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T R O U B L E D C O M P A N Y R E P O R T E R
L A T I N A M E R I C A
Friday, August 1, 2003, Vol. 4, Issue 151
Headlines
A R G E N T I N A
ARTE GRAFICO: Bonds Get Default Ratings From Fitch
BERSA: Banco Nacion Commences Bidding Process
BODEPES: Court Assigns Receiver For Bankruptcy Process
CABLEVISION: Fitch Assigns Default Ratings To $1.5B of Bonds
CTI HOLDINGS: Fitch Says $300M Bonds Deserve Junk Status
DIRECTV LA: Objects to Raven Media's Trustee, Examiner Motion
DISCO: Ahold Confirms Seizure of Assets
EL CORRALON: Court Announces Creditors' Meeting
ELECTRICIDAD ARGENTINA: Fitch Assigns Default Ratings to Bonds
HIDROELECTRICA PIEDRA: $300M of Bonds Rated 'D(arg)' by Fitch
HIDROELECTRICA PIEDRA: Fitch Rates Various Bonds 'D(arg)'
HSF MEDIA: Creditors Called To Formal Meeting
IMAGEN SATELITAL: Fitch Rates $80M of Bonds 'D(arg)'
IRSA: $250M of Bonds Get Junk Ratings From Fitch
MULTICANAL: Fitch Assigns Default Ratings To Bonds
NII HOLDINGS: Announces Strong Performance in 2Q03
REPSOL YPF: Posts Net Profit of EUR1,165M for 1H03
SCP: Bonds Get 'D(arg)' From Local Fitch
SIDECO: Fitch Rates Corporate Bonds 'D(arg)'
TERBON: Court Announces Creditors Meeting
TRANSENER: Corporate Bonds Receive Default Ratings From Fitch
YOMA GROUP: Seeks to Renegotiate Debt With Banco Nacion
B E R M U D A
GLOBAL CROSSING: Secures Court Approval for SAP Settlement Pact
LORAL/QUALCOMM: Seeks Plan Exclusivity Extension through Oct. 10
B O L I V I A
COTEL: Kicks Off Long Distance Operations
B R A Z I L
AES CORP.: Reports 2Q03 Continuing Ops Income of $0.11/Share
COSIPA: Board Approves Plan To Issue Bonds Overseas
EMBRATEL: Instituto Embratel 21 Has New Chairman
RBS PARTICIPACOES: S&P Lowers Ratings to 'B-', Off CreditWatch
C H I L E
ENAMI: Bill To Transfer Ventanas To Codelco Goes To Congress
ENERSIS: Parent Reports 1H03 Consolidated Results
ENERSIS: S&P Comments on Endesa S.A.'s A Rating
ENERSIS: Concludes Management Shake-up
ENERSIS: Informs Regulator August Dividend Suspended
C O L O M B I A
VALORES BAVARIA: Sale Of Portfolio Firms Helps Reduce Net Loss
G U A T E M A L A
*S&P Assigns 'BB-' Rating to Guatemala's $300M Bond
J A M A I C A
AIR JAMAICA: Relocating Some Operations To Cut Costs
C&WJ: Cuts Incoming Int'l Calls To Rival on Illegal Activity
M E X I C O
GRUPO MEXICO: Reports $3.6M Net Loss In 2Q03
MAXCOM TELECOMUNICACIONES: Announces Improved 2Q03 Results
SATMEX: Expects To Conclude Satmex 6 Financing In September
T R I N I D A D & T O B A G O
BWIA: 25 Retrenched Workers To Get Severance Payments This Week
V E N E Z U E L A
*S&P Raises Venezuelan LT FC Rating Raised to 'B-'
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A R G E N T I N A
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ARTE GRAFICO: Bonds Get Default Ratings From Fitch
--------------------------------------------------
Corporate bonds issued by Arte Grafico Editorial Argentino S.A.
received default ratings from Fitch Argentina Calificadora de
Reisgo S.A. Wednesday. The 'raD' rating is assigned to bonds that
are currently in payment default, said the ratings agency. It was
based on the Company's finances as of the end of Mach 2003.
The National Securities Commission described the affected bonds
as "Obligaciones Negociables", worth a total of US$600 million.
The bonds, whose maturity dates were not disclosed, are
classified under "Program".
BERSA: Banco Nacion Commences Bidding Process
---------------------------------------------
Argentina's Banco de la Nacion kicked off this week the bidding
process for the sale of Banco de Entre Rios (BERSA). Potential
bidders have until August 26 to submit their proposals. According
to local reports, the Macri Group is interested in making a bid
for the bank, which went into receivership over a year ago when
its French parent, Credit Agricole, quit Argentina amid a sharp
financial crisis. Bidders must have at least ARS30 million to buy
BERSA.
CONTACT: BANCO DE ENTRE RIOS S.A. (BERSA)
Monte Caseros 128
Parana
3100 Entre Rios
Argentina
Phone: 0343-4201200
Fax: 0343-4213869
Contact: Alberto Roque Ferrero, Vice-President
BODEPES: Court Assigns Receiver For Bankruptcy Process
------------------------------------------------------
The Civil and Commercial Tribunal of Mar del Plata assigned Mr.
Oscar Adolfo Sanchez as receiver for the bankruptcy proceedings
Bodepes S.A. is undergoing. Infobae reports that Court No. 6 of
Mar del Plata is handling the Company's case.
Creditors must have their claims verified by the receiver before
September 1, 2003. The Court expects to have the individual
reports on October 24 followed by the general report on December
5 this year.
CONTACT: Bodepes S.A.
Acha 890
Mar del Plata
Oscar Adolfo Sanchez
Avenida Colon 2991
Mar del Plata
CABLEVISION: Fitch Assigns Default Ratings To $1.5B of Bonds
------------------------------------------------------------
Fitch Argentina Calificadora de Riesgo S.A. rates corporate bonds
issued by Cablevision S.A. 'D(arg)', relates the National
Securities Commission of Argentina. The rating, which was
assigned Wednesday, applies a total of US$1.5 billion worth of
bonds.
The affected bonds, which the NSC described as "Obligaciones
Negocibles Simples", were classified as "Program". The maturity
date, however, was not indicated.
The rating given was based on the Company's finances as of March
31, 2003. Fitch said the 'D(arg)' rating is assigned to financial
commitments in Argentina that are currently in default.
CTI HOLDINGS: Fitch Says $300M Bonds Deserve Junk Status
--------------------------------------------------------
Fitch Argentina Calificadora de Riesgo S.A. assigned junk ratings
to US$300 million worth of corporate bonds issued by CTI Holdings
S.A., relates the country's National Securities Commission. The
'C(arg)' rating, which was given Wednesday, denotes an extremely
weak credit risk relative to other issues in the country, said
Fitch.
The NSC described the bonds as "Obligaciones Negociables con
Cupon Diferido, autorizadas por AGOyE de fecha 6.11.97". These
were classified under "Simple Issue". Maturity date was given as
April 1, 2008. The Company's financial position as of March 31
this year determined the rating assigned.
DIRECTV LA: Objects to Raven Media's Trustee, Examiner Motion
-------------------------------------------------------------
Objections
1. DirecTV
According to Joel A. Waite, Esq., at Young, Conaway, Stargatt &
Taylor, LLP, in Wilmington, Delaware, Raven Media Investments,
LLC, demands that the Court exercise the drastic and
extraordinary remedy of appointing a Chapter 11 trustee or,
alternatively, appointing an examiner for the Debtor. Amazingly,
Mr. Waite notes, Raven's demand comes despite the Official
Committee of Unsecured Creditors and its financial advisors
having already established themselves as active participants in
this proceeding and being funded with $2,000,000 by Hughes
Electronics Corporation to investigate the very issues, which
Raven insists can be more appropriately handled by a Trustee or
Examiner. Perhaps the best evidence that Raven's request for a
Trustee or Examiner is entirely self-interested is that Raven
invested in DTVLA over two years before the Petition Date with
full knowledge of the company's relationship with Hughes and its
affiliates, including PanAmSat, California Broadcast Center LLC
and SurFin Ltd., and of the fact that the Debtor was and would
continue to be managed by certain "seconded" Hughes executives.
Thus, the Debtor objects to Raven's request as Raven cannot
overcome the strong legal presumption against removing the
Debtor's current management and appointing a trustee.
A fundamental principle that pervades Chapter 11 is that a debtor
must be afforded a fresh start, and the opportunity to analyze
and correct, to the extent required, existing operations. In
complete accord with this principle is the basic tenet that a
debtor should be permitted to continue operation of its business
during the period in which the reorganization is pending. Thus,
any deviation from the basic design of Chapter 11 is an
extraordinary remedy. In the Third Circuit, "the appointment of
a trustee is the exception, rather than the rule." Sharon Steel,
871 F.2d at 1225; see also Marvel Enter. Group, Inc., 140 F.3d at
470.
Accordingly, Raven must prove the need for a Trustee by clear and
convincing evidence. However, Mr. Waite maintains, Raven has
not, and cannot, meet this burden. The conflicts of interest
Raven alleged do not constitute sufficient cause under Section
1104(a)(1) of the Bankruptcy Code to appoint a trustee in this
case, Mr. Waite says.
The statutory language of Section 1104 (a)(1) provides that
"cause" may be established by proving that current management is
guilty of:
(i) one or more of the acts specified in Section 1104(a)(1)
-- i.e., fraud, dishonesty, incompetence or gross
mismanagement, or
(ii) acts similar to those specified in Section 1104(a)(1).
Mr. Waite notes that Raven offers no proof that any Section
1104(a)(1) "acts" or "similar acts" presently exist in DirecTV's
case. Rather, Raven simply argues that cause exists for the
appointment of a Trustee because they believe that the Debtor's
management is irreconcilably conflicted and, therefore,
"incapable of discharging its fiduciary duties" to DirecTV's
estate.
"Not only does Raven take substantial liberty with the facts, it
often mischaracterizes the record and omits certain information
which is highly relevant to the overall picture," Mr. Waite
argues. These defects are fatal to Raven's request that the
Court appoint a Trustee:
A. The Relevant Legal Authority Does Not Support Raven's
Request For The Appointment Of A Trustee
Mr. Waite notes that curiously absent from Raven's request
is any meaningful discussion of the relevant case law
where courts have considered when conflicts of interest
might constitute sufficient cause to appoint a Trustee.
Raven cites In re Marvel Entertainment Group, Inc., 140 F
3d 463, 471 (3d Cir. 1998) in support of the proposition
that conflicts could exist where management might be
forced to evaluate their own claims against the estate.
But Marvel does not support Raven's request for a Trustee
in DirecTV's case.
In Marvel, the Third Circuit affirmed the appointment of a
Trustee by the district court where bondholders, led by
financier Carl Ichan, acquired control of the debtor-in-
possession six months after the bankruptcy case was
initiated and were unable to make any significant progress
towards Marvel's reorganization. The district court
believed that there was an "unhealthy conflict of
interest" based on the "deep-seeded conflict and animosity
between the Ichan-controlled debtor and the Lenders and in
the lack of confidence all creditors had in the Ichan
interests' ability to act as fiduciaries." Marvel, 140
F.3d at 472.
The Marvel case is wholly distinguishable from DirecTV's
case. Most notably, the Third Circuit did not apply the
usual presumption against appointing a Trustee because the
debtor-in-possession acquired control of the company
postpetition by buying claims against the estate and did
not possess the "usual familiarity with the business". In
contrast, the debtor-in-possession in DirecTV's case, has
managed the Debtor's business from its inception. Hughes
was one of the original investors in the business and has
always controlled the Debtor's board. No party has ever
alleged that the Debtor's management has engaged in
misconduct or fraud, and the causes of the Debtor's
financial distress have largely been outside management's
control.
By contrast, Mr. Waite notes, the denial of Raven's
Request is supported by other relevant authority. See,
e.g., Richter v. Klein/RayBroad. (In re Klein/Ray Broad.),
100 B.R, 509 (BAP. 9th Cir. 1987) (denying motion to
appoint trustee where motion merely raised questions as to
possible conflicts, and no evidence suggested that the
debtor's current management had acted with any
impropriety); In re Justus Hospitality Prop. Ltd., 86 BR.
