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/raid1/www/Hosts/bankrupt/TCRLA_Public/030314.mbx T R O U B L E D C O M P A N Y R E P O R T E R L A T I N A M E R I C A Friday, March 14, 2003, Vol. 4, Issue 52 Headlines A R G E N T I N A ARGENTINE BANKS: Court Ruling On Deposits May Prompt Bailout DISCO: SOBI Holding Press Conference on Ahold Case Progress HIDROELECTRICA EL CHOCON: Corporate Bonds Get `CCC' From Moody's INVERSORA ELECTRICA DE BUENOS AIRES: S&P Rates Bonds `raD' JUAN MINETTI: Struggling To Stay Afloat Amid Deep Recession ROYAL AHOLD: Execs Downplay Accounting Woes, Bankruptcy Threat SCOTIABANK QUILMES: Scotiabank Offers Buyout to Creditors * Courts Brace for Lawsuits After Landmark Deposit Ruling B E R M U D A GLOBAL CROSSING: Board Committee Says Investigation Mishandled TYCO INTERNATIONAL: Forecasts Up To $325M In Charges TYCO INTERNATIONAL: Keeps 4 Aircraft Despite Promise To Sell All B R A Z I L BRAZILIAN STEELMAKERS: Deem Meeting With Officials `Productive' SUDAMERIS BRASIL: IntesaBci Exec Confirms Sale Plans C O L O M B I A COLOR SIETE: Financial Health Improves TERMOEMCALI: Fitch Cuts Rating, Maintains Rating Watch Neg. * S&P Assigns Colombia's $500M Global Bond 'BB' E C U A D O R PACIFICTEL: To Begin ILD Contract Renegotiations March 24 M E X I C O AEROMEXICO: Fuel Price Spike Prompts Ticket Price Hike ALESTRA: Creditors Expected To Snub Debt Buyout Proposal COPAMEX: Poor Financials Prompts S&P Credit Rating Cut ======= P E R U ======= WEISE SUDAMERIS: Intesa Mulls Potential Sale U R U G U A Y * Uruguayan Delegation Off to New York, Italy to Sell Debt Plan * Fitch Downgrades Uruguay to 'CCC-' Negative Outlook V E N E Z U E L A PDVSA: Cuts Prices To Bolster Market Share After Strike PDVSA: Paraguana Refinery Resumes Exports PDVSA: Puerto La Cruz Terminal Returns to Normal Operations - - - - - - - - - - ================= A R G E N T I N A ================= ARGENTINE BANKS: Court Ruling On Deposits May Prompt Bailout ------------------------------------------------------------ Banks in Argentina are looking for assistance from the government in case the courts order all deposits be "redollarized," according to Business News Americas. In addition, they will seek compensation for the way last year's pesification was carried through. Economy Ministry officials met with banking representatives on Tuesday evening. Reports had it that the talks focused on compensating the sector for the asymmetric form of the pesification, which saw dollar deposits converted at ARS1.4 to the dollar and indexed to inflation, whereas dollar debts were converted at 1:1 and indexed to salaries. While inflation shot up 41% last year, salaries hardly budged. A report by business daily Cronista suggested that the government will use a 10-year BODEN bond to compensate the banks for the different indexing of the assets. However, the compensation will exclude the 20% of credits that debtors have defaulted on, the paper claimed. The government is in the process of compensating banks for converting the loans and deposits at different rates. Regarding possible redollarization of deposits, the government has said it won't discuss the type of assistance it might offer, saying last week's Supreme Court ruling was on one specific case and that the situation of other pesified deposits remains unclear. However, a report in local daily Infobae said the banks are proposing that they return part of the dollars to savers through a mix of cash and bonds and that the rest come from the government. Banks have said they are willing to pay the ARS1.4 plus inflation for each dollar swapped. The difference between that and the exchange rate would be made the government's responsibility. DISCO: SOBI Holding Press Conference on Ahold Case Progress ----------------------------------------------------------- The Dutch Foundation for the Investigation of Corporate Information (SOBI), which filed a complaint last month at the Amsterdam public prosecution office, alleging there may have been insider trading in Royal Ahold shares last year, will present "new developments" on the case Thursday at a press conference. Dow Jones recalls that the independent watchdog group's case relates to Ahold's dealings in former joint venture partner Velox Retail Holdings. Ahold teamed up with Velox Retail Holdings in 1998 to start retail supermarket operations in Latin America. Ahold took full control of the joint venture, called Disco Ahold, in August 2002, following Velox's default on various debts. At the center of the allegations is the link between Ahold chairman Cees van der Hoeven and Uruguay's Peirano family, which runs the Velox Group, Bank Velox in Argentina, Bank Aleman in Paraguay and Trade & Commerce Bank in the Cayman Islands. CONTACT: Ahold Corporate Communications +31.75.659.5720 HIDROELECTRICA EL CHOCON: Corporate Bonds Get `CCC' From Moody's ---------------------------------------------------------------- Moody's Latin America Calificadora de Riesgo S.A. issued junk ratings to US$140 million of Hidroelectrica El Chocon S.A.'s corporate bonds. According to the National Securites Commission of Argentina, the affected bonds were classified under `Simple Issue', and mature on February 14, 2004. The bonds were assigned a `CCC' rating last Thursday. The designation was based on the Company's financial health as of December 31, 2002. The bonds were described as "Obligaciones Negociables" The announcement did not indicate the reasons behind the rating issue, nor the CUSIP. INVERSORA ELECTRICA DE BUENOS AIRES: S&P Rates Bonds `raD' ---------------------------------------------------------- A total of US$230 million of Inversora Electrica de Buenos Aires S.A., were rated `raD' by the Argentine arm of Standard & Poor's International Ratings, Ltd. last Monday. An announcement in the National Securities Commission of Argentina indicated that the ratings were based on the Company's performance as of the end of September 30, 2002. The affected bonds include US$100 million of "Obligaciones Negociables Simples no convertibles en acciones", due on September 16, 2002. Another US$130 million of corporate bonds with the same description, but matures exactly two years after the first one were also affected. Standard & Poor's said that an obligation is rated 'raD' when it is in payment default, or the obligor has filed for bankruptcy. The 'raD' rating is used when interest or principal payments are not made on the date due, even if the applicable grace period has not expired, unless Standard & Poor's believes that such payments will be made during such grace period. JUAN MINETTI: Struggling To Stay Afloat Amid Deep Recession ----------------------------------------------------------- Juan Minetti, Argentina's second-largest cement producer, continues to reel from the effects of the country's economic recession. In a statement to Argentina's securities regulator, the CNV, the Company revealed that its losses widened to ARS443 million last year, from losses of ARS126 million in 2001. Minetti's domestic cement shipments fell 29% to 3.84Mt last year due to the recession, while Portland cement sales fell 29% to 1.3Mt. In January, credit rating agency Fitch maintained its Category 4 rating on the Company's shares. Category 4 is for low quality, medium liquidity shares with a low capacity to generate funds. The rating reflects the Company's weak fund generation denominated in pesos compared to the Company's high (over 90%) dollar-denominated debt, coupled with the effect of the peso's devaluation (73%) on Minetti's dollar-denominated costs, Fitch explained. Minetti is controlled by Swiss cement giant Holcim. ROYAL AHOLD: Execs Downplay Accounting Woes, Bankruptcy Threat -------------------------------------------------------------- Royal Ahold's recent disclosure about accounting irregularities in the U.S. and possible fraudulent transactions in Argentina could lead to a takeover of the Company or bankruptcy, according to speculations, which an executive from the Dutch retailer dismissed. "I don't believe a takeover is the only means of rescuing Ahold," said Henny de Ruiter, chairman of Royal Ahold's supervisory board. Ruiter also rejected suggestions Ahold could sell its flagship Dutch supermarket chain, Albert Heijn. SCOTIABANK QUILMES: Scotiabank Offers Buyout to Creditors --------------------------------------------------------- Scotiabank announced Wednesday it is funding an offer to purchase outstanding medium term notes and certain other debt of its Argentine subsidiary, Scotiabank Quilmes S.A. (Quilmes), which is now in judicial liquidation. The offer recognizes the difficult situation facing creditors and is intended to provide certainty of a partial recovery on the amounts owing by Quilmes to them. The offer is being made by a trust established by J.P. Morgan Trust Company (Cayman) Limited as trustee. Scotiabank's funding of the offer will total a maximum of US$37.4 million and is expected to have minimal net financial impact on the Bank. This amount has been considered in the Bank's previous net provisioning related to Argentina. The offer is consistent with Scotiabank's commitment throughout this process to maximize returns for Quilmes' creditors. Creditors who tender to the offer will receive cash of US$0.20 for each US$1.00 of the outstanding debt that is eligible for purchase and will assign to the trust all claims and rights relating to the indebtedness owing to them by Quilmes, including claims against third parties. Creditors who file claims with the Quilmes liquidator before tendering to the offer will retain the possibility of receiving any liquidation distributions for their tendered debt. In addition, Scotiabank does not intend to benefit from any recoveries that may be made on the Quilmes debt it holds with the intent of enhancing the position of other creditors of Quilmes. Documentation regarding the offer will be provided to noteholders and other creditors in permitted jurisdictions shortly. The offer is scheduled to expire at 12:00 noon, EST, on April 22, 2003. * Courts Brace for Lawsuits After Landmark Deposit Ruling --------------------------------------------------------- Lawyers polled by Reuters recently confirmed receiving hundreds of inquiries, a week after a landmark ruling declared unconstitutional the 'pesofication' of dollar deposits last year. "We have had non-stop inquiries since the ruling. So far we have several hundred new cases to present next week," lawyer Felix Pazo, who works for one of Argentina's biggest law firm, told Reuters late last week. "If inquiries and decisions to lodge cases continue at this rate in coming weeks, we are expecting thousands," he said. Reuters says there are about 250,000 depositors who have not yet taken legal action, a year after the government forcibly converted all dollar deposits into peso and subsequently froze it out of reach. Over 100,000 cases are currently pending and this number could grow dramatically in the coming weeks, according to lawyers. By its estimate, Reuters says the banks and the cash-starved Argentine government could face a US$20 billion claim if the high court decision -- ordering the redollarization of the devalued US$247 million fixed-term deposit held by San Luis province -- will not be overturned. The government has 60 days to work out how the payment will be made. Meanwhile, analysts warn the barrage of cases expected to follow the landmark decision could undermine an aid pact sealed with the IMF in January. Accordingly, it will put pressure on the fragile banking system, which has shouldered billions of dollars in losses due to the devaluation. The IMF has yet to comment on the ruling, while the government has not yet say whether or not it will print bonds to pay its share of dues to depositors, Reuters says. ============= B E R M U D A ============= GLOBAL CROSSING: Board Committee Says Investigation Mishandled -------------------------------------------------------------- A board committee for Global Crossing believes the investigators on some transactions of the bankrupt telco mishandled the accusations made by former Global Crossing vice president Roy Olofson. Mr. Olofson said in August that capacity swaps between Global Crossing and Qwest were intended to inflate earnings. He was then fired in November. Lawyers at Coudert Brothers LLC, which was retained last April to assist a Global Crossing board committee that was put together to probe Olofson's allegations, said that the investigation, done by lawyers at Simpson Thacher & Bartlett "proved to be flawed and incomplete", reports the Bermuda Sun on Wednesday, citing a report filed with the U.S. Bankruptcy Court in Manhattan. "The Company's failure to respond in a timely and effective manner to Olofson's allegations was caused by the failure of the company's acting general counsel and primary outside counsel to properly investigate the allegations and implement the appropriate response," said Coudert Brothers. Lynn M. LoPucki, a professor at the University of California, Los Angeles School of Law, said, "It's inconceivable that Global Crossing's board wouldn't bring suit or try to negotiate a financial settlement with Simpson Thacher." She said that Global Crossing is likely to argue that this error put the Company in a bankruptcy it did not need