/raid1/www/Hosts/bankrupt/TCRLA_Public/030109.mbx
T R O U B L E D C O M P A N Y R E P O R T E R
L A T I N A M E R I C A
Thursday, January 9, 2003, Vol. 4, Issue 6
Headlines
A R G E N T I N A
BANCO VELOX: Closed Branches To Reopen Next Month
PEREZ COMPANC: Stunned by Argentine President's Comments
B E R M U D A
ANNUITY & LIFE: Bernstein Liebhard & Lifshitz Files Class Action
TYCO INTERNATIONAL: Selling $3.75B Convertible Debenture
B R A Z I L
AT&T LATIN AMERICA: Responds to Disclosures by AT&T Corp
CEMIG: Governor Proposes BNDES Take Over Partners' Stake
C H I L E
ENAMI: Govt., Regulators Sign Protocol For Ventanas Transfer
ENDESA CHILE: Building Ralco-Charrua Transmission Line
J A M A I C A
JUTC: Needs To Revise Budget Due To Fuel Price Hike
M E X I C O
CFE: Invites LNG Plant Bids
EMPRESAS ICA: Shares Plummet In 2002 Due To Financial Woes
VITRO: Issues Six-Year Medium Term Note for MXN1B
P A N A M A
CHIQUITA BRANDS: Outlines Policy On Financial Transparency
T R I N I D A D & T O B A G O
BWIA: Unions Concessions May Result In Job Cuts
U R U G U A Y
URUGUAY: Fitch Lowers Sovereign Rating to 'B-'; Outlook Negative
V E N E Z U E L A
PdVSA: Government May Split Company To End Strike
PdVSA: Analysts Optimistic Foreign Unit Will Pay Debt
PDVSA: Keeping U.S. Unit
- - - - - - - -
=================
A R G E N T I N A
=================
BANCO VELOX: Closed Branches To Reopen Next Month
-------------------------------------------------
Argentine bank El Nuevo Banco Industrial Azul, owned by the local Meta
family, is poised to reopen the 14 branches it took over last year from
suspended local bank Banco Velox, reports Business News Americas.
After the February reopening, only 213 of the 580 employees, who previously
worked for Banco Velox, will remain, the defunct bank's union leader Vicente
Rotundo, said.
Banco Velox was intervened and suspended by Argentina's central bank in July
due to liquidity problems and the financial woes of its Uruguayan parent,
the Velox group. Banco Velox actually requested the intervention from the
central bank because of the country's poor economic condition and the
critical financial situation in the Mercosur trade region.
CONTACT: BANCO VELOX S.A
Sarmiento 532 (1041) Capital Federal
Buenos Aires
Phone: 4321-1800
Fax: 4321-1820
E-mail: mailto:servicioalcliente@velox.com.ar
Home Page: http://www.bancovelox.com.ar/
Contacts:
Juan Peirano, President
Carlos Peterson, Representative
GRUPO VELOX
Burgos 80, piso 5, Of. 501
Las Condes
Santiago, chile
Phone: 208-8380
Fax: 208-8332
Home Page: http://www.finambras.com.br/grupo_velox.html
PEREZ COMPANC: Stunned by Argentine President's Comments
---------------------------------------------------------
Argentine President Eduardo Duhalde surprised Brazil's Petrobras with his
comments pertaining to a US$1-billion deal signed between the Brazilian
giant and Perez Companc in October.
According to a Reuters report, Duhalde declared that that his government had
"serious doubts" over certain aspects of the operation and said that he is
going to tackle unspecified issues regarding the sale in a scheduled visit
to Brazil's President Luiz Inacio Lula da Silva later this month.
"We have pending the transfer of shares of Perez Companc ... We have serious
doubts on some aspects of that operation. We also believe that it is a
national decision," Duhalde said in a news conference. The deal still awaits
approval of Argentina's Defense of Competition Secretariat.
These remarks stunned Petrobras.
"It's surprising for us. There is no reason for such a declaration,"
Petrobras' Financial Director Joao Pinheiro Nogueira said. According to the
executive, Petrobras had not received any official notification from
Argentina regarding doubts about the merger. And he added that he believed
the approval process by Argentina's anti-trust authority was proceeding
well.
"The purchase of Perez Companc only brings more competitiveness. It is
beneficial for Argentina as it brings foreign investment. If there is a
company that has supported Argentina in its crisis, it's Petrobras," he
added.
Nogueira also said that the anti-trust agency could not judge the deal by
the stockmarket price.
Equity analysts said Duhalde was most likely referring to anti-trust issues
and general worries, which is often voiced by Argentines in their worst
economic crisis, over the sale of large local companies to interests outside
Argentina.
"It's unclear but it could well be about strategic issues over sales to
foreign firms," said one analyst, who asked not to be named.
=============
B E R M U D A
=============
ANNUITY & LIFE: Bernstein Liebhard & Lifshitz Files Class Action
----------------------------------------------------------------
A securities class action lawsuit was commenced in the United States
District Court for the District of Connecticut on behalf of all persons who
purchased or acquired Annuity & Life Re (Holdings), Ltd. (NYSE: ANR)
("Annuity" or the "Company") securities (the "Class") between April 19, 2000
and November 19, 2002, inclusive (the "Class Period"). A copy of the
complaint is available from the Court or from Bernstein Liebhard & Lifshitz,
LLP. Please visit our website at www.bernlieb.com or contact us at (800)
217-1522 or by e-mail at ANR@bernlieb.com.