261 (Bankr. M.D. Fla, 1988) (denying motion to appoint
trustee where evidence failed to establish fraud,
dishonesty or serious error on the part of management,
even though management was controlled by the debtor's
major lender).
B. Raven Has Not Established, And Cannot Establish, Facts
Sufficient For The Court To Conclude That DTVLA'S Current
Management Cannot Continue To Satisfy Its Fiduciary Duty
To the Estate
Raven's request is based on unsupported allegations and
intentionally misleading assertions. Mr. Waite cites
certain notable inaccurate, misleading or unsupported
assertions offered by Raven:
(a) Executive Compensation
Raven's allegation that the Debtor's "seconded"
management is entirely compensated by Hughes and,
therefore, that management cannot effectively
renegotiate the Debtor's satellite and programming
contracts or propose a reorganization plan that
satisfies the estates' overall interests, is a
dramatic overstatement.
While its management enjoys limited participation in
certain Hughes' performance-based incentives, the
Debtor bears the ultimate economic burden for
"seconded" manager compensation and these managers
also participate under the terms of DTVLA's key
employee retention plan, as approved by the Court in
March 2003.
As a result, current management has every incentive to
renegotiate all of the Debtor's contracts and collect
as much royalty payments from the LOCs as possible,
regardless of whether the affected entity is a Hughes
or non-Hughes-related party.
(b) Royalties
The Debtor has filed several pleadings with the Court
concerning the business justification for the LOCs
allocation of their limited cash receipts between debt
payments owed to SurFin and royalty payments owed to
the Debtor. However, Raven continues to insist that
Hughes dictated this decision in order to benefit
itself. These allegations attempt, without any
factual support, to portray this allocation as
improper or as the cause of the Debtor's financial
problems and are misleading. Mr. Waite argues that
the Debtor has the ultimate incentive to collect its
receivables aggressively and to work with individual
LOCs to ensure the future of satellite television in
Latin America.
(c) Darlene
Raven's allegation that the Debtor's management has
disabling conflicts as a result of the Term Sheet
entered into by Hughes and Darlene is disingenuous at
best. Mr. Waite contends that the Debtor is not a
party to this Term Sheet, under which Darlene would be
willing to contribute various interests it owns in the
LOCs to the Debtor under a reorganization plan. Thus,
any releases contained in the Darlene Term Sheet are
not binding on this estate unless and until:
-- they are provided for in a plan of reorganization,
and
-- the Court approves the releases at confirmation in
accordance with applicable law.
Until that time, the Committee and other parties have
will ample opportunity to consider all of the terms of
the Term Sheet and related documents, and any party
can raise objections at confirmation if, and to the
extent, they are incorporated into the Debtor's plan.
(d) DTV USA
Raven's assertion that the Debtor would somehow
compromise its negotiations with key programmers, like
HBO, MTV, Discovery and TNT, in order to generate
"goodwill" for Hughes with respect to its DirecTV
business in the United States is ridiculous.
In fact, Mr. Waite confirms, the Debtor rejected its
programming agreement with Disney by stipulated order
shortly after the bankruptcy case commenced.
Moreover, the Debtor's prospect of successfully
reorganizing depends greatly on management's ability
to renegotiate all of its satellite and programming
contracts. Thus, the Debtor and its management have
every incentive to renegotiate the best possible terms
with all of its programmers regardless of the
programmers' contractual relationships with DTV USA.
C. Raven's Attempt To Discredit Existing "Checks And
Balances" Is Unpersuasive And Contrary To Applicable Law
The Committee has amply demonstrated its ability to
investigate claims against Hughes and other insiders.
Thus, while Raven may be uncomfortable with the
Committee's position opposing Raven's purported
$189,000,000 claim against the Debtor, it cannot
reasonably be contended that the Committee is not acting
to insure that Hughes' interests in DTVLA and other
related entities do not improperly dictate or influence
the Debtor's reorganization.
In addition, independent remedies exist for any individual
creditor or party-in-interest including Raven to oppose
any reorganization plan, which the objector does not
believe was proposed in good faith or otherwise satisfies
the conditions for confirmation.
Mr. Waite points out that majority of the courts
considering the issue at hand have refused to appoint a
Trustee where alleged conflicts could be balanced by
traditional remedies under the Bankruptcy Code, "the
strict rules governing the Debtor-In-Possession" or the
"watchful eye" of a creditors' committee or the U.S.
Trustee.
In short, Raven's concern that the bankruptcy process
itself will not adequately protect the Debtor's estate
from any potential conflicts is unfounded. Ample "checks
and balances" exist to protect Raven and other parties,
and bankruptcy courts readily cite to protections in
rejecting requests to appoint Trustees.
The Debtor also objects to the Raven's request because they
believe that the appointment of trustee is not in the best
interest of the estate within the meaning of Section 1104(a)(2)
of the Bankruptcy Court. To prevail under Section 1104(a)(2),
Raven must convince the Court that appointment of a trustee is in
the interests of the creditors, the equity security holders, and
other interests of the estate. The moving party under Section
1104(a)(2) must establish that appointment of a Trustee is in the
interest of all constituencies.
But Mr. Waite notes that Raven's request is not only unwarranted,
but would actually inure to the detriment of creditors in these
cases. Any minimal benefit that Raven envisions a Trustee will
bring to DirecTV's case is substantially outweighed by the
detriments, which may include the cessation of ongoing business
operations, especially if Hughes decides to exercise its default
remedies and cease funding under the DIP facility. This estate
also need not be forced to incur the additional expense
associated with appointment of a Trustee.
Ultimately, Mr. Waite asserts that the appointment of an examiner
is not required in DirecTV's case and is unwarranted under the
circumstances. The Debtor does not have fixed, liquidated,
unsecured non-trade, non-insider debt exceeding $5,000,000. The
vast majority of the Debtor's debt is owed to Hughes, an insider
of the Debtor. The Debtor's remaining obligations are owed to
trade creditors or taxing authorities. Moreover, Raven's
$189,000,000 claim under the Put Agreement is entirely disputed
by the Debtor. Thus, the Court is not required to appoint an
Examiner pursuant to Section 1104(c)(2) of the Bankruptcy Code.
Mr. Waite tells the Court that the Committee has gained
substantial knowledge with respect to these issues during the
past several months and expended considerable estate resources in
the process. Displacing the Committee on these matters, at this
stage and without cause, would be unnecessarily wasteful with
respect to both time and economic resources.
2. The Official Committee of Unsecured Creditors
Kathleen Marshall DePhillips, Esq., at Pachulski, Stang, Ziehl,
Young, Jones & Weintraub, P.C., in Wilmington, Delaware, tells
the Court that the Committee shares Raven's dual concerns that:
(a) Hughes holds enormous leverage in the plan confirmation
process, and
(b) Hughes' prepetition conduct merits extremely close
scrutiny.
However, the Committee disagrees with Raven's conclusion that the
conflicts they cited necessarily justify the appointment of a
trustee or an examiner at this time.
Ms. DePhillips relates that the Committee has been dissatisfied
with the degree of the Debtor's cooperation with this
investigation to date. The Committee has no doubt that the
resistance it encountered is the result of Hughes' influence. The
Committee is attempting to work through these issues with the
Debtor and is hopeful that these issues will be resolved.
All of the Hughes conflicts Raven cited are known to the
Committee. In fact, Ms. DePhillips says, many of these conflicts
were uncovered by the Committee in discovery. The Committee's
efforts to unravel all of Hughes' relationships with the Debtor
is still ongoing. Presently, the Committee concedes that:
(a) Hughes controls the Debtor. Three of the four members
of the Debtor's "Executive Committee" are Hughes
employees. Hughes employees also hold six of the seven
senior officer positions with the Debtor and are paid by
Hughes directly. The Debtor then reimburses Hughes for
this expense;
(b) The Debtor has a monthly fixed cost of approximately
$6,300,000 to two Hughes subsidiaries, PanAmSat and
California Broadcast Center, which provide satellite and
broadcasting services to the Debtor;
(c) Hughes, through DirecTV LA Holdings Corporation, also has
equity interests in the Hughes LOCs. These Hughes LOCs
could not function absent the Debtor's continued
operation; and
(d) Hughes has a 75% ownership stake and is the primary
creditor of Surfin Group, which provides financing to all
LOCs in each region for the cost of integrated receiver
decoders. Repayments are made directly from the LOCs to
Surfin. The Debtor has apparently guaranteed the Surfin
Obligations in an amount exceeding $300,000,000, secured
by a pledge of the Debtor's equity in the LOCs. The
Debtor's continued operation is necessary for the LOCs to
honor their Surfin Obligations.
Ms. DePhillips notes that Section 1104(a) of the Bankruptcy Code
provides that the Court may appoint a trustee "(1) for cause,
including fraud, dishonesty, incompetence, or gross mismanagement
of the affairs of the debtor by current management . . . or (2)
if the appointment is in the interests of creditors, any equity
security holders, and other interests of the estate, without
regard to the number of holders of securities of the debtor or
the amount of assets or liabilities of the debtor." However, Ms.
DePhillips argues, a Chapter 11 trustee in DirecTV's case is not
mandated by either the "cause" or "best interests" standards
embodied in Sections 1104(a)(1) and (2). Ms. DePhillips relates
that many courts held that the existence of conflicts, standing
alone, does not necessarily justify the appointment of a trustee.
The Committee believes that Raven's "cause" argument for the
appointment of a trustee is unpersuasive, given the ameliorative
steps taken to address the Hughes conflicts. In particular, the
Debtor and Hughes agreed to take some steps necessary to create a
balanced plan negotiation playing field. The most obvious
example is the $2,000,000 investigation fund, which Hughes
provided to the Committee to investigate the very relationships,
which give Raven concern. Thus, Ms. DePhillips asserts, this is
not a case where a debtor will be expected to investigate claims
against its own affiliates. That is the Committee's job, and the
Committee has been funded to perform that function. Thus, the
existence of conflicts, standing alone, should not constitute
cause for the appointment of a trustee.
Furthermore, Ms. DePhillips refutes Raven's assertions that the
appointment of a trustee is in the best interests of the
creditors, notwithstanding the obvious Hughes conflicts, for at
least three reasons:
(a) The occurrence of default under the Hughes DIP Financing
is not in the best interest of creditors.
Most obviously, the appointment of a trustee has the
potential to terminate this reorganization because it
constitutes an event of default under the proposed Hughes
DIP Financing. The Committee is at a loss as to how
taking this risk could be in the best interest of
creditors.
(b) The additional cost and delay of the appointment of a
trustee is not in the best interest of creditors.
The appointment of a trustee will obviously create
significant delay in the plan negotiation process. A
stranger will be asked to take over management control of
the Debtor and then attempt to educate himself or herself
as to the extraordinarily complicated relationships of
which Raven complains. In the meantime, it is reasonable
to assume that the plan process will simply grind to a
halt.
(c) The appointment of a trustee will not cleanse the plan
negotiation process of conflict but will rather
complicate the process by introducing an additional
player.
The Committee's goal in this case is the consensual
reorganization of the Debtor as a going concern. This
goal necessitates an enormous amount of negotiation with
Hughes. Nonetheless, Raven asserts that a trustee should
be appointed so that there is an independent party with
whom the Committee can negotiate a plan and who can
negotiate the Debtor's contracts without the taint of
conflict.
If a trustee is appointed, Hughes would no longer control
the Debtor in the plan process. Nonetheless, the
Committee would have to negotiate or litigate with Hughes
directly concerning Hughes' prepetition claims,
prepetition contractual activities, going forward
satellite commitments, going forward customer commitments
and the proper resolution of Hughes' enormous
superpriority administrative claim in DirecTV's case.
The appointment of a trustee would not facilitate any of
these negotiations. From the Committee's perspective,
the appointment of a trustee would simply inject a
newcomer to the negotiation process, at the cost of
additional monetary expense and unavoidable delay.