to be in. Global Crossing filed for bankruptcy in January 2002, with US$12.4 billion in debt. Coudet Brothers alleged that SimpsonThatcher conducted one interview, of Joe Perrone, the chief accounting officer and Olofson's supervisor. They added that Simpson Thacher failed to obtain supporting documents identified by Perrone, did not consult with or share the letter with Global Crossing's auditors at Arthur Andersen LLP. Simpson Thatcher allegedly sought to minimize its responsibility by denying that it had been engaged to conduct an investigation, after that, said Coudert Brothers. CONTACT: GLOBAL CROSSING Press Contacts Kendra Langlie Phone: + 1 305-808-5912 E-mail: kendra.langlie@globalcrossing.com Analysts/Investors Contact Ken Simril Phone: +1 310-385-3838 E-mail: investors@globalcrossing.com TYCO INTERNATIONAL: Forecasts Up To $325M In Charges ----------------------------------------------------- Tyco International Ltd. (NYSE: TYC, BSX: TYC, LSE: TYI) announced Wednesday that in the quarter ending March 31, 2003, it expects to take non-cash, pre-tax charges that are estimated to be between $265 million and $325 million for issues identified primarily in its Fire & Security Services business. These charges are expected to lower earnings by $0.09 to $0.11 per share. In the Company's Forms 10-K and 8-K filed December 30, 2002, based on Tyco's review and analysis of its accounting and internal procedures during the second half of 2002, the Company committed to implementing a process of intensified internal audits, detailed controls and in-depth operating reviews of each business segment. As a result of these audits and reviews, Tyco has identified a number of issues, primarily in its Fire & Security Services business. These charges result from conforming certain accounting policies across a number of Fire & Security European businesses that were recently reorganized under a single management team, improving compliance with other existing policies, conducting additional account reconciliation procedures, as well as other matters. The Company's process of intensified internal audits and detailed controls and operating reviews of business segments is still in its implementation phase and is designed both to identify any legacy accounting issues, but also, and more importantly, to create and maintain on an ongoing basis the policies and culture that will meet Tyco's goals of integrity and transparency in all of its business practices. The Company anticipates that intensified audits and reviews will remain a continuing part of Tyco's regular operational procedures. Updated Guidance The Company has tightened its cash flow guidance for fiscal 2003 to a range of $2.6 billion to $3.0 billion. Under a new definition of free cash flow that the Company will adopt beginning in the current fiscal quarter, free cash flow for the fiscal year is expected to range from $1.45 billion to $1.85 billion. In determining free cash flow under this new definition, the Company will include the effect of spending on ADT dealer account acquisitions as well as purchase accounting and holdback liabilities related to prior acquisitions. The Company also said that because of a weakening in the economies in which it operates, particularly over the past 30 days, as well as declining margins at Tyco Fire & Security, the Company has reduced its operational fiscal 2003 EPS guidance, excluding the non-cash charges announced Wednesday, to a range of $1.40 to $1.50. Including these non-cash charges, EPS for the year is expected to range from $1.30 to $1.40. The Company will discuss these issues and the updated guidance at its investor conference on Thursday, March 13. This conference will be web cast at http://www.tyco.combeginning at 8:15 a.m. EST. New Leadership at Tyco Fire & Security Services Tyco also announced Wednesday that it has appointed David Robinson, currently the President of Tyco Plastics & Adhesives, as President of the Company's Fire & Security Services segment. The Company terminated Jerry Boggess, who had served as President of Tyco Fire & Security Services. Earlier, in January of this year, Tyco appointed Mark Schmitz, a 20-year veteran of General Motors, as Chief Financial Officer of Tyco Fire & Security. As a result of Mr. Robinson's appointment to head the Fire & Security Services segment, Tyco has named Terry Sutter, the former President of Specialty Chemicals at Cytec Industries, to succeed Mr. Robinson as President of Tyco Plastics & Adhesives. Ed Breen, Chairman and Chief Executive Officer of Tyco, commented: "Our Fire & Security unit has solid business fundamentals. The demand for Fire & Security's 'life safety' services and products remains strong in these uncertain times, and its powerful brand names, with leading positions in global markets, provide steady recurring revenue. However, we have concluded that management changes are necessary in order for us to fully address the opportunities in this business, strengthen its operating margins, improve performance and make it a more efficient and well-run enterprise." Mr. Breen continued. "We believe Dave Robinson is the right person to take the helm of the large businesses that make up Fire & Security. He represents an unusual combination of leadership, hands-on management skills, industrial and consumer experience, financial expertise and personal integrity. We recruited him to Tyco late last year because he reflects the uncompromising, high standards we are setting for leaders throughout the new Tyco. I have confidence in the future of the Fire & Security business under Dave Robinson and expect that it will improve its performance and make an important contribution to Tyco's long- term success." Mr. Robinson said: "Tyco Fire & Security is a great business with terrific products, enviable market share and outstanding employees. I intend to move quickly to improve upon every aspect of its operations. I will work with Ed Breen and his team to improve the performance and productivity of this business and set the highest standards of quality in delivering products and services to our customers." Background on David Robinson Mr. Robinson was brought to Tyco by Mr. Breen in November 2002. Prior to joining Tyco, Mr. Robinson had over 17 years of experience with Motorola (formerly General Instrument). In addition to his position as Executive Vice President and President of its Broadband Communications Sector, Mr. Robinson also served as Senior Vice President and General Manager, Digital Network Systems; Director, Cableoptics, Wireless and Headend; Product Manager; and Financial Analyst during his career at General Instrument. Mr. Robinson