Plaintiff alleges that throughout the Class Period Defendants caused Annuity
to make materially false and misleading public statements concerning the
Company's earnings and expenses, which figures were misstated due to the
Company's failure to properly account for: i) embedded derivatives in
certain reinsurance contracts; ii) minimum interest guarantee expenses; and
iii) a $19.5 million reserve of minimum interest guarantees.
On July 25, 2002, Defendants disclosed that Annuity would have to restate
its financial statements for fiscal 2001 and the first quarter of fiscal
2002 because separate accounting was required for its embedded derivatives,
which are derivative contracts that exist as part of securities. The
understated expenses, misclassified reserve, and the fact that fiscal year
2000 and second quarter fiscal year 2002 financial statements would also
have to be restated was not disclosed. After this partial disclosure,
Annuity stock fell almost 50%, from $12.87 per share on July 25, 2002 to
$6.30 per share on July 26, 2002.
The full truth came out on November 19, 2002. On that date, Annuity
announced that it was going to restate its financial results not only for
fiscal year 2001 and the first quarter of 2002, but for fiscal year 2000 and
the second quarter of 2002 as well. Defendants revealed that Annuity's $19.5
million reserve would have to be re-classified and that its minimum interest
payments were wrongfully characterized as reductions in liability rather
than as expenses. After the November 19th announcement, the price of Annuity
stock dropped another 40%, on enormous volume twenty times larger than that
of November 19th, from a close of $4.08 per share on November 19, 2002 to a
close of $2.24 per share on November 20, 2002.
Plaintiff seeks to recover damages on behalf of all those who purchased or
otherwise acquired Annuity securities during the Class Period. If you
purchased or otherwise acquired Annuity securities during the Class Period,
and either lost money on the transaction or still hold the securities, you
may wish to join in the action to serve as lead plaintiff. In order to do
so, you must meet certain requirements set forth in the applicable law and
file appropriate papers no later than February 3, 2003.
CONTACT: Ms. Linda Flood, Director of Shareholder Relations
Bernstein Liebhard & Lifshitz, LLP
10 East 40th Street
New York, New York 10016
(800) 217-1522 or (212) 779-1414
E-mail: ANR@bernlieb.com
TYCO INTERNATIONAL: Selling $3.75B Convertible Debenture
--------------------------------------------------------
Tyco International Ltd. (NYSE - TYC, BSX - TYC, LSE - TYI) announced Tuesday
that it has agreed to privately place $2.5 billion principal amount of 2.75%
Series A Convertible Senior Debentures due 2018 and $1.25 billion principal
amount of 3.125% Series B Convertible Senior Debentures due 2023 through its
wholly-owned subsidiary, Tyco International Group S.A. The placement of the
debentures is expected to close on January 13, 2003. Tyco intends to use the
net proceeds to repay debt and for general corporate purposes. The initial
purchasers of the debentures will also have a 30-day option to purchase up
to 20% of additional debentures, which, if exercised, would give Tyco
additional net proceeds.
The Series A debentures will be convertible at a conversion price of
$22.7832 per share and the Series B debentures will be convertible at a
conversion price of $21.7476 per share. The debentures are fully and
unconditionally guaranteed by Tyco. Holders of the Series A debentures can
require their repurchase at five and ten years after issuance. Holders of
the Series B debentures can require their repurchase at twelve years after
issuance. The Series A debentures may not be redeemed by the issuer during
the first three years following issuance, and the Series B debentures may
not be redeemed by the issuer during the first five years following
issuance.
The debentures will be offered to qualified institutional buyers in reliance
on Rule 144A under the Securities Act of 1933. The debentures will not be
registered under the Securities Act. Unless so registered, the debentures
may not be offered or sold in the United States except pursuant to an
exemption from, or in a transaction not subject to, the registration
requirements of the Securities Act and applicable state securities laws.
This press release shall not constitute an offer to sell or the solicitation
of an offer to buy, nor shall there be any sale of the debentures in any
state in which such offer, solicitation or sale would be unlawful prior to
registration or qualification under the securities laws of any such state.
CONTACT: Tyco International Ltd.
Gary Holmes (Media), +1-212-424-1314
Kathy Manning (Investors), +1-603-778-9700
===========
B R A Z I L
===========
AT&T LATIN AMERICA: Responds to Disclosures by AT&T Corp
--------------------------------------------------------
AT&T Latin America Corporation (Nasdaq: ATTL) announced that its majority
shareholder, AT&T Corporation, has disclosed that it has entered into a
non-binding letter of intent with Southern Cross Group, LLC, a
telecommunications holding company, to sell 8,000,000 shares of Class A
common stock of ATTL and 73,081,595 shares of Class B common stock of ATTL
for $1,000.00 in a transaction within the next twelve months.
"As part of our restructuring efforts, we have been in discussion with AT&T
regarding their desire to sell their equity stake in ATTL. We are pleased
that Southern Cross has expressed an interest in acquiring a significant
equity position in AT&T Latin America. We look forward to working with
Southern Cross and other potential investors to support their due- diligence
efforts," said Patricio Northland, President and CEO of AT&T Latin America.
