold the plant to Operadora Omega International S.A. de C.V.
in October.
Durango-Georgia, which shut down last Friday, has 903 employees
and US$50 million in debts.
CONTACTS: CORPORACION DURANGO, S.A. DE C.V.
Mayela R. Velasco
+52 (1) 829 1008
mrinconv@corpdgo.com.mx
Arturo Diaz Medina
+52 (1) 829 1015
adiaz@corpdgo.com.mx
=================================
T R I N I D A D & T O B A G O
=================================
VERMILION: Selling Trinidad Assets In Reorganization
----------------------------------------------------
Vermilion Resources Ltd., "Vermilion" (VRM, TSX) released results
for the third quarter 2002.
Note: All natural gas values are converted to a barrel of oil
equivalent on a 6:1 ratio unless otherwise stated. This should be
read in conjunction with our Annual Report and previously
released public documents.
On November 4, 2002, Vermilion announced a corporate
reorganization creating Vermilion Energy Trust, that will retain
approximately 94% of Vermilion's assets and a separate publicly
listed, high growth, exploration- focused producer, "Exploreco",
which will hold certain gas weighted assets and undeveloped land.
Vermilion's Trinidad assets will be sold to Aventura Energy Inc.
("Aventura") (AVR, TSX-V) in exchange for equity in Aventura.
Upon completion of the transaction, Vermilion Energy Trust will
hold a 71% ownership position (fully diluted) in Aventura. The
transactions are subject to various shareholder regulatory and
other applicable approvals of the Plan of Arrangement.
The target date for the filing of the Plan of Arrangement is mid-
December with the shareholder meeting planned for mid-January and
closing no later than January 31, 2003.
The separation of Vermilion's assets under the contemplated
structure better aligns risks and returns from each asset class
in a way that is both tax effective and sustainable. This has
been evidenced by the market's reaction since the announcement
that has fuelled a 46% increase in Vermilion's share price and
trading of more than 50% of the float.
An information circular with details of the Plan of Arrangement
is anticipated to be mailed in mid-December 2002 and Vermilion
expects that the shareholder meeting to consider the
reorganization will occur prior to the end of January 2003. The
Plan of Arrangement requires the approval of 66 2/3% of the votes
cast by the shareholders and optionholders of Vermilion voting at
the shareholder meeting, and the approval of the Court of Queen's
Bench of Alberta, as well as other regulatory agencies.
Vermilion's Management and Directors, representing approximately
13% of the diluted common shares, have indicated they intend to
vote in favour of the Plan of Arrangement.
OPERATIONS
Vermilion's production averaged 25,489 boepd over the third
quarter, up 13% relative to the same period a year ago and down
slightly relative to the second quarter of 2002. Volumes for the
nine-month period averaged 25,383 boepd reflecting a 15% increase
over 2001. Incremental production for both the quarter and nine-
month period compared to the respective periods in the prior year
came entirely from the addition of the Peace River Arch area.
CANADA
Vermilion was active in the Central Alberta area (previously
Mikwan) during the third quarter, drilling properties acquired
through the Artemis transaction. The Company drilled a total of
seven wells targeting cretaceous gas, with an 86% success rate.
The Company also purchased 260 km(2) of 3D seismic which has
already generated eight additional prospects to the Company's
expanding inventory currently standing at 37 prospects.
In the Peace River Arch, the Operator is slowly ramping up
production of the most northerly well at North Gage. The
production of this well will partially offset the loss of 1,000
boepd of production following the watering out of the down-dip
well. Vermilion has recently cased a development well to the
Shane Kiskatinaw pool, which will be completed and placed on
production in the fourth quarter of 2002. This well will enhance
the drainage efficiency of the pool and help to determine the
ultimate reserve potential. While plant constraints will limit
incremental production in the near term, the Company is currently
evaluating alternatives for upgrading the infrastructure to allow
this well to produce gross production of 10 mmcf/d plus liquids.
Vermilion holds an 80% working interest in the discovery well and
a 65% working interest in the follow-up development well. Upon
completion of the corporate reorganization, Vermilion Energy
Trust and Exploreco will be partners with equal ownership in
these wells and associated lands.
At Chip Lake a total of seven wells were drilled. Vermilion
continues to diversify away from the traditional Rock Creek
targets and has now established a significant inventory of
shallower prospects for the Cardium, Belly River and potentially
Edmonton Sand. This initiative is already seeing some success in
a recent Cardium oil well, which is capable of greater than 500
boepd on initial production. The overall success rate has
exceeded 90% in this area. Vermilion also is evaluating the
potential of a low risk infill-drilling program in the Rock Creek
to maximize the recovery from these relatively tight gas sands.
Vermilion diversified its portfolio in the Slave Lake area
(previously Utikuma) through the acquisition of certain
properties, which established a presence in the Mitsue area and
increased the Company's presence in the Gift Lake area. A total
of five wells were drilled in the Slave Lake area resulting in
three oil wells.
With respect to drilling activities in the Chain Lakes/Longview
area Vermilion has withdrawn its licence application to the EUB.