graduated with a B.A. from Bates College and received his M.B.A. in general management from The Amos Tuck School, Dartmouth College. Background on Terry Sutter Mr. Sutter joins Tyco from Cytec Industries, one of the world's leading specialty chemicals companies, where he has served as President of the Specialty Chemicals division since 2002. Prior to joining Cytec, Mr. Sutter served as President, Industry Solutions at Honeywell/Allied Signal, Inc., where he had responsibility for a $1.5 billion business unit with over 6,000 employees worldwide. While at Honeywell/Allied Signal, Mr. Sutter also served as Vice President-General Manager, Fluorine Products and Vice President, Marketing & Business Development. Mr. Sutter also spent eight years at Morton International in its Adhesives and Specialty Polymers Group, most recently serving as the business manager of the Thermoplastic Polyurethanes division. About Tyco Fire & Security Services Tyco Fire & Security Services designs, manufactures, installs and services electronic security systems, fire protection, detection and suppression systems, sprinklers, and fire extinguishers. Tyco Fire & Security Services consists of more than 60 brands that are represented in over 100 countries. Its products are used to safeguard firefighters, prevent and fight fires, deter thieves, and protect people and property. About Tyco International Ltd. Tyco International Ltd. is a diversified manufacturing and service company. Tyco is the world's largest manufacturer and servicer of electrical and electronic components; the world's largest designer, manufacturer, installer and servicer of undersea telecommunications systems; the world's largest manufacturer, installer and provider of fire protection systems and electronic security services and the world's largest manufacturer of specialty valves. Tyco also holds strong leadership positions in medical device products, and plastics and adhesives. Tyco operates in more than 100 countries and had fiscal 2002 revenues from continuing operations of approximately $36 billion. CONTACT: Gary Holmes (Media) 212-424-1314 Kathy Manning (Investors) 603-334-3900 TYCO INTERNATIONAL: Keeps 4 Aircraft Despite Promise To Sell All ---------------------------------------------------------------- Tyco International, Ltd. is still in possession of a small group of planes despite promises to sell off "all company aircraft". The Boston Globe reports that the Company is using the airplanes to ferry executives and directors to their annual meeting at their home base in Bermuda. John F. Fort, who replaced former chief executive Dennis Kozlowski, promised in June 13 last year that the Company would save US$125 million by consolidating offices, reducing corporate staffing and selling assets, "including all company aircraft." Elizabeth Mather, a spokesperson for Tyco, offered the Company's side of the story. According to Ms. Mather, the planes were used to save the executives' time, as "it is the most efficient way for them to travel." "It is in the interests of shareholders and employees that management has ready access to its many business locations," she added. The source also said that the Company has sold all other aircraft in the Company fleet except for a helicopter and three jets. The Company had 13 aircraft before the present chief executive Edward Breen took office in July. She also said that executives who make their own way to Bermuda are reimbursed at the same rate of a first-class ticket. In a statement, the spokeswoman said, "The Company now has four aircraft. In addition, the Company exited two of the airplane hangar facilities [one owned, one leased] and now leases significantly less hangar space. Since last June, the Company has cut the corporate aviation budget dramatically." But the Company did not reveal the amount saved. The Boston Globe said that the private transportations might save the executives' time, but it does not appear to be cheaper. According to Richard Aboulafia, vice president of the Teal Group, an aerospace consulting firm in Fairfax, Va., flying on a corporate jet is more expensive than last-minute coach tickets or early-booked first-class seats. "The differential is huge," he said, adding, "My best estimate is first-class would cost maybe US$5,000 [a seat] and the private jet would cost US$15,000. The price of coach seats varies widely, but a last-minute ticket for the annual meeting from Boston could be purchased for less than US$1,000. Mr. Aboulafia added the other companies around the country are finding ways to reduce the cost of travel for executives. Some have even eliminated their private jets across the board. Tyco's 10-K annual report indicated that for the fiscal year ending September 30, 2002, it has allowed its directors to use Company aircraft for personal travel. =========== B R A Z I L =========== BRAZILIAN STEELMAKERS: Deem Meeting With Officials `Productive' --------------------------------------------------------------- Brazilian steelmakers met with sector representatives on Tuesday to discuss the increase in steel prices over the past year. Both parties said the meeting was "productive", and Development minister Luiz Fernando Furlan outlined plans to create a forum to discuss oil prices and contracts. Previous local reports suggested that the steelmakers in the country would withhold investments if the government intervenes with the industry. At the meeting, IBS, an association of steelmakers in Brazil explained that companies have been attending to the demands of the domestic market. Companies said that the effect of exchange rates on the price of imported inputs as well as reference prices on the international market forced them to increase their products' prices. The IBS added that the world steel industry has suffered losses in recent years, proving the cyclic nature of the world steel market. The organization criticized the notion suggesting the government should apply taxes or restrict exports. "The average increase of 29.5% of exports in steel intensive sectors in the second half of 2002 compared to the previous semester demonstrates that steel does not represent a barrier to the competitiveness of those sectors," said the IBS. "We will discuss long-term forecasts and contracts in exchange for prices. Sectors that export could concede part of the prices they obtain in dollars, and sectors that do not export could sit at the negotiating table and discuss sales volumes, " said Jose Armando Campos, the president of IBS. However, Rony Stefano, a steel analyst for investment bank BBV, believes that the government will not take any drastic measures against the steelmakers. SUDAMERIS