/raid1/www/Hosts/bankrupt/TCRLA_Public/030325.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
Tuesday, March 25, 2003, Vol. 4, Issue 59
Headlines
A N T I G U A & B A R B U D A
LIAT: TT Governments to Back New Loan Guarantees
A R G E N T I N A
AT&T LATIN AMERICA: In Sale Talks With Embratel
DIRECTV LA: Seeks To Employ Young Conaway As Local Counsel
DIRECTV LA: Moves Court To Retain Ordinary Course Professionals
DIRECTV LA: Application To Employ Mayer Brown As Counsel
DIRECTV LA: Motion To Continue Cash Management System
DIRECTV LA: Motion To Continue Employee Retention Plan
DIRECTV LA: Motion Waiving Investment & Deposit Requirements
DIRECTV LA: Motion To Pay Prepetition Employee Obligations
DIRECTV LA: Motion To Establish Compensation Procedures
DIRECTV LA: Motion To Enjoin Utilities From Altering Service
DIRECTV LA: Meeting With Us Trustee To Form Committees
DIRECTV LA: U.S. Trustee Schedules Sec. 341(a) Meeting
PECOM ENERGIA: Pays Outstanding Portion of $35M 6.75% Notes
B E R M U D A
ANNUITY & LIFE: Fitch Lowers IFS Rating to 'C'
ANNUITY & LIFE: Withdraws Offer To Sell $200M In New Debt
B R A Z I L
AES TIETE: Uncertain Market Conditions Put Project On Hold
VARIG: Reports BRL2.02 Bln Loss For Jan-Sep 2002 Period
C H I L E
AES GENER: Liquidity Concern Prompts Feller Rate Equity Cut
ENERSIS: SC Ruling On Case May Come Next Week
INVERLINK: SVS Slaps Chairman $4.1M Fine For Mismanagement
C O L O M B I A
AVIANCA: Case Summary & Largest Unsecured Creditors
C O S T A R I C A
ICE: Seeks Approval On Draft Modernization Bill
E C U A D O R
* IMF Approves $205M Stand-By Arrangement for Ecuador
J A M A I C A
AIR JAMAICA: Majority Owner May Cede Part of Stake to Government
M E X I C O
GRUPO TMM: Extends Debt Exchange Offers
PEMEX: Supreme Court Rules Oil Spill Fine Must Be Paid
N I C A R A G U A
ENITEL: State Assuming Debt Incurred By Previous Administration
V E N E Z U E L A
* Venezuela Struggles To Lure Investors
- - - - - - - - - -
=================================
A N T I G U A & B A R B U D A
=================================
LIAT: TT Governments to Back New Loan Guarantees
------------------------------------------------
After three days of Cabinet deliberations, the Trinidad and
Tobago Government agreed to guarantee loans made by the Caribbean
Development Bank to shareholders of LIAT, the Caribbean Investor
reports, citing a statement by Minister of Trade and Industry Ken
Valley.
Mr. Valley, who is also a Minister in the Ministry of Finance,
said the Caribbean Development Bank will provide LIAT
shareholders loans to the tune of TT$30 million (EC$12.5
million). However, Mr. Valley said the Government of Trinidad and
Tobago was not prepared to give LIAT money directly and further
commented that the matter is being well investigated by a
Government appointed Steering Committee, led by Ken Gordon.
"Until the committee reports, there would be no more direct
funding to either LIAT or BWIA." he highlighted. The Steering
Committee is considering a proposal to merge LIAT, BWIA and Air
Jamaica into one regional airline sources said.
With total indebtedness EC$100 million, LIAT needs the money very
badly for the immediate payment of US$935,000. In the event of
non-payment, 5 of its 10 aircraft would be seized.
CONTACT: LIAT Corporate Headquarters
V.C. Bird International Airport,
P.O. Box 819,
St. John's, Antigua West Indies
Phone: 1 (268) 480-5600/1/2/3/4/5/6
Fax: 1 (268) 480-5625
Home Page: http://www.liatairline.com/
Contacts:
Garry Cullen, Chief Executive Officer
David Stuart, Vice President of Marketing
=================
A R G E N T I N A
=================
AT&T LATIN AMERICA: In Sale Talks With Embratel
-----------------------------------------------
Brazilian telephone company Embratel, which is looking to expand
its Latin American reach, is negotiation to buy AT&T Latin
America Corp., reports Reuters. AT&T Latin American, based in
Washington, D.C., ran into a cash-crunch after its parent, AT&T
Corp., declined to provide it with additional funding. The unit
failed to meet the revenue targets under its financing pacts and
its third-quarter loss swelled to US$532 million amid problems in
Argentina and Brazil.
Last month, AT&T Latin America hired restructuring firm Greenhill
and Co. to evaluate its strategic options after AT&T Corp. agreed
to sell its 69% stake in its unprofitable subsidiary for $1,000
cash to Southern Cross Group LLC, a telecommunications holding
company.
Meanwhile, Embratel itself is also battling with financial
problems. Last month, it reached an agreement with creditors to
restructure US$700 million in debt. Embratel was the object of
takeover rumors itself only recently.
To see AT&T's financial statements:
http://bankrupt.com/misc/AT&T.htm
CONTACT: AT&T
Eileen Connolly, +1-908-234-8510
Dan Lawler, +1-908-234-6846
To see Embratel's financial statement:
http://bankrupt.com/misc/Income_Statement.htm
To see Embratel's Balance Sheet:
http://bankrupt.com/misc/Balance_Sheet.htm
CONTACT: Embratel Participacoes S.A.
Silvia Pereira, Investor Relations Manager
Tel: 55 21 2121-6474/9662 (messages)
Email: Silvia.Pereira@embratel.com.br
invest@embratel.com.br
DIRECTV LA: Seeks To Employ Young Conaway As Local Counsel
----------------------------------------------------------
Pursuant to Section 327(a) of the Bankruptcy Code, DirecTV Latin
America, LLC seeks the Court's authority to employ Young Conaway
Stargatt & Taylor LLP as its local bankruptcy counsel.
According to Craig D. Abolt, Chief Financial Officer of DirecTV
Latin America, LLC, DirecTV has selected Young Conaway because of
the firm's extensive experience and knowledge in the field of
debtor's and creditors' rights and business reorganizations under
Chapter 11. In addition, Young Conaway's expertise, experience
and knowledge practicing before this Court will be efficient and
cost effective for DirecTV's estate. In fact, in preparing for
this case, Young Conaway has become familiar with DirecTV's
financial affairs and prior business and many of the potential
legal issues, which may arise in the context of this Chapter 11
case.
Joel A. Waite, Esq., a Young Conaway partner, tells Judge Walsh
that he and his Firm will:
(a) provide legal advice with respect to DirecTV's powers
and duties as debtor-in-possession in the continuing
operation of its business and management of its
properties;
(b) prepare and pursue confirmation of a plan and approval
of a disclosure statement;
(c) prepare on behalf of DirecTV necessary applications,
motions, answers, orders, reports and other legal papers;
(d) appear in Court and protect the interests of DirecTV
before the Court; and
(e) perform all other legal services for DirecTV which may
be necessary and proper in these proceedings.
Young Conaway will charge DirecTV on an hourly basis and look for
reimbursement of actual, necessary expenses and other charges it
will incur. The principal attorneys and paralegals presently
designated to represent DirecTV and their standard hourly rates
are:
Professional Rate
------------ ----
Joel A. Waite $425
M. Blake Cleary 315
Alfred Villoch, III 204
Stefanie Hubloue 120
Other attorneys and paralegals may from time to time serve
DirecTV in connection with Young Conaway's employment.
Mr. Waite tells the Court that Young Conaway received $100,000 in
connection with the planning and preparation of initial documents
for filing this case. A portion of this amount covers the
payment of prepetition fees and expenses while the balance will
be held by Young Conaway as security for postpetition fees and
expenses.
To the best of his knowledge, Mr. Waite says that Young Conaway
has not represented DirecTV, its creditors, or any other parties-
in-interest, or their respective attorneys, in any matter
relating to DirecTV or its estate. If Young Conaway learns of
any connections with other parties-in-interest, the Firm will
make an appropriate disclosure. Mr. Waite is confident Young
Conaway is a "disinterested person" as that phrase is defined in
Section 101(14) of the Bankruptcy Code. (DirecTV Latin America
Bankruptcy News, Issue No. 2, Bankruptcy Creditors' Service, Inc.
609/392-0900)
DIRECTV LA: Moves Court To Retain Ordinary Course Professionals
---------------------------------------------------------------
DirecTV Latin America, LLC seeks the Court's authority to retain
and compensate professionals that the company turns to in the
ordinary course of its business.
Joel A. Waite, Esq., at Young Conaway Stargatt & Taylor, LLP, in
Wilmington, Delaware, relates that DirecTV retains various
professionals in the ordinary course of its business to render
services relating to the numerous issues that arise in the
conduct of its regular business affairs unrelated to this Chapter
11 cases. DirecTV needs these services on a continuing basis.
Rather than file formal employment applications for each and
every professional, DirecTV proposes that each ordinary course
professional be required to file an affidavit with the Bankruptcy
Court providing disclosure about the firm's identity, services to
be performed, compensation arrangements and potential conflicts
within 30 days of their retention.
Mr. Waite indicates that ordinary course professionals are
compensated on an hourly fee basis. In some instances, the
ordinary course professionals will be owed for accrued pre-
petition fees. Since the ordinary course professionals that are
attorneys are being retained for matters that would qualify them
as "special" counsel, if retained pursuant to Section 327(e) of
the Bankruptcy Code, DirecTV submits that these ordinary course
professionals should not be required to demonstrate their
disinterestedness as provided by Section 327(a) of the Bankruptcy
Code. DirecTV has inquired of the Ordinary Course Professionals
and it does not believe that any of them hold or represent any
interest adverse to DirecTV or its estates with respect to the
matters on which they are to be employed.
Furthermore, DirecTV asks the Court to allow it to pay, without
need to file a formal fee application with the Court, 100% of the
fees and expenses of each of the ordinary course professional
upon submission of an invoice setting in reasonable detail the
nature of the services rendered and any corresponding charges and
expenses. Mr. Waite clarifies that DirecTV expressly reserves
the right to dispute any invoice.
The Debtor agrees, during the pendency of the Chapter 11 case,
that no ordinary course professional will be paid more than
$25,000 per month without an order from the Court authorizing a
higher amount. In addition, no ordinary course professional will
be paid more than $150,000 in fees in the aggregate during the
pendency of this Chapter 11 cases without a Court order
authorizing a higher amount.