The Company's decision to pursue a corporate reorganization has
resulted in a review and reprioritization of projects, and
postponement of exploration projects in all areas.
FRANCE
With the drilling of two wells this year, one being D&A, a recent
workover campaign on several Dogger wells drilled in late 2001
has added in excess of 600 boepd of sustainable production. The
success of this workover program has lead to additional workovers
planned for 2003 and has given the confidence for renewed
drilling in the Dogger. Vermilion is also currently evaluating
potential missed pay in the Mothes 2 well, in an Albian Reef
Complex. This zone, currently being perforated, has considerable
upside for additional production as well as for proving up a new
play type in the Basin.
TRINIDAD
As part of the corporate reorganization and separate from the
Plan of Arrangement, Vermilion's existing working interest in the
Central Block in Trinidad will be transferred to Aventura. Upon
completion of the Plan of Arrangement, Vermilion Energy Trust
will own approximately 71% of the common shares of Aventura on a
fully diluted basis. The purpose of this transaction is to
consolidate the Trinidad property working interest into one
international entity ("Aventura") and allow for further
development of these growth assets in order to fully realize the
value to Aventura and Vermilion shareholders. All capital
expenditure commitments will be the responsibility of Aventura
with no further funding obligations remaining with Vermilion
Energy Trust.
Construction work continues on the 12-kilometer 10-inch natural
gas pipeline for the six-month production test for Carapal Ridge-
1. The main pipeline is 90% complete while site facility
construction is underway. Net production volumes to the
Vermilion/Aventura combined 65% ownership during the long-term
test will be approximately 2,500 boepd. Overall, the project is
still on target for a production start up in December 2002. The
remaining capital budget for 2002 and future capital for the
entire 65% working interest will be assumed by Aventura.
Plans are currently being finalized to initiate a two-well
exploration drilling program prior to year-end. The first well,
Saunders-1, is a down-dip test of the Carapal Ridge-1 discovery
well and the second well, Baraka-1, is on the large CO40 prospect
directly to the north and east of the Carapal Ridge-1 discovery.
The drilling program designs have been completed and drill sites
selected. Bids have been received from several drilling
contractors and are being evaluated. These two wells should
fulfill both the 42- and 60- month Central Block minimum work
obligations.
FINANCIAL
World oil prices strengthened in the third quarter due once again
to increased speculation over possible US military strikes
against Iraq. While OPEC continues to produce over previously
stated levels, the price stayed strong in the third quarter under
the threat of war. Natural gas prices on the other hand continued
to fall in the quarter despite a decline in US domestic
production. While the forward gas price is beginning to
strengthen in advance of winter, third quarter prices remained
soft due to moderate demand and ample US inventories.
Vermilion's combined crude oil & NGL's price was $35.01 per bbl
for the first nine months of 2002 and $39.35 per bbl for the
third quarter compared to $38.10 per bbl and $34.12 per bbl,
respectively, for the same periods a year ago. The Company
generated third quarter revenues of $70.7 million in 2002 up from
$59.0 million in 2001 as a direct result of continued production
growth and the increased prices discussed above. Revenues for the
year were $204 million in 2002 down from $217 million for the
same period in 2001. The decline is directly attributable to the
fall in gas prices from $5.89 per mcf for the nine months in 2001
to $3.91 per mcf in 2002 which more than offsets increased
production. Gas prices quarter to quarter remained fairly
constant; $3.56 per mcf in 2002 and $3.41 per mcf in 2001.
Vermilion continues to manage its risk exposure through prudent
commodity and currency hedging strategies. Natural gas contracts
for 24.4 mmcf/d remain in place for the calendar year of 2002
with various price structures resulting in an average floor of
$4.84 per mcf. Currently, the Company has hedged 23.4 mmcf/d of
its 2003 natural gas production, with various price structures
resulting in an average floor of $5.14 per mcf. On the crude oil
side, Vermilion has hedges covering 5,671 bbls/d for the calendar
year of 2002 and 5,550 bbls/d in 2003, at $25.20 and $24.74 US
WTI equivalent, respectively. The Company has Canadian/US dollar
currency hedges in place covering two-thirds of its oil hedge
positions for 2002 at approximately $0.65 US per Canadian dollar.
Royalties for the nine months totalled $6.21 per boe down from
$8.53 in 2001. The decrease is due to a year over year decline in
commodity prices including a drop in natural gas prices from the
record levels attained in 2001. Royalties for the quarter also
declined to $5.90 per boe from $6.58 per boe a year ago, in line
with static commodity prices, quarter to quarter, combined with
increased production.