Further, Mr. Northland stated, "We continue to follow the restructuring
process we defined with our board in December. This process includes
strengthening our liquidity position, working with our creditors to
restructure our debt, and identifying potential financial investors or
strategic operators that will acquire the company. ATTL is a unique
telecommunications asset with a strong and attractive customer base. Not
surprisingly, we have had significant interest from a number of qualified
investors, in addition to Southern Cross, a couple of which have already
delivered preliminary offers that address both the equity and debt of the co
mpany," continued Mr. Northland. Given the positive interest in the company,
ATTL will seek to retain an investment bank to manage the process and
determine the optimal investor for the company. ATTL expects to announce in
the next several days the investment-banking firm that will lead these
efforts.
"We believe that AT&T's decision to sell its equity stake has no impact on
our ability to service our customers. We provide services to over 140,000
total customers, including 5,400 data/Internet business customers and
approximately 800 multi-national corporations," stated Mr. Northland. "We
have invested nearly $600 million in a state of the art network that enables
us to deliver high-quality services on an international basis." AT&T Latin
America was recently named the top telecommunications firm in the region
with regards to quality of service. "We have every intention to maintain
that honor and distinction," commented Mr. Northland.
Addressing the ultimate vision for ATTL, Mr. Northland stated, "We are a
leader in the Latin American market. Our current asset base can support
significant growth without major new investment. Our goal is to seek a
financial partner or strategic operator that can build on ATTL's scalable
network platform to consolidate operations in Latin America and grow their
business with the premier companies in the region. We believe this process
is good news for our existing customers. Not only do we intend to maintain
the quality of service to which our customers are accustomed, we intend to
do so from a strong operating and financial position."
As part of its ongoing restructuring efforts, AT&T Latin America has
successfully implemented actions designed to maximize its cash flow,
materially strengthen its continuing liquidity, and upgrade customer support
and profitability. "Recent and ongoing measures to reduce our cost structure
and cash requirements have significantly enhanced our ability to fund our
operations without additional capital requirements," said Lawrence Young,
ATTL's Chief Financial Officer. "Through these measures, we have materially
reduced the previously announced funding gap. Our objective is to be self-
sufficient from a cash flow perspective by June of this year."
Notwithstanding the improved liquidity outlook, however, the Company also
mentioned that it could still decide to file petitions for reorganization in
the U.S. and/or in one or more of the countries in which it operates, to
obtain relief from creditors or to facilitate an orderly transfer or
restructuring of its business. The Company has held productive discussions
with major creditors in recent weeks and such discussions are ongoing. "Our
efforts are focused on maximizing value and providing real choices for our
constituents, while continuing to serve our customers and build on the
strong base we enjoy today," stated Northland.
CONTACT: AT&T Latin America Corporation
Media: Lydia Rodriguez, +1-202-689-6321
Lydia.Rodriguez@attla.com
Investors: Catherine Castro, +1-202-689-6336,
catherine.castro@attla.com
URL: http://www.attla.com
CEMIG: Governor Proposes BNDES Take Over Partners' Stake
--------------------------------------------------------
Minas Gerais state governor, Aecio Neves, proposed to the new Brazilian
President Luiz Inacio Lula da Silva that the country's national development
bank BNDES take over the stakes held by three private investors in state
power company Cemig, reports Business News Americas.
Neves made the proposal in a meeting with the president at the end of last
year and has reportedly gained the latter's support for the said proposal.
US-based AES, Mirant and Brazilian investment group Opportunity acquired a
33% stake in Cemig in 1997 for US$1 billion. BNDES reportedly put up a
significant amount of financing to close the operation. But recently,
repayments have run into trouble due to the lack of operational control and
the subsequent disruption to the flow of dividends.
Neves is apprehensive that the three partners might sell their share in
Cemig to investors. The three partners have been unhappy about the
investment since the previous governor, Itamar Franco, overturned a
shareholders' agreement that gave them operating control despite not owning
a majority of the Company's ordinary shares. Franco obtained a ruling from a
local court declaring the shareholders' agreement was illegal and proceeded
to take back operating control.
In order for BNDES to recover the loans, Neves made the proposal to the
president. If BNDES were to take the 33% stake, it would give the Minas
state government more time to find a suitable buyer, he said.
CONTACT: Cia Energetica de Minas Gerais (Cemig)
Registered Office
Edificio Julio Soares
Avenida Barbacena, 1200
Sto Agostinho
30123-970 Belo Horizonte - MG
Brazil
Tel +55 31 3349-2111
Fax +55 31 3299-4691
URL: http://www.cemig.com.br
Contact:
Djalma Bastos de Morais, Chairman
=========
C H I L E
=========
ENAMI: Ventanas Transferred to Codelco
--------------------------------------
A protocol to transfer Enami-operated Ventanas copper smelter-refinery to
state copper corporation Codelco was signed Monday, reports Business News
Americas.
Mining minister Alfonso Dulanto, finance minister Nicolas Eyzaguirre, and
the heads of the mining and energy and finance committees of the lower and
upper chambers of congress, signed.
The transfer, which paves a way for a solution to Enami's US$480-million
debt crisis, came after a two-year negotiation.
Under the agreement, the government pledges to send a bill to congress in
the first half of this year to authorize the transfer. The sale of the
Ventanas is aimed at repaying a large chunk of the US$480-million debt.
According to Dulanto, the sale price will be determined by the net present
value of Ventanas, but added he had "no idea" what that may be. Local press
reports suggested the plant is worth US$300-400 million.