BRASIL: IntesaBci Exec Confirms Sale Plans ---------------------------------------------------- Sudameris Brasil will go on the block this year, confirmed Corrado Passera, the CEO of Sudameris' Italian parent IntesaBci, according to local daily Valor Economico. Financially, Sudameris Brasil is doing well with net income jumping 23.9% to BRL220 million (US$62.7mn) in 2002 from that of the previous year's figure. Nevertheless, the unit has to go under the gavel this year as part of its parent's plan to exit the troubled South American market and boost profitability. Last year, IntesaBci negotiated the sale of Sudameris with the country's second largest private bank Itau. However, talks broke down in November when the two parties could not agree on the price. Itau had initially accepted to buy Sudameris for US$1.45 billion, but the depreciation of Brazil's currency during the 11 months of negotiations made the price too high in local currency. CONTACT: IntesaBci SpA Piazza Paolo Ferrari 10 20121 Milano Italy Tel +39 02 88 441 Fax +39 02 8844 3638 Homepage: http://www.intesabci.it/ Contact: Corrado Passera - Chief Executive Officer Giampio Bracchi - Vice Chairman Gianfranco Gutty - Vice Chairman USIMINAS: In Talks With CVRD For Rail Production ------------------------------------------------- Brazilian flat steelmaker Usinas Siderurgicas de Minas Gerais Usiminas PN A (Usiminas) confirmed that it is developing a project to build railroad cars, according to Business News Americas. Usiminas spokesperson Paulo Paiva said that the project will be done in partnership with local mining form CVRD. Local news source, Valor Economico, said that CVRD commissioned Usiminas to renew its fleet of rail cars as the cost of importing the products are more expensive, while the lone local producer, AmstedMaxion is working at full capacity. CVRD plans to obtain 1,800 wagons, and is considering getting another 1,200. Rinaldo Campos Soares, president of Usiminas, said that studies are being under way, and the project should be completed soon. The report indicated the Usiminas' construction arm, Usiminas Mecanica would take care of the production. Business News Americas added that Mecanica may use its factory in Santana do Paraiso in Minas Gerais. The said factory is currently on standby. The subsidiary's chief Guilherme Muylaert Antunes said that they would need to invest in technology for making wheels and axles. He added that the Company may contact other companies in making these items. CVRD spokesperson Roberto Largman said, "The Company is carrying out an evaluation of the technical capacity of possible suppliers." If the project is approved, Mecanica is expected to start producing between 60 to 70 wagons every month. Usiminas may even consider creating a new division. CONTACT: Usinas Siderurgicas de Minas Gerais Usiminas PN A Rua Prof. Jose Vieira de Mendonca, 3011 Engenheiro Nogueira 31310-260 Belo Horizonte - MG Brazil Phone: +55 31 3499-8000 Fax: +55 31 3499-8475 Home Page: http://www.usiminas.com.br Contact: Jose Augusto Muller de Oliveira Gomes, Chairman =============== C O L O M B I A =============== COLOR SIETE: Financial Health Improves --------------------------------------- Comercializadora Internacional Color Siete, a Colombian manufacturer of men's and women's clothing, has increased the number of its workers. Last year in July, the Company only had 85 employees, but now, the Company has doubled that size, and will probably increase it to between 300 and 350 in the near future. This indicates that the Company, which entered pre-bankruptcy proceedings under Colombia's Ley 550 legislation eight months ago, is slowly getting back on its feet. Color Siete is close to regaining its financial health following consolidation of its own brand, the production of a private label for Sears in Mexico, and manufacturing for other companies. Color Siete has been in business for 15 years. TERMOEMCALI: Fitch Cuts Rating, Maintains Rating Watch Neg. ----------------------------------------------------------- Fitch Ratings has lowered the rating on the TermoEmcali Funding Corp.'s US$165 million 10.125% senior secured bonds due 2014 to 'CC' from 'CCC'. The rating remains on Rating Watch Negative. Fitch believes that default is highly probable at the 'CC' rating level. The rating action follows the Empresas Municipales de Cali (Emcali) payment default under the 20-year power purchase agreement (PPA) with TermoEmcali, and reflects the higher level of uncertainty in receiving future Emcali payments. As a result of the PPA payment default, Fitch has lowered Emcali's implied foreign currency rating to 'D' from 'CCC.' Emcali is the contractual offtaker of the TermoEmcali project under the 20-year PPA and is the project's sole source of revenue. As previously stated in the Fitch press release dated February 4, 2003, a federal government resolution implemented in late January 2003 by the Superintendence of Public Services (Superintendent) addressed a possible liquidation of Emcali in the near term. A subsequent resolution announced on March 5, 2003 further clarify the extent of the Superintendent's takeover of Emcali for liquidation purposes and included the suspension of all Emcali payment obligations accrued up to the date of the March 5th resolution. As a result of the March 5th resolution, Emcali failed to make a PPA payment of approximately US$4.2 million due on March 6, 2003. Total outstanding PPA payments that Emcali owes to TermoEmcali amount to approximately US$19 million. Going forward, it is uncertain whether Emcali will be able to resume its contractual payment obligations to TermoEmcali. Although TermoEmcali has sufficient funds to fully cover the upcoming US$5.3 million debt service payment on March 15, 2003 without relying on its debt service reserve, TermoEmcali's liquidity position will diminish over the coming months and will likely require external liquidity support for subsequent debt payments on the project bonds. TermoEmcali's external liquidity sources include two letter of credit-backed reserve funds: a letter of credit that backstops Emcali's PPA obligations of approximately US$11.3 million, and a US$12.4 million debt service reserve letter of credit, which was recently renewed and currently expires in April 2004. It is uncertain at this time whether the Emcali PPA-letter of credit will be available to TermoEmcali. The Rating Watch Negative addresses the heightened degree of uncertainty related to TermoEmcali's ability to continue to meet its subsequent quarterly debt service payments on a timely basis without external liquidity support, the possible renegotiation of the TermoEmcali