There is also no current need to fund an examiner, because Hughes
has already agreed to fund the Committee, to the extent of
$2,000,000, to examine the very relationships and prepetition
events of which Raven complains.
Raven also asks the Court to appoint an examiner, who would
evaluate the numerous intercompany issues and transactions
engaged in by the Debtor, Hughes and its affiliates. Raven does
not address the obvious inefficiency and economic waste inherent
in its proposal, Ms. DePhillips notes. Rather, Raven focuses on
the fact that the appointment of an examiner is mandated, given
the size of DirecTV's case. While the Bankruptcy Code appears to
mandate the appointment of an examiner, it gives the Court
complete flexibility to determine the scope of the investigation
that the Court believes is appropriate.
Accordingly, the Committee asks the Court to deny Raven's
request.
3. Hughes Electronic Corporation
Hughes and its wholly owned subsidiary, DIRECTV Latin America
Holdings, Inc. object to Raven Media Investments LLC's request
for the appointment of a Trustee or Examiner because Raven's
arguments are weak. Hughes believes that the arguments are
nothing more than expressions of Raven's frustration at the
Debtor's unwillingness to concede in an unrelated proceeding in
the case that Raven's alleged claims, which are based on its
prepetition equity interests in the Debtor, should be regarded as
general unsecured prepetition claims against the Debtor's estate.
Raven's request generally alleges that a crisis exists at the
Debtor's management level that threatens its Chapter 11 estate.
Richard P. Krasnow, Esq., at Weil, Gotshal & Manges, in New York,
notes that Raven's request features a long and confusing
recitation of alleged facts and a "parade of horribles" that
might occur if the Court declines to appoint a trustee or an
examiner with expanded powers. It is not surprising that Raven's
request contains a relatively short discussion of the law.
Mr. Krasnow asserts that the entire premise of Raven's request --
that the Debtor's relationships with Hughes and Hughes'
affiliates render the Debtor unfit to discharge its fiduciary
duties as a debtor-in-possession -- is based on pure speculation.
At no point does Raven even allege that the Debtor has breached
its fiduciary duties or otherwise acted improperly since the
commencement of the case almost four months ago. Instead, Raven
attempts to cast a shadow over the case simply by:
(i) describing the relationships, which have already been
publicly disclosed to the Court numerous times by the
Hughes Entities and the Debtor, among the Debtor, Hughes
and Hughes' affiliates, and
(ii) guessing that the Debtor, Hughes, Hughes' affiliates and
their employees and professionals, none of whom Raven has
the audacity to allege has yet engaged in misconduct,
will breach their fiduciary duties and act
unprofessionally or inappropriately because of the
relationships.
Not surprisingly, Raven is unable to cite a single case in which
a court found cause for the appointment of a trustee solely
because of a potential or anticipated conflict of interest. In
Marvel and Sharon Steel, the only cases stated in the Trustee
Motion, the courts found that extensive postpetition misconduct
had already occurred, and thus the extreme and disfavored remedy
of a trustee appointment was based on something much more
substantial than the uniformed predictions of a disputed
creditor.
Mr. Krasnow relates that the Bankruptcy Court's decision in
Clinton 85 B.R. 980 (Bankr. E.D. Pa. 1988) is more apposite to
the Debtor's current case than either Marvel or Sharon Steel. In
Clinton, a significant creditor of the debtor moved for the
appointment of a trustee because interrelationships between the
debtor, the debtor's principal and a non-debtor company owned by
the debtor's principal that leased equipment to the debtor made
the creditor suspicious that the debtor and its principal were
siphoning the debtor's assets to the non-debtor affiliate.
The Clinton Court observed that the movant failed to provide
evidence that the postpetition lease agreements were
unreasonable, and elaborated that, as long as a debtor keeps
sufficient books and records, a movant cannot meet its burden of
showing cause for the appointment of a trustee simply by alleging
impropriety based on interrelationships between a debtor and non-
debtor affiliates, but must actually establish the existence of
the impropriety.
Mr. Krasnow points out that the Debtor's conduct is clearly
distinguishable from the conduct of the debtors in Marvel and
Sharon Steel, where the debtors engaged in significant
improprieties postpetition. Moreover, the evidence Raven
provided to show cause for the appointment of a trustee does not
even rise to the level of the evidence the movant in Clinton
provided, where the debtor failed to seek necessary court
approvals before engaging in postpetition transactions with
affiliates.
Raven alleges that an absence of checks and balances in the case
gives cause for the appointment of a trustee. Mr. Krasnow argues
that this argument contains several glaring weaknesses:
(a) It assumes that the Debtor and its professionals will
breach their fiduciary duties to the parties-in-interest;
(b) It heavily discounts the role of the Committee;
(c) It overlooks the ability of all parties-in-interest,
including Raven, to object to any relief the Debtor may
request; and
(d) It ignores the role of the Court -- any conduct of the
Debtor outside of the ordinary course of its business
requires review by the Court.
In short, the system of checks and balances present in any
Chapter 11 case is in place in DirecTV's case, and is fully
capable of protecting the Debtor's estate from adverse
consequences that Raven guesses might arise from the Debtor's
alleged conflicts of interest.
Furthermore, Raven cannot cite a case law that will satisfy
Section 1104(a)(2) of the Bankruptcy Code, which authorizes the
appointment of a trustee in a Chapter 11 case if the appointment
is in the interests of creditors, any equity security holders,
and other interest of the estate without regard to the number of
the Debtor's holders of securities or the amount of its assets or
liabilities. In fact, several cases hold the opposite -- that
conflicts of interest do not justify the appointment of a trustee
pursuant to Section 1104(a)(2) absent proof of some actual
failure by the debtor-in-possession. See e.g., In re Royster Co.,
145 B.R. 88, 90-91 (Bankr. M.D. Fla. 1992); In re ATR Dev. Co.,
97-19838DAS, 1997 WL 614372, *1-*2 (Bankr. E.D. Pa. Oct 2, 1997);
In re Justus Hospitality Prop., Ltd., 86 B.R. 261, 266-67 (Bankr.
M.D. Fla. 1988); Klien/ray, 100 B.R. at 511.
When considering whether the appointment of a trustee is in the
interests of a debtor's parties-in-interest, a Court should also
consider the costs to the Debtor's estate of the appointment of a
trustee. In DirecTV's case, the appointment would be extremely
damaging to the estate. The appointment of a trustee is
inherently fraught with delay and expense, and as regularly
recognized by the Courts, causes the displacement of experienced
management to the detriment of creditors.
Mr. Krasnow also notes that Raven's request is riddled with false
and misleading assertions:
(a) Raven makes a series of allegations about agreements
between Hughes and Darlene Investments, LLC, another
holder of prepetition equity interests in the Debtor.
However, the first page of the draft term sheet cited by
Raven as evidence of the agreements clearly states that
"This Term Sheet is not a binding agreement and is
subject to negotiation and completion of definitive
agreements and obtaining requisite approvals of Hughes
and Darlene . . . as well as any required approval of any
Bankruptcy Court."
Despite this language, Raven misleadingly characterizes
the contents of the Term Sheet as an existing and binding
agreement between Hughes and Darlene. Not surprisingly,
the actual agreement Hughes and Darlene ultimately
executed contained materially different terms from those
Raven alleged.
(b) Raven alleges that the bonuses of the Debtor's current
management all are based on Hughes' performance, not the
Debtors. Mr. Krasnow asserts that this is simply not
true. The DIRECTV Latin America 2003 Retention Plan,
approved by a May 13, 2003 Court Order, provides for the
payment of bonuses to the Debtor's current management
based solely on criteria related to the Debtor.
In addition, Mr. Krasnow says, appointing a trustee would
immediately create an Event of Default under the DIP Facility.
This Event of Default would allow Hughes to terminate its
obligations to loan funds under the DIP Facility and declare the
loans under the DIP Facility due and payable, thus potentially
forcing the Debtor into immediate liquidation.
In the event that the Court denies Raven's request for the
appointment of a trustee, Raven alternatively seeks the
appointment of an examiner pursuant to Section 1104(c) of the
Bankruptcy Code with the power either to:
(i) act for the Debtor on all business and legal issues
between the Debtor and Hughes and its affiliates, or
(ii) investigate and file a report on a broad range of issues
related to transactions between the Debtor and Hughes and
and Hughes' affiliates.
Raven alleges that an examiner must be appointed because the
Debtor's requisite debts exceed the $5,000,000 threshold Section
1104(c)(2) of the Bankruptcy Code established. However, the
Debtor vigorously disputes this allegation. Hughes adopts by
reference the Debtor's argument with respect to this allegation.
Raven also alleges that the appointment of an examiner is in the
interests of the Debtor's creditors and other parties-in-interest
because the Debtor purportedly cannot evaluate the issues
relating to transactions between the Debtor, Hughes and Hughes'
affiliates. However, Mr. Krasnow states, Raven is unable to cite
any probative evidence of any misconduct by the Debtor's
management. On the contrary, an investigation by an examiner of
Hughes and its affiliates' relationships with the Debtor would be
duplicative of the ongoing Investigation and extremely wasteful
of the Debtor's limited assets, manpower and time.
In the event that the Court appoints an examiner with powers
merely to investigate and report on issues relating to the Debtor
and Hughes and Hughes' affiliates, to ensure that the appointment
is fair and equitable and to avoid the subjection of the Debtor
and Hughes to costly and duplicative simultaneous investigations,
Hughes submits that such examiner:
(i) should entirely replace the Committee in its
Investigation, and
(ii) may have access to the Investigation Carve-out to fund
any investigation or prosecution of claims or defenses
against Hughes and its affiliates, but that:
-- the amount of the Investigation Carve-out will not be
increased, and
-- the examiner will not have access to additional funds
for the Additional Investigation.
To the extent that the Final DIP Order does not address the
appointment of an examiner, and no other portion of the DIP Order
provides a mechanism for funding an investigation, Hughes agrees
to the ample Investigation Carve-out to provide the Debtor's
other creditors with a fair opportunity to understand the
relationships between the Debtor and Hughes and Hughes'
affiliates. Hughes, however, will not fund continually
multiplying, redundant investigations.
Granting Raven's request would likely devastate the Debtor's
reorganization efforts and seriously harm the interests of the
Debtor's legitimate creditors. Accordingly, the Hughes Entities
ask the Court to deny Raven's request in its entirety. (DirecTV
Latin America Bankruptcy News, Issue No. 10; Bankruptcy
Creditors' Service, Inc., 609/392-0900)
DISCO: Ahold Confirms Seizure of Assets
---------------------------------------
Dutch retailer Ahold affirmed media reports that an Argentine
court has seized the assets of its Argentine unit Disco. The move
follows a case brought by former account holders at failed bank
Banco Montevideo, part of the Velox group, Ahold's former partner
in Disco. Ahold took full control of the joint venture, called
Disco Ahold, in August 2002, following Velox's default on various
debts.
But according to a Reuters report, an Ahold spokeswoman said the
Company would appeal the court's decision.
Martha van Dijk said the group was in talks with the Argentinean
judge and expected the seizure to be lifted "within days".
"We think this seizure is unjustified," Van Dijk said, adding
Ahold did not expect the legal move to block its attempts to sell
the Argentinean retailer.
EL CORRALON: Court Announces Creditors' Meeting
-----------------------------------------------
The Civil and Commercial Court of Cutral Co calls creditors of El
Corralon S.R.L. to a meeting, reports a local source, without
revealing the intended time and date.
The Company is currently undergoing a reorganization. Court No. 9
of Cutral Co, which handles the case, set August 19, 2003 as the
date for the informative assembly.
ELECTRICIDAD ARGENTINA: Fitch Assigns Default Ratings to Bonds
--------------------------------------------------------------
Fitch Argentina Calificadora de Riesgo S.A. rated 'D(arg)'
corporate bonds issued by Electricidad Argentina S.A. on
Wednesday. The National Securities Commission of Argentina
described the affected bonds as "Obligaciones Negociables."
Fitch said that the 'D(arg)' rating is assigned to financial
commitments in Argentina which are currently in default. It was
based on the Company's financial position as of March 31, 2003.
