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/raid1/www/Hosts/bankrupt/TCRLA_Public/021127.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 Wednesday, November 27, 2002, Vol. 3, Issue 235 Headlines A R G E N T I N A BANCO RIO: Rolling Over $250M In Debt to New Issues FLEETBOSTON FINANCIAL: Depositors File Suit In Miami Court TRANSENER: Massive Power Outage Due To Device Failure B E R M U D A TYCO INTERNATIONAL: May Face New Jersey Lawsuit TYCO INTERNATIONAL: May Have Hidden Info During Probe B R A Z I L CAIUA: Moody's Performance, Leverage Level Prompts Downgrade EMBRATEL: Slams Reports Suggesting Takeover TAM: Hires Fator To Evaluate Options For Securities Sale VARIG: CEO Resigns After Controller Ditches Debt Plan * Brazil President May Name Central Bank Head This Week C H I L E ENERSIS: Antitrust Commission Head Demands Ownership Reduction FALCONBRIDGE LTD.: S&P Takes Negative Outlook on Noranda C O L O M B I A ALIANZA SUMMA: Currency Slump Leads to $100M Loss This Year BANCO SANTANDER: Fitch Lowers Ratings on Weak Conditions E C U A D O R * Crises Deepens As Confidence Dwindles M E X I C O BITAL: HSBC Completes Bital Acquisition GRUPO MEXICO: Asarco Mine At Risk Of Closure INTERNATIONAL THUNDERBIRD: Issues Statement On 3Q02 Results SATMEX: Three Institutions To Extend Credits, Freeing Cashflow - - - - - - - - - - ================= A R G E N T I N A ================= BANCO RIO: Rolling Over $250M In Debt to New Issues --------------------------------------------------- Banco Rio, the Argentine subsidiary of Spanish group Santander Central Hispano, is looking to swap US$250 million in debt due in 2003 for new issues due between 2009-2012, reports Reuters. In a statement, the bank said that the swap would "protect the business interests of Banco Rio during upcoming years after the recent economic crisis in Argentina." "The goal of the offer is to rearrange the debt and interest profile of Banco Rio and, that way, ensure its investors collect their holdings," the statement said. The bank said it would offer a cash incentive to sweeten the offer, which became effective as of Monday. Banco Rio is one of the Argentine banks that posted the largest losses during the first half of this year due to the massive devaluation of the Argentine peso. According to reports, the bank reported losses of ARS97.5 million during the period. Other factors contributing to the poor results 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. CONTACTS: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 FLEETBOSTON FINANCIAL: Depositors File Suit In Miami Court ---------------------------------------------------------- FleetBoston Financial Corp. is one of the banks accused by Argentine depositors of dragging their feet in returning deposits made to accounts that the country froze earlier this year. The Argentine government banned most withdrawals in January to protect its banking system after it defaulted on US$95 billion in bonds and devalued its currency. The restrictions deepened Argentina's four-year-old recession. The government lifted the ban on some accounts last month. In a lawsuit filed Nov. 15 in federal court in Miami, depositors claimed that the Argentine units of Citibank, a unit of Citigroup Inc., FleetBoston and HSBC Holdings Plc are wrongfully keeping the deposits and owe customers at least US$60 million in damages. The banks "have engaged in an aggressive and systematic pattern of conduct that can only be described as an attempt to appropriate for themselves all deposits," depositors said in the suit. The suit may be the first filed in the U.S. against Citibank, FleetBoston and HSBC over the deposits. Thousands of such suits have been filed in Argentina by customers seeking to retrieve their savings. Two weeks ago, Argentine Criminal Court Judge Maria Cristina Bertola charged Fleetboston executives for allegedly refusing to return US$700,000 in deposits before the government restricted withdrawals. The bank's chief executive, Manuel Sacedote, and 14 other managers allegedly committed "fraudulent administration related to the unwarranted retention of deposits." A 12-page order from Judge Bertola instructed a court official to freeze ARS500,000 (US$141,000) of Sacerdote's assets, but places no restrictions on his movement. FleetBoston was reported to have about US$1.4 billion in writedowns related to Argentina by the end of June. This year's third quarter resulted in a US$42-million loss for its Argentine unit. Earlier, the group had announced the suspension of further investments in the country. CONTACT:FLEETBOSTON FINANCIAL CORP Head Office 100 Federal Street Boston MASSACHUSETTS United States 02110 Tel +1 617 434-2200 Web http://www.fleet.com/ Contacts: Terrence Murray, Chairman Charles K. Gifford, President & Chief Executive TRANSENER: Massive Power Outage Due To Device Failure ----------------------------------------------------- Argentine electricity company Transener asserted that the massive power outage, which left more than a third of Argentina without electricity for three hours on Sunday afternoon, was due to the breakdown of one of its main transformers. The Company made an effort to explain the trouble to contradict widespread speculation that it intentionally staged the outage to lobby for an increase in frozen utility rates. "We at Transener are here not to cause inconveniences for the population but to provide a service," a company spokesman said. "The whole issue of rates being discussed elsewhere has nothing to do with this." Mostly foreign-owned utility companies have repeatedly warned in recent months that service cuts would be inevitable if rates stayed frozen since much of their equipment is imported and must be paid for using dollars. According to Reuters, Argentina's government