The protocol also commits the government to obtaining credits, or issuing
bonds, to restructure Enami's debt. The Company has just restructured US$220
million worth of short-term bank loans that matured at 0the end of 2002.
Income from the Ventanas sale will be used to pre-pay this debt, said Fitch
Ratings analyst Mariana Sepulveda.
Key to securing the restructuring of the short-term debt was the Chilean
government's decision to make the state the formal guarantor of the
three-year bullet loan, obtained from a group of banks led by Dresdner
Kleinwort Wasserstein.
Previously, the state did not provide a formal guarantee for Enami's debts,
something that was blamed for the failure of a proposed US$140-million bond
issue in 2001. The Company is said to be mulling a second try at a bond
issue in order to pay off the long-term portion of its debts.
CONTACT: ENAMI (Empresa Nacional de Mineria)
MacIver 459,
Santiago, Chile
Phone: 637 52 78
637 50 00
Fax: 637 54 52
Email: webmaster@enami.cl
Home Page: www.enami.cl/
Contact:
Jorge Rodriguez Grossi, President
ENDESA CHILE: Building Ralco-Charrua Transmission Line
------------------------------------------------------
After obtaining approval from the Chilean government's economy and
development sub-secretary, generation company Endesa will build a 220kV
transmission line linking its 570MW Ralco hydro plant in southern Chile to
the central grid's (SIC) Charrua substation.
Citing Endesa spokesperson Rodolfo Nieto, Business News Americas reports
that the Company will invite bids as soon as legal paperwork is completed.
Daily newspaper Estrategia relates that the government decree states that
construction of the line must start within 30 days from the final signing of
documents and should be completed 15 months later.
Nieto also said that Endesa will invest US$27 million for the said project.
The US$540-million Ralco hydroelectric project in Chile's Alto Biobio is
about 65% complete, and is due to start operations in mid-2004.
In December, Spanish parent Endesa vowed to proceed with its investments for
Endesa Chile even though Standard & Poor's lowered the unit's ratings to BBB
from BBB+, lowering them to its second lowest investment grade with a
negative outlook. The Spanish utility said that it was satisfied with the
units' credit ratings.
Nonetheless, investors at that time were a bit edgy. If S&P cuts
the debt on Endesa Chile to junk status, Endesa Chile could be forced to pay
off bank loans right away.
=============
J A M A I C A
=============
JUTC: Needs To Revise Budget Due To Fuel Price Hike
---------------------------------------------------
The higher than expected fuel price increase has pushed cash-strapped
Jamaican Urban Transit Company (JUTC) to revise its budget, reports RJR
News, citing JUTC President Sterling Soares.
Soares said the Company is yet to determine the impact of the increase on
JUTC's operations after its allocation for a fuel price increase fell short
of the actual rice increase. Shell, Texaco and Petcom are JUTC's suppliers
of petroleum products.
The National Transport Cooperative Committee said that they will not pass
the increase on to its commuters.
Earlier, Petrojam had issued a warning on an increase in the prices of
petroleum products in the short-term, after world oil prices shot up on
concerns of a US-led attack on Iraq. The ongoing national strike in
Venezuela, which has reduced oil exports by 90 percent, according to
reports, has also contributed to the world oil price increase.
===========
M E X I C O
===========
CFE: Invites LNG Plant Bids
---------------------------
Companies are encouraged by Mexican state power company CFE to submit bids
for a contract to build, operate and maintain a liquid natural gas (LNG)
regasification plant in the country's Tamaulipas state, reports Business
News Americas, citing local newspapers.
The 15-year contract involves building installations to off loan LNG from
supply ships, LNG transport to storage areas, constructing regasification
installations and laying out a pipeline to connect with the Cactus-Reynosa
gas pipeline.
The finished plant is expected to generate about 14 million cubic meters of
natural gas from LNG per day, and supply the Altamira V, Tuxpan V and
Tamazunchale compbined cycle power plants, reports BNAmericas. Commercial
operations should have started by January 10, 2006.
Technical bids will be opened on April 22, while economic bids on April 29.
CONTACT: COMISION FEDERAL DE ELECTRICIDAD
Rio Rodano 14, Col. Cuauhtemoc
06598 Mexico, D.F., Mexico
Phone: +52-55-5229-4400
Fax: +52-55-5310-4614
http://www.cfe.gob.mx
Contacts:
Alfredo Elias Ayub, General Director
Arturo Hernandez Alvarez, Director of Operations
Francisco J. Santoyo Vargas, Director of Finance
EMPRESAS ICA: Shares Plummet In 2002 Due To Financial Woes
----------------------------------------------------------
Shares of Mexican engineering and construction company Empresas ICA closed
2002 at MXN1.76 (US$0.17), a 58% drop from the previous year's MXN4.18
(US$0.40), El Norte reports, adding that the fall in dollar terms was 63%.
The drop in the stock reflected long-standing financial problems that ICA
had battled with for most of 2002. Adding to the woes is the uncertain
economic situation in its two largest markets, Mexico and the US,
specifically a strike at Mexico's state oil company Pemex.
Over the past few months, ICA had to reduce its workforce in order to trim
down costs. The reduction is estimated to save the Company some MXN121
million this year.
However, slow growth in 2002 didn't stop ICA from announcing a series of new
projects for 2003. It also didn't hamper a US$116-million credit from local
financial institution Inbursa. The loan will be used to refinance previous
debts and repurchase US$71 million worth of convertible bonds due March
2004.