The affected bonds, worth a total of US$200 million, were
classified under "simple issue". However, its maturity date was
not indicated.
HIDROELECTRICA PIEDRA: $300M of Bonds Rated 'D(arg)' by Fitch
-------------------------------------------------------------
A total of US$300 million of corporate bonds issued by
Hidroeletrica Piedra del Aguila S.A. received default ratings
from Fitch Argentina Calificadora de Riesgo S.A., relates the
National Securities Commission of Argentina.
The rating applies to bonds, which the NSC describes as
"Obligaciones Negociables Simples". There were classified as
"program" and will reportedly mature on September 20 this year.
Fitch said that the rating, based on the company's finances as of
the end of March 31 this year, is assigned to financial
commitments that are currently in default.
HIDROELECTRICA PIEDRA: Fitch Rates Various Bonds 'D(arg)'
---------------------------------------------------------
A number of Hidroelectrica Piedra del Aguila S.A.'s corporate
bonds received 'D(arg)' ratings from Fitch Argentina Calificadora
de Riesgo S.A., relates the Argentine Securities Commission.
Fitch said that the rating, based on the Company's financial
health as of March 31, 2003, is assigned to financial commitments
that are in default.
The rating apples to :
-- US$97.3 million of "Clase I dento del Programa de US$300
millones"
-- US$97.3 million of "Clase II dentro del Programa de US$300
millones"
-- US$62.5 million of "Clase II dentro del Programa de US$300
millones"
-- US$62.5 million of "Clase IV dentro del Programa de US$300
millones"
-- US$35 million of "Clase IV dentro del Programa de US$300
millones"
-- US$35 million of "Clase V dentro del Programa de US$300
millones"
All the said bonds were classified under "Series and/or Class",
but their maturity dates were not disclosed.
HSF MEDIA: Creditors Called To Formal Meeting
---------------------------------------------
Court No. 16 of Buenos Aires is calling creditors to HSF Media
S.A. to a formal meeting, reveals a local source. However, the
source did not indicate the date and venue of the meeting.
The Company is in the process of restructuring itself after its
motion for "Concurso Preventivo" received court approval. The
receiver designated for the process is Carelli Martino.
The source added that creditors have until December 22 this year
to have their claims verified. The receiver will submit the
individual reports on April 7 next year, followed by the general
report on June 24. The informative audience is scheduled for
February 9, 2005.
CONTACT: Carelli Martino
Lavalle st. n§ 1118
Buenos Aires
IMAGEN SATELITAL: Fitch Rates $80M of Bonds 'D(arg)'
----------------------------------------------------
Fitch Argentina Calificadora de Riesgo S.A. rates corporate bonds
issued by Imagen Satelital S.A. 'D(arg)', a rating, which denotes
that the bonds are currently in default.
The rating was based on the company's finances as of March 31,
2003.
Given on Wednesday, the rating applies to US$80 million of
corporate bonds, which the National Securities Commission
describes as "Obligaciones Negociables". The bonds were
classified under "Simple Issue".
IRSA: $250M of Bonds Get Junk Ratings From Fitch
------------------------------------------------
The National Securities Commission of Argentina relates that
US$250 million worth of "Programa Global de Obligaciones
Negociables" corporate bonds issued by Inversiones y
Representaciones S.A. (IRSA) were rated 'B(arg)-' by Fitch
Argentina Calificadora de Riesgo SA.
The rating, which was given Wednesday, denotes significantly weak
credit risk relative to other issues in Argentina. Financial
commitments are currently being met but a limited margin of
safety remains and capacity for continued timely payments is
contingent upon a sustaines, favorable business and economic
condition, said Fitch.
MULTICANAL: Fitch Assigns Default Ratings To Bonds
--------------------------------------------------
Corporate bonds issued by Multicanal S.A. received default
ratings from Fitch Argentina Calificadora de Riesgo S.A.
Wednesday. The 'D(arg)' rating is issued to financial commitments
that are currently in default, said Fitch.
The National Securities Commission of Argentina relates that the
rating applies to US$125 million of "Obligaciones Negociables",
classified under "Simple Issue". It also applies to another
US$125 million of bonds called "Obligaciones Negociables
Simples", also under simple issue. Fitch also gave the same
ratings to US$1.05 billion of "obligaciones negociables" bonds,
which are classified under "Program".
A total of US$1.3 billion worth of bonds received the default
rating. The Company's financial results as of March 31, 2003
determined the ratings given to the bonds.
NII HOLDINGS: Announces Strong Performance in 2Q03
--------------------------------------------------
NII Holdings, Inc. (Nasdaq: NIHD - News) announced Wednesday its
consolidated financial results for the second quarter of 2003,
including consolidated net income of $42 million, or $2.04 per
basic share, compared to a net loss of $237 million in the second
quarter of 2002. Consolidated operating revenues were $226
million, a 19% increase over the same period last year. The
Company also reported consolidated operating income before
depreciation and amortization of $63 million during the second
quarter, a 128% increase from the second quarter of 2002, and
consolidated operating income of $43 million, a $36 million
increase from the second quarter of 2002. As of June 30, 2003,
NII Holdings reported approximately 1.33 million subscribers and
consolidated unrestricted and restricted cash balances of $314
million.
"Solid execution of our profitable growth strategy has yielded
strong results for the quarter," said Steve Shindler, NII
Holdings' Chairman and CEO. "We added high quality subscribers to
our network and posted record operating income before
depreciation and amortization of $63 million. Because of our
strong results and positive trends for the first half of the
year, we are raising our guidance for 2003."
NII Holdings' average monthly revenue per subscriber (ARPU) was
approximately $53 for the second quarter, up from $50 in the
first quarter. The Company also announced its sixth consecutive
quarter of churn reduction, reporting average consolidated churn
of 2.5% in the second quarter down from 2.6% in the first quarter
of 2003.
Nextel Mexico, NII's largest subsidiary, reported $56 million in
second quarter 2003 operating income before depreciation and
amortization and $39 million of operating income. These amounts
represent significant improvements over second quarter 2002
operating income before depreciation and amortization of $29
million and operating income of $15 million. In addition, Nextel
Mexico reported about 27,900 net subscriber additions during the
second quarter of 2003, increasing its total subscriber base to
about 580,700 units as of June 30, 2003. Each of NII's operating
companies in Brazil, Argentina and Peru also reported positive
operating income before depreciation and amortization and
operating income during the second quarter of 2003.
During the second quarter of 2003, the Company closed on several
communication tower sale-leasebacks in Mexico and Brazil under
its previously announced agreement with American Tower
Corporation raising $17 million. Under U.S. GAAP, the sale-
leaseback transactions are accounted for as financing
transactions. As a result, these transactions are classified as
long-term debt on the Company's balance sheet. The Company's
total long-term debt as of June 30, 2003 was $513 million,
including $69 million in tower financing obligations. Together
with its $314 million reported quarter end cash balance, the
company's net debt continues to be below $200 million.
"During the second quarter, NII improved on its liquidity
position as a result of additional tower sale-leaseback financing
transactions, as well as solid operating cash flow, made
substantial progress in building out its network in Baja
California and delivered healthy performance in its operating
markets, including marked reductions in customer churn in Brazil.
NII was able to continue improving its consolidated operating
income before depreciation and amortization margin from 14% in
the second quarter of 2002 to 28% in the second quarter of 2003.
In addition, all of our operating companies were profitable in
the first half of 2003," said Byron Siliezar, NII's Vice
President and Chief Financial Officer.
Consolidated capital expenditures, including capitalized
interest, were $53 million during the second quarter of 2003.
Because of the positive trends in the business through the first
half of the year, NII Holdings is raising its guidance for 2003.
The revised guidance is predicated on reasonably stable foreign
exchange rates, subscriber growth assumptions, and the timely
launch of our Baja California network. This guidance is forward
looking and is based upon management's current beliefs, as well
as a number of assumptions concerning future events, and as such,
should be taken in the context of the risks and uncertainties
outlined in the SEC filings of NII Holdings, Inc., including
NII's annual report on Form 10-K for the year ended December 31,
2002 and it's subsequent Form 10-Q for the three months ended
March 31, 2003.
2003 Guidance (revised to reflect positive trends through the
first half of the year)
-- Net subscriber additions of 180,000 -- up 20% from 150,000
-- Revenue of $900 million -- up from $850 million
-- Operating income before depreciation and amortization of
$240 million -- up 20% from $200 million
-- Cash Capex of $215 million -- up from $200 million
In addition to the results prepared in accordance with accounting
principles generally accepted in the United States (GAAP)
provided throughout this press release, NII has presented
consolidated operating income before depreciation and
amortization and ARPU, which are non-GAAP financial measures and
should be considered in addition to, but not as substitutes for,
the information prepared in accordance with GAAP. Reconciliations
from GAAP results to these non-GAAP financial measures are
provided in the notes to the attached financial table. To view
these and other reconciliations of non-GAAP financial measures
that the company uses and information about how to access the
conference call discussing NII's second quarter results, visit
the investor relations link at http://www.nii.com.
About NII Holdings, Inc.
NII Holdings, Inc., a publicly held company based in Reston, Va.,
is a leading provider of mobile communications for business
customers in Latin America. NII Holdings, Inc. has operations in
Argentina, Brazil, Mexico and Peru, offering a fully integrated
wireless communications tool with digital cellular service,
text/numeric paging, wireless Internet access and Nextel Direct
Connectr, a digital two-way radio feature. NII Holdings, Inc.
trades on the NASDAQ market under the symbol NIHD. Visit the
Company's website at http://www.nii.com.
Nextel, the Nextel logo, Nextel Online, Nextel Business Networks
and Nextel Direct Connect are trademarks and/or service marks of
Nextel Communications, Inc.
To see financial statements
http://bankrupt.com/misc/NII_HOLDINGS.htm
CONTACT: Investor Relations: Tim Perrott
(703) 390-5113
tim.perrott@nii.com
Media Relations: Claudia E. Restrepo
(786) 251-7020
claudia.restrepo@nii.com
REPSOL YPF: Posts Net Profit of EUR1,165M for 1H03
--------------------------------------------------
Net Adjusted Income up 55% and operating income 20% higher
Production 9 % higher at 1,082,700 million barrels of oil
equivalent per day (boepd) Financial expenses down 73%. At the
end of the second debt reduced quarter by Eu 1,262 million
Repsol YPF net reported income for the first half-year 2003 was
Eu 1,165 million vs. Eu 1,302 million in the equivalent period
last year while operating income, at Eu 2,075 million, was 19.7%
higher and net adjusted income climbed 55% to Eu 1,414 million.
The extraordinary capital gains, more than 1 billion euros,
recorded last year on the sale of a 23% stake in Gas Natural sdg
and its impact on last year's net income is mainly responsible
for these differences. The cash flow in this period was Eu 2,450
million.
These results reflect strong volume growth in several of the
Company's core activities: oil and gas production, marketing in
Europe, petrochemicals and LNG marketing; cost restraint and
improvement; lower financial expenses; and a more benign
environment in oil and gas prices and downstream margins. The
performance of the dollar against the euro and the higher tax
rate, however, mitigated this improvement.
Repsol YPF activities in the first six months of the year were
carried out against a backdrop of high benchmark oil prices,
higher than in the same period last year, with the price of Brent
crude at an average 28.8$/bbl versus 23.1$/bbl in first half-year
2002. International refining margin indicators were also higher
than in the equivalent period a year earlier (3.48$/bbl versus
1.01$/bbl in 2002). These prices, however, fell sharply in the
second part of this first six-month period.
In Chemicals, margins showed a positive trend in the first six
months thanks to the positive performance of Argentinean exports,
while Gas & Power results continued to be strongly influenced by
the changes in the scope of consolidation following the sale of
Gas Natural sdg and Enagas in first quarter 2002.