has said it will eventually allow a rise in rates of about 10%, saying any more would unduly punish those left poor by a devastating four-year recession. Companies have asked for about a 30% average increase. But the government has dragged its feet on the issue as polls show the vast majority of Argentines want rates to stay frozen. The delay has become a key sticking point in prolonged aid talks with the International Monetary Fund. Transener, which is owned by Pecom Energia and the UK's National Grid, registered consolidated losses of ARS620.4 million (US$174.3mn) for the nine months to September 30, 2002, compared to net profits of ARS51.5 million in the same period of 2001. Sales revenues during the period decreased 34.4% to ARS220.8 million due to the freeze on power rates. For the nine months ended Sep. 30, the Company also recorded non- operating losses of ARS666.3 million, of which exchange rate differences on liabilities accounted for ARS505.1 million. Transener defaulted on debt payments in 2002 and holds some US$460 million in dollar-denominated debt. The Company remains in default, but in a recent statement, said it "continues working towards the objective of evaluating the restructuring of its debt and maintaining fluid conversation with its creditors." Morgan Stanley is Transener's financial advisor. Transener owns the concession to operate the extra high voltage electricity transmission network in the Argentine Republic. Since its creation in 1993, the Company has remained a leader in the field. CONTACT: COMPANIA DE TRANSPORTE DE ENERGIA ELECTRICA EN ALTA TENSION (Transener S.A.) Av. Paseo Colon 728, 6"Piso - (1063) Buenos Aires, Argentina Tel. (5411) 4342-6925 Business Development: Carlos A. Jeifetz (jeifecar@transx.com.ar) Gerardo Baseotto (baseoger@transx.com.ar) Tel.: (54-11) 4334-0182 / 4342-6925 Fax: (54-11) 4342-4861 MORGAN STANLEY, DEAN WITTER & COMPANY 1585 Broadway New York, New York 10036 United States Phone: +1 212 761-4000 Home Page http://www.msdw.com ============= B E R M U D A ============= TYCO INTERNATIONAL: May Face New Jersey Lawsuit ----------------------------------------------- Bermuda-based Tyco International, Inc. is one of four corporations that may have to face lawsuits to be filed by the state of New Jersey, reports the Associated Press. Aside from Tyco, Gov. James McGreevey mentioned three other companies: Sears Roebuck and Co., Qwest Communications and Electronic Data Systems. The state claims that the companies misled investors, including the state's pension system, by their faulty accounting practices and in some cases, outright fraud. New Jersey's pension fund lost US$22 billion in the stock market downturn during the last two years. The state's officials aim to recover US$150 million in state pension funds lost due to the alleged financial offenses. Payments to retirees are not threatened however, but taxpayers may have to shoulder about US$1 billion into the fund to meet reserve requirements. McGreevey had to freeze state aid to towns and schools, raise tobacco taxes and revise the corporate tax code in order to balance this year's budget. 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: May Have Hidden Info During Probe ----------------------------------------------------- U.S. Securities regulators have asked officials of Tyco International, Inc. to determine whether the Company withheld key documents during a probe into its accounting practices. According to a report from The Wall Street Journal, the SEC posted the question after obtaining documents that were not submitted during a 1999-2000 probe. The report further indicated that the documents in question might have prompted the agency to continue its investigation on Tyco, instead of ending the inquiry in July this year, without actions. Most of the controversial documents revolve around U.S. Surgical, which Tyco acquired in 1998 for US43.17 billion, said the report. The said papers include a memo between former Tyco finance executives discussing how to slow the growth of a company Tyco intends to buy, aiming to show growth after the acquisition, according to the report. The report also indicated that both Tyco and the SEC were not avaible for comments. =========== B R A Z I L =========== CAIUA: Moody's Performance, Leverage Level Prompts Downgrade ------------------------------------------------------------ Brazilian distributor Caiua Servicos de Eletricidade received a ratings downgrade, with a negative outlook from Moody's Investors Service due to weak financial performance and high leverage. Caiua's issuer rating global local currency and some US$55 million in senior unsecured medium-term notes were lowered to rating Caa1 from B2, while the Company's issuer rating Brazil local scale and about BRL167 million in senior unsecured local currency debentures fell to Caa1.brfrom Ba2.br. According to Moody's, the Company's financial condition and the limited availability of funding alternatives in the Brazilian market have made refinancing of Caiua's short-term debt maturities more difficult. Caiua previously proposed to amend the original terms and conditions f the US$55 million senior unsecured Euro medium-term notes due Nov. 29 this year. Caiua, which controls another six distributors in Brazil, is controlled by Grupo Rede, whose parent, EEVP is one of the country's largest private players in the power industry. Caiua controls the operating and financial coordination of the group, being the principal company. Caiua's ratings also reflect the group's credit risk as a consolidated entity, said Moody's. CONTACT: Caiua Servicos de Electricidade SA Registered Office Avenida Paulista, 2439 - 5o Andar Cerqueira Cesar 01311-936 Sao Paulo - SP Brazil Tel +55 11 3066-2000 Fax +55 11 3060-9550 Telex 32058 