According to Mr. Waite, DirecTV should be allowed to continue to
retain the ordinary course professionals because:
(a) DirecTV cannot continue to operate its business in
accordance with sound business practice unless it retains
and pays for the services of the ordinary course
professionals;
(b) it would hinder DirecTV's operations if it was required
to submit to the Court an application, affidavit and
proposed retention order for each ordinary course
professional;
(c) a number of the ordinary course professionals are
unfamiliar with the interim and final fee application
procedures employed in the bankruptcy cases, with some
of them unwilling to work with DirecTV if these
requirements were imposed;
(d) the cost of preparing and prosecuting the retention
applications and fee applications, to ultimately be borne
by the estate, would be significant and unnecessary;
(e) the requirement that the ordinary course professionals
each file retention pleadings and follow the usual fee
application process used by other bankruptcy
professionals would burden the clerk's office, this Court
and the Office of the U.S. Trustee with unnecessary fee
applications;
(f) the procedures for retention and compensation of ordinary
course professionals are not unusual given the size of
DirecTV's estate and the magnitude, complexity and
multi-jurisdictional nature of its business. (DirecTV
Latin America Bankruptcy News, Issue No. 2, Bankruptcy
Creditors' Service, Inc. 609/392-0900)
DIRECTV LA: Application To Employ Mayer Brown As Counsel
--------------------------------------------------------
DirecTV Latin America, LLC seeks the Court's authority to employ
Mayer, Brown, Rowe & Maw as its bankruptcy counsel, effective as
of March 18, 2003, pursuant to Section 327(a) of the Bankruptcy
Code.
Craig D. Abolt, DLA's Chief Financial Officer, relates that Mayer
is well-qualified to represent DirecTV because:
-- Mayer has extensive experience and knowledge in the field
of Chapter 11 reorganization; and
-- Mayer has been advising DirecTV with respect to its
restructuring alternatives since August 2002, making it
uniquely familiar with DirecTV's business and affairs and
many of the potential legal issues, which may arise in the
context of this Chapter 11 case.
Mr. Abolt relates that DirecTV is also employing Young Conaway
Stargatt & Taylor LLP as local bankruptcy co-counsel. Mr. Abolt
informs Judge Walsh that the two professionals have discussed the
division of responsibilities between the firms regarding this
engagement and will coordinate their efforts in the most
efficient and cost-effective manner possible. DirecTV believes
that the services Mayer will provide will compliment rather than
duplicate the services Young Conaway will provide.
As DirecTV's counsel, Lawrence K. Snider, Esq., a partner in
Mayer, Brown, Rowe & Maw, relates that Mayer will provide these
services:
(a) advising and representing DirecTV with respect to its
rights and duties as debtor-in-possession in this Chapter
11 case;
(b) advising DirecTV with respect to legal issues relating to
confirmation and implementation of a plan of
reorganization and all matters related thereto;
(c) advising DirecTV with the development, negotiation and
implementation of an alternative restructuring or similar
transaction in the event that a plan of reorganization is
not confirmed or must be withdrawn, including,
participation as a representative of DirecTV in
negotiations with creditors and other parties;
(d) assisting DirecTV in evaluating, negotiating and
documenting mergers, acquisitions, stock sales, asset
sales and other major corporate transactions as may be
proposed during the course of this Chapter 11 case;
(e) evaluating, preparing and documenting proposals to
creditors, employees, shareholders and other parties-in-
interest in connection with this Chapter 11 case;
(f) assisting DirecTV's management with presentations made
regarding this Chapter 11 case;
(g) advising DirecTV with respect to matters of general
corporate, corporate, finance, real estate and
intellectual property law as the advise relates to this
Chapter 11 case;
(h) representing DirecTV in its litigation matters, including
any litigation arising from this Chapter 11 case,
including assisting DirecTV with respect to the
evaluation of claims filed against DirecTV's estate and
resolution of disputes with respect to the claims; and
(i) performing any and all other legal services that may be
required from time to time, including court appearances,
as are in the interests of DirecTV's estate.
Subject to a Court approval and in accordance with Section 330(a)
of the Bankruptcy Code, Mayer will be compensated for legal
service on an hourly basis and be reimbursed from the Debtor's
estate for its actual, necessary expenses and other charges it
will incur. The principal attorneys and paralegal presently
designated to represent DirecTV are:
Professional Position Hourly Rate
------------ -------- -----------
Lawrence K. Snider partner $640
Stuart M. Rozen partner 575
John F. Lawlor partner 410
Alex P. Montz associate 375
Sean Scott associate 300
Andrew Connor paralegal 170
Mr. Snider notes that Mayer received a $325,000 retainer as
advance payment of certain of its services in preparation of this
Chapter 11 case. The Retainer will be applied to pre-petition
billings and any balance will be held to be applied against post-
petition fees and expenses. During the one year period prior to
the Petition Date, Mayer received payments from DirecTV totaling
$413,000 for professional services rendered and expenses
incurred.
Mr. Snider reports that Mayer has reviewed its database and
related conflicts systems to learn of any conflict of interest in
its representation.
Mr. Snyder assures the Court that his Firm does not represent or
hold any interest adverse to DirecTV or its estate with respect
to the matters on which it is to be employed. Mr. Snyder says
that Mayer has no present connection with any of DirecTV's
creditors or other significant parties-in-interest in connection
with these cases or the U.S. Trustee in these cased, or any
person employed in the Office of the U.S. Trustee for the
District of Delaware. Mr. Snyder discloses that Mayer has
represented certain of DirecTV's creditors and other parties-in-
interest on matters that are completely unrelated to this Chapter
11 case and account for a de minimis portion of Mayer's 2002
annual revenues. Mayer will not represent any of those entities
in connection with this Chapter 11 case. Should it be apparent
that Mayer's representation of DirecTV in any specific manner in
this Case conflict with its past or present representation of the
creditor or party-in-interest, Young Conaway will handle the
matter. (DirecTV Latin America Bankruptcy News, Issue No. 2,
Bankruptcy Creditors' Service, Inc. 609/392-0900)
DIRECTV LA: Motion To Continue Cash Management System
-----------------------------------------------------
DirecTV Latin America LLC sought and obtained a Court order
allowing it to continue the use of its cash management system and
waiving certain operating guidelines imposed by the United States
Trustee on all chapter 11 debtors. The Debtors remind the Court
that the U.S. Trustee requires:
-- all existing Bank Accounts to be closed and that a debtor-
in-possession open new bank accounts designated as
"Debtor-in-Possession Accounts;"
-- that the debtor-in-possession obtain and use new checks
bearing a "Debtor-in-Possession" legend.
DirecTV maintains a centralized cash management system for all of
its business operations. The Cash Management System is an
integrated, centralized network of five bank accounts maintained
in the United States that facilitate the timely and efficient
collection, concentration, management and disbursement of funds
DirecTV used in the ordinary course of its business.
Under the Cash Management System, Joel A. Waite, Esq., at Young
Conaway Stargatt & Taylor LLP, in Wilmington, Delaware, explains,
funds consisting of Royalties paid to DirecTV by the Local
Operating Companies and amounts advanced by Houghes Electronic
Corporation and DirecTV Latin America Holdings, Inc. as loans or
capital contributions are deposited electronically by wire
transfer directly into a main concentration account at Citibank.
DirecTV uses the funds deposited into the Concentration Account
to fund four disbursement accounts used for payroll, employee
flex spending, petty cash and various other expenses arising in
the ordinary course of DirecTV's business. The Disbursement
Accounts are funded directly from the Concentration Account on an
as-needed basis to fund disbursements by DirecTV against the
respective accounts.
Mr. Waite relates that DirecTV's Cash Management System enables
it to collect, transfer and disburse funds as needed for its
continuing business operations. Thus, Mr. Waite contends that
the inevitable disruption of DirecTV's Cash Management System
would result from the required closure of its prepetition Bank
Accounts. There would be significant delays in DirecTV's
collection and disbursement of funds. Moreover, it would be
difficult and expensive for DirecTV to establish new bank
accounts and institute a new cash management system that would
adequately fulfill its needs.
Mr. Waite assures Judge Walsh that DirecTV will use its best
efforts to ensure that any authorization to continue its existing
Cash Management System and Bank Accounts during the pendency of
the Chapter 11 Case will not result in the unauthorized payment
of prepetition claims.
In addition, with respect to the use of new checks, Mr. Waite
asserts that if this requirement is not waived, the estate will
incur:
(a) delays in the DirecTV's operations at the very outset of
the Chapter 11 Case; and
(b) additional expenses that DirecTV considers unnecessary in
light of the likelihood that parties doing business with
DirecTV undoubtedly will be aware of its status as a
Chapter 11 Debtor-in-Possession due to the size of the
case and broad coverage in the industry and financial
media.
Judge Walsh rules that DirecTV may maintain and continue using
its existing Bank Accounts in the names and with the account
numbers existing immediately prior to the Petition Date. DirecTV
would retains the right to:
(i) close one or more of the Bank Accounts and, if necessary,
open new debtor-in-possession accounts;
(ii) deposit funds in and withdraw funds from the accounts by
all usual means; and
(iii) treat its prepetition Bank Accounts for all purposes as
debtor-in-possession accounts.
Judge Walsh also authorizes all banks with which DirecTV
maintains its Bank Accounts to continue to maintain, service and
administer the Bank Accounts, except that they are not authorized
to honor any check issued or dated prior to the Petition Date
absent a Court order. (DirecTV Latin America Bankruptcy News,
Issue No. 2, Bankruptcy Creditors' Service, Inc. 609/392-0900)
DIRECTV LA: Motion To Continue Employee Retention Plan
------------------------------------------------------
Given the multi-jurisdictional nature of its business, DirecTV
Latin America, LLC requires a diverse and highly skilled
workforce with market and region-specific knowledge and
experience, operating expertise, in-county relationships and
critical foreign language skill. The DirecTV workforce includes
Hispanics of 12 different nationalities.
"Assembling its workforce has been a difficult, complex and
costly task for DirecTV," Joel A. Waite, Esq., at Young Conaway
Stargatt & Taylor LLP, in Wilmington, Delaware, remarks.
During the past two years, DirecTV has undergone significant
workforce reductions as part of various cost-reduction
initiatives. From 355, DirecTV currently has 113 Employees
remaining and 22 software and engineering support contractors.
Although DirecTV has eliminated some tasks and shifted certain
responsibilities from DirecTV to the Local Operating Companies,
Employees have nevertheless been asked to assume much greater
workloads in a period of great financial uncertainty. These have
deteriorated the Employees' morale in the recent past.