INVESTMENTS AND DIVESTMENTS
Investments in the first half-year 2003 reached Eu 2,138 million
61.7% more than the year earlier equivalent. This increase is
essentially the result of the acquisitions made in Trinidad and
Tobago, thanks to which Repsol YPF has trebled its reserves and
production in this country. Despite the size of the investments
made in the first quarter, Repsol YPF is committed to the
investment contention policy set by the Company for this year.
Divestments in this period totalled Eu 143 million and relate
mainly to the sale of a 6.78% stake in CLH.
FINANCIAL DEBT
Repsol YPF financial debt at the end of the first six months of
2003 was Eu 6,424 million, Eu1,262 million less than in the first
quarter of 2003, thanks to, among other factors, the cash flow
generated by the Company and the evolution of the euro/dollar
exchange rate. Consequently, the debt ratio stands at 25.9%,
much lower than the 32.8% level recorded in the equivalent period
last year.
This significant reduction enabled the Company to reduce
financial expenses by 73.2%, to Eu170 million versus Eu635
million in the first six months of 2002. Moreover, debt reduction
was achieved while maintaining the Company's net cash position -
Eu 4,873 million at 30 June 2003 - a figure that was further
increased by Eu1 billion obtained from the July 10-year bond
issue. In keeping with the Company's conservative financial
policy, accumulated cash was used for early repayment of debt
maturing up to early 2005.
BREAKDOWN BY ACTIVITIES
EXPLORATION AND PRODUCTION
The Exploration & Production area posted Eu 1,213 million in
operating income, 75.5% up on the 2002 equivalent. This growth
was essentially driven by crude oil and gas production growth,
higher oil prices, the improvement in gas prices in Argentina and
Trinidad and Tobago, and the incorporation of income obtained
from marketing and transport of gas purchased in Trinidad and
Tobago at more favourable terms.
The average Repsol YPF liquids realisation price was 25.81$/bbl
versus 18.20$bbl in the equivalent period last year. Average gas
prices were 40% higher, $1.05 per thousand cubic feet ($/thousand
scf) vs. 0.75 $/thousand scf. This increase reflects the higher
contribution from Trinidad and Tobago to total gas sales and the
improvement in realisation prices in Argentina, 24.8% more than
in the first half-year of 2002. This improvement in prices is the
result of the gradual dollarisation of internal sales to
industrial export customers and the positive impact of a stronger
peso.
Oil and gas production, 1,082,700 barrels of oil equivalent per
day (boepd) was 9.1% higher than in the first six months of
2002. The Company's production in June reached a record level of
more than 1,200,000 boepd. This increase comes mainly from
Trinidad and Tobago, reaching 116,400 boepd in June with three
liquefaction trains in operations, and the sharp increase in
Argentina's gas production. To a lesser extent, growth in
production came from the acquisition of an additional 25% stake
in Quiamare La Ceiba in Venezuela, and the increase in gas
production in Bolivia and crude oil production in Libya, which
compensated for lower production in Algeria, Ecuador, Dubai, and
Spain. Production in Venezuela, at 100,000 boepd, was completely
back to normal levels.
In June, the Government of Trinidad and Tobago approved the
construction of a fourth liquefaction train, thereby increasing
the Repsol YPF proven reserves by 185 million boepd. This
measure, and the new exploration agreement for six very promising
blocks in Libya further strengthen the foundations for the
Company's future growth.
Investments in exploration and production in this period were Eu
1,529 million, including payment for the 20% BPTT stake and an
additional 25% stake in Quiamare La Ceiba (Venezuela).
Development investments were mainly earmarked for Argentina,
Venezuela, Bolivia, and Trinidad and Tobago.
REFINING AND MARKETING
At Eu 705 million, operating income from Refining & Marketing
activities in the first half-year 2003 rose 50.3% year-on-year.
This increase is mainly attributable to higher international
margins, up 245% versus the equivalent period last year.
Marketing margins in Spain were also higher, in line with the
rest of Europe, and in Argentina, thanks to the positive impact
of the price stability agreement. LPG margins in Spain were
lower, but higher in Latin America.
Total oil product sales increased 6% to 26.05 million tons. In
Spain, Repsol YPF total sales were 1.7% higher, reaching 15.5
million tons while sales in Argentina were up 3.1% to more than
6.2 million tons. Sales to our own network increased 5% in
comparison with the six months of 2002. In Argentina, fuel and
gas-oil sales fell 1.3%, with gasoline sales dropping 12.2%
because of lower demand in the country and its substitution by
piped natural gas, while gas oil sales increased 2.4%. LPG sales
in Latin America remained stable and dropped 1.2% in Spain.
Refining & marketing investments were Eu 249 million, 14.7% more
than in the first six months of 2002, and were mainly spent on
current refining projects, namely the mild hydrocracker at
Puertollano, a vacuum unit and a visbreaking unit in La Pampilla,
revamping of the service station network, and in developing
several commercial LPG products in Spain and Latin America.
CHEMICALS
In Chemicals, operating income in the first six months of this
year was Eu 109 million 122.4% more than in the equivalent period
a year earlier. This result was mainly driven by higher
international margins, particularly in basic petrochemicals and
Latin American derivatives (urea and methanol) , and sales
growth.
Total sales of petrochemical products were 2,034 Kt, 14% up year-
on-year mainly thanks to the increase in methanol sales, now that
the Plaza Huincul facility is running at full capacity.
First half-year 2003 investments in the Chemical division
totalled Eu 38 million, 9.5% lower than the year before.
Expenditure was mainly earmarked for the enlargement of the
Tarragona cracker and for environmental upgrading of existing
units.
GAS & POWER
January to June 2003 operating income from the Repsol YPF Gas &
Power area was Eu 99 million versus Eu 526 million in the
equivalent period last year. These two aggregates are not
comparable in that the second quarter 2003 figures include
24.999% of Gas Natural sdg operating income, whereas first
quarter 2003 incorporated 24.042%. Operating income in 2002 up
to May incorporated 100% of same and June 2002 results
incorporate 24.042%. On equivalent terms, income would have
fallen 30.3%. This decrease is mainly attributable to the
consolidation of Enagas by Gas Natural sdg by the equity method
since July 2002 and the changes introduced in the remuneration
regime for the sector in Spain in February 2002.
Investments in the first six months of 2003 were Eu 260 million,
46.9% lower than in the equivalent period last year. This was
mainly due to the previously mentioned changes in the
consolidation method, the impact of which was partly offset by
the acquisition of Gas Natural sdg shares.
SCP: Bonds Get 'D(arg)' From Local Fitch
----------------------------------------
Some US$400 million worth of bonds, which the National Securities
Commission of Argentina described as "Obligaciones Negociables"
were rated 'D(arg)' by Fitch Argentina Calificadora de Riesgo
S.A. on Wednesday. The bonds were issued by Sociedad Comercial
del Plata S.A., the NSC said, without indicating the bonds'
maturity date.
The rating was given based on the Company's finances as of the
end of March 2003. Fitch said that the rating is assigned to
financial commitments that are currently in default.
SIDECO: Fitch Rates Corporate Bonds 'D(arg)'
--------------------------------------------
Fitch Argentina Calificadora de Riesgo rates corporate bonds
issued by Sideco Americana S.A. 'D(arg)'. The rating, which is
assigned to financial commitments that are currently in default,
was given Wednesday.
The affected bonds were described by the National Securities
Commission of Argentina as "Obligaciones Negociables". Worth a
total of US$200 million, these bonds were classified as
"Program". The bonds matured on June 30, 2000.
The Company's financial standing as of March 31, 2003 was used as
a basis for the rating.
TERBON: Court Announces Creditors Meeting
-----------------------------------------
Creditors of Terbon S.A. are being summoned to a yet-to-be-
scheduled meeting by Court No. 2 of Buenos Aires, a local source
announced. The Company is undergoing a restructuring. The source
said that the receiver for the process is Mr. Mario Sogari. The
deadline for credit claims verification is August 28 this year.
The individual and general reports are due for submission on
October 13 and November 24, respectively. The informative
assembly will be held on May 27 next year.
CONTACT: Mario Sogari
Montevideo St. 734
Buenos Aires
TRANSENER: Corporate Bonds Receive Default Ratings From Fitch
-------------------------------------------------------------
Transener S.A.'s corporate bonds were rated 'D(arg)' by Fitch
Argentina Calificadora de Riesgo S.A., relates the Argentine
National Securities Commission.
The affected bonds were called "Programa Global de Obligaciones
Negociables simples no convertibles en acciones", and was worth a
total of US$450 million. The bonds were classified under
"Program". The NSC said that the bonds matured in May this year.
The rating was determined by the Company's financial position as
of the end of March 2003. Fitch said that the rating is assigned
to financial commitments that are in default.
YOMA GROUP: Seeks to Renegotiate Debt With Banco Nacion
-------------------------------------------------------
The Yoma Group informed Banco de la Nacion, through the bank's
head, Ms. Felisa Melice, that it wants to renegotiate US$183.5
million of debt with the bank. The move is part of the group's
bid to avoid the execution of the guarantees attached to the debt
extended by Banco Nacion in 1997. The group is threatening to
close some of its factories if negotiations are not done, a
situation that would leave nearly 1,300 people unemployed.
=============
B E R M U D A
=============
GLOBAL CROSSING: Secures Court Approval for SAP Settlement Pact
---------------------------------------------------------------
Global Crossing Ltd., and its debtor-affiliates obtained the
Court's approval of a Settlement Agreement with SAP America,
Inc., an enterprise software provider that maintains and licenses
certain proprietary software. The Court also authorized the
Debtors to assume the License Agreement with SAP.
Pursuant to the Settlement Agreement, the Debtors will:
(i) assume the Agreement pursuant to Section 365 of the
Bankruptcy Code;
(ii) reduce the cure amount otherwise due under the Agreement
by $1,500,000;
(iii) eliminate certain of the Debtors' outstanding
obligations to SAP; and
(iv) negotiate in good faith with SAP to reduce maintenance
costs associated with the Licenses for the year 2003.
The salient terms of the Settlement Agreement are:
A. Parties: GX and all of its subsidiaries and affiliates,
excluding Asia Global Crossing Ltd. and its direct and
indirect subsidiaries and SAP and all of its direct and
indirect subsidiaries and other affiliates.
B. Payment to SAP: The Debtors will pay to SAP $950,000, which
will be inclusive of and in full and final settlement of
all amounts due and owing as of December 31, 2002, except
for any claims resulting from any breach by the GX Entities
involving the unauthorized use or disclosure of Proprietary
Information. To the extent the Total Cash Consideration is
not paid when the amount is due, SAP will have an allowed
administrative expense claim against the Debtors for the
deficiency.
C. Maintenance Fees: Promptly after the execution of the
Settlement Agreement, the parties agree to negotiate in
good faith to reduce the maintenance fees paid by the GX
Entities under the Agreement.
D. Warranty of Work, Services or Material Provided by SAP: SAP
covenants that any work, services or material will be
promptly and adequately provided in accordance with the
terms of the Agreement or, in the absence of these terms,
customary industry practices.
E. Assumption of the Agreement: The Debtors will assume the
Agreement, as amended by the Settlement Agreement,
effective after the occurrence of the effective date of a
plan of reorganization for substantially all of the Debtors
that preserves or transfers substantially all of the core
network on a going concern basis.
F. Assignment of the Agreement: The GX Entities will be
permitted to assign the Agreement, subject to the terms and
conditions of the Agreement, pursuant to a confirmed Plan
or other Court order, to the Investor or any entity
created in connection with the transactions contemplated by
the Purchase Agreement, provided that the assignment is
solely for the purpose of providing continued use of the
Software to operate the GX Entities' business.
G. Releases: Both parties agree to mutual releases providing
that the parties and their officers, employees,
shareholders, agents, representatives, attorneys,
successors and assigns are discharged and released from any
and all claims, demands, obligations, causes of action,
rights or damages, through and including December 31, 2002,
other than claims arising under the warranties contained in
the Agreement, claims for unauthorized use or disclosure of
Proprietary Information, and claims relating to obligations
expressly preserved in the Settlement Agreement.