Contact: Jorge Queiroz de Moares Junior, Chairman EMBRATEL: Slams Reports Suggesting Takeover ------------------------------------------- Reports that Brazil's three fixed line incumbents are planning to join together to acquire Embratel are untrue according to the country's largest long distance operator in response to local press reports, relates Business News Americas. Last week, the local press quoted the CEO of Spain's Telefonica, Fernando Xavier, as saying that his company was in very preliminary talks with fixed line operators Brasil Telecom and Telemar to jointly acquire Embratel. Embratel, in a statement, responded saying that fixed line operators started the rumor to create a "false perception of crisis" and to ultimately preserve their own monopoly in the market. Furthermore, local antimonopoly regulations prevent fixed line incumbents from buying Embratel, the statement said. Anatel, Brazil's telecommunications regulator, agreed with Embratel. According to an Anatel spokesperson, local regulations will not allow such a venture. In order for the law to be changed, Brazil's congress would have to examine the issue, he said. "The [three] incumbents are just throwing out the idea to see Anatel's reaction, to see if there is some alternative way around the law," he said. Debt costs for Embratel, the Brazilian unit of U.S.-based WorldCom Inc., have climbed on a currency devaluation as most of its debt is denominated in foreign currency. Embratel's debt rose to BRL5.18 billion (US$1.46 billion) at the end of the third- quarter, from BRL3.8 billion a year earlier. The Company has US$790 million in principal payments coming due next year, with about 40% due in the first three months of 2003. CONTACT: EMBRATEL PARTICIPACOES S.A. Investor Relations Silvia Pereira Tel. (55 21) 2519-9662 Fax: (55 21) 2519-6388 Email: Silvia.Pereira@embratel.com.br invest@embratel.com.br or Press Relations: Helena Duncan/Mariana Palmeira Tel: (55 21) 2519-3653/3654 Fax: (55 21) 2519-8010 Email: hduncan@embratel.com.br mpalm@embratel.com.br TAM: Hires Fator To Evaluate Options For Securities Sale -------------------------------------------------------- TAM Linhas Aereas SA, Brazil's second-largest airline, is considering selling new securities after its costs soared due to the declining value in the local currency. Citing a company statement sent to the Sao Paulo stock exchange, Bloomberg reports that the airline hired Banco Fator SA to evaluate the possibility. The statement revealed that TAM wants to be prepared when opportunities arise and doesn't anticipate selling securities in the near future. TAM, like most other airline, has suffered as a 35% slump in the country's currency raised costs for dollar-linked items such as fuel. The airline had a second quarter loss of BRL238 million (US$67.1 million) and said in September it would fire 524 workers as it scrapped flights to nine Brazilian cities to adjust for a slump in ticket sales. CONTACT: Daniel Mandelli Martin, President Buenos Aires Tel. (54) (11) 4816-0001 URL: www.tam.com.br VARIG: CEO Resigns After Controller Ditches Debt Plan ----------------------------------------------------- Fundacao Ruben Berta (FRB) foundation, the employee fund that controls 87% of Viacao Aerea Rio- Grandense SA (Varig), rejected an agreement with creditors to renegotiate US$118 million of debt, reports Bloomberg. In a statement, FRB claimed it hadn't received sufficient assurances from Varig's management on how the Company could avert bankruptcy after Nov. 30. FRB also said the agreement favored some creditors to the detriment of a large number of suppliers. Varig, Latin America's largest carrier, is struggling to reduce its US$900 million in debt and raise capital to stay afloat during a slump in air travel. Flavio Souza, president of Varig's pilot union, now sees creditors demanding payment immediately following the rejection of the debt proposal. "There is a great risk of Varig having to cease all its flights if companies stop supplying fuel to the Company," Souza said. Also, following the rejection is the resignation of Varig's Chief Executive Arnim Lore, a former central bank debt negotiator, whom Varig hired in August to help turn around the carrier, which hasn't posted a profit since 1997. Lore replaced Ozires Silva, who resigned after a disagreement with the foundation on how to restructure the Company. According to Lore, the rejection by the employee fund amounted to a vote of no confidence after he negotiated an agreement last month with lenders to delay payment on debt that is overdue or due this month. "The rejection of our proposal was a no confidence vote, so it doesn't make any sense for me to stay," Lore said. 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 * Brazil President May Name Central Bank Head This Week ------------------------------------------------------- Local newswire service Folha de Sao Paulo reported that Brazil's new president Inacio Lula da Silva is close to appointing the president of the country's central bank this week. Senator Eduardo Suplicy, leader of Lula's Workers' Party in the upper house was cited in the report saying the nomination of the central bank president and seven board members must be approved by the senate to make sure they start working on the same date Lula assumes office. Lula, whose administration will start on January 1 next year, had said that he will be replacing current central bank president Arminio Fraga, who has held the position since 1999. Investors believe that Fraga's replacement will signal the direction of the central bank's policy under Lula's leadership. ========= C H I L E ========= ENERSIS: Antitrust Commission Head Demands Ownership Reduction -------------------------------------------------------------- Jose Luis