When DirecTV filed for Chapter 11 protection, the Employees
became even more keenly aware of the great uncertainty regarding
DirecTV's future operations and financial condition, and
consequently, their individual job security.
In light of the already sharply reduced staffing levels, DirecTV
will be required to task a large majority of the Employees with
significant additional responsibilities in connection with its
restructuring efforts. Thus, Mr. Waite fears, any Employee
resignation will have a disproportionately high negative impact
on DirecTV, necessarily make business operations more difficult,
and impede speedy progress towards a resolution of the Chapter 11
case that maximizes value for the estate and its creditors. The
Employee loss will hinder, delay and disrupt DirecTV's pursuit of
a timely and successful reorganization.
DirecTV believes that it would highly costly, and likely
impossible to replace Employees because:
(a) DirecTV has over time expended significant time and
resources in the recruitment and development of its Employees;
(b) a company in Chapter 11 is not a particularly appealing
employment option for experienced job candidates;
(c) DirecTV requires employees with extensive language
capabilities including fluency in Spanish or Portuguese, in
addition to job-specific skills, as a prerequisite for many
positions;
(d) there is a scarcity of potential employees in the
marketplace with the necessary combination of job-specific skills
and language capabilities;
(e) to find suitable replacements for the departures, DirecTV
would likely be required to pay above-market salaries, signing
bonuses, moving expenses, immigration and visa-related expenses
or severance packages to induce qualified candidates to accept
employment with a Chapter 11 debtor, as well as, to pay executive
search firm fees; and
(f) replacement employees will likely not have the depth of
knowledge of DirecTV, the industry or Latin American business
that the Employees already possess, requiring them to dedicate
time to the training and development of replacement employees,
ultimately resulting in a loss of productivity.
DirecTV believes that the most cost effective way to counteract
these negative effects and protect itself against unwanted
attrition is to offer financial incentives designed to retain the
Participants. Mr. Waite explains that the Retention Plan was put
in place during the Attempted Out of Court Restructuring to
mitigate the uncertainties that would face the Participants
throughout the restructuring process, whether in the Attempted
Out of Court Restructuring or in a Chapter 11 proceeding.
By this motion, DirecTV seeks the Court's authority to continue
the Retention Plan, including the authority to make payments due
under the Retention Plan. The salient terms of the Retention
Plan are:
A. Stay Bonus
The Retention Plan provides for payment of "stay" bonuses
payable quarterly throughout the reorganization process as an
inducement to Participants to remain employed by DirecTV
during the restructuring process or for 24 months after the
Effective Date, whichever comes first. Each Participant,
regardless of tier, will receive a bonus of 3% of their
annual base salary as of the Effective Date, for each three-
month period prior to a Successful Completion. The Stay
Bonus will be paid in arrears for the previous period on the
first day of the following period. Since this element of the
Retention Period was implemented at the outset of the
Attempted Out of Court Restructuring and became effective on
the Effective Date, the first Stay Bonus will be payable in
the first regularly scheduled paycheck of the payroll cycle
after the quarterly period ending March 31, 2003. If a
Participant is laid off while the Stay Bonus is in effect,
the Participant will receive a pro-rata portion of the Stay
Bonus for the current quarter based on actual days worked.
If a Participant is laid off in the same quarter as, but
prior to the Successful Completion, the Participant will
receive a pro-rata Stay Bonus for that quarter, but no
Success Bonus. No Stay Bonus will be paid in the quarter
that a Success Bonus is paid.
B. Success Bonus
The Retention Plan provides for the payment of a "success"
bonus to all Participants who remain employed by DirecTV upon
the date of the Successful Completion. The schedule of
payout will be:
Plan Confirmation Date Tier 1 Tier 2 Tier 3
---------------------- ------ ------ ------
Within 12 months of Petition Date 50% 30% 6%
More than 12 months after Petition 40% 20% 6%
Date
In order to encourage the Participants to work diligently to
achieve a quick reorganization, the Participants will receive
a higher Success Bonus if Successful Completion occurs more
quickly. In addition, in keeping with the effort expected to
be expended towards the reorganization efforts, the
Participants in higher tiers will be paid a larger Success
Bonus upon Successful Completion than Participants in lower
tiers.
C. Post-Emergence Bonus
DirecTV realizes that the Participants are essential not just
to the reorganization process but also to the ongoing health
and viability of DirecTV's continuing business. In order to
encourage Participants to remain employed by DirecTV after
Successful Completion and to participate in a success of the
reorganized business, a post-emergence bonus will be paid
under the terms of the Retention Plan to all Participants who
remain employed by DirecTV on the later of six months after
Plan Confirmation or February 2004. The Post-Emergence Bonus
will be deemed to be earned upon Plan Confirmation. The
schedule of payout as a percent of annual base salary is:
Tier Stay Bonus
---- ----------
Tier 1 30%
Tier 2 15%
Tier 3 6%
D. Severance Benefit
The Retention Plan includes a severance benefit to be paid to
certain Employees that are laid off. Under the Severance
Benefit, severance payments are made to Employees classified
as a regular full or part-time employees for and laid off by
DirecTV who comply with the conditions of the Retention Plan,
including executing a general release in favor of DirecTV.
Payments under the Severance Benefit are based on the length
of service with DirecTV. The Severance Benefit provides for
severance equal to eight weeks of annual salary plus an
additional two weeks of base salary for each year of service.
The minimum Severance Benefit is eight weeks of annual base
salary; the maximum is 24 weeks of annual base salary. A
Participant's years of service will be measured from the date
of hire with DirecTV. In recognition of the fact that
DirecTV is a young company with few employees having long
service, DirecTV fees that the minimum of eight weeks is
reasonable and appropriate. In addition, the Retention Plan
provides outplacement assistance to severed Participants for
a period and a level commensurate with salary level.
DirecTV estimates that the maximum aggregate cost of the
Retention Plan is between $9,500,000 to $10,500,000. The maximum
aggregate cost of the Retention Bonuses, assuming all
Participants remain id DirecTV's employ through the term of the
program is between $6,000,000 to $6,500,000. The maximum
hypothetical liability under Severance Benefit is between
$3,500,000 to $4,000,000. The Retention Plan replaces and
enhances DirecTV's normal annual bonus arrangement, which have
been suspended during the Chapter 11 case. Mr. Waite asserts
that cost of the Retention Plan is modest when compared to the
damage to DirecTV if employee turnover results from the
uncertainty of a Chapter 11 filing.
Furthermore, Mr. Waite contends that the Severance Benefit is
cost-effective since:
-- there is a significant risk that the Participants will not
remain with DirecTV absent some form of severance
protection, especially that there have been significant
workforce reductions the past two years; and
-- payout amounts under the Severance Benefit are
significantly lower than those received by employees in
the prior rounds of layoffs. (DirecTV Latin America
Bankruptcy News, Issue No. 2, Bankruptcy Creditors'
Service, Inc. 609/392-0900)
DIRECTV LA: Motion Waiving Investment & Deposit Requirements
------------------------------------------------------------
M. Blake Cleary, Esq., at Young Conaway Stargatt & Taylor LLP, in
Wilmington, Delaware, relates that DirecTV Latin America, LLC has
five main bank accounts at these institutions:
(a) Citibank Account No. 36542614 for Accounts Payable;
(b) Citibank Account No. 40700602 for Main Operating Account
and Concentration Account;
(c) Suntrust Account No. 285001005913 for General Purposes;
(d) Suntrust Account No. 285001008946 for Payroll; and
(e) Suntrust Account No. 285001005529 for Employee Flexible
Spending.
DirecTV believes that all of the Bank Accounts are held by
financially stable banking institutions and all are subject to
FDIC or FSIJC insurance.
According to Mr. Cleary, DirecTV does not use the Bank Accounts
as investment accounts. Instead, the Concentration Account is
used to fund four disbursement accounts. In addition, the
balances in the Concentration Account are swept and transferred
at the close of business on a daily basis to an overnight
investment account at a Citibank branch in Nassau, The Bahamas.
Mr. Cleary explains that the balance earns interest at the 10:00
a.m. Garvin Guy Butler Federal Funds rate less 100 basis points.
The Nassau Investment Account is subject to the laws of
Commonwealth of the Bahamas. Although the Nassau Investment
Account does not have insurance, it is backed by the full faith
and credit of Citigroup.
Section 345(a) of the Bankruptcy Code authorizes deposits or
investments of money of a bankruptcy estate in a manner that will
"yield the maximum reasonable net return on the money, taking
into account the safety of the deposit or investment. Moreover,
Section 345(b) provides that the estate must require from the
entity with which the money is deposited or invested a bond in
favor of the United States secured by the undertaking of an
adequate corporate surety.
By this motion, DirecTV asks the Court to waive the investment
and deposit requirements Section 345 imposed.
Mr. Cleary contends that cause exist in waiving the requirements:
(a) The Nassau Investment Account is held at Citibank, one of
the highest rated and most financially sound financial
institution in the world. Citibank's parent Citigroup
currently has a top rating from both Moody's and Standard
& Poor;
(b) DirecTV actively manages its cash through closely
tracking and accurately projecting sources and uses of
funds; and
(c) under the terms of the proposed DIP Financing, DirecTV
will be restricted in the amount of cash it can
accumulate. (DirecTV Latin America Bankruptcy News, Issue
No. 2, Bankruptcy Creditors' Service, Inc. 609/392-0900)
DIRECTV LA: Motion To Pay Prepetition Employee Obligations
----------------------------------------------------------
At DirecTV Latin America, LLC's request, Judge Walsh authorizes
DirecTV to:
(a) pay in the ordinary course of business all Compensation
Obligations, Benefit Obligations, Withholding
Obligations, Administrative Obligations and Reimbursement
Obligations, including all amounts incurred but not yet
paid as pf the Petition Date;
(b) continue in the ordinary course of business all plans,
practices, programs, policies and agreements in effect as
of the Petition Date with respect to the Employment
Obligations;
(c) take other actions as may be necessary or appropriate to
ensure that its Employees' rights with respect to the
Employment Obligations and Employment Policies are not
prejudiced as a result of the commencement of this
Chapter 11 Case; and
(d) pay prepetition obligations owing to certain essential
independent contractors.
The Court also authorizes and directs the payroll banks to honor
and pay all prepetition checks issues and fund transfer requests
DirecTV made on its payroll accounts with respect to Employment
Obligations, regardless of the date of the checks or requests.
To the extent the prepetition checks or fund transfer request
have been dishonored or denied, Judge Walsh authorizes DirecTV to
issue new postpetition checks and fund transfer requests on
account of those dishonored or denied.