PPA, and the possibility of Emcali's liquidation over the near term. Emcali is the exclusive provider of electrical power services, water and sewer services and local exchange telephone services in the city of Cali, Colombia. The company is wholly owned by the city of Cali. TermoEmcali is owned 54% by InterGen, a subsidiary of Bechtel and Shell, 43% by Emcali, and 3% by Corporation Financiera del Pacifico (CFP) and other private investors. CONTACT: Caren Y. Chang 1-312-368-3151, Chicago John W. Kunkle, CFA 1-312-606-2329, Chicago Giovanny Grosso 1-312-368-2074, Chicago Glaucia Calp, 571-347-4573, Bogota, Colombia Media Relations: James Jockle 1-212-908-0547, New York * S&P Assigns Colombia's $500M Global Bond 'BB' ----------------------------------------------- Standard & Poor's Ratings Services said Wednesday that it assigned its 'BB' long-term foreign currency senior unsecured debt rating to the Republic of Colombia's US$500 million 10.375% 30-year global bond, due January 2033. At the same time, Standard & Poor's affirmed its 'BBB/A-3' local and 'BB/B' foreign currency sovereign credit ratings on the republic. The outlook on the ratings remains negative. "The continued negative outlook reflects the uncertainty for passage of the June 2003 national referendum, which would implement a number of political and economic measures through changes in the constitution," said sovereign analyst Richard Francis. "The economic measures contained in the referendum are critical to a achieving a public sector primary surplus of close to 3% of GDP. Standard & Poor's estimates that a primary surplus of this magnitude is needed to stabilize to government's adverse debt dynamics at nearly 50% of GDP," he added. Colombians are expected to vote on a raft of political and economic measures that will also gauge the popular backing of the administration of President Alvaro Uribe. According to Mr. Francis, there has been a marked boost in domestic confidence despite the negative outlook, due to the strengthening of the military and the passage of fiscal measures in late December that should narrow the government's overall deficit by nearly 1% of GDP in 2003. The rise in confidence should stimulate private sector demand, leading higher economic growth. "The referendum remains key, however, because the freeze in public spending envisioned in the law is needed to stabilize the government's debt dynamics. If the economic measures in the referendum fail, the government's debt will continue to rise unless alternatives, such as new taxes, are adopted in their place," Mr. Francis noted. "Furthermore, the country's governability could be weakened if the referendum is not passed," he concluded. ANALYSTS: Richard Francis, New York (1)-212-438-7348 John Chambers, CFA, New York (1) 212-438-7344 ============= E C U A D O R ============= PACIFICTEL: To Begin ILD Contract Renegotiations March 24 --------------------------------------------------------- Ecuadorian fixed line operator Pacifictel will kick off contract renegotiations with 19 long distance carriers on March 24 and expects to start signing revised contracts by May 10, revealed chairman David Jaramillo. According to Business News Americas, Pacifictel is trying to renegotiate ILD contracts in order to save money and standardize agreements. Mr. Jaramillo said call termination fees paid by the carriers represent 20% of Pacifictel's income. He also noted that some carriers had managed to negotiate more advantageous contracts than others. Meanwhile, Pacifictel CEO Mauricio Galindo clarified that Pacifictel and fellow fixed line operator Andinatel will have equal shares in the mobile telephony venture they plan to set up with Cuenca-based operator Etapa due to the fact that they are sister companies, by virtue of their mutual shareholder - the government's solidarity fund FS. Mr. Galindo made the clarification following reports by the local press that Andinatel would have a 51% stake in the venture. =========== M E X I C O =========== AEROMEXICO: Fuel Price Spike Prompts Ticket Price Hike ------------------------------------------------------ Mexican flagship carrier Aeromexico, which is struggling to deal with an increase in fuel prices due to the impending war in Iraq, added a temporary surcharge to domestic and international ticket prices. According to an EFE report, domestic ticket prices will cost an additional MXN50 ($4.50), U.S.-bound flights will go up by US$5 and flights to Europe and South America will increase by US$10. "This phenomenon is taking place in several airlines throughout the world ... it must be pointed out that fuel costs are one of an airline's biggest expenses and, at the same time, one of the least predictable," Aeromexico explained. "Suffice it to say that in the last year, the price of jet fuel in pesos skyrocketed 68 percent," the carrier said. Historically, Aeromexico's fuel expenses were close to 13% of operating costs, but the recent crisis and the hike in oil prices have increased it to 19%, equivalent to 60-80 million pesos ($5.4 million to $7.2 million) per month. ALESTRA: Creditors Expected To Snub Debt Buyout Proposal -------------------------------------------------------- The lack of cash in Mexican telecommunications company Alestra SA's an offer to replace US$570 million in defaulted bonds is likely to dampen creditors' interest, according to bondholders. Reuters recalls that Alestra's shareholders offered bondholders US$65 million to buy back some of the bonds at 43 cents on the dollar. The rest would be exchanged for bonds with longer maturities in a swap that requires approval from holders of 95% of the bonds. "People would like to see more cash put on the table so that the company can both pay a higher price for the bonds and retire more of the debt," said Robert Rauch, director of research for Gramercy Advisors, which owns Alestra bonds. Alestra's bondholders, who include Latin America's wealthiest businessman, Carlos Slim, are betting 49% owner AT&T Corp. considers its Mexican operations strategic enough to increase the US$32.5 million it pledged to support the restructuring offer. But what concerns them most is that even if shareholders offer more cash, Slim, the owner of more than US$100 million in Alestra bonds, won't accept the terms. Mr. Slim controls Alestra's largest competitor, Telefonos de Mexico SA, and has enough bonds to block an agreement under terms set by the Company for acceptance of its offer. Alestra's other shareholders are steel and chemical producer Alfa SA and Grupo Financiero BBVA Bancomer SA. CONTACT: ALESTRA, S. DE R.L. DE C.V. Investor Relations: Alberto Guajardo Phone: (52-818) 