Perez, the president of Chile's antitrust commission, urged Chilean power sector holding Enersis to limit its ownership of generator Endesa Chile to 25% from 60%, relates Business News Americas. Enersis is completely self-sufficient in terms of generation, and has an unfair control over the distribution market, Perez said, noting that Enersis has 55% control of the central grid (SIC) through Endesa Chile's 3,935MW installed capacity, as well as 50% of the distribution market through its Chilectra and Rio Maipo subsidiaries. Perez also said Enersis should also be fined some US$412,000 for growing its Endesa Chile stake in 1999 without consulting antitrust authorities beforehand. Perez was out-voted four to one in an October 31 antitrust commission ruling that rejected accusations that the vertical integration of Enersis' assets would affect consumers. However, according to an El Mercurio report, Perez also sits on the Supreme Court and could get support during the next stage of the legal process after lawyers appealed the antitrust commission's decision to the country's highest court. Nevertheless, an Enersis source said that the Company is still confident that the Supreme Court will ratify the antitrust commission's ruling. Enersis lawyers argued that Perez's claim was unfounded given that the Company sold its transmission subsidiary Transelec to Canada's Hydro Quebec for US$1.1bn in 2001. Enersis is forbidden from buying or selling shares in Endesa Chile until the Supreme Court gives its ruling, which was the position when the matter was before the antitrust commission. Furthermore, no board member of Enersis, Chilectra or Endesa Chile can sit on the board of one of the other two companies. To see financial statements: http://bankrupt.com/misc/Enersis.pdf CONTACT: ENERSIS Investor Relations: Ricardo Alvial Chief Investments & Risks Officer of Enersis Email: ram@e.enersis.cl Phone: (562) 353-4682 Contacts: Susana Rey, srm@e.enersis.cl Ximena Rivas, mxra@e.enersis.cl Pablo Lanyi-Grunfeldt, pll@e.enersis.cl FALCONBRIDGE LTD.: S&P Takes Negative Outlook on Noranda -------------------------------------------------------- Standard & Poor's Ratings Services said Monday it lowered its outlook on Canadian nickel and copper company Falconbridge Ltd. to negative from stable. The ratings outstanding, including the 'BBB-' long-term corporate credit rating, were affirmed. The outlook revision reflects the change to the outlook on Noranda Inc., the parent of Falconbridge. "The ratings on Falconbridge have been capped by the ratings on Noranda since September 1999, due to Noranda's controlling ownership interest in Falconbridge. Noranda currently owns a 58.8% interest in Falconbridge," said Standard & Poor's credit analyst Chris Timbrell. The ratings on Falconbridge reflect its good business position as a major, integrated low-cost producer of nickel and copper with a solid financial profile, albeit somewhat weakened by the economic slowdown and low metal prices. Falconbridge's ability to maintain the current ratings depends on the success of its parent company, Noranda, in meeting cash flow targets, including achieving planned cash flows from operations and asset sales, and Noranda's ability to refinance its June 2003 debenture maturity. If Noranda is unable to demonstrate that it can achieve these objectives, or if base metals markets fall below expectations, the ratings on both companies could be lowered. =============== C O L O M B I A =============== ALIANZA SUMMA: Currency Slump Leads to $100M Loss This Year ----------------------------------------------------------------- Alianza Summa, an alliance between Colombia's top two airlines, Avianca and Aces, is expected to post losses of US$100 million this year partly as a result of this year's 17% depreciation of the local currency against the dollar, Dow Jones reports, citing an El Tiempo newspaper. Summa President Juan Emilio Posada noted that 60% of the airlines' costs are in dollars. Avianca and its subsidiary airline SAM, controlled by conglomerate Valores Bavaria, and Aces, which is owned by Colombia's National Federation of Coffee Growers, merged operations in May. Each group controls a 50% stake in the alliance. The government is yet to approve a merger of assets. CONTACT: VALORES BAVARIA SA No 7A-47 Calle 94 Santafe de Bogota DC Colombia Phone: +57 1 600 2100 Home Page: http://www.bavaria.com.co/ Contacts: Javier Aguirre Nogues, Chairman Leonor Montoya Alvarez, President Victor Alberto Machado Perez, Secretary AVIANCA P.O. Box 151310 Av. el Dorado no. 93-30 Bogota, Colombia Phone: (1) 413 9511 (1) 295 8977 ACES (AEROLINEAS CENTRALES DE COLOMBIA) Atahualpa Ave. 955 and Republica, Edificio Digicom, Office #204 Phone: 253123 253124 253294 Fax: 253131 Email: http://www.aces.com.co BANCO SANTANDER: Fitch Lowers Ratings on Weak Conditions -------------------------------------------------------- Fitch Ratings has downgraded Banco Santander Colombia's (BSCO) long-term debt rating to 'BB-' from 'BB' and its individual rating to 'D/E' from 'D'. In addition, Fitch has revised its support rating to '4T' from '3T', signifying that it believes support for the bank is likely, but not certain. The Rating Outlook on the bank's long-term rating has been revised to Stable from Negative. The downgrade of the bank's long-term and individual ratings reflects its continued weak financial condition, particularly its negative free capital, as a result of an ongoing economic slowdown and business restructuring. The bank has been making losses since 1999 due to a sustained contraction in its business volumes and asset quality pressures, common to the banking system, which were brought upon by the prolonged economic downturn in Colombia. Under the direction of a newly appointed president, management