M. Blake Cleary, Esq., at Young Conaway Stargatt & Taylor LLP, in
Wilmington, Delaware, relates that DirecTV's employees are paid
basic compensation either as wages or salaries every two weeks in
arrears. Certain Employees also received bonuses, paid on an
annual basis. However, bonuses were not paid for 2002 and are
being suspended for the duration of the Chapter 11 Case, except
as provided in the Retention Plan DirecTV will ask the Court for
authority to continue in a separate motion.
As of Petition Date, DirecTV owes to Employees no more than
$250,000 for Wage Obligations relating to periods prior to the
Petition Date. DirecTV's books and records also indicate that
its Wage Obligations will not exceed $4,650 with respect to any
Employee as of the Petition Date. Thus, Mr. Cleary asserts, the
prepetition Compensation Obligations are entitled to priority
under Section 507(a)93) of the Bankruptcy Code.
Furthermore, DirecTV established and maintains in the ordinary
course of business various plans, programs and policies pursuant
to which it provides specific employment-related benefits to its
Employees. These benefits include insurance coverage for:
(a) medical, dental, vision, prescription drug, health
pregnancy program and similar healthcare-related benefits
-- the Healthcare Benefits;
(b) life insurance, accidental death and dismemberment,
short-term or long-term disability and similar plans or
benefits;
(c) a 401(k) retirement savings plan and a restoration plan
providing additional retirement savings opportunities;
(d) immigration assistance and related payments; and
(e) other miscellaneous benefits, in each case excluding
severance benefits.
Mr. Cleary informs the Court that the Healthcare Benefits
represent the most significant portion of DirecTV's prepetition
Benefit Obligations. To provide the Healthcare Benefits for its
Employees, DirecTV pays a monthly premium to Blue Cross Blue
Shied. DirecTV shares this cost with the Employees by deducting
each employee's portion of the premium from the employee's bi-
weekly Wage Obligation. The monthly cost of DirecTV for its
Healthcare Benefits premium is approximately $185,000.
Other Benefit Obligations are comprised of life insurance,
disability insurance and retirement savings plans, as well as
other miscellaneous benefits with less than $50,000 owed.
Mr. Cleary continues that in connection with the payment of its
Employment Obligations, DirecTV is required under applicable law
to withhold from payroll checks certain obligations of the
Employees, including federal, state and local income taxes,
social security, Medicare and unemployment taxes. In the
ordinary course of business, DirecTV may also withhold from
payroll checks:
-- Employee contributions to 401(k) or other retirement
plans;
-- Employee contributions to medical, dental, insurance
disability or similar plans; and
-- other contributions or obligations of the Employees as
directed by individual Employees or pursuant to applicable
law.
DirecTV also makes payments of the employer's portion of payroll
taxes and other obligations as required by applicable law. As of
Petition Date, DirecTV estimates the total Withholding
Obligations to be $120,000.
As is customary for companies of this size, DirecTV utilizes the
services and supplies of certain consultants and other third
party service providers in the ordinary course of business to
facilitate:
(a) the delivery of payments with respect to the Employment
Obligations; and
(b) the administration and maintenance of the Employment
Policies.
As of Petition Date, DirecTV estimates that it owes to Third
Party Providers $10,000 for administrative services provided
prepetition. Mr. Cleary contends that the amount is relatively
de minimis in comparison to the harm that DirecTV and the
Employees will suffer if the Employment Obligations cannot be
effectively satisfied and the Employment Policies cannot be
effectively carried out during the pendency of this Chapter 11
Case.
In addition, Mr. Cleary notes that in the ordinary course of
their duties on behalf of DirecTV, various Employees may from
time to time incur certain expenses for which they are
customarily reimbursed by DirecTV in accordance with the expense
reimbursement policy in place. In other cases, the expenses are
charged directly to DirecTV, although the Employee could be
obligated to the third party on the expenses if DirecTV does not
pay it -- the Expense Reimbursement Obligations. According to
Mr. Cleary, the Expense Reimbursement Obligations includes
travel, entertainment, meal, cell phone, moving and relocation
expenses. As of Petition Date, $50,000 worth of Expense
Reimbursement Obligations is owed to the employees.
Judge Walsh clarifies that DirecTV's authority to honor and
continue its existing Employment Policies is not deemed to
constitute postpetition assumption or adoption of any Employment
Policy pursuant to Section 365 of the Bankruptcy Code. Mr.
Cleary assures the Curt that DirecTV is in the process of
reviewing these matters and reserves all of its rights under the
Bankruptcy Code with respect thereto. Moreover, pursuant to the
terms of the Employment Policies, and to the extent permitted by
the Bankruptcy Code, DirecTV reserves the right to modify or
terminate any of the Employment Policies at any time.
Stay Bonus Retention Plan
DirecTV also asks the Court for permission to continue its
Retention Plan. The Retention Plan provides for the payment of
"stay bonuses" payable quarterly throughout the reorganization
process. The first Stay Bonus is payable on April 11, 2003.
However, Mr. Cleary fears that the Court may not hear the
Retention Bonus Motion before April 11, 2003. Thus, Judge Walsh
authorize DirecTV to pay the April 11 Stay bonus as scheduled to
prevent:
-- the violation of the Retention Plan Participants'
expectations; and
-- to prevent the damage of the Participants' morale, which
may lead to resignation.
DirecTV expects the April 11 Stay Bonus to be no more than
$325,000.
In addition to its 113 salaried and hourly Employees, DirecTV
also utilizes 22 independent contractors for various key
operating and administrative aspects in its business, including
accounting, information technology services, software consulting,
engineering and security. DirecTV's ability to outsource various
tasks to Independent Contractors allows for payment of services
on an as-needed basis, rather than having to maintain permanent
salaried employees on DirecTV's payroll.
To the extent that DirecTV owes the Independent Contractors
prepetition amounts for services, it may not be able to compel
them to continue to provide DirecTV with the services while the
obligations are outstanding. Because many of the Independent
Contractors provide specialized services or have institutional
knowledge of the company over time, DirecTV believes that the
expenses of replacing the Independent Contractors would
substantially exceed the outstanding prepetition obligations
owing to the contractors. DirecTV estimates that as of Petition
Date, it owes $150,000 to the Independent Contractors.
Mr. Cleary argues that the relief requested is justified because:
(a) DirecTV's Employees are the lifeblood of its business.
DirecTV's continued operation and the successful
reorganization depends on the retention and motivation of
its Employees;
(b) it avoids the personal hardship of the Employees and
their families they will suffer if DirecTV's employee-
related obligations are not paid when due; and
(c) it minimizes the extent to which Employees pursue, and
leave DirecTV for, alternative employment opportunities,
for competing enterprises or otherwise; (DirecTV Latin
America Bankruptcy News, Issue No. 2, Bankruptcy
Creditors' Service, Inc. 609/392-0900)
DIRECTV LA: Motion To Establish Compensation Procedures
-------------------------------------------------------
Joel A. Waite, Esq., at Young Conaway Stargatt & Taylor LLP, in
Wilmington, Delaware, notes that Section 331 of the Bankruptcy
Code requires all professionals to submit applications for
interim compensation and reimbursement of expenses every 120
days, or more often if the Court permits.
Accordingly, DirecTV Latin America LLC seeks the Court's
authority to establish a procedure for compensating and
reimbursing its professionals on a monthly, interim and final
basis to enable the Court and all parties-in-interest to monitor
fees incurred more effectively and on a more current basis.
DirecTV proposes these procedures:
A. Monthly Applications
The Professional is permitted to be compensated for services
rendered and reimbursement of expenses incurred:
(a) on or before the 15th of each calendar month, each
Professional seeking interim compensation may submit an
application to the Curt for interim approval and
allowance of compensation for all services rendered and
reimbursement of expenses incurred during the immediately
preceding month. Each Monthly Application will contain:
-- itemized time records, by timekeeper and matter
number, of the services rendered and hours expended;
-- hourly rates charges for the services, if applicable;
and
-- a summary statement of the status of all previous
requests;
(b) Each Monthly Application will comply with the Bankruptcy
Code, the Federal Rules of Bankruptcy Procedure,
applicable Third Circuit law and the Local Rules of this
Court and will be served to all parties set forth in the
official service list, the U.S. Trustee, counsel for the
DIP Lender, and counsel to any statutory committee;
(c) Each Notice party will have 20 days after service of a
Monthly Application to object thereto. If a any Notice
Party objects to a Professional's Monthly Application, it
must file s written objection with the Court and serve it
on the Professional, and each of the Notice Party so that
it is received on or before the Objection Deadline. The
objection will set forth the nature of the objection and
the specific amount of fees or costs at issue.
Thereafter, the objecting party and the Professional may
attempt to resolve the objection on a consensual basis;
(d) If the parties are unable to reach a resolution of the
objection within 20 days after the service of the
objection, the Professional may either:
-- file a response to the objection with the Court,
together with a request for payment of the difference,
if any, between the Maximum Payment and the Actual
Interim Payment made to the affected Professional --
the Incremental Amount, which request will be heard
at no sooner than 20 days after the Professional files
and serves the request; or
-- forego payment of the Incremental Amount until the
next interim or final fee application hearing, at
which time the Court will consider and dispose of the
objection, if requested by the parties;
(e) Upon the expiration of the Objection Deadline, the
Professional or DirecTV may file a certificate of no
objection or certificate of partial objection with the
Court after which DirecTV is authorized to pay each
Professional an amount equal to the lesser of:
-- 80% of the fees and 100% of the expenses requested in
the Monthly Application -- the Maximum Payment; and
-- 80% of the fees and 100% of the expenses that are not
subject to an objection;
(f) Beginning with the period ending June 15, 2003, and at
three-month interval or other intervals convenient to the
Court, each professional will file with the Court and
serve on the Notice Parties an interim application for
allowance of compensation and reimbursement of expenses,
pursuant to Section 331 of the Bankruptcy Code, of
amounts sought in the Monthly Applications that are the
subject of the request and any other information
requested
by the Court or required by the Local Rules.