625-2219 E-mail: aguajard@alestra.com.mx COPAMEX: Poor Financials Prompts S&P Credit Rating Cut ------------------------------------------------------ Standard & Poor's Ratings Services said Wednesday it lowered the local and foreign currency corporate credit ratings on consumer products and paper producer Copamex S.A. de C.V. to 'B+' from 'BB-'. The downgrade reflects Copamex's inability to improve its operating performance and reduce debt in a material way, resulting from the highly competitive environment and current market conditions that have deteriorated its financial profile. The outlook is stable. Copamex's debt totals US$508 million. The Mexican-based company has not been able to improve its operating margins due to the increased price competition from imports in the packaging division; lower prices in the international paper markets; and to a lesser extent, competitive pressures in the consumer products division. As of December 2002, operating margins decreased to 15% compared to 17% as of December 2001. Although during the past year, the company was able to reduce debt by around US$15 million and to refinance an important portion of its short-term debt, leverage (US$508 million as of December 2002) remains high with a total debt to EBITDA and EBITDA interest coverage ratios of 4.5x and 2.4x respectively, as of December 2002, compared with 3.6x and 2.4x as of December 2001. Current total debt to EBITDA is 4.19x. Liquidity is tight. At December 2002, Copamex had around US$8 million in cash and short-term investments, and about US$29.6 million in short-term lines of credit available. The company has US$123 million in short term debt for 2003. The stable outlook reflects Standard & Poor's expectation that the company should be able to gradually increase its cash flow generation (in line with economic recovery in the country) and reduce its debt levels by continuously increasing its higher value-added product mix. Standard & Poor's expects that the company will be able to continue rolling over its existing short-term obligations, and has incorporated this assumption in the ratings. Any indication that the refinancing of the company's debt is at risk might result in a rating or outlook change. Additionally, if the company's financial position requires it to seek secured financing, the senior unsecured debt rating could be lowered due to structural subordination. Copamex is one of the leading producers of value-added paper- based consumer products and industrial paper products in Mexico, with sales of US$754 million as of December 2002. The company participates in three major segments: consumer products, packaging, and printing and writing paper, which as of December 2002 represented 48%, 27%, and 24% respectively of the company's total sales. ANALYSTS: Beatriz Coll, Mexico City (52) 55-5279-2016 Patricia Calvo, Mexico City (52) 55-5279-2073 ======= P E R U ======= WEISE SUDAMERIS: Intesa Mulls Potential Sale -------------------------------------------- Italy's Banca Intesa SpA said it is not ruling out a possible sale of its Peruvian subsidiary Banco Wiese Sudameris, Dow Jones Newswires reports, citing Intesa chief executive Corrado Passera. Mr. Passera's comments contradicted last month's announcement that the Italian bank, after completing a review of Wiese's financial situation, will no longer sell the subsidiary. Instead, it will support the bank by investing US$150 million in it. Indeed, just recently, Banca Intesa sent US$150 million to continue Banco Wiese Sudameris' restructuring. Now, however, Intesa is indicating that it will put Banco Wiese Sudameris on the block as part of an effort to rid itself of various Latin American holdings. The Italian bank admits the operation won't be easy. "In Peru, given the size of the bank and the market share, it is difficult to sell," Mr. Passera said, adding however, that no final decision has been made. Banco Wiese Sudameris has delisted its New York-traded ADR, but it continues to have a small float on the Lima Stock Exchange. CONTACT: IntesaBci Investor Relations: Piazza della Scala, 6 20121 - Milano Fax: (39) 02 8850 2587 E-mail: investorelations@intesabci.it Contacts: Andrea Tamagnini, Tel: (39) 02 8850 3180 Marco Delfrate, Tel: (39) 02 8850 2622 Cristina Paltrinieri, Tel: (39) 02 8850 3571 Carla De Alberti, Tel: (39) 02 8850 3159 Giorgio Grossi, Tel: (39) 02 8850 3189 Anna Gervasoni, Tel: (39) 02 8850 3466 Maria Vittoria Buscicchio, Tel: (39) 02 8850 7114 Manuela Banfi, Tel: (39) 02 8850 3273 BANCO WIESE SUDAMERIS Dionisio Derteano, 102 Esquina con Miguel Seminario Lima 27, Peru Phone: +51-1-211-6000 Fax: +51-1-440-7945 Website: http://www.bws.com.pe Luis F. Wiese de Osma, Chairman Eugenio Bertini, CEO Carlos Palacios Rey, President, Executive Committee ============= U R U G U A Y ============= * Uruguayan Delegation Off to New York, Italy to Sell Debt Plan --------------------------------------------------------------- No less than the central bank chief himself was among the official delegation that embarked on a road trip Wednesday to convince bondholders to participate in Uruguay's voluntary debt swap, says Reuters. The trip includes a trans-Atlantic swing, from New York to Italy, says the news agency, which added that the move could heap praises from Wall Street. Accordingly, foreign creditors have long waited a similar move by neighbor, Argentina, which ironically triggered Uruguay's decline from being one of Latin America's stable economies. The government announced the long-speculated voluntary debt- restructuring program last Tuesday, offering longer-term bonds for debt coming due over the next five years. "It is aimed at clearing financing over the next five years. This will work if there is a high level of participation," Reuters quoted Central Bank President Julio de Brun as saying recently. To be coordinated by U.S. investment bank, Salomon Smith Barney, the restructuring described by the government as "market friendly" could cover up to US$3 billion in debt issued in foreign currency, says Reuters. Uruguay's debts total US$12 billion and are rated 'CCC' and 'CCC-' by Standard & Poor's and Fitch, respectively. * Fitch Downgrades Uruguay to 'CCC-' Negative Outlook ----------------------------------------------------- Fitch Ratings downgraded Wednesday Uruguay's long-term foreign currency and long-term local currency (Uruguayan Peso) ratings of Uruguay to 'CCC-' from 'B-' and 'B', respectively. The short-term local currency and foreign currency ratings were both lowered to 'C' from 'B'. The Rating Outlook remains Negative. The downgrades come on the announcement yesterday of the government's plans for a debt