has implemented positive changes to the bank's strategy in 2002. Nevertheless, Fitch believes the near to medium term prospects for the bank remain challenging, particularly its ability to generate sustainable net income and build capital internally given the smaller franchise, more limited capital base and the unfavorable economic climate. Over the past few years, the bank has focused on ridding the balance sheet of problematic assets and improving efficiency. In that aim, it halted new lending due to the adverse Colombian economic conditions and the loan portfolio contracted 44% in nominal terms between 1999 and end-June 2002. In order to compensate for the decline in loan revenues, management placed much of the excess liquidity in government securities, which grew to represent 38% of total assets by end-June 2002. This strategy, in addition to hefty depreciation and amortization expenses related to goodwill, technological investments and fixed assets, weighed heavily on profitability, offsetting modest efficiency gains made through branch and personnel reduction. Following a change in management in the first half of 2002, the bank has revised its strategy and has sought to renew lending, while reducing the portfolio of government securities due to increase market volatility. In the third quarter, the loan portfolio expanded by 16%, while holdings of government securities were reduced by 44%. Management also made significant operating cost reductions, continuing the branch and personnel rationalization that has been underway for several years. Also in the first half of 2002, Santander injected capital of US$79 million, which was used to write down goodwill and technological investments and fund the personnel reduction and a pension liability. Despite these efforts, the bank posted the largest losses since 1999 in the first nine months of 2002 as profitability was further weakened by losses on the sale of government securities and unrealized mark to market losses on the remaining portfolio as a result of the wider spreads on government bonds. Due to third quarter loan growth and losses in the period, the bank's total capital ratio dropped to 13.5% (includes goodwill of COP 28.5 billion) at end-September 2002 from 20.3% at end-June 2002. While above the regulatory requirement, this ratio partly reflects the high proportion of assets in zero-risk weighted government securities. In addition, while the bank has significantly reduced its fixed and intangible assets, they represented 107% of the bank's equity at end September 2002. Going forward, the recent measures, particularly the reduction of expenses and the renewal of lending, should favorably impact the bank's profitability and management forecasts a small profit for 2003. In the third quarter of 2002, total operating expenses, including depreciation and amortization, declined to roughly half of the level of the first two quarters of the year. In addition, the reduction of government securities and the decision to reclassify 32% of the remaining portfolio to the held to maturity category, should somewhat lessen the impact of market risk on earnings. Nevertheless, in the context of the current economic conditions in Colombia, Fitch believes that it will take some time for the bank to rebuild sustainable solid income, which will be necessary to augment capital to support current operations and fund future growth. Given the lack of new lending coupled with conservative risk management policies implemented by SCH, Fitch has seen a consistent positive trend in loan quality indicators, which remain superior to peer indicators. At end-September 2002, the past due to total loan ratio was 1.4% and loan loss reserve coverage stood at 450%. However, as is common throughout the system, restructured loans have grown, partly due to a government sponsored program to restructure state credits implemented in 2000 and loans accounted for 17% of the portfolio at end- September 2002. This was concentrated in 3 state credits (80% of total) and was backed by both municipal revenue and central government guarantees, and was 26% reserved at the local level. Given the current debt ratings for Colombia ('BB'; Outlook Negative), the bank is also exposed to credit risk through its high, albeit declining holdings of government securities (25% of total assets at end-September 2002). The change in BSCO's support rating, which represents the agency's assessment of whether a bank would receive support should it be necessary, reflects the tightening of Fitch's global methodology for assigning support ratings, as communicated by the agency on July 29, 2002. A support rating of '3' is assigned to a bank that has an institutional, majority owner of sufficient reputation and possessing such resources and resolve that, in Fitch's opinion, support would be forthcoming. In order to qualify for a support rating of '3', certain conditions must be met, including written confirmation of the formalization of parental support. While Fitch continues to take SCH's ownership into account and considers that its commitment to BSCO remains strong as evidenced in the recent capital injection, the more restrictive conditions for assigning a support rating of '3' have forced the change, not only in Colombia, but to a number of subsidiaries of financial institutions globally. Similar to other banks operating in sub-investment grade countries, transfer risk concerns for BSCO's foreign currency denominated obligations remain, as indicated by the 'T' suffix attached to the support rating. BSCO is Colombia's 11th largest commercial bank with a 2.7% deposit market share at end-June 2002 (end-June 2000: 4.6%). Since May 1997, BSCO has been majority owned by SCH, under which the bank has undertaken significant