Additionally, each Professional will serve notice of any
Interim Fee Application on all parties that have entered
their appearance pursuant to Rule 2002 of the Federal
Rules of Bankruptcy Procedure. The notice will indicate:
-- the Professional seeking fees and expenses;
-- the period for which fees and expenses were incurred;
-- the amount previously received by the Professional in
accordance with the procedures set forth herein; and
-- the amount sought in the Interim Fee Application;
(g) Any Interim Fee Application must be filed and served
within 45 days of the conclusion of the Interim Period
for which the Interim Fee Application seeks allowance of
fees and reimbursement of expenses. The first Interim
Fee Application Request should cover the Interim Fee
Period from the commencement of the case through and
including June 15, 2003. Any Professional who fails to
file an Interim Fee Application when due will be
ineligible to receive further interim payments of fees or
expenses under the compensation procedures until the time
as the Interim Fee Application is submitted;
(h) DirecTV will request that the Court schedule a hearing on
the Interim Fee Application at least once every six
months. However, DirecTV may request a hearing to be
held every three months or at other intervals as the
Court deems appropriate;
(i) The pendency of an objection to payment of compensation
or reimbursement of expenses will not disqualify a
Professional from future payment of compensation or
reimbursement of expenses, unless the Court orders
otherwise;
(j) Neither the payment of nor the failure to pay, in whole
or in part, monthly interim compensation and
reimbursement
of expenses nor the filing of or failure to file an
objection will bind any party-in-interest or the Court
with respect to the allowance of interim or final
applications for compensation and reimbursement of
expenses of Professionals;
(k) All fees and expenses paid to the Professionals under the
Interim Compensation Procedures are subject to
disgorgement until final allowance by the Court; and
(l) Except as otherwise set forth herein, any amounts billed
by the Professionals to DirecTV and any efforts by the
Professional to collect thereon, will be in accordance
with the terms and conditions of the engagement of the
Professional by DirecTV.
B. Committee Member Expenses
Each member of any committee be permitted to submit
statements of reasonable expenses and supporting vouchers to
counsel for the committee, who will then collect and submit
the requests for reimbursement in accordance with the
foregoing procedure for interim compensation and
reimbursement of professionals.
C. Final Applications
The Professionals should file the final applications for
compensation and reimbursement in accordance with the
provisions of the Bankruptcy Code, the Bankruptcy Rules and
the Local Rules and any orders of this Court, or in
accordance with other procedures as this Court may authorize
by separate order, and by the deadline as may be established
in a confirmed Chapter 11 plan or in an order of this Court.
The Professionals will serve the final fee applications on
the Notice Parties and the 2002 Parties.
Mr. Waite says that the procedures suggested will enable DirecTV
to monitor closely the costs of administration, maintain and
forecast a level of cash flow and implement efficient cash
management procedures. Moreover, those procedures will allow the
Court and key parties to insure the reasonableness and necessity
of the compensation and reimbursement sought. (DirecTV Latin
America Bankruptcy News, Issue No. 2, Bankruptcy Creditors'
Service, Inc. 609/392-0900)
DIRECTV LA: Motion To Enjoin Utilities From Altering Service
------------------------------------------------------------
Joel A. Waite, Esq., at Young Conaway Stargatt & Taylor LLP, in
Wilmington, Delaware, relates that DirecTV Latin America LLP
performs all of its operations at its corporate office in 2400
East Commercial Boulevard, Ft. Lauderdale, Florida. In
connection with the normal operation of its business at this
office, DirecTV obtains electricity, natural gas, water, garbage
collection and other similar, non-telecommunications services as
part of the direct expenses billed to it by the lessor,
California State Teachers' Retirement System under the terms of
the Lease. However, DirecTV obtains its voice and data
communications services through these Telecommunications
Companies:
-- TriStar Communications
-- Impsat
-- MCI Worldcom ITV Connectivity
-- AT&T CKT ID DHEC784864 IT Connectivity
-- Sprint Ckt ID 199966 IT Connectivity
-- AT&T
-- MCI Worldcom
-- VoiceStream
-- MCI Worldcom/PALS
-- Bellsouth
-- Verizon
-- PacBell
Pursuant to Section 366(a) of the Bankruptcy Code, DirecTV asks
the Court to restrain the 12 Telecommunications Companies and the
Lessor from altering, refusing or discontinuing the services or
providing adequate assurance.
"Uninterrupted Telecommunications Services are essential to
ongoing operations and, therefore, to the success of DirecTV's
reorganization," Mr. Waite remarks. DirecTV's Operating
Companies are widely dispersed throughout Latin America. As a
result, DirecTV employees are in constant communications with the
Operating Companies via phone, internet and email. Should the
Telecommunications Companies refuse or discontinue the services
even for a brief period, operations would be severely disrupted.
The impact on business operations, revenue and reorganization
efforts would be extremely harmful and would jeopardize DirecTV's
reorganization efforts.
Mr. Waite informs Judge Walsh that DirecTV has a satisfactory
payment history with the Telecommunications Companies. Moreover,
DirecTV is unaware of any significant current defaults or payment
issues with respect to any undisputed invoices.
Mr. Waite assures the Court that DirecTV has the ability to
continue paying for the Telecommunications Services since:
(a) under the terms of the DIP Financing, it will have more
than adequate liquidity to pay for postpetition
Telecommunication Services on a current basis in the
ordinary course of business; and
(b) as DirecTV has no secured prepetition debt, the
Telecommunications Companies are amply protected by their
entitlement to an administrative expense priority under
Section 503 of the Bankruptcy Code for any unpaid
postpetition Telecommunications Services.
For the same reasons, Mr. Waite continues, the Lessor and the
utilities with whom it contracts directly, are adequately assured
of future payment. Under Section 365(d)(3) of the Bankruptcy
Code, the Lessor is entitled to timely payment of postpetition
rent.
DirecTV proposes to serve a copy of the order approving this
motion via U.S. Mail within three business days on the Lessor and
on all of the 12 Telecommunications Companies. Further, DirecTV
proposes that the Lessor or the Telecommunications Companies
thereafter may request from DirecTV additional assurance in the
form of deposits or other securities; provided, however, that the
request is made in writing and received within 25 days from the
Order date -- Deposit Request Deadline.
In the event the Parties could not agree on the amount of
additional assurance, DirecTV proposes that the
Telecommunications Company be required to file a motion for
determination of adequate assurance of payment and schedule a
hearing on the next omnibus hearing date that is at least 30 days
after the Deposit Request Deadline, unless otherwise agreed by
the Parties or by Court order.
According to Mr. Waite, the motion is warranted because if
DirecTV will be forced to place funds in the hand of the Lessor
or the Telecommunications Companies that might be better used to
fund DirecTV's reorganization efforts. In addition, DirecTV
believes that granting the relief will not prejudice the rights
of the Lessor and the Telecommunications Companies under Section
366 of the Bankruptcy Code.
Judge Walsh grants this motion in all respects. (DirecTV Latin
America Bankruptcy News, Issue No. 2, Bankruptcy Creditors'
Service, Inc. 609/392-0900)
DIRECTV LA: Meeting With Us Trustee To Form Committees
------------------------------------------------------
The United States Trustee for Region III will meet with the
Debtor's largest creditors at 1:00 a.m. on Wednesday, March 26,
2003, in Room 2112 on the 2nd Floor of the J. Caleb Boggs Federal
Building located at 844 King Street in Wilmington, Delaware.
(DirecTV Latin America Bankruptcy News, Issue No. 2, Bankruptcy
Creditors' Service, Inc. 609/392-0900)
DIRECTV LA: U.S. Trustee Schedules Sec. 341(a) Meeting
------------------------------------------------------
Acting U.S. Trustee Roberta A. Deangelis advises the Clerk of the
Bankruptcy Court that she will convene the first meeting of the
Debtor's creditors, pursuant to 11 U.S.C. Sec. 341(a), on April
24, 2003 at 1:30 p.m. The Meeting will be held at Room 2112, 2nd
Floor, J. Caleb Boggs Federal Building, 844 King Street,
Wilmington, Delaware.
This is the first meeting of creditors required under 11 U.S.C.
Sec. 341(a) in all bankruptcy cases. All creditors are invited,
but not required, to attend. This Meeting of Creditors offers the
one opportunity in a bankruptcy proceeding for creditors to
question a responsible office of the Debtor under oath about the
company's financial affairs and operations that would be of
interest to the general body of creditors. (DirecTV Latin America
Bankruptcy News, Issue No. 2, Bankruptcy Creditors' Service, Inc.
609/392-0900)
PECOM ENERGIA: Pays Outstanding Portion of $35M 6.75% Notes
-----------------------------------------------------------
As expected by Standard & Poor's Ratings Services, Pecom Energˇa
S.A. (Pecom, foreign currency: CCC/Negative/--) paid Friday the
outstanding portion of the US$35 million 6.75% notes due March
21, 2003. In order to fund this transaction, the company issued
bonds for US$32.8 million on March 14, 2003, and therefore the
debt burden of the company was not reduced after the payment.
Although Pecom's maturity profile has significantly improved
after the successful 2002 bond exchange, Standard & Poor's
continues to be concerned about the total debt burden of the
company. In addition, since Pecom's controlling shareholder
changed, Standard & Poor's will analyze the strategic objectives
of the company for the coming years as well as its financial
performance in order to determine if any rating action is
required to reflect improvements or deteriorations of Pecom's
credit quality.
ANALYSTS: Pablo Lutereau, Buenos Aires (54) 114-891-2125
Marta Castelli, Buenos Aires (54) 114-891-2128
=============
B E R M U D A
=============
ANNUITY & LIFE: Fitch Lowers IFS Rating to 'C'
----------------------------------------------
Fitch Ratings-Chicago-March 21, 2003: Fitch Ratings has lowered
the insurer financial strength rating of Annuity & Life
Reassurance, Ltd. (ANR) to 'C' from 'CC'. The Rating Watch
remains Negative.
The rating action reflects additional disclosures in an amended
third quarter 2002 10-Q filed by the company on Friday. In
particular, the company added a Going Concern and Subsequent
Events statement disclosing that the company has been served with
a statutory demand under Bermuda law, which if deemed valid,
could lead to liquidation if the company is unable to satisfy the
obligations claimed by the filing party.
On February 26, 2003, Fitch downgraded ANR's insurer financial
strength rating from 'CCC' to 'CC', following the company's
public disclosure on February 24th of a number of adverse
developments related to its operating performance and financial
position. Of particular concern to Fitch were the company's
announcements that it had ceased writing new business and had
notified its existing reinsurance clients that it cannot accept
additional cessions under previously established treaties, as
well as disclosure of continued adverse mortality and a large
number of open claim submissions. These disclosures, combined
with other negative developments, led the company to announce
that a significant loss will be reported in the fourth quarter of
2002, and for the year, although the company has not yet
disclosed the severity of those losses.
The company also acknowledged in its February press release that
it fell $15 million short of securing a letter of credit issued
in its favor by The Manufacturers Life Insurance Company. In
addition, the company still has not satisfied yearend 2002
collateral requirements for the benefit of certain ceding
companies.