To see financial statements:
http://bankrupt.com/misc/Empresas_ICA.pdf
CONTACTS: EMPRESAS ICA SOCIEDAD CONTROLADORA S.A. DE C.V.
Bernardo Quintana Isaac, Chairman/Pres/CEO
Jos, L. Guerrero Alvarez, EVP Finance and CFO
THEIR ADDRESS:
Mineria No. 145, Colonia Escand>n
11800 Mexico, D.F., Mexico
Phone: +52-55-5272-9991
Fax: +52-55-5227-5012
URL: http://www.ica.com.mx
VITRO: Issues Six-Year Medium Term Note for MXN1B
-------------------------------------------------
Vitro, S.A. de C.V. (NYSE:VTO; BMV: VITROA) announced that on December 30,
2002, it issued a medium term note (Certificados Burs tiles) in the Mexican
market for approximately Ps. 1 billion maturing on December 22, 2008. The
note will bear an interest rate of 325 basis points over the 182-day Mexican
CETES.
This issue was granted a rating of AA-(mex) by Fitch M‚xico, S.A. de C.V.,
rating agency. The rating implies a more solid credit rating relative to
other issuers or issues in Mexico.
This transaction is part of Vitro's previously stated strategy to strengthen
the Company's financial position while maintaining a presence in the capital
markets.
Vitro, S.A. de C.V. (NYSE: VTO; BMV: VITROA), through its subsidiary
companies, is one of the world's leading glass producers. Vitro is a major
participant in three principal businesses: flat glass, glass containers, and
glassware. Its subsidiaries serve multiple product markets, including
construction and automotive glass; fiberglass; food and beverage, wine,
liquor, cosmetics and pharmaceutical glass containers; glassware for
commercial, industrial and retail uses; plastic and aluminum containers.
Vitro also produces raw materials, and equipment and capital goods for
industrial use. Founded in 1909 in Monterrey, Mexico-based Vitro has joint
ventures with major world-class partners and industry leaders that provide
its subsidiaries with access to international markets, distribution channels
and state-of-the-art technology. Vitro's subsidiaries have facilities and
distribution centers in seven countries, located in North, Central and South
America, and Europe, and export to more than 70 countries worldwide. For
further information, please visit our website at: http://www.vitro.com
CONTACT: (Media Relations - Monterrey):
Albert Chico Smith
Vitro, S. A. de C.V.
+52 (81) 8863-1335
achico@vitro.com
Media Relations - M‚xico, D.F.:
Eduardo Cruz
Vitro, S. A. de C.V.
+52 (55) 5089-6904
ecruz@vitro.com
Investor Relations
Beatriz Mart¡nez
Vitro, S.A. de C.V.
+52 (81) 8863-1258
bemartinez@vitro.com
(U.S. Agency):
Luca Biondolillo/Susan Borinelli
Breakstone & Ruth Int.
(646) 536-7012 / 7018
Lbiondolillo@breakstoneruth.com
sborinelli@breakstoneruth.com
===========
P A N A M A
===========
CHIQUITA BRANDS: Outlines Policy On Financial Transparency
----------------------------------------------------------
Chiquita Brands International, Inc., outlined Tuesday the company's new
policy on financial transparency and guidance in a letter to investors from
Chairman and Chief Executive Officer Cyrus F. Freidheim, Jr. The letter also
summarizes the company's progress in achieving its stated goals and provides
information on various fourth quarter 2002 operational items. Full text of
the letter is reproduced below:
Dear Investor:
When Chiquita Brands International emerged from its Chapter 11 financial
reorganization on March 19, 2002, our newly elected board began a
top-to-bottom strategic review of the company. On September 24, we presented
the results of that review to analysts and investors in New York, inviting
other stakeholders to participate through a global webcast.
In that review, we laid out a three-pronged, long-term strategy to increase
shareholder value:
1. Focus on the core, by improving the company's Fresh and Processed Foods
business units and divesting non-core assets;
2. Drive better performance, by reducing costs significantly and increasing
financial flexibility; and
3. Profitably invest cash, by reducing debt, leveraging existing assets into
new businesses and paying dividends and/or buying back stock.
We set specific cost, earnings and debt targets for 2005 and described the
cost-reduction programs the company is undertaking. We committed to develop
milestones for the interim years so that our performance could be tracked.
Since that September presentation, we have had a number of discussions with
investors about financial transparency, earnings guidance and the
appropriate milestones to track our progress.
As most investors recognize, the fresh banana business is subject to
significant volatility due to changes in weather, exchange rates, market
pricing and a variety of other factors outside the company's immediate
control. In addition, quarterly or even annual earnings guidance wrongly
focuses management on short-term priorities. We have seen far too many
examples lately of companies feeling pressured to make accounting judgments
based on meeting quarterly guidance targets.
Nevertheless, we believe that companies should provide greater financial
transparency and give investors the kinds of information they need to
evaluate their investment decisions and track the key levers effecting
growth and profitability. Recognizing this need, we fully intend to provide
investors with more transparent and user-friendly financial information to
assist them in measuring our progress and evaluating their investment in
Chiquita. While we must safeguard certain competitive information, we are
committed to providing investors with the financial and operational
information necessary to develop models of company performance.