As a result of the Company's recently initiated cost reduction
program, operating costs and general and administrative expenses
have declined significantly between the second and third quarters
of 2002. Operating costs dropped 6% from $4.69 per boe to $4.39
per boe while G&A declined by 14% from $1.15 per boe to $0.99 per
boe. Operating costs of $4.39 per boe for the quarter and $4.35
per boe for the nine-month period have increased relative to the
$4.14 per boe and $4.02 per boe recorded for the respective
periods in 2001. In Canada, processing costs in the Peace River
Arch area have contributed to the year over year increase. In
France, power costs have risen and account for most of the
increase over prior years. General and administrative expenses
for the year increased to $1.06 per boe from $0.91 per boe in
2001 and to $0.99 per boe in the quarter from $0.94 per boe in
2001. The year over year increase in both cases is due to
expanded staffing levels and increased G&A resulting from the
consolidation of Aventura.
Interest expense increased to $0.77 per boe for the quarter from
$0.64 per boe in 2001 as a result of higher debt levels following
the Trinidad acquisition. However a slight decline in interest
rates in 2002 along with increased production volumes has reduced
the nine-month interest charge from $0.71 per boe in 2001 to
$0.57 per boe in 2002.
Increased production and a reserve revision in the fourth quarter
of 2001 resulted in increased depletion and depreciation
expenses. A lower than anticipated drilling success ratio in 2002
has resulted in a quarter over quarter increase in the depletion,
depreciation and amortization rate in 2002. Year-to-date
September 30, 2002 depletion and depreciation was $10.02 per boe
and the quarter was $10.92 per boe compared to $5.67 per boe
year-to-date 2001 and $5.80 per boe in the third quarter 2001.
Continued high commodity prices have accelerated the utilization
of Vermilion's tax pools in both Canada and France. This has
increased the provision to $2.51 per boe in 2002 compared with
$1.33 per boe in 2001 and $2.45 per boe this quarter compared
with $1.10 per boe in the third quarter 2001. The estimate for
2002 is in the range of $22 million.
Vermilion's debt (net of working capital) on September 30, 2002
was $210.8 million. The increase from $192.2 million at June 30,
2002 was a result of increased drilling and acquisition
activities in the third quarter after a quiet drilling period in
the second quarter. This facility currently reflects a borrowing
base of $270.0 million. Vermilion has continued with a one-year
revolving loan that is now classified as a current liability
under the new accounting guidelines. The bank loan facility is
currently under review given the proposed reorganization.
Management has reduced fourth quarter spending in Canada and
France in order to maintain prudent debt levels upon closing of
the Plan of Arrangement.
Prior to distribution of the Information Circular in mid-December
detailing the Plan of Arrangement, Vermilion will be press
releasing reserve summaries and landholdings along with
valuations for each of the new entities, Vermilion Energy Trust
and Exploreco including separate disclosure of assets in
Trinidad.
To see financial statements:
http://bankrupt.com/misc/Vermilion.htm
CONTACT: VERMILION RESOURCES LTD.
Steve Bjornson, V.P. Finance & Chief Financial Officer
Tel: (403) 269-4884
Heather Strang, Manager, Corporate Communications
(403) 269-4884;
URL: http://www.vermilionresources.com
=============
U R U G U A Y
=============
* S&P Lowers Ratings on Uruguay to 'B-/C'; Outlook Negative
-----------------------------------------------------------
Standard & Poor's Ratings Services said Thursday that it lowered
its sovereign credit ratings on the Oriental Republic of Uruguay.
The local and foreign long-term sovereign credit ratings were
lowered to 'B-' from 'B'; the local and foreign short-term
sovereign credit ratings were lowered to 'C' from 'B'. The
outlook on the long-term ratings remains negative.
The ratings downgrade and negative outlook reflect the greater
risk that the government's envisioned fiscal adjustment may prove
inadequate and that investor confidence may be further eroded by
the government's slower-than-expected progress in crafting a
definitive resolution to the problems of four suspended private-
sector banks.
"Pressures preceding the presidential elections in 2004 may
complicate implementation of a large fiscal adjustment in 2003,
the same year the government will likely have to return to the
capital markets for financing," said Sovereign Analyst Lisa M.
Schineller. "While the financial system has stabilized somewhat,
the government's indecision in resolving problems with the
suspended banks has delayed disbursement under the IMF's US$2.8
billion Stand-By Agreement-highlighting the difficulty between
reconciling the differences between the government's local and
external constituencies," she added.
According to Ms. Schineller, Uruguay's economic team must both
present an acceptable solution for the suspended banks and garner
support in Congress to meet the advanced timeframe for reform in
order to assure access to official funds that are crucial to
maintaining timely debt service in 2002-2003.
"Uruguay is moving into a fifth consecutive year of recession,
and prospects for a strong recovery in 2004 depend upon growth in
the economically weak region," noted Ms. Schineller. "The ratings
could move downward if pressures on the financial system deepen,
political frictions further impede policy adjustment, or fiscal
balances deteriorate materially-which, in turn, could lead to a
cut-off from official lending.
Creditworthiness could improve if the government takes meaningful
measures to strengthen fiscal flexibility and thus reduce its
debt burden, along with resolving the open issues pertaining to
the suspended banks, she concluded.
ANALYST: Lisa M Schineller, New York (1) 212-438-7352
Jane Eddy, New York (1) 212-438-7996
Sebastian Briozzo, New York 212-438-7342
***********
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.
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