Being Bermuda-based, ANR is an unauthorized reinsurer in the
U.S., and like all unauthorized reinsurers, it must post
collateral to the benefit of its U.S. ceding companies per U.S.
regulatory requirements. Such collateral can be provided in the
form of trust deposits and/or letters of credit. The company
disclosed in its amended third quarter 2002 10-Q that its cedents
now claim that the company must satisfy a total of approximately
$140 million of additional collateral requirements.
The Rating Watch Negative will remain in place until after ANR
reports fourth quarter 2002 results, and Fitch is able to better
judge the impact of the loss on capital.
Entity/Issue Type Action Rating/Watch
Annuity & Life Reassurance, Ltd. --Insurer financial strength
Downgrade 'C'/ Negative.
CONTACT: Bradley S. Ellis, CFA 1-312-368-2089
Julie A. Burke, CPA, CFA 1-312-368-3158, Chicago
Media Relations: James Jockle 1-212-908-0547, New York
ANNUITY & LIFE: Withdraws Offer To Sell $200M In New Debt
---------------------------------------------------------
Annuity & Life RE Holdings Ltd. requested the withdrawal of an
offering to sell up to US$200 million in senior debt securities
from time to time, according to a report by Dow Jones.
The report, citing a company filing with the Securities and
Exchange Commission, reveals that the Company originally filed
the registration statement with the SEC on March 1, 2002. The
filing stated that the Company is withdrawing the offer because
it doesn't intend to have the registration statement declared
effective.
The Company had wanted to use the proceeds of the offering to
boost working capital, to repay debt and to finance acquisitions.
===========
B R A Z I L
===========
AES TIETE: Uncertain Market Conditions Put Project On Hold
----------------------------------------------------------
Brazilian generator AES Tiete plans to build a 700MW thermo
project in Sao Paulo state as part of its commitments under the
concession contract signed in December 1999, reports Business
News Americas. According to AES Tiete VP Demostenes Barbosa da
Silva, the Company is in the process of securing environmental
licensing for the project. However, it will not proceed with the
project until market conditions improve, da Silva said.
The December 1999 contract requires AES Tiete to add 15% capacity
within the first eight years of the concession. But, the project
size goes beyond that commitment, which would only require the
Company to add 400MW, based on its existing installed capacity of
2,651MW.
VARIG: Reports BRL2.02 Bln Loss For Jan-Sep 2002 Period
-------------------------------------------------------
Brazilian airline Viacao Aerea Rio Grandense SA (or Varig) posted
the following results for the first nine months of 2002 in a
filing with the stock exchange Friday:
- Net loss of BRL2.02 billion ($1=BRL3.48)
- Net revenues of BRL4 billion
- Gross earnings of BRL1.05 billion
- Operating loss of BRL1.21 billion
- Negative book value of BRL2.54 billion
According to Dow Jones, the results were presented on a non-
consolidated basis, excluding the performance of Varig's
logistics, maintenance and travel services units.
Varig didn't offer explanations for its performance over the
first nine months of 2002.
The third quarter earnings statements were long overdue, and the
Sao Paulo Stock Exchange threatened earlier this month to lower
Varig's corporate governance rating unless financial information
through September was filed.
The airline, which is trying to stave off bankruptcy by merging
its operations with rival carrier TAM Linhas Aereas, has not yet
set a date for reporting results for the full-year 2002.
CONTACT: VARIG (Viacao Aerea Rio-Grandense, S.A.)
Rua 18 de Novembro No. 800, Sao Joao
90240-040 Porto Alegre,
Rio Grande do Sul, Brazil
Phone: (51) 358-7039/7040
(51) 358-7010/7042
Fax: +55-51-358-7001
Home Page: www.varig.com.br/english/
Contacts:
Dorival Ramos Schultz, EVP Finance and CFO
E-mail: dorival.schultz@varig.com.br
Investor Relations:
Av. Almirante Silvio de Noronha,
n 365-Bloco "B" - s/458 / Centro
Rio de Janeiro, Brazil
KPMG Brazil
Belo Horizonte
Rua Paraba, 1122
13th Floor
30130-918 Belo Horizonte MG
Telephone 55 (31) 3261 5444
Telefax 55 (31) 3261 5151
or
Brasilia
SBS Quadra 2 BL A N 1
Edificio Casa de Sao Paulo SL 502
70078-900 Braslia - DF
Telephone 55 (61) 223 2024
Telefax 55 (61) 224 0473
BAIN & CO
Primary Contact: Wendy Miller
Two Copley Place, Boston, MA 02116
USA
Phone: +1-617-572-2000
Fax: +1-617-572-2461
Email: miles.cook@bain.com
URL: http://www.bain.com
=========
C H I L E
=========
AES GENER: Liquidity Concern Prompts Feller Rate Equity Cut
-----------------------------------------------------------
Chilean credit rating agency Feller Rate, a Standard & Poor's
affiliate, downgraded its rating on shares of local generator AES
Gener to first class level 4 from first class level 3, reports
Business News Americas.
The move reflects the Company's "sustained fall in liquidity
indicators," Feller Rate said in a statement Friday. Meanwhile,
the rating agency is maintaining its BBB- rating on AES Gener
bonds, and all ratings are on negative creditwatch.
In Feb. 2003, liquidity indicators were at 21%, down from 62% in
the same month of the previous year. The generator is yet to
implement a divestment plan, which was announced in 2002. Further
delays in divesting assets will lead to Feller rating AES Gener
at less than investment grade, the statement said.
AES Gener faces debt payments of US$500 million in 2005 and
US$200 million in 2006. Financial support from AES Corp. is very
unlikely to come since the US parent also has problems on its own
to contend with, Feller said.
ENERSIS: SC Ruling On Case May Come Next Week
---------------------------------------------
The Supreme Court heard closing arguments on Thursday from
lawyers Ramon Briones and Hernan Bosselin, who are opposed to the
antitrust commission's ruling, which rejected accusations that
the vertical integration of Chilean power sector holding Enersis'
assets would affect consumers. In 14 days' time, the Supreme
Court will hand down its decision on the case.
Business News Americas recalls that in October 2002, the
antitrust commission voted four to one in favor of Enersis and
against lawyers Briones and Bosselin. Briones and Bosselin
appealed the decision to the Supreme Court, claiming that the
vertical integration between Enersis and its subsidiaries gives
the Company unfair control over the end-price paid by power
consumers.
However, Enersis lawyers argued that the claim was unfounded
given that the company sold its transmission subsidiary Transelec
to Canada's Hydro Quebec for US$1.1 billion in 2001.
Enersis owns 60% of generator Endesa Chile and 98.5% of
distributor Chilectra. Until the Supreme Court decides on the
case, Enersis cannot buy or sell shares in Endesa Chile. In
addition, no board member of Enersis, Chilectra or Endesa Chile
is permitted to sit on the board of one of the other two
companies.
INVERLINK: SVS Slaps Chairman $4.1M Fine For Mismanagement
----------------------------------------------------------
Chile's securities and exchange regulator, the SVS, issued
Eduardo Monasterio, chairman of financial group Inverlink, a
US$4.1-million fine for financial mismanagement at life insurance
company Le Mans Desarrollo. The ruling, according to Business
News Americas, is the maximum financial sanction permitted under
Chilean law.
Monasterio carried out financial transactions at Inverlink's
stock brokerage subsidiary that left the group's life insurance
unit Le Mans saddled with debts, the SVS said.
The regulator justified the fine based on the financial damages
Monasterio's actions could have for Le Mans's clients.
===============
C O L O M B I A
===============
AVIANCA: Case Summary & Largest Unsecured Creditors
---------------------------------------------------
Lead Debtor: Aerovias Nacionales de Colombia S.A. Avianca
720 Fifth Avenue
5th floor
New York, New York 10019-4107
aka Avianca
Bankruptcy Case No.: 03-11678
Debtor affiliates filing separate chapter 11 petitions:
Entity Case No.
------ --------
Avianca, Inc. 03-11679
Type of Business: The Debtor, the oldest airline in the Western
Hemisphere, operates a domestic (Colombia)
and international airline passenger business,
but it also carries mail and freight cargo on
its domestic and international routes.
Chapter 11 Petition Date: March 21, 2003
Court: Southern District of New York (Manhattan)
Judge: Allan L. Gropper
Debtors' Counsel: Ronald E. Barab, Esq.
SMITH, GAMBRELL & RUSSELL, LLP
1230 Peachtree Street, NE, Suite 3100
Atlanta, Georgia 30326
Tel: (404) 815-3500
Howard D. Ressler, Esq.
Michael J. Venditto, Esq.
ANDERSON, KILL & OLICK, P.C.
1251 Avenue of the Americas
New York, New York 10020
Tel: (212) 278-1000
Estimated Assets: More than $100 Million
Estimated Debts: More than $100 Million
A. Aerovias Nacionales' 20 Largest Unsecured Creditors:
Entity Nature Of Claim Claim Amount
------ --------------- ------------
Caja de Auxilios y Pension Debt $73,856,000
Prestaciones de Acdac
"CAXDAC"
Carrera 10A No. 90 - 35
Bogota, Colombia
Attn: Monica Guererro
Telephone: 5716180287
Fax: 5712188098
G.E. Capital Aviation Promissory Note $23,111,000
Services
Fleming Way Crawley West,
Sussex RH1
Shanon, England
Attn: Allison O'Sullivan
Telephone: 3536170650
Fax: 35361707768
Bank of New York Loan $20,727,000
101 Barclay Street [Of which,
New York, NY 10286 approximately
Attn: Nicole Caprio $1,200,000 is
Telephone: 2128156278 secured]
Fax: 2128156278
Instituto de Seguro Social Pension Debt $20,205,000
Avenida 15 No. 100 - 43
Bogota, Colombia
Attn: Walter Osorio Salazar
Telephone: 5715223300
Fax: 5715223300
Debis AirFinance B.V. Promissory Note $12,275,000
Avert Van de Beekstraat
221118 CL
Amsterdam
Attn: Martin Wills
Telephone: 203161431
Fax: 310206559190
Banco de Bogota Loan $10,736,000
Calle 35 No. 7 - 47 Piso 3
Bogota, Colombia
Attn: Alberto Perez
Telephone: 5713320032
Fax: 5713380933
Valores Bavaria S.A. Loan $10,078,000
Carrera 14 No. 93-68
Bogota, Colombia
Attn: Julieta Murcia
Telephone: 5716172000
Fax: 5716172043
Direccion Nacional de Taxes and Withholdings $9,798,000
Impuestos
Carrera 8 6-64 Edificio San
Agustin
Bogota, Colombia
Attn: Luz Myriam Garcia
Telephone: 5712458100
Fax: 5753448296
Ansett World Wide Aviation Promissory Note $7,601,000
Services
Tower 1 TNT Plaza Lawson
Square Red
Australia
Attn: Mary Kaiwalker
Telephone: 6129319840
Fax: 61282516211
Israel Aircraft Industries Maintenance $6,199,000
Ben Gurion Int'l Airport 70100
Israel
Attn: Arie Benn
Telephone: 9723938
Fax: 3054666008
Debis Finance Ireland PLC Promissory Note $5,349,000
Avert Van de Beekstraat 22
1118 CL Amsterdam
Attn: Benno de Paa
Telephone: 312-06559100
Fax: 310206559190
Dresdner Kleinwort Promissory Note $5,123,000
Wasserstein Limited
PO Box 18075
River Bank House,
2 Swan Lane
London, England EC4R 3UX
Attn: Amanda Callaghan
Telephone: 2074757943
Fax: 2074756595
Pratt & Whitney Columbus Maintenance $3,491,000
500 Knotter Drive M/S 303-21
Cheshire, CT 06410
Attn: Rafael Latorre
Telephone: 5712956365 BOG
Fax: 5714139815
Alfa Romeo Avio - Fiat Maintenance $3,101,000
Avio
Viale Impero 80038
Pomigliano
D'Arco, Italy
Attn: Emilio Serejo
Telephone: 39813163
Fax: 9544311612
Exxon Mobil de Colombia Fuel Provider $2,709,000
S.A.