exchange with bond investors. The negative rating outlook reflects concern that the debt exchange is likely to imply net present value (NPV) losses to bond investors which would be considered a default event by Fitch. To the extent that certain local currency bonds are excluded from the exchange, these instruments might not be downgraded further. The government has elected to restructure obligations on domestic and externally-issued debt with original maturities of one year or more in order to close a substantial fiscal financing gap. Based on its expectations of a budget deficit higher than the target identified in the previous IMF program, Fitch estimates this year's gap at about $450 million, given scheduled amortizations of $1.45 billion and expected disbursements of $1.37 billion. Available liquidity is insufficient to cover the estimated gap in 2003; gross international reserves were $520 million at March 10, and were negative net of IMF borrowing. Uruguay currently has no access to capital markets. The ratings have been under pressure for some time, as first indicated by the negative rating outlook assigned in July 2001. Since then, Uruguay's sovereign ratings have 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. General government debt to GDP rose from 54% in 2001 to about 94% at year-end 2002 because of the peso devaluation, economic contraction of about 10%, and continued fiscal deficits. Pending debt exchanges are likely to be considerably more comprehensive than the small one affected with pension funds in November. Because US$4.5 billion of Uruguay's US$11.5 billion in public debt is with multilaterals creditors and cannot generally be rescheduled, more of the adjustment burden will have to fall on bond debt, which accounts for US$5.8 billion, and is nearly all in U.S. dollars. In order for bond debt restructuring to significantly improve the sustainability of Uruguay's debt, it would have to improve the debt's net present value, a trigger for Fitch's definition of default, even if defined by the government as 'voluntary'. Once the terms of the debt exchange are announced, Fitch would lower the ratings to 'CC' if there are clear NPV losses to bond investors. If local currency instruments are excluded from the exchange, the long-term local currency rating could remain at 'CCC-'. After such an exchange is completed, the ratings for those instruments included would be assigned a default rating. The new debt instruments created by the exchange would be assigned a non-default rating once Fitch has completed an assessment of the terms and seniority of the new debt, as well as the capacity and willingness to meet these obligations going forward. ================= V E N E Z U E L A ================= PDVSA: Cuts Prices To Bolster Market Share After Strike ------------------------------------------------------- Petroleos de Venezuela, S.A. is offering discounts on crude oil to recapture market lost during a two-month national strike. Local paper El Universal cited former employees of the Venezuela's state oil Company saying that as much as US$7 per barrel is offered. Former PDVSA sales chief Ciro Izarra, said that the Company is offering discounts as it is having a hard time welling its crude. Presently, light crude from the country sells for about US$37 per barrel, said Universal. Mr. Izarra added that the Company is importing gasoline to meet domestic demand. For this month alone, some 3.8 million barrels have been imported. A total of 11.15 barrels were imported since the strike. Workers, except those from the oil industry ended the strike last month. The strike, aimed at deposing President Hugo Chavez, almost totally crippled Venezuela's main source of income - oil. Mr. Chavez retaliated by dismissing thousands of workers from PDVSA. PDVSA: Paraguana Refinery Resumes Exports ----------------------------------------- The Paraguana refinery complex owned by Petroleos de Venezuela SA (PDVSA), Venezuela's state oil Company, has resumed exports of petroleum products, though at a level lower than before the national strike. An executive who requested anonymity told Dow Jones Newswires that the oil tanker Caura, from PDVSA's Marina unit left port with 185,000 barrels of gas oil and lubricants on Tuesday. The products will be brought to Panama, said the source. Dow Jones added that the refinery, which closed down in December, has not resumed gasoline production as of the time of the report. However, the production of gas oil has been restarted, and about 20,000 - 30,000 barrels are produced daily, said former PDVSA crude trading manager, Ciro Izarra. Mr. Izarra's figures did not corroborate with government reports that that the refinery is producing about two thirds of its 940,000 barrels per day installed capacity, or about Izarra contradicts government reports the refinery is processing about two-thirds of its 940,000 b/d installed capacity; or approximately 627,000 barrels per day. PDVSA: Puerto La Cruz Terminal Returns to Normal Operations ----------------------------------------------------------- The Guaraguao shipping terminal in Puerto La Cruz of Venezuelan state oil monopoly Petroleos de Venezuela SA (PdVSA) resumed normal operations, Dow Jones Newswires reports, citing a Company statement. The terminal was closed when a strike that almost crippled Venezuela's oil industry hit the country. PDVSA said that it had shipped over 6 million barrels of crude oil through this terminal in the eastern side of Venezuela. PDVSA lifted its force majeure, which was declared in the first week of December for crude sales earlier this month but has maintained it on some products because its refineries aren't yet operating normally, said the report. About 16,000 PDVSA workers were dismissed as President Hugo Chavez' reaction to the strike that aimed for his removal from office. A number of PDVSA's oil refineries that were affected by the strike are starting to return to normal mode. Separate reports indicated that the Company may offer discounts on its products to regain the market lost during the strike. *********** 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 photocopying) is strictly prohibited without prior written permission of the publishers. Information contained herein is obtained from sources believed to be reliable, but is not guaranteed. The TCR Latin America subscription rate is $575 per half-year, delivered via e-mail. Additional e-mail subscriptions for members of the same firm for the term of the initial subscription or balance thereof are $25 each. For subscription information, contact Christopher Beard at 240/629-3300. * * * End of Transmission * * *