Backgrounder
The Global Crossing Debtors entered into a Software End-User
License Agreement with SAP America. Pursuant to the Agreement,
SAP licensed to the GX Debtors and certain of its affiliates the
right to use certain SAP software. The GX Debtors use the
Software to, among other things, track the location of funds in
their cash management system, categorize data regarding
investments, organize information relating to sales and
distribution of the Debtors' products and services, produce
financial statements, monitor purchasing of products and
services, conduct billing transactions, and pay employees. All of
the GX Debtors' critical records are maintained and accessed
through the Software. Essentially, the Software is the basis for
the GX Debtors' information reserve. As a result, continued
access to the Software is integral to the GX Debtors' efficient
operations on a going forward basis. Pursuant to the Agreement,
SAP also provides maintenance services in connection with the
Software and the Licenses costing $1,500,000 per year.
As of December 31, 2002, the GX Debtors owe SAP under the
Agreement $2,466,663.01, including $1,057,314.13 in prepetition
and $1,409,348.88 in postpetition arrearages. (Global Crossing
Bankruptcy News, Issue No. 44; Bankruptcy Creditors' Service,
Inc., 609/392-0900)
LORAL/QUALCOMM: Seeks Plan Exclusivity Extension through Oct. 10
----------------------------------------------------------------
Loral/Qualcomm Satellite Services, LP, along with its debtor-
affiliates, wants the Court to give them more time within which
they have the exclusive right to file their Chapter 11 plan and
disclosure statement with the U.S. Bankruptcy Court for the
District of Delaware.
The Exclusivity and Solicitation Periods afford the Debtors a
full and fair opportunity to propose a consensual plan and
solicit acceptances of that plan without the deterioration and
disruption of their businesses or operations that might be caused
by the filing of competing plans by non-debtor parties.
The Debtors point out that to terminate the Exclusivity and
Solicitation Periods in these chapter 11 cases before the process
of plan negotiation has begun is to defeat the very purpose of
section 1121 of the Bankruptcy Code.
The Debtors submit that ample cause exists to extend the
Exclusive Periods. In particular, the Debtors point out factors
that weigh in favor of granting a further extension at this time:
a) the Debtors liabilities may be contingent liabilities
that may arise based upon their liability as general
partners for certain of the debts of Globalstar LP,
there is a complex set of facts and issues that must be
addressed before a final plan can be formulated;
b) all postpetition payments are being made as they become
due, accrued obligations, including professionals' fees
to the extent allowed) have been paid, and the Debtors
are working diligently to advance the reorganization
process;
c) the extension is not being sought in order to pressure
creditors; and
d) an extension of the exclusivity and solicitation periods
will give the Debtors the ability to evaluate their
contingent liabilities in light of Globalstar's proposed
plan of reorganization, thereby giving the Debtors a
better opportunity to negotiate a consensual Plan that
can be confirmed.
Additionally, the Debtors report that these cases involve in
excess of $768 million in claims, which are contingent upon the
claims of Globalstarl due to the Debtors' liability as general
partners for certain of the debts of Globalstar. Without the
requested extension of the Exclusive Periods, the Debtors will be
unable to evaluate these contingent claims.
The Debtors want the Court to stretch their plan filing
exclusivity period through October 10, 2003 and extend the time
for the company to solicit acceptances of that Plan through
December 9, 2003.
Loral/Qualcomm Satellite Services, LP, along with its four
debtor-affiliates filed for chapter 11 protection on February 15,
2002 (Bankr. Del. Case No. 02-10506). The Debtors are closely
related entities, whose primary assets are their partnership
interests in each other or in Globalstar, LP. The Debtors are one
of the world's leading satellite communications companies with
substantial activities in satellite-based communications services
and satellite manufacturing. As of July 15, 2003, the Debtors
listed $2,654,000,000 in total assets and $3,061,000,000 in total
debts. (Troubled Company Reporter, July 30, 2003, Vol. 7, Issue
149)
=============
B O L I V I A
=============
COTEL: Kicks Off Long Distance Operations
-----------------------------------------
Bolivia's La Paz-based local telephony cooperative Cotel was due
to launch long distance operations on Wednesday, according to
local daily La Razon. Cotel has long since attempted to enter
into the long distance, as well as, the Internet market, but
power struggles within the Company hampered its efforts.
However, thanks to the government's decision to intervene Cotel
early April, the Company has cleared its way into the markets.
The telecoms regulator Sittel decided on July 3 to renew the
intervention period for another 90 days, during which intervener
Javier Tapia aims to hold elections for new administrative and
oversight boards.
===========
B R A Z I L
===========
AES CORP.: Reports 2Q03 Continuing Ops Income of $0.11/Share
------------------------------------------------------------
The AES Corporation (NYSE:AES) announced Wednesday that income
from continuing operations for the quarter ended June 30, 2003,
was $65 million, or $0.11 per diluted share, up from a loss of
$(101) million, or $(0.19) per diluted share for the second
quarter of 2002. Income from continuing operations for the six
months ended June 30, 2003, was $142 million, or $0.25 per
diluted share, up from income of $11 million, or $0.02 per
diluted share, for the six months ended June 30, 2002.
Net loss for the quarter ended June 30, 2003 was $(129) million,
or $(0.22) per diluted share compared to a loss of $(115)
million, or $(0.22) per diluted share for the second quarter of
2002. Net loss for the six months ended June 30, 2003 was $(35)
million, or $(0.06) per diluted share compared to a loss of
$(428) million, or $(0.80) per diluted share, for the six months
ended June 30, 2002. The net losses for all periods included
charges for discontinued operations. For the second quarter of
2003, the charges in discontinued operations primarily arise from
the Company's decision to classify it's businesses in The
Republic of Georgia as held for sale.
Revenues for the quarter ended June 30, 2003 were $2.2 billion,
up from $2.0 billion for the quarter ended June 30, 2002.
Revenues for the six months ended June 30, 2003 were $4.4
billion, up from $4.2 billion for the six months ended June 30,
2002. Operating Income for the quarter ended June 30, 2003 was
$459 million, up from $409 million for the quarter ended June 30,
2002. Operating Income for the six months ended June 30, 2003 was
$1.04 billion, down from $1.05 billion for the six months ended
June 30, 2002.
AES also announced that consolidated net cash provided by
operating activities for the second quarter of 2003 was $291
million and $737 million for the first half of 2003.
Additionally, its subsidiary distributions to parent and
qualified holding companies for the second quarter of 2003
totaled $300 million and $480 million for the first half of 2003.
Paul Hanrahan, Chief Executive Officer stated, "We are extremely
pleased with the progress we have made in improving the financial
situation of the Company. Looking back over the last 9 months and
culminating with yesterday's completion of our bank loan
financing, we have refinanced or raised approximately $5 billion
of debt while increasing the average life of our parent
maturities from 5.8 years to 7.8 years. During the quarter we
also successfully raised $335 million in a common stock offering.
In addition, we now have approximately $1 billion of cash on hand
which provides renewed flexibility to continue our deleveraging
program and to pursue attractive growth opportunities."
Barry Sharp, Chief Financial Officer, stated, "In addition to the
significant improvement in our maturity profile, we also
continued to grow our corporate liquidity position with total
distributions to the parent and qualified holding companies of
$480 million through the first six months of 2003. Along with the
proceeds from asset sales, we have also repaid debt at the parent
level by over $660 million since December 2002 and we plan to
continue that progress with our recently announced intention to
call our $198 million 10.25% 2006 notes. For the full year of
2003 we continue to expect consolidated net cash provided by
operating activities of approximately $1.5 billion, with $737
million generated through the first six months."
AES is a leading global power company comprised of contract
generation, competitive supply, large utilities and growth
distribution businesses.
The company's generating assets include interests in 158
facilities totaling over 55 gigawatts of capacity, in 28
countries. AES's electricity distribution network sells 108,000
gigawatt hours per year to over 16 million end-use customers.
More general information is available at the company's Website:
www.aes.com or by contacting investor relations at
investing@aes.com.
To see financial statements:
http://bankrupt.com/misc/AES_CORP.htm
CONTACT: AES Corporation
Kenneth R. Woodcock, 703/522-1315
COSIPA: Board Approves Plan To Issue Bonds Overseas
---------------------------------------------------
Brazilian steelmaker Companhia Siderurgica Paulista (Cosipa)
announced Wednesday that its board approved earlier this month
plans to raise up to US$550 million through foreign capital
markets, relates Business News Americas.
The Company, a subsidiary of Usiminas, is negotiating three
overseas deals worth US$250 million and a Eurobond worth up to
US$300 million.
Early this week, the Company announced it obtained approval from
shareholders to launch a BRL240-million (US$81.6mn) public
debenture issue. The approval came at an extraordinary meeting
held Tuesday afternoon.
The date of the operation, however, depends on the approval of
Brazil's National Monetary Council (CMN), the Troubled Company
Reporter - Latin America said in a report.
CONTACT: COSIPA
Avenida do Cafe, 277
Torre B, 8 e 9 andar
Vila Guarani
04311-000 Sao Paulo, Brazil
Phone: +55-11-5070-8800
Fax: +55-11-5070-8863
URL: http://www.cosipa.com.br
EMBRATEL: Instituto Embratel 21 Has New Chairman
------------------------------------------------
Embratel's director of Institutional Relations, Eduardo Jardim,
will be taking office in July as chairman of Instituto Embratel
21, a not-for-profit institution created in April of 2001 by
Embratel S.A. and by Embratel Participa?oes S.A. The arrival of
Jardim promises to bring a fresh leadership to the actions
planned by the Institute, whose mission consists of promoting
cultural, scientific, educational, sports and social projects for
the benefit of the Brazilian people.
Instituto Embratel 21 is focused on community interest projects.
One of its major purposes consists of promoting cultural
integration and development across the many regions of the
country. In order to fulfill such goal it looks for partnerships
in Brazil and abroad. One of such projects is the Multimedia
Digital Library, which includes the generation and storage of
digital content in Portuguese, made available for internet users
on-line all over Brazil and worldwide, and three video channels:
for videoconferencing, for digital TV with educational, artistic
and cultural programs, and a channel for transmitting programs on
a TV over the internet.
Eduardo Jardim will take charge of Instituto Embratel 21 but will
remain as Embratel's Director of Institutional Relations as well.
He graduated from Universidade Federal Fluminense with a degree
in Law and got a post-graduate degree in public administration
from Funda?ao Get£lio Vargas. He joined Embratel in 1982, where
he has been in charge of the legal department, and began to work
at the Institutional Relations department in 1999.
Embratel is the premium telecommunications provider in Brazil,
offering a wide range of telecommunication services, such as
advanced voice, high-speed data transmission, internet, data
communication by satellite and corporate networks. The company is
national leader in data and internet services, in a privileged
position to become the Latin American carrier with an all-
distance network. Embratel network has national coverage with
almost 17,500 miles of optic cables, representing around one
million miles of fiber optics.
CONTACT: EMBRATEL
Advertising, Press and Public Relations Department
Tel: (02121) 2121 7837 / 2121 6291
Fax: (02121) 2121 7791
Mid-West- Phone: (02161) 242-9058 / 2845 / 916-9188
Contact: Fl vio Resende
E-mail: cmsocial@embratel.net.br
URL: www.embratel.com.br
RBS PARTICIPACOES: S&P Lowers Ratings to 'B-', Off CreditWatch
--------------------------------------------------------------
Standard & Poor's Ratings Services said Wednesday that it lowered
its local and foreign currency corporate credit ratings on RBS
Participa?oes S.A. (RBS) to 'B-' from 'B+'. The rating on the
company's $125 million medium-term notes due 2007 was also
lowered to 'B-' from 'B+'. The ratings were removed from
CreditWatch, where they were placed on June 11, 2003. The outlook
is negative.
"The downgrade reflects Standard & Poor's expectation that
advertising trends should remain uncertain in Brazil, which will
make it difficult for RBS to achieve a substantial improvement in
cash flow protection measures as previously expected in the
rating," said credit analyst Jean-Pierre Cote Gil. "In
particular, the group is not expected to generate free cash flow
to repay debt, and it will continue to depend on asset sales and
external funding sources and remain very exposed to the
volatility of the Brazilian economy and to credit availability,"
he added.