Calle 90 NO.21-32 / 58
Bogota, Colombia
Attn: Aurora Pelaez
Telephone: 5716283431
Fax: 5716283350
Iberia, Lineas Aereas de Maintenance $1,915,000
Espa¤a
Nueva Zona Industrial (La
Munoza)
Madrid, Spain
Telephone: 349158758
Fax: 34915874877
Tesoro Nacional Aerocivil Government Services $1,616,000
Aeropuerto Eldorado Piso 5.
Bogota, Colombia
Attn: Mauricio Macaya
Telephone: 5714138009
Fax: 5714139415
P.C.A. S.A Service Provider $1,507,000
Tranversal 93 No. 60-02
Bogota, Colombia
Attn: Jorge Montoya
Telephone: 5714147700
Fax: 5714139789
Aseguradora Colseguros S.A. Insurance Provider $8,138,000
Carrera 13 a No. 29-27 Piso 17
Bogota, Colombia
Attn: Myriam Mora
Telephone: 5715600656
Fax: 5715612724
Jeppesen Sanderson, Inc. Service Provider $1,136,000
55 Inverness Drive East
Englewood, Colorado 80112
Jeppesen Sanderson, Inc.
Attn: Gary B. Rose
Telephone: 303-799-9090
Fax: 3033284115
B. Avianca Inc.'s 20 Largest Unsecured Creditors:
Entity Nature Of Claim Claim Amount
------ --------------- ------------
Michelin Aircraft Tire Co. Aircraft Spare Parts $774,496
1305 Perimeter Rd
Greenville, SC 29605
Attn: Nelson Leroy
Telephone: 864 422 7026
Fax: 864 422 7066
Fokker Services B.V Aircraft Spare Parts $529,167
Lucas Bolstraat 7
2152 Cz Nieuw Vennep
The Netherlands
Attn: Johan Van Dorst
Telephone: 31 0 164 618410
Fax: 31 0 164 618666
United Aerospace Corp. Aircraft Spare Parts $403,246
9800 Premier Parkway
Miramar, FL 33025
Attn: Mayra Quian
Telephone: 954 364 0085 x324
Fax: 954 364 0090
Hamilton Sundstrand Aircraft Spare Parts $304,826
One Hamilton Rd
Windsor Locks, CT 06096
Attn: Steven Grabscheid
Telephone: 860 654 6047
Fax: 860 654 6552
Boeing Commercial Airp. Aircraft Spare Parts $279,236
635 Park Avenue North
Renton, WA 98055
Attn: Amy Logue
Telephone: 425 237 4608
Fax: 425 237 3830
Curtiss Wright Accessory Aircraft Spare Parts $212,448
Aircraft Service Int'l Ground Services $211,673
ASIG DSI Miami
Gate Gourmet Services On Board $206,356
Honeywell /Lockbox 905132 Aircraft Spare Parts $174,789
LSG Sky Chefs Services On Board $156,302
Swissport USA, Inc Subcontracted Personnel $145,986
Med-Craft Inc. Aircraft Spare Parts $141,546
AAR Aircraft Component Aircraft Spare Parts $134,559
Technical Service Int'l Aircraft Spare Parts $117,056
Mitchell Aircraft Exp, LLC Aircraft Spare Parts $88,650
ASI Aircraft Spare Parts $72,725
Soundair, Inc. Aircraft Spare Parts $65,204
Brite Air Parts, Inc. Aircraft Spare Parts $64,655
Goodrich Aerospace Aircraft Spare Parts $63,581
Lanchile Ground Services $62,683
===================
C O S T A R I C A
===================
ICE: Seeks Approval On Draft Modernization Bill
-----------------------------------------------
Costa Rica's state electric power and telecom company ICE
submitted a draft modernization bill to congress that would allow
it to increase debts to 60% of total assets, reports Business
News Americas.
If congress approves the bill, ICE would be able to raise an
extra CRC590 billion (US$1.52B) in debt, bringing its total
maximum debt to CRC1 trillion, which is equivalent to almost one-
sixth of the country's GDP.
Already, ICE's debt totaled CRC402 billion, or 24% of its CRC1.6
trillion in assets at the end of last year.
But according to ICE executive president Pablo Cob, it is not
necessary to lay down maximum levels of indebtedness in law. The
important thing was to win credibility with company creditors,
Cob added.
Finance minister Jorge Walter Bolanos on the other hand, suggests
that before a maximum level of indebtedness is imposed, the
composition of the debt needs to be analyzed first. This would
mean considering the mix of domestic versus foreign debt, fixed-
interest debt versus variable-interest debt, maturity portfolios
and the impact of the debt on public finances.
=============
E C U A D O R
=============
* IMF Approves $205M Stand-By Arrangement for Ecuador
-----------------------------------------------------
The Executive Board of the International Monetary Fund (IMF)
approved Friday a 13-month SDR 151 million (about US$205 million)
Stand-By Arrangement for Ecuador to support the country's
economic and financial program through March 2004. The approval
opens the way for the immediate release of SDR 30.2 million
(about US$41 million).
In addition, the Executive Board approved the authorities'
request to extend by one year the repayment expectations arising
from a purchase under a Stand-By Arrangement approved on April
19, 2000. These repayments in an aggregate amount are equivalent
to SDR 14 million (about US$19 million) and were expected to be
made on August 30, 2003; November 30, 2003; and February 29,
2004. Purchases in the credit tranches are expected to be repaid
in eight quarterly installments made within 2.25 and 4 years
after the date of purchase. The extension granted by the
Executive Board is allowed under the Fund's general policies
governing repurchase expectations which authorize the Executive
Board to extend repurchase expectations on request by a member
with an insufficiently strong external position.
Following the Executive Board discussion, Horst K”hler, Managing
Director, said:
"While the Ecuadoran economy had begun to recover following
dollarization, policy slippages in 2002 led to a slowing of
economic growth, continued payments arrears in the public sector,
and rising concerns about the inconsistency of fiscal and wage
policies with dollarization. In particular, rapid public sector
wage increases undercut the fiscal position and contributed to
the continued relatively high rate of inflation. In addition,
structural reforms were suspended in key areas.
"The new administration has shown impressive leadership in
dealing with a difficult economic situation. Immediately upon
taking office, the new government acted to reverse the policy
slippages in 2002 by implementing important decisive measures to
boost revenues and control expenditures, balanced with social
safety net support, and by announcing a broad program of economic
reforms. These efforts aim at strengthening fiscal performance
and boosting confidence and competitiveness, thus laying the
basis for sustained improvement in the growth performance.
"Upfront fiscal measures are already helping to raise the public
sector primary surplus and overcome the very difficult liquidity
position in the Central Government that the authorities faced
upon assuming office. It remains imperative to sustain the
government's fiscal consolidation objectives, including through
the customs reform that is already being advanced through
Congress, and with the important reforms contemplated later this
year in the civil service and the tax and revenue earmarking
system. At the same time, greater attention should be paid to
improving the living conditions of the poor, including by
improving the targeting of the social safety net.
"The government has already acted to revive the reform agenda in
other areas, including by unfreezing the tariffs of the public
enterprises, and steps to deal with the lingering problem of the
closed banks. The authorities are contemplating additional
important initiatives to improve the functioning of the public
enterprises in the electricity, telephone, and petroleum sectors.
Directors strongly support these steps, because they can make a
substantial contribution to lowering production costs in the
economy.
"Recognizing the strong start made by the new government, the
Fund anticipates continuing to work closely with the Ecuadoran
authorities as they proceed with the implementation of their
ambitious and comprehensive economic program," Mr. K”hler said.
ANNEX
Recent Economic Developments
Ecuador went through a difficult period in the 1990s, and per
capita income stagnated. The 1998 oil price slump, damage from
the El Ni¤o weather phenomenon, and disease in the shrimp
industry further complicated the situation. As a result, Ecuador
experienced severe economic stress, culminating in accelerating
inflation, which spilled over into a banking crisis, a deposit
freeze, and the closure of some 18 banks, affecting half of total
deposits and ended in a currency crisis.
The adoption of the U.S. dollar in January 2000 stabilized
expectations, and economic activity began to turn around. Oil
prices recovered, while imports surged due to a boom in domestic
demand associated with the exchange rate-based stabilization. In
2001, demand was given further impetus by the start of the
construction of a new private oil pipeline (Oleoducto de Crudos
Pesados, OCP) and higher public sector spending.
However, economic growth slowed again to 3 percent of GDP in 2002
from 5.1 percent in 2001 due to policy slippages and faltering
confidence. Fiscal discipline weakened with large increases in
the wage bill, the granting of new revenue earmarking, and
discretionary tax cuts. Inflation has dropped but remained still
too high for a dollarized economy. Consumer price inflation came
down from 91 percent at end-2000 to 9.4 percent by end-2002, but
strong domestic demand (fiscal expansion), weak domestic supply
(suspension of structural reforms), and wage-driven cost
increases have prevented it from dropping to international
levels. Wages have more than doubled since dollarization in
early 2000 (led by the public sector), exceeding inflation over
this period. The unemployment rate has dropped by half since
2000, to 8.5 percent at end-2002 recovering by end-2001 its pre-
crisis level.