We believe that the most important measures of our progress against our
strategic goals are:
1. Focus on the core
* Operating margins
* Volume
* Percent of sales of yellow (ripened) versus green
(unripened) bananas
* Divestiture of non-core assets
2. Drive better performance
* Cost reduction
* SG&A as a percentage of sales
* Cash generation through operations and divestitures
3. Profitably invest cash
* Debt reduction
* Successful launch of new businesses
- We are targeting year-over-year improvement in each category in 2003.
Beginning with the company's fourth quarter and full-year 2002 financial
release and conference call in February 2003, we will report our progress
against these measures. At each year-end conference call, we will update the
2005 earnings targets, which we established last September. In addition, we
will provide comparative data for important market factors that impact the
company's financial results, including product volume and pricing trends by
major market, logistics costs, the effect of currency exchange rate shifts
and significant changes in pricing of key materials, such as purchased
fruit, paper and fuel.
We thank our shareholders and investors for their input. By providing
expanded information on performance-related trends, we believe that
investors will have a clear picture of Chiquita's business operations and
the progress we are making against our stated goals.
In this spirit of providing increased transparency, we offer the following
information on a number of factors impacting our financial results.
- Cost-Reduction Milestones
As we reported in September, we have initiated a series of global
performance-improvement programs to reduce costs by more than US$100 million
by the end of 2005. These programs include improvements in farm productivity
and canning operations as well as reductions in global purchasing and
overhead expenses. We expect to realize in 2003 gross cost-reduction savings
of US$40 million to US$50 million, offset by one-time costs of US$15 million
associated with these savings. Our current target for 2004 is to generate an
additional US$50 million of gross savings, offset by associated one-time
costs of US$10 million to US$15 million.
- Debt Reduction We outlined specific targets for 2005 to strengthen our
balance sheet, including reducing net debt to US$400 million. In 2002, net
debt was US$597 million on March 31, US$521 million on June 30, US$516
million on Sept. 30, and is estimated to be approximately US$470 million on
Dec. 31.
In addition to operating cash flow, the principal driver of the net debt
reduction was the sale of non-core assets. Against a goal to shed US$100
million to US$150 million in non-core assets by year-end 2005, we have
already divested US$99 million, including US$54 million from the sale of
five non-core ships and US$45 million from the sale of the Castellini group
of companies, a non-core wholesale produce distribution business. These cash
inflows were partially offset by an estimated US$50 million in capital
expenditures, including the US$14 million acquisition of one ship previously
under operating lease to the company.
Net debt is expected to increase by about US$75 million with the previously
announced acquisition of the German company, Atlanta AG, and acquisition of
another ship. The Atlanta transaction is on schedule and expected to close
in the first quarter 2003. Until that time, Chiquita will continue to
account for Atlanta's results as an equity investment.
We are confident that we can meet our 2005 debt target and plan to achieve
it earlier.
- Armuelles, Panama
As we have noted in the past, losses in our Armuelles division cannot be
sustained. For weeks, we have been discussing with government and union
leaders a proposal to sell our farms to an employee-owned cooperative with
long-term contracts to supply fruit to Chiquita at market prices. The
Panamanian government has been very supportive of our efforts in Armuelles
and believes that our proposal is in the best interests of the country, the
region, the workers and Chiquita. We have not yet reached an acceptable
agreement with the union. On Jan. 1, 2003, we ceased funding any additional
cash to our operations in Armuelles. There are adequate funds to operate for
a brief period while we work toward a final agreement. However, if we cannot
negotiate a viable long-term solution before funds run out, we will not be
able to continue operating in Armuelles, which represents approximately 6
percent of Chiquita's Latin America banana supply. We expect to have
sufficient access to cost-competitive, high-quality bananas in the event of
a closure in Armuelles.
- Flooding in Costa Rica and Panama
In early December, Costa Rica and the Atlantic coast of Panama experienced
serious flooding. These floods damaged many farms owned by major marketers,
including Chiquita, and independent producers in the region. Currently, we
estimate that the industry as a whole lost production of approximately two
to three million boxes in the fourth quarter. We estimate the fourth quarter
charges and write-downs associated with the flooding will be approximately
US$5 million. Additionally, the company purchased fruit from Ecuador to
partially replace the banana volume lost in the flood. The effect on
industry production in 2003 is still being evaluated, but it could be 10
million to 15 million boxes. We are anticipating a net reduction in fruit
availability; however, we believe we will be able to continue meeting all
core customer requirements.
- Banana and Commodity Pricing
Local banana prices in the company's core European market in the fourth
quarter were 10 percent below the same period a year ago, but a stronger
euro partially offset this decline. In North America, banana prices were
down for most of the quarter compared with 2001. Oil and paper prices have
risen in recent months, with an estimated US$3 million to US$5 million
impact on fourth quarter earnings versus 2001.
- Other Developments
In Processed Foods, the 2002 pack was somewhat below expectations, which
will result in lower fourth quarter earnings of US$3 million to US$5
million.
Atlanta AG has been restructuring its operations to improve profitability
and expects to incur related charges and costs estimated at US$10 million to
US$15 million, which would be included in Chiquita's fourth quarter 2002
results.
Chiquita's sale in December of its interest in the Castellini group of
companies will result in a fourth quarter gain of approximately US$10
million.
In addition, a quarter-to-quarter increase in the euro versus the dollar
will result in a translation gain of approximately US$7 million.