Brazil-based RBS is a holding company for the RBS Group, which
operates in television and radio broadcasting, newspaper
publishing, and other media businesses. Total debt for the
combined RBS entities as of December 2002 was $178 million.
The group's excess cash position has always been a key component
of the ratings since operating performance and cash flow ratios
historically have been weak for the rating category. Very adverse
economic environment in 2002 and low availability of credit
contributed to the depletion of cash reserves and deterioration
of the group's debt profile.
The company is expected to end 2003 with about $25 million in
cash, which should suffice to meet 2004 maturities of $29
million. Internal cash generation would fund working capital and
capital expenditure requirements. After 2004, however, the group
would depend on refinancing, the availability of which is
uncertain, as credit facilities in Brazil are typically
uncommitted.
Ratings would be lowered further if RBS' cash position is used up
by 2004 and the group continues to show marginal or negative free
cash flow, or is unable to find alternatives to repay debt from
2005 on. A revision of the outlook to stable will depend on RBS'
success in finding alternative sources of cash that will help it
reduce debt in the short term and resolve refinancing issues in
the future, and on significant improvement in cash flow
protection measures.
ANALYSTS: Milena Zaniboni, Sao Paulo (55) 11-5501-8945
Jean-Pierre Cote Gil, Sao Paulo (55) 11-5501-8946
=========
C H I L E
=========
ENAMI: Bill To Transfer Ventanas To Codelco Goes To Congress
------------------------------------------------------------
A bill to transfer the Ventanas copper smelter-refinery from
Chilean state minerals company Enami to state copper miner
Codelco is now in the hands of the congress, Business News
Americas reveals.
The government submitted the bill to help Enami pay off its
crippling debts, which currently stand at around US$500 million.
The Ventanas smelter, in central Chile's Region V, has been
valued at around US$430 million by a consultancy hired by Enami.
But a study commissioned by Codelco tagged the facility at US$330
million. The final value of the facility is likely to be decided
by mining minister Alfonso Dulanto, who is the chairman of both
Enami and Codelco.
Enami posted a loss for 2002 of US$21.6mn, compared with a loss
of US$28.7 million the previous year.
CONTACT: ENAMI (Empresa Nacional de Mineria)
MacIver 459,
Santiago, Chile
Phone: 637 52 78
637 50 00
Fax: 637 54 52
Email: webmaster@enami.cl
Home Page: www.enami.cl/
Contact:
Jorge Rodriguez Grossi, President
ENERSIS: Parent Reports 1H03 Consolidated Results
-------------------------------------------------
-- Cash flow amounted to Euro 1,842 million in the first half
2003, a 15.5% increase over the same period in 2002.
-- Ordinary income was Euro 1,139 million in the first half of
2003, with an increase of Euro 1,115 million against the same
period in 2002, when amounted to Euro 24 million.
-- This change shows a positive operative evolution of the
Company together with the important improvement in the quality of
the results.
-- Operating income amounted to Euro 1,642 million in the first
six months of 2003, increasing 3.5% versus the same period in
2002.
-- Operating income of the domestic electricity business amounted
to Euro 891 million, an 18.2% increase vis-a-vis the first half
of 2002. This reflects the high competitiveness of ENDESA's
generation mix even in strong hydro recovery scenarios, like the
current one.
-- ENDESA's debt amounted to Euro 18,019 million as of June 30th
2003, representing a Euro 4,728 million decrease in absolute
terms and 20.8% in relative terms over the debt reported in
December 2002 driving to a remarkable strengthen of ENDESA's
balance sheet.
-- This debt reduction allowed an important decrease in the
leverage ratio that on June 30th 2003 was 127% compared to 203%
at year-end 2002.
-- In the first half of 2003 ENDESA completed the construction of
Tarragona 400 MW combined cycle as well as Son Reus 70 MW gas
turbine that concludes the 226 MW combined cycle in the Balearic
Islands. Likewise, 49 MW of new capacity have been added to
Granadilla (Canary Islands) power plant, 12 MW in Ceuta and
Melilla, 74 MW in new wind farms and 16 MW in biomass recycling
facilities.
-- Demand in the peninsular markets supplied by ENDESA increased
by 7.1% in the first half of 2003 over the same period of 2002.
In the extra-peninsular markets of ENDESA, the demand increased
by 8.4% in the same period.
-- Operating income for the electricity business in European
countries other than Spain amounted to Euro 160 million, a 50.9%
increase against the first half 2002. This result mainly
corresponds to the activity carried out by ENDESA Italia that
continues to overperform its business plan.
-- Operating income for the Latin American electricity business
amounted to Euro 579 million, an 18.2% decrease against first
half 2002 mainly due to the strength of the Euro.
-- However, in local currency terms, operating income for the
Latin American electricity business increased by 20.3% while in
US dollar grew by 0.6%, reflecting the effect of the first
symptoms of economic recovery in the region.
-- Auna and Smartcom experienced a positive evolution in the
first half of 2003, representing a Euro 69 million improvement in
the equity income contribution over the same period of 2002.
-- The asset sale in Latin America, ENERSIS's capital increase
and the debt refinancing in ENERSIS and Endesa of Chile mean that
the ENERSIS's strengthening plan is almost completed at the end
of the first half of 2003.
-- Regarding ENERSIS's capital increase, is important to
highlight that the subscriptions by shareholders other than
ENDESA amounted to Euro 580 million, reflecting the support of
the minority shareholders to the corporate project that ENERSIS
is implementing in Latin America.
-- Capital expenditures in electric facilities in Spain amounted
to Euro 477 million in the first half of 2003, a 45.4% increase
versus the same period of 2002.
-- This increase has been compatible with a 27.3% reduction on
total investments, in line with the 2002 - 2006 Strategic Plan of
ENDESA.
-- ENDESA has exercised the call option to buy a 3% of AUNA from
SCH. The payment for this transaction will take place in January
2004 for a total amount of Euro 260 million.
ENDESA's (NYSE: ELE) net income for the first half 2003 was Euro
876 million and earnings per share were Euro 0.83. In both cases,
first half 2003 results are 4.7% higher than the same period
2002.
In homogeneous terms, that is, disregarding the effect of capital
gains and extraordinary provisions effects in both periods, net
income and earnings per share in the first half 2003 increased by
145.4% over the same period in 2002.
First half 2003 cash flow amounted to Euro 1,842 million, a 15.5%
increase against the first half of 2002.
Ordinary income was Euro 1,139 million in the first half of 2003,
with an increase of Euro 1,115 million over the same period in
2002, when amounted to Euro 24 million. This change shows a
positive operative evolution of the Company together with the
important improvement in the quality of the results.
Operating income amounted to Euro 1,642 million, increasing 3.5%
with respect to the first six months of 2002.
This increase was mainly based on the positive evolution of the
operating income both in the domestic and the rest of European
electricity business.
Operating income of the domestic electricity business amounted to
Euro 891 million, an 18.2% increase over the same period of 2002,
despite it did not include the result from the transmission
network sold to Red Electrica de Espana, S.A (REE) effective
January 1st 2003.
This increase, obtained in a better hydro scenario, confirms
ENDESA's domestic electricity business capacity to keep an stable
path of growth under any hydro conditions.
Operating income of the electricity business from European
countries other than Spain amounted to Euro 160 million, a 50.9%
rise vis-a-vis the same period of 2002.
Regarding the Latin America electricity business, operating
income amounted to Euro 579 million in the first half 2003, Euro
129 million lower than first half 2002. This amount represents an
18.2% decrease and is mainly due to the local currencies
devaluation between the first half 2002 and the same period in
2003.
On the other hand, in local currency terms, operating income of
the Latin America electricity business increased by 20.3% while
in US dollar terms grew by 0.6%.
This growth shows the positive operating performance of the Latin
American business as well as the effect of the first symptoms of
economic recovery in the region.
ENDESA debt decreased by Euro 5,415 million or a 23% between June
30th 2002 and June 30th 2003. If compared with December 31st
2002, debt decreased by Euro 4,728 million equivalent to a 20.8%
decline.
This substantial decrease, together with a sustained average cost
of debt at a similar level as the first half 2002, enabled an
8.3% decrease in net financial expenses.
Debt reduction allowed a sharp decrease in the leverage ratio
that on June 30th 2003 was 127% compared to 203% at year-end
2002.
Financial results improved by Euro 971 million. This positive
evolution is mainly a consequence of lower foreign exchange
differences that amounted to a Euro 169 million net gain, against
a Euro 710 million loss in the first half 2002.
On the other hand, it is important to point out the significant
improvement in AUNA's and Smartcom's results, meaning for ENDESA
a Euro 69 million increase in the equity income contribution from
these stockholdings, compared to the same period in 2002.
ENDESA has exercised the call option to buy a 3% of AUNA from
SCH. The payment for this transaction will take place in January
2004 for a total amount of Euro 260 million. The exercise of such
option rescinds the put option hold by SCH for the same amount of
shares and the same price.
Finally, in the first half 2003 extraordinary provisions were
allocated to cover different contingencies for an amount of Euro
290 million.
Main transactions of the first half 2003
In the first half 2003, ENDESA continued the implementation of
the asset sale plan included in the Strategic Plan 2002-2006.
Basically, the assets sold in the period were the mainland
transmission network and certain real estate assets both agreed
in 2002, together with the stake in REPSOL and the 7% in Red
Electrica de Espana. These transactions delivered Euro 702
million in gross capital gains.
Moreover, in the first half 2003 ENERSIS Group completed the sale
in Chile of Rio Maipo distribution company, Canutillar hydro
power plant, the transmission assets of the Norte Grande
interconnected system and its stake in Infraestructura 2000, for
an aggregate amount of US dollar 384 million. Should the Euro 220
million debt of the divested companies be considered, asset sale
would have amounted to Euro 604 million.
ENDESA's first half 2003 net earnings do not include any positive
effect of these transactions since goodwill has been amortized
for the amount corresponding to ENDESA from ENERSIS's capital
gains.
Among the financial transactions carried on in Spain in the first
half of 2003, is important to point out the Euro 1,500 million
Preferred Securities issue by ENDESA Capital Finance LLC and the
subscription of ENERSIS' capital increase by shareholders other
than ENDESA for an amount of Euro 580 million, which
significantly contributed to the debt reduction above mentioned.
Additionally, in the first half 2003 ENDESA made several long-
term financial transactions that, besides extending the average
term of debt, increased ENDESA's liquidity in Spain. On June 30th
2003, liquidity amounted to Euro 5,005 million, more than
covering the debt maturing in the next 2 years and a half.
Out of this amount, Euro 2,639 million correspond to available
lines of credit and Euro 2,366 million to cash.
With regard to the main transactions carried out in Latin
America, is worthwhile to highlight ENERSIS's capital increase
and the Euro 580 million subscription by shareholders other than
ENDESA. As with the Preferred Securities, this transaction
increased the balance of the minorities shareholders in the
balance sheet and decreased the amount of debt, leading to a
remarkable improvement on the financial structure of ENDESA.
Moreover, ENERSIS closed the refinancing of its bank debt for an
amount of US$ 2,330 million, extending its maturity until the end
of 2008. On June 30th ENERSIS liquidity amounted to Euro 966
million.
It's important to mention that as a consequence of these and
other transactions carried out in Latin America, the Financial
Strengthening Plan of ENERSIS has been virtually completed in the
first half of 2003.
Total investment for the period amounted to Euro 961 million, a
27.3% decrease over the first half of 2002.
This reduction has been compatible with an important investment
effort in electric facilities in Spain that amounted to Euro 477
million, a 45.4% increase over the first six months of 2002.
This evolution on total investments and capital expenditures in
the electricity business in Spain is in line with the 2002 - 2006
Strategic Plan of ENDESA.
Change in consolidated perimeter
The main changes in the consolidated perimeter in the first half
of 2003 are the following:
-- As a consequence of the sale of ENERSIS' stake in Rio Maipo,
this company is no longer globally consolidated in ENDESA's
accounts in the first half 2003.