The external current account deficit widened to 5 percent of GDP
in 2002 from 2.4 percent in 2001. While merchandise exports
benefited from higher oil prices and continued growth of non-oil
exports, imports grew rapidly on strong domestic demand, and an
appreciating real effective exchange rate.
Program Summary
Within days of taking office on January 15, 2003, the new
authorities started implementing a comprehensive and ambitious
economic program. The program projects real GDP growth of 3.5
percent in 2003, and a decline in consumer price inflation to an
end-of-period rate of 6-7 percent, after the initial adverse
effect of the unfreezing of utility, fuels, and other prices.
Assuming a cautious oil price of US$18 per barrel, the external
current account deficit is projected at just over 5 percent of
GDP in 2003.
The authorities' program has four building blocks: a package of
immediate fiscal measures; fiscal structural reforms; liquidating
closed banks and resolving other outstanding issues from the
banking crisis; and reforms in the state enterprises.
The main objectives of the fiscal program are to address
immediate liquidity constraints and to bring expenditure growth
under control, consistent with the demands of dollarization. The
government has already moved quickly to implement a package of
revenue measures. Spending growth has been limited by a budgetary
freeze on wages and other expenditure controls. According to the
Fiscal Responsibility law approved in 2002, primary expenditures
can grow annually to a maximum of 3.5 percent in real terms. The
budget sent by the government and approved by congress in
February is consistent with the primary expenditures fiscal rule.
The social safety net has been strengthened to compensate the
poor for the effects of some of the revenue measures.
In order to limit the growth in public sector spending and
maintain revenue buoyancy, the authorities are planning a
customs, civil service, and tax reform, thus laying a strong
foundation for sustainable fiscal policies in the medium term.
The government has submitted to Congress a law to overhaul the
customs administration and to bring it under the umbrella of the
tax administration office (SRI).After passage of the customs law,
the government will seek approval for a public sector wage
unification and civil service reform law, which aims at achieving
a lower nominal wage bill in 2004 through shrinking the size of
government and reducing personnel. The wage unification aims at
phasing in a broadening of the base for social security
contributions and income taxes, akin to the reform in the private
sector.
Finally, the authorities will seek the passage of a tax reform
law to eliminate revenue earmarking not mandated in the
constitution, and most tax exemptions, including special rules in
the income tax system. The law would also cut some low-yielding
taxes; increase fees for vehicles; and reduce the currently high
standard deduction for income taxes .
The government also intends to reassess, with outside technical
assistance, the operations of the social security system and the
actuarial position of the general social security system (IESS)
and the pension funds for the military and the police (ISSFA and
ISSPOL).
While the private banking system has recovered well, the
authorities plan to address some still unresolved issues,
including the liquidation of Filanbanco, and the preparation for
sale of Banco del Pacˇfico. The private banks and the authorities
also have been discussing a strategy to replace the existing
Liquidity Fund It is contemplated that the new Liquidity Fund
would be administered by an independent private manager, who
would keep most of the liquidity abroad.
Ecuador is an original member of the IMF. Its quota is SDR 302.3
million (about US$410 million); and its outstanding use of IMF
credit currently totals SDR 226.7 million (about US$308 million).
CONTACT: IMF External Relations Department
Public Affairs: 202-623-7300 - Fax: 202-623-6278
Media Relations: 202-623-7100 - Fax: 202-623-6772
=============
J A M A I C A
=============
AIR JAMAICA: Majority Owner May Cede Part of Stake to Government
----------------------------------------------------------------
Air Jamaica Holdings Limited, which comprises a consortium of
investors led by Gordon 'Butch' Stewart, is likely to see its
ownership in the ailing Air Jamaica go down to 55% from its
current 75%.
This would be the likely scenario, the Jamaica Gleaner suggests,
if the government, whom the airline has approached for help,
agrees to take a bigger stake in a debt-to-equity swap, thereby
increasing its share of the national carrier to 45%.
At the same time, the airline is also looking for an immediate
injection of cash to finance operations over the next year, which
it hopes Government will either guarantee or supply up front.
"We need about US$30-35 million to make it through this year, and
we need it sooner than later," said chief executive officer,
Christopher Zacca.
Given the industry uncertainties worldwide, Zacca said it was not
unreasonable to expect the Jamaican Government to provide the
assistance, as other governments have been so doing. Last year,
the airline grossed US$420 million, but operational expenses
topped US$500 million, said the CEO, leaving the Air Jamaica with
losses of US$80-90 million for the year.
CONTACT: Air Jamaica
4 St. Lucia Avenue
Kingston 5,
Jamaica
Phone: 876/922-3460
Fax: 929-5643
E-mail: webinfo@airjamaica.com
Contact:
Gordon Stewart, Chairman
Allen Chastanet, Vice President for Marketing and Sales
===========
M E X I C O
===========
GRUPO TMM: Extends Debt Exchange Offers
---------------------------------------
Grupo TMM, S.A. (NYSE:TMM) (BMV:TMM A) announced Friday that it
has extended the expiration date of its previously announced
exchange offers and consent solicitations for all of its
outstanding 9 1/2 percent Senior Notes due 2003 and its 10 1/4
percent Senior Notes due 2006. The exchange offers and consent
solicitations will expire at 5:00 p.m., New York City time, on
Thursday, April 3, 2003, unless further extended by Grupo TMM.
All other terms and conditions of the exchange offers and consent
solicitations remain the same. As of 5:00 p.m., New York City
time, on March 20, 2003, approximately 34.34 percent of the
outstanding 2003 notes, or $60,745,000 principal amount, had been
tendered and not withdrawn, and 86.07 percent of the outstanding
2006 notes, or $172,141,000 principal amount, representing a
majority of the 2006 notes, had been tendered and not withdrawn.
Salomon Smith Barney Inc. is acting as the dealer manager for the
exchange offers and consent solicitations.
Headquartered in Mexico City, Grupo TMM is Latin America's
largest multimodal transportation company. Through its branch
offices and network of subsidiary companies, Grupo TMM provides a
dynamic combination of ocean and land transportation services.
Grupo TMM also has a significant interest in TFM, which operates
Mexico's Northeast railway and carries over 40 percent of the
country's rail cargo. Grupo TMM's web site address is
www.grupotmm.com and TFM's web site is www.tfm.com.mx. Grupo TMM
is listed on the New York Stock Exchange under the symbol TMM and
Mexico's Bolsa Mexicana de Valores under the symbol TMM A.
The exchange offers and consent solicitations are made solely by
the prospectus dated March 5, 2003. Copies of the prospectus and
transmittal materials can be obtained from Mellon Investor
Services LLC, the information agent for the exchange offers and
consent solicitations, at the following address:
Mellon Investor Services LLC
44 Wall Street, 7th Floor
New York, NY 10005
(888) 689-1607 (toll free)
(917) 320-6286 (banks and brokers)
This announcement is neither an offer to purchase nor a
solicitation of an offer to sell Grupo TMM Notes. The exchange
offers and consent solicitations are not being made to, nor will
tenders be accepted from, or on behalf of, holders of existing
Notes in any jurisdiction in which the making of the exchange
offers and consent solicitations or the acceptance thereof would
not be in compliance with the laws of such jurisdiction. In any
jurisdiction where securities, blue sky laws or other laws
require the exchange offers and consent solicitations to be made
by a licensed broker or dealer, the exchange offers and consent
solicitations will be deemed to be made on behalf of Grupo TMM by
the dealer manager or one or more registered brokers or dealers
licensed under the laws of such jurisdiction.
PEMEX: Supreme Court Rules Oil Spill Fine Must Be Paid
------------------------------------------------------
Mexico's state-owned oil monopoly Pemex lost in its appeal to
have the Supreme Court overturn a ruling ordering it to pay a
fine for an oil spill last year in the Gulf coast state of
Tabasco, the AP reports, without disclosing the amount of the
fine.
Pemex had gone to the Supreme Court to appeal the fine, saying
that environmental authorities did not have a court warrant to
inspect the spill site. But the SC ruled that none was needed,
given that an inspection order had been issued by environmental
authorities.
The leak occurred at a Pemex well in Huimanguillo, Tabasco, about
400 miles (600 kms) southeast of Mexico City.
=================
N I C A R A G U A
=================
ENITEL: State Assuming Debt Incurred By Previous Administration
---------------------------------------------------------------
Apparently the government, before making its exit in the
incumbent Enitel, will have to assume a US$5.25-million debt the
Company owed to Cuban-American Ricardo Mas Canosa. Nicaraguan
daily La Prensa reports that Canosa is demanding payment in
connection to a 1998 international settlement agreement he signed
with Enitel, then a fully state-run company, administrated at the
time by Gabriel Levy.
However, the paper says that Mr. Levy's successor Jorge Solis
Farias refused to continue with the Canosa contract after the
latter refused to pay him a monthly US$40,000 bribe.
Enitel has since been privatized after the Megatel consortium -
comprised of Sweden's Telia Swedtel and Honduran electricity
company EMCE - obtained a 40% stake in the Company.
According to Enitel legal counsel Rafael Chamorro, the new owners
have no responsibility for the old contract. Citing a clause in
the privatization contract, Chamorro says the state - which still
owns a non-controlling 49% stake - will have to assume all the
liabilities related to the dealings of the previous
administration.
"There is a clause in the [privatization] contract that all the
debts, litigation and lawsuits that derive from events prior to
the handover of the firm correspond to the state," he said.
=================
V E N E Z U E L A
=================
* Venezuela Struggles To Lure Investors
---------------------------------------
Investors remain apprehensive about putting any more money into
Venezuela after the nation plunged into chaos when oil workers
lodged a strike in December. Last week, the government attempted
to sell VEB78.2 billion of 89-day notes, VEB21.5 billion of 180-
day notes and VEB15.5 billion of 271-day notes. However, no debt
was sold, the central bank said at its Web site.
According to a report by Bloomberg, Venezuela lost about US$7
billion during the December-January strike, forcing the
government to finance its budget by selling debt and by offering
to extend maturities on debt coming due. Analysts have said that
the Venezuelan economy may contract by 20% this year.
"There is little demand for bonds, because some still expect
political turmoil to resume and the economy will contract sharply
this year," said Rodrigo Sacca, an economist at Stone & McCarthy
in Mexico. "How will the government get the tax resources to pay
back the debt?"
Bloomberg says Venezuela has US$29.8 billion in international and
domestic debt.
***********
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 * * *