- Strengthening the Board
We indicated in September that we planned to add new members to our board of
directors with international and branded consumer products experience. In
December, Durk Jager, former chairman, president and CEO of Procter and
Gamble, and Steven Stanbrook, president of S.C. Johnson's Europe, Africa and
Middle East regions, were elected to the board.
Mr. Jager has extensive knowledge of the global branded consumer products
business. In his 30 years with P&G, Dutch-born Mr. Jager has run businesses
in Europe, Asia and North America. He also serves on the board of directors
of Eastman Kodak and the supervisory board of KPN, the largest
telecommunications company in the Netherlands.
Mr. Stanbrook, a native of Britain, has more than 20 years experience with
S.C. Johnson, Sara Lee and CompuServe in senior management roles. He has
managed operations across the globe. His focus has been branded consumer
food and nonfood products.
We are confident that these new directors will add further strength and
independent thinking to our board.
Despite the challenges of the fourth quarter, we are pleased with the
overall progress of Chiquita. This past year has been a year of transition
by putting in place projects and programs that will enable us to achieve the
financial targets we set in September for 2005. We remain confident that we
are on the right path and that the actions we are taking will position
Chiquita as a leader and will create significant shareholder value.
Sincerely,
Cyrus Freidheim
Chairman and CEO
Chiquita Brands International
Chiquita Brands International is a leading international marketer, producer
and distributor of high-quality fresh and processed foods. The company's
Chiquita Fresh division is one of the largest banana producers in the world
and a major supplier of bananas in North America and Europe. Sold primarily
under the premium Chiquita(R) brand, the company also distributes and
markets a variety of other fresh fruits and vegetables. In addition,
Chiquita Processed Foods is the largest processor of private-label canned
vegetables in the United States. Additional information is available at
http://www.chiquita.com/.
CONTACT: Chiquita Brands International, Inc.
News Media, Michael Mitchell, +1-513-784-8959
mmitchell@chiquita.com
Investors, Bill Sandstrom, +1-513-784-8194
bsandstrom@chiquita.com
Web site: http://www.chiquita.com/
=================================
T R I N I D A D & T O B A G O
=================================
BWIA: Unions Concessions May Result In Job Cuts
-----------------------------------------------
BWIA, the troubled Flag carrier of Trinidad and Tobago, warns of more job
cuts this year despite management's indication that BWIA is likely to make
profits this year, according to a report released by Caribbean Investor.
Last year, 40 pilots and 8 managers were laid-off as the airline
rationalizes its fleet and tries to save at least US$1.4 million every
month.
"We've got to get costs down or we'll be out of business," said BWIA chief
Conrad Aleong in a press conference on Monday.
Aleong said that any retrenchment should be blamed on the unions for not
giving enough labor concessions. Employees agreed to only US$130,000 out of
the US$300,000 in monthly labor concessions needed.
Trade Minister Kenneth Valley believes that the airline's failure to get
labor concessions will hinder it from receiving future payments from the
US$13.5 million State Loan, from which BWIA had already received US$2
million, and a letter of comfort for another US$4 million loan.
BWIA had been receiving the State money though the employee's concessions
were not enough to qualify the airline for the loan.
But Aleong remains optimistic the unions will give the concessions, saying,
"We've been trying since September 11 (2001) not to do it so we're still
hopeful and we're still trying to talk with them and see if there are ways
to do it on a voluntary basis."
CONTACT: BRITISH WEST INDIES AIRWAYS
Phone: + 868 627 2942
E-mail: mailto:mail@bwee.com
Home Page: http://www.bwee.com/
Contacts:
Conrad Aleong, President and CEO (Trinidad)
Beatrix Carrington, VP Marketing and Sales (Barbados)
Paul Schutz, CFO (Trinidad)
=============
U R U G U A Y
=============
URUGUAY: Fitch Lowers Sovereign Rating to 'B-'; Outlook Negative
----------------------------------------------------------------
Fitch Ratings announced Tuesday a downgrade of Uruguay's sovereign long-term
foreign currency rating to 'B-' from 'B'. The long-term local currency
(Uruguayan Peso) rating remains at 'B' and the short-term foreign currency
rating remains at 'B'. The Rating Outlook is Negative.
The downgrade reflects heavy near-term public financing pressures, doubts
about longer-term debt sustainability, and ongoing vulnerabilities in the
banking system. Going forward, the ratings could be downgraded if Uruguay
fails to meet performance requirements for continued multilateral funding,
currently its only external financing source, or in the event of a
distressed debt exchange.
The ratings have been under pressure for some time, as first indicated by
the Negative Outlook assigned in July 2001. Since then, the Uruguayan
sovereign has undergone successive downgrades because of contagion from
Argentina's default, a banking crisis, drastic depreciation of the Uruguayan
peso, and, now, the poor outlook for public finances and growth in light of
the cumulative impact of these pressures. Even assuming Uruguay meets an
aggressive IMF primary surplus target that could range between 3-4% of GDP
this year, government debt to GDP could continue to rise beyond its current
level of over 90% of GDP because of continued weakness in the Uruguayan
peso. In this context, pressures are mounting for the Uruguayan government
to consider a comprehensive restructuring of its market debt, following the
small debt exchange done in November 2002.
In a November 27 press release, Fitch indicated concerns that the debt
exchange executed the previous day with domestic pension funds was a sign of
financial stress. Although the debt exchange was relatively small, covering
only a 1.5% of total public debt and 6% of 2003 maturities, it was
indicative of Uruguay's need to find sources of finance other than capital
market issues in order to fund its US$1.45 billion in 2003 maturities.