restructuring. Following the capitalization in May, SCH's stake in BSCO rose to 97.4% from 90.7% at end-2001 and the remaining shares are widely held. CONTACTS: Ricardo Chaves 1-212-908-0606 Linda Hammel 1-212-908 0303 Peter Shaw 1-212-908 0553, New York Media Relations: James Jockle 1-212-908-0547, New York ============= E C U A D O R ============= * Crises Deepens As Confidence Dwindles --------------------------------------- Ecuador is facing a new debt crisis as the election of former army colonel Lucio Gutierrez as president is stripping investor confidence in the country's ability to pay US$2.1 billion of debt maturing next year, according to a Bloomberg report Monday. Gutierrez, who won with about 54 percent of the vote, had previously supported renegotiation of all debts of Latin American countries. According to a report from Bloomberg News, Gutierrez's victory depended in part on the support of voters who want the government to increase subsidies and end relations with the International Monetary Fund. The IMF has required the country, whose US$15.4 billion of debt corresponds to about 77 percent of the GDP, to reduce spending in order to get a new loan. Three years ago, Ecuador defaulted on US$6.5 billion of bonds. However, the country was pulled out of recession after replacing its local currency with the U.S. dollar. The move had reduced the annual inflation rate to 10 percent from 90 percent two years ago. The economy reported a growth of 5.6 percent last year, and has growth predictions of 3 percent this year. The report indicated Ecuador's benchmark bonds climbed to as high as 85.5 cents on the dollar April 22 from about 58.6 cents a year before, to yield as low as 14.75 percent. But things went downhill after that. The government refused to reduce spending, which hindered its chances of obtaining the US$250 million loan it was asking from the IMF. According to the IMF, the country cannot afford to print money to cover budget shortfalls, one of the disadvantages of the dollarization. The lender added that the country's budget deficit may reach US$500 million, or about 2.5 percent of the GDP. Ecuador's long-term foreign debt has a rating of CCC+ from Standard & Poor's, while Moody's gave it a Caa2. Gutierrez had been trying to regain investor confidence in the country by meeting investors and promising to secure a new accord from the IMF. The benchmark bond gained 4 centavos after his talk with investors in New York on October 31, according to the report. Analysts say the government would need a primary budget surplus of 6 percent of the GDP, excluding debt payments to pay about US$2 billion in financial obligations for the next two years. This is greater than the expected surplus of 5 percent this year. =========== M E X I C O =========== BITAL: HSBC Completes Bital Acquisition --------------------------------------- HSBC Holdings plc (HSBC) finalized the acquisition of Grupo Financiero Bital S.A. de C.V. (GF Bital) with the close of its cash tender offer to acquire all of the outstanding shares in GF Bital. The offer expired at 15:45 p.m., Mexico City time, on Friday, 22 November 2002. 731,525,483 Series 'O' shares and 203,442,973 Series 'L' shares, which represent 99.21 per cent of the total capital stock of GF Bital, were validly tendered and accepted for payment. Settlement of the offer price will be made on Wednesday, 27 November 2002. The offer price was US$1.20967 per share in cash for each outstanding share of the Series 'O' shares and Series 'L' shares. The total offer consideration to be paid by HSBC for the tendered shares is US$1,131,003,292.17. All conditions for completion of the offer were met and HSBC obtained all the Mexican regulatory approvals required in connection with the offer, including the approvals of the Banking and Securities Commission (CNBV), the Ministry of Finance and Public Credit, and the Mexican Stock Exchange. HSBC Group Chief Executive Sir Keith Whitson said: "I am delighted with the result of the offer. As a member of the HSBC Group, GF Bital will have access to the global expertise and resources of one of the world's largest financial services organisations. The strengths of both banks will be combined to provide an outstanding level of service to GF Bital's six million customers." HSBC considers GF Bital to be an attractive banking franchise and a major and highly respected force in Mexican financial services. The acquisition will enable HSBC to become one of the few banks that can facilitate investment and trade flows seamlessly amongst the NAFTA countries and internationally. With some 7,000 offices in 81 countries and territories and assets of US$746 billion at 30 June 2002, the HSBC Group is one of the world's largest banking and financial services organisations. CONTACT: HSBC London Richard Beck or Adrian Russell, 44/20-7260-6757/8211 New York Linda Stryker-Luftig, 212/525-3800 Hong Kong SAR Gareth Hewett or Viginia Lo, 852/2822-4929/4930 GF Bital Mexico City Hill & Knowlton Jose Antonio Tamayo or Juan A Lozano, 52/55-5729-4010 GRUPO MEXICO: Asarco Mine At Risk Of Closure -------------------------------------------- Asarco, a U.S.-based copper mine owned by Grupo Mexico, is hoping better prices for the red metal will come soon, as the future of its Mission mine in Arizona depends on it, reports Reuters. "The price needs to be a little higher than where it is for us to think we can keep this going," spokesman Clay Allen answered when asked what price copper would have to be to keep mine open. According to Allen, the LME copper price was just over 73 cents a pound at 1500 GMT while Asarco's current operating costs are somewhere in the 80s cents a lb. Asarco is currently battling with debts totaling to almost US$1 billion, including a US$450-million credit facility and a US$100- million bond, due to be paid in January and February 2003 respectively. A decision on Mission would appear imminent as Asarco said in late October it would take a few weeks to explore the possibility of closing it. Closure of the mine would mean a production cut of about 5%, or 50,000 tonnes, of contained copper of Grupo Mexico's overall production. Furthermore, closure could prompt the Company to shut down its Hayden smelter in Arizona, which relies on Mission feed. Also at risk is the Amarillo refinery in Texas. CONTACT: GRUPO MEXICO S.A. DE C.V. Avenida Baja California 200, Colonia Roma Sur 06760 M,xico, D.F., Mexico Phone: +52-55-5264-7775 Fax: +52-55-5264-7769 Home Page: http://www.gmexico.com Contacts: Germ n Larrea Mota-Velasco, Chairman and CEO Xavier Garca de Quevedo Topete, President and COO Alfredo Casar P,rez, COO, Ferrocarril Mexicano Daniel Ch vez Carre n, COO, Industrial Minera M,xico Daniel Tellechea Salido, VP and Administration and Finance President ASARCO 2575 E. Camelback Rd., Ste. 500 Phoenix, AZ 85016 Phoenix City Phone: 602-977-6500 Fax: 602-977-6701 Home Page: http://www.asarco.com Contacts: Germ n Larea Mota-Velasco, Chairman and CEO Genaro Larrea Mota-Velasco, President Daniel Tellechea Salido, VP and CFO INTERNATIONAL THUNDERBIRD: Issues Statement On 3Q02 Results ----------------------------------------------------------- International Thunderbird Gaming Corporation (TSX:INB) announces its financial results for the third quarter ended September 30, 2002. All figures are in US dollars. Third Quarter results: For the three months ended September 30, 2002, gaming revenues were $4,252,000 compared to 2001 revenues of $4,424,000. The Company's 50% stake in Panama's revenues was $3,345,000 in 2002 compared to $3,448,000 for the same period in 2001. The Company's interest in Guatemala revenues was $409,000 in 2002 compared to $465,000 for the third quarter in 2001. Nicaragua's revenues improved from $489,000 in 2001 to $498,000 in 2002. The Company has a 30% equity interest in Venezuela, which is not consolidated for financial statement reporting purposes. The Venezuela operations achieved revenues of $847,000 in 2002 compared with $941,000 for the quarter in 2001. The Company's equity interest in Venezuela was 36% in 2001. The Company also has equity interests in its skill machine locations in Mexico, which are also not consolidated for financial statement reporting purposes. The combined Mexico operations achieved revenues of $nil in 2002 compared to $1,249,000 in the third quarter of 2001. Thunderbird recorded a loss for the quarter of $74,000 or $nil per share compared with a gain of $94,000 or $nil per share in the third quarter of 2001. The 2002 financial statements for the third quarter were positively affected by non-recurring events in the net amount of $162,000. The net impact of the settlement with a California tribe, from whom the Company secured a note for $750,000, was $488,000. The Company also reserved $326,000 against the fiestacasinos.com receivable due to the fact that the Company has not received a payment on the note since March 2002. The Company's equity interest in Venezuela and Mexico collectively accounted for a loss of $187,000 for the quarter, compared to a loss of $111,000 in 2001. The Venezuela operation, which contributed a loss of $138,000 to the 2002 third quarter, continues to suffer in the midst of the country's economic and political instability. The Company achieved EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) for the three-month period ended September 30 of $792,000 compared to $1,153,000 for the same period in 2001. Year to Date results: For the nine months ended September 30, 2002, gaming revenues reached $13,213,000, an increase of 8.7% compared to 2001 revenues of $12,160,000. The Company's 50% stake in Panama's revenues improved from $9,938,000 in 2001 to $10,545,000 for the same period in 2002. The Company's interest in Guatemala revenues was $1,158,000 in 2002 compared to $1,246,000 for the nine months in 2001. Nicaragua's revenues improved from $887,000 in 2001, encompassing the first seven months of operations, to $1,499,000, representing nine full months of operations in 2002. The Company has a 30% equity interest in Venezuela, which is not consolidated for financial statement reporting purposes. The Venezuela operations achieved revenue of $4,171,000 in 2002 on 9 full months of operations. The year-to-date revenues for 2001 were $941,000 and reflect the first 45 days of operation, which opened August 16, 2001. The Company's equity interest in Venezuela was 36% in 2001. The Company also has equity interests in its skill machine locations in Mexico, which are also not consolidated for financial statement reporting purposes. The combined Mexico operations achieved revenues of $2,444,000 for the nine months of 2001 compared to $57,000 in 2002, which reflects just 10 days of operations in the Reynosa location. Thunderbird recorded a loss for the nine months of $145,000 or $0.01 per share compared with a loss of $1,409,000 or $0.06 per share in the first nine months of 2001. The Company's equity interest in Venezuela and Mexico collectively accounted for a loss of $334,000 for the nine months compared to a loss of $624,000 in 2001. The Venezuela operation, which contributed a loss of $176,000 to the 2002 results, continues to suffer in the midst of the country's economic and political instability. Year to date the Company has achieved EBITDA of $2,585,000 compared to $1,566,000 for the same period in 2001. Operations: The Company previously reported that its 2001 year end financial statements and its 2002 1st and 2nd quarter financial statements were prepared on the basis of accounting principles applicable to a