Authorities are also expecting to obtain a payment extension on US$170
million due to the IMF in 2003. Scheduled disbursements of US$1.37 billion
from multilaterals should cover these requirements, but will leave little
protection in the event of resident deposit outflows, other capital account
pressures, or underperformance on the 1.5% of GDP public sector deficit
target this year. Fitch believes that the November debt exchange could
presage additional exchanges, and that the risk that such exchanges may be
disadvantageous to investors, and perhaps constitute events of default, has
risen.
Looking ahead, the scheduled multilateral support and relief from the
November exchange could be sufficient for Uruguay to make it through 2003
without restructuring current maturities. Amortizations in 2004, estimated
at US$790 million, may also be manageable to the extent that multilaterals
increase their disbursements and allow their loans to be used for
refinancing the US$326 million in obligations due to private creditors. By
2005, however, amortizations rise to US$1.1 billion, roughly half of which
will be to private creditors. By then, Uruguay must have access to market
finance at reasonable rates in order have a sustainable debt load and to
avoid an involuntary restructuring. Yet with end-2002 public sector debt at
over 90% of GDP, and likely to rise this year, debt sustainability remains
in doubt and begs the question about whether a near-term debt restructuring
that reduces Uruguay's debt load would represent a plausible public policy
option.
CONTACT: Fitch Ratings, New York
Morgan C. Harting
Tel: 212/908-0820
Roger M. Scher
Tel: 212/908-0240
Media Relations:
Matt Burkhard
Tel: 212/908-0540
=================
V E N E Z U E L A
=================
PdVSA: Government May Split Company To End Strike
-------------------------------------------------
Struggling to put an end to a six-week strike, the Venezuelan government may
divide state-owned oil company Petroleos de Venezuela SA (PdVSA) into two,
the New York Times reports, citing Energy Minister Rafael Ramirez.
Ramirez disclosed that the government would split PdVSA into PdVSA East and
PdVSA West in a bid to restore daily production capacity of 3.1 million
barrels of crude oil a day. The energy minister noted that PDVSA is
currently turning out 800,000 barrels a day, a quarter of the Company's
output before the strike.
Venezuelan President Hugo Chavez is seeking to restore oil production and
exports that have been idled since the strike began. Overhauling the
Company, which controls the largest oil fields outside the Middle East and
is a major supplier to the U.S., may also help Chavez achieve his goal of
removing political opponents from managerial posts at the oil company,
analysts said.
The management breakup may eliminate middle- and upper-level executives who
have joined business and labor leaders in the strike aimed at ousting
Chavez.
PdVSA: Analysts Optimistic Foreign Unit Will Pay Debt
-----------------------------------------------------
Analysts expect Venezuelan state oil company PdVSA to make payments on its
debt held by its Cayman Island-registered financing arm, PDVSA Finance Ltd.
Bloomberg reports the Cayman Island unit, which Fitch rates BBB - six levels
above the rating for Venezuela's sovereign debt - has US$150-million debt
payment expiring this Feb. 15.
Analysts say the payment will be covered by at least US$300 million of
export revenue already accumulated in the Cayman Island- registered
company's account. PDVSA Finance makes quarterly payments on about US$3.5
billion in debt securities.
According to UBS Warburg, the finance arm's 9.95% bond due 2020 has fallen
11$ since the strike began Dec. 2 to 72.91 cents on the dollar. The bond
yields 14.18%, compared with a yield of 12.5% on Dec. 2.
Fitch Ratings analyst Sam Fox said that the state oil company has enough
money held in offshore accounts to keep current on payments for at least six
months. In addition, PDVSA Finance collects oil export revenue before it
reaches the federal government, strengthening its ability to make payments.
"The structure mechanism keeps the money out of the hands of the Venezuelan
government," Fox said.
PDVSA: Keeping U.S. Unit
------------------------
"Citgo is not for sale."
This was the statement made by Ali Rodrigues, president of Petroleos de
Venezuela SA, in response to reports indicating that the embattled Latin
American country would unload the Tulsa, Okla.-based PdVSA unit due to the
ongoing labor strike.
Knight-Ridder Business News recalls that media reports in Caracas and The
Wall Street Journal have disclosed that Venezuelan President Hugo Chavez had
discussed with Nigerian President Olusegun Obasanjo about selling Citgo to
Nigeria.
"Several of the newspapers had speculated about whether that was the case,
and we simply needed to clarify the issue," said Kent Young, a spokesman at
Citgo's Tulsa headquarters. "There really hadn't been anything up in the
air. Citgo is a U.S. corporation, and our primary goal is to supply our
networks with petroleum."
Citgo's five refineries in Texas, Louisiana and Illinois are specially
equipped to handle the heavy crude oil pumped in Venezuela. The company has
been able to make up for the loss of Venezuelan supplies by buying oil from
other markets, Young said.
"Our traders have done an excellent job of finding supplies on the open
market," he said. "We've purchased what we need and are going to keep our
refineries at full operation. We don't buy everything we need from Venezuela
anyway. It's not unusual for us to be out on the market looking for
additional supplies."
***********
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 2003. All rights reserved. ISSN 1529-2746.
This material is copyrighted and any commercial use, resale or publication
in any form (including e-mail forwarding, electronic re-mailing and
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