going concern, which assumes the realization of assets and liabilities in the normal course of business, and that the application of the going concern concept is dependent on the Company's ability to generate future profitable operations. The Company's overall operations have shown strong revenues during the initial 55 days of the 4th quarter. In Panama, the expansion at the El Panama Hotel Casino was completed on November 16, 2002. The El Panama Casino added 100 video gaming and slot machines increasing the total gaming machines to 320 and added 35 table positions increasing the total table positions to 175. In Guatemala, the company is awaiting the results of the arbitration proceeding. The Fiesta Casino in Venezuela has successfully re-financed its high interest rate loan with Del Sur Bank (approximate principal debt of $2.2 million dollars), and as a result significantly reduced its monthly interest expense. The previous interest rate was a variable rate of between 50% and 60% and the current interest rate is now fixed at 18%. The Company continues to pursue two parallel paths in Mexico: (1) Discussion with the Mexico Government on settling the NAFTA claim with hopes of re-opening the Mexico Skill Game operations; and (2) aggressively litigating the NAFTA claim. The Company continues to pursue certain receivables including an action filed against the Spotlight 29 Casino. The lawsuit is scheduled to go to trial in April of 2003. The Company was successful in October 2002 in entering into "work-outs" with its two major creditors, MRG Entertainment and Prime Receivables. The effect of the workouts, which will be reflected in the 2002 audited year end financials, would have reduced the Company's working capital deficiency as of September 30, 2002, from $6,319,000 to $3,756,000. Newly appointed auditor: The Company is pleased to announce that Davidson & Company Chartered Accountants will perform the audit of the Company's consolidated financials for 2002 following KPMG's resignation, made effective November 15, 2002. Davidson & Company will rely on KPMG-Panama for the "in-country" audit for the Panama operations and Deloitte &Touche for the "in-country" audits of the Nicaragua and Guatemala operations. The Company thanks KPMG-Vancouver for its thorough audit services during the past several years and is confident that Davidson & Company will deliver a quality independent audit. Trading and Listing: The Company's listing application to the TSX Venture Exchange was denied. The TSX Venture advised that the Company does not currently meet its minimum listing requirements. The Company is applying for listing on the OTCBB and intends to qualify with a new exchange, the "BBXchange" once the OTCBB is phased out. The Company is seeking market makers with the goal of resuming trading on the OTCBB and expects the qualifying process to take between 6 weeks and 3 months. International Thunderbird Gaming Corporation is an owner and manager of international gaming facilities. Additional information about the Company is available on its World Wide Web site at www.thunderbirdgaming.com. On behalf of the Board of Directors, Jack R. Mitchell, President and CEO CONTACT: International Thunderbird Gaming Corporation Albert Atallah, 858/451-3637 858/451-1169 (FAX) Email: info@thunderbirdgaming.com Website: www.thunderbirdgaming.com SATMEX: Three Institutions To Extend Credits, Freeing Cashflow -------------------------------------------------------------- Mexico-based satellite operator Satmex, which is majority controlled by Loral Space & Communications, is close to obtaining credits worth US$300 million from the US government's export financing bank EximBank, French export agency Cofase and local development bank Bancomext, reports Mexico City daily El Universal. Satmex CFO Cynthia Pelini indicated that the move will allow the Company to prepay debt of about US$205 million that is subject to a floating interest rate, as well as restructure the rest of its US$525 million debt. The remaining US$320 million of debt is in the form of fixed rate bonds due 2004, Pellini said, adding that the Company is negotiating with bondholders to extend the term. The agreement with the three institutions is dependent on payment for the construction and the launching of Satmex's next satellite Satmex 6, which will cost US$300 million. Satmex will initially finance that with insurance proceeds stemming from failure of the Solidaridad I satellite, but Eximbank and Cofase have offered to provide loans equivalent to 85% of the completed Satmex 6 investment, with Bancomext offering the final 15%. Meanwhile, Satmex has postponed the Satmex 6 launch from the first quarter of 2003 to the second quarter of the same year. The Company predicts Satmex 6 will eventually generate annual revenues of US$80 million, but is unlikely to contribute much to 2003 revenues because it will take time to activate clients and there will be a post-launch testing phase, Pelini said. Satmex, the leading Mexican satellite operator in the Americas, owns and operates a satellite system through which it offers broadcast, telephone and telecommunications services to 39 countries in the region. The Satmex fleet also helps develop rural areas by offering distance learning and rural telephony services. And, through its business partners in the NAFTA region and Latin America, Satmex provides highspeed connectivity to ISPs and Digital Broadcast Services (DBS), thus contributing to the integration of Latin America with the rest of the Continent. Satmex is ISO 9001 certified. CONTACTS: Kristi King Etchberger: + (52) 55 5201-0804 (Satmex) Tony Doumlele: (212) 338-5214 (Loral) *********** 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. 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