-- Additionally, as a consequence of the sale of ENDESA's stake
in REPSOL, its consolidation by equity method has also been
discontinued in the first half 2003.
-- Finally, since January first 2003 ENDESA Gas is no longer
included in ENDESA Diversificacion and started reporting to
ENDESA Red. For this reason, the results of the gas distribution
and supply activities have been included in the domestic
electricity business, instead of under "other business" as was
reported in the first half 2002.
Analysis of Results
Operating income
ENDESA's revenues in the first half 2003 amounted to Euro 7,762
million, a 5.6% decrease versus the first half of previous year.
EBITDA was Euro 2.458 million, approximately the same figure than
in the first half 2002.
Operating income for the first six months of 2003 was Euro 1,642
million, an increase of 3.5% against the same period last year.
Electricity business in Spain
In the first half 2003, demand for electricity in the mainland
grew by 4.6% against the same period of 2002.
Demand in the markets supplied by ENDESA grew clearly above
average in the mainland. In the first six months of 2003, demand
growth in ENDESA's distribution markets in the mainland was 7.1%,
while in the extra-peninsular systems was 8.4%.
These increases clearly show that ENDESA's distribution markets
are among those that usually register highest demand growth in
Spain.
Regarding electricity generation, mainland ordinary regime
production increased by 3.7% in the first six months of 2003 over
the same period of 2002, while special regime increased by 16.9%
and net international exchanges decreased by 75.5%.
Operating income for ENDESA's electricity business in Spain was
Euro 891 million, a Euro 137 million increase in absolute and
18.2% in relative terms against the same period of 2002.
This increase corresponds to generation including its natural
hedging, that is, CTC's and supply.
The increase in regulated margin in distribution compensated the
effect of the transmission network sale in the mainland. Hence,
despite this sale, distribution and transmission operating income
was similar to the one obtained in the first half of 2002.
Should the effect of the sale of transmission network be
discounted, operating income would have increased by 22.0%
against the same period of 2002.
Among other considerations, this increase in the operating income
reflects the high competitiveness of ENDESA's generation mix and
its flexibility to adjust to any hydro conditions, resulting in a
higher stability in the operating income compared to the rest of
the industry.
This higher operating income has been mainly due to the 1.65%
average increase in the 2003 regulated electricity tariff, the
6.5% increase of the liberalized customer electricity prices and
the Euro 59 million lower fuel costs as a consequence of better
hydro conditions.
Paragraphs below show a detailed analysis of the items comprised
in the operating income of the electricity business in Spain.
Revenues
Revenues from the domestic electricity business amounted to Euro
4,966 million in the first half of 2003, a decrease of 4.8%
against the same period of 2002.
Sales
Sales in the first half 2003 were Euro 4,682 million
Generation
ENDESA's output in the mainland sold in the wholesale market was
38,908 GWh in the first half 2003, approximately the same than in
first half 2002. This represents a 42.4% market share in the
ordinary regime.
Despite approximately the same generation output than in the
first half 2002, sales in the mainland were 33.7% lower as a
result of a 34.7% lower pool price.
This decrease was due to lower fuel costs of the system driven by
better hydro conditions, driving the pool price down to 3.24 Euro
cents per Kwh.
Nevertheless, lower generation revenues due to the lower pool
prices have been compensated by lower fuel costs as well as the
natural hedging of the generation price, that is, CTC's and the
supply business. Therefore, gross margin in generation, supply
and CTC's increased by Euro 187 million, a 19.1% increase over
the same period of 2002.
Distribution
ENDESA sold 39,152 GWh in the mainland in the first half 2003, a
7.1% increase over the same period of 2002. This figure
represents a share of 42.4% of distribution in the mainland.
Hence, growth in energy distributed by ENDESA in the mainland was
higher than the average peninsular demand growth. This reflects
that, in general terms, ENDESA distributes electricity in those
peninsular markets with higher growth rates.
Revenues from distribution in the mainland dropped by Euro 326
million. This decrease corresponded to the lower cost of energy
purchases, mainly as a result of the lower pool prices.
Should the effect of lower cost of energy purchases be
disregarded, distribution sales would have increased by Euro 2
million against first half 2002, a 0.4% rise. Moreover, should
the effect of the transmission network sale been discounted,
gross margin in distribution would have increased by 10.1%
Supply
In the first six months of 2003, ENDESA sold 11,983 GWh to
eligible customers, a 7.1% increase against the same period of
2002 and a 36.8% market share.
This higher electricity sold together with a 6.5% increase in its
average price, resulted in a 14% revenues increase in supply,
amounting to Euro 667 million.
Extra Peninsular Systems
In the first half 2003 ENDESA's output in the extra peninsular
systems was 5,807 GWh, 9.2% higher than in the first half of
2002.
Demand in the extra-peninsular systems grew by 8.4%, with an
increase of 7.8% and 8.7% in the Balearic and Canary market
respectively.
Current generation capacity of ENDESA is enough to cover this
strong demand growth. This is due to the significant investments
in new generation facilities carried out by ENDESA in the last
years in the extra peninsular systems.
Sales in these markets amounted to Euro 466 million, a 12.3%
increase against the same period of 2002 driven, among other
reasons, by higher demand.
In addition to this, revenues include Euro 100 million from
compensations, a Euro 3 million increase against the first half
2002.
CTC
As a consequence of better hydro conditions in the first half
2003 over the same period of 2002, total revenues of the industry
covered the costs of the system.
The balance has been applied to CTC's, corresponding to ENDESA
Euro 129 million.
Moreover, in the first half 2003, Euro 56 million from the tariff
deficit and extra peninsular systems compensations prior to 2003
were recovered. Out of this amount, Euro 41 million decreased the
balance of the tariff deficit account payable and Euro 15 million
was accounted as financial income
Is important to recall that in the first half 2002 total industry
revenues did not cover all recognized costs of the system. For
this reason, a shortfall in the regulated business revenues -
tariff deficit- emerged. ENDESA, due to a reasonable uncertainty
in its recovery, reported this shortfall as lower revenues for an
amount of Euro 364 million.
Purchases
In the first half 2003, purchases decreased by Euro 446 million
or 13.5% against first half 2002 mainly due to the following
reasons:
-- Lower energy purchases by ENDESA's distribution and supply
subsidiaries in the amount of Euro 498 million, representing a
20.7% decrease over the first half 2002. This decrease was due to
the reduction in the average pool price mentioned above and
despite the increase in the energy supplied to final customers.
-- A reduction on Fuel costs that amounted to Euro 59 million as
a consequence of higher hydro generation in the first three
months of 2003 when compared to the same period of 2002.
-- Reporting of Gas purchases for the regulated gas business
amounting to Euro 25 million under this caption that in the first
half 2002 was reported under "Other businesses". This is a
consequence of the inclusion of ENDESA Gas financial information
in ENDESA Red, while in 2002 it was reported in ENDESA
Diversificacion.
-- Electricity transmission costs and other costs that increased
by Euro 86 million due to the sale of the transmission network.
Personnel expenses
On June 30th 2003 workforce of ENDESA's domestic electricity
business amounted to 13,568 employees. Should the 109 employees
of ENDESA Gas be disregarded since in 2002 this company was
reported under "Other businesses", ENDESA's workforce would have
decreased by 89 employees over December 31st 2002.
Personnel expenses in the first half 2003 amounted to Euro 415
million, a 1.5% increase versus the same period of 2002. This
increase also reflects the new way of reporting ENDESA Gas in the
domestic electricity business, as mentioned above.
Other operating expenses
Other operating expenses amounted to Euro 350 million in the
first half 2003, increasing by Euro 71 million when compared to
the same period of 2002.
This increase was due to the following reasons:
-- Expenses related to new activities amounted to Euro 13
million. These activities are mainly related to domestic
electricity business, that is, CCGT's, gas distribution and
liberalized retail customer service.
-- Higher offices lease costs of Euro 13 million. This was due to
the transfer to the new headquarters in Campo de las Naciones in
Madrid and to the sale of real estate assets.
-- Tax cost increased mainly due to the public thoroughfare levy,
amounting to Euro 14 million.
-- A Euro 17 million increase on reparation and maintenance
expenses, basically due to the plans set up to optimize the
efficiency of the distribution network.
-- Certain expenses materialized in advance that do not imply any
change in total annual expenses; therefore, this amount will be
diluted in the following quarters to be compared with the same
period of 2002.
European electricity business
Operating income for the electricity business in European
countries other than Spain amounted to Euro 160 million, a 50.9%
increase over the first half 2002. This result mainly corresponds
to the activity carried out by ENDESA Italia.
Trading business in European markets is included in both revenues
and energy purchases, delivering a balanced result.
Operating income of ENDESA Italia amounted to Euro 165 million, a
44.7% increase over the first half of 2002.
Revenues of ENDESA Italia in the first half of 2003 increased by
15.2% over the first half 2002 as a result of a 2.3% increase in
energy sales and 13% higher sales price.
Total electricity sales in the first half 2003 was 9,310 GWh, of
which 729 GWh correspond to electricity purchased from third
parties representing a Euro 42 million cost. ENDESA Italia total
output amounted to 8,597 GWh in the first half 2003 compared to
9,106 Gwh in the same period of 2002.
This 509 GWh output decrease breakdowns in a 327 GWh increase in
hydro generation and an 836 GWh decrease in thermal generation,
enabling Euro 19 million in lower fuel costs.
On the other hand, first half 2003 operating income includes a
Euro 24 million effect of the hydro penalty cancellation
effective January 1st 2003 as was approved by the Italian
authorities during the second quarter of 2003.
It is important to highlight the reduction in fixed costs in the
first half 2003, both personnel and other operating costs. This
decline is mainly due lower workforce that on June 30th 2003,
totaled 1,115 employees, while on June 30th 2002 was 1,248
employees.
Therefore, the evolution of ENDESA Italia during the first half
of 2003 confirms that the company overperforms its business plan.
Latin American electricity business
Electricity demand strongly recovered in all the countries where
ENDESA operates in the first half 2003 compared to the same
period in 2002, specially in Brazil and Chile.
This growth confirms the first symptoms of recovery from the
economic situation suffered by the region during 2002 and, at the
same time, reveals that the Latin America electricity business of
ENDESA will experience a remarkable improvement once the recovery
is confirmed.
The 4.2% increase on the energy distributed compares with the
3.2% decrease registered in the first half of 2002 versus the
first six months of 2001.
Despite these recovery symptoms, results from Latin American
business of ENDESA have been still affected by the aftermaths of
the difficult economic scenario that Latin America went through
in 2002, which on the other hand, were felt with mixed intensity
among the different countries of the area. Particularly important
were the local currencies devaluations against the Euro between
the first half 2002 and the same period of 2003, ranging between
19.2% in the Peruvian Sol and 38.5% in the Brazilian Real.
However, if measured in both, local currencies and in US dollar,
results from Latin America reflect this improvement in the
economic scenario.
Operating income for the Latin American electricity business
amounted to Euro 579 million, an 18.2% decrease against first
half 2002. However, in local currency terms increased by 20.3%
while in US dollar grew by 0.6%.
It's important to point out that in all countries the decrease in
EBITDA was lower than the local currency devaluation, meaning
that EBITDA increased in local currency terms in all countries
were ENDESA operates.
The remarkable performance of generation in Argentina was mainly
due to electricity exports and demand recovery. However,
distribution did not show the same trend since the increase in
generation prices could not been passed through to the final
customers.
Likewise, income in Colombian distribution decreased by 18.2%
while in generation was stable compared to the first half of
2002. This result reflects the high correlation between the
electricity prices and US dollar, since Colombian peso
experienced a 35.7% devaluation against Euro over the first half
of 2002.
In the rest of countries, income decreased, in general, less than
local currency devaluation. However, although the pass through of
2002 currency devaluation to electricity prices is more gradual
than in Colombia, it is foreseeable that an important part of the
2002 devaluations will be recovered in the future.
Finally, the Euro 46 million decrease in operating income in
generation in Chile is affected by the Euro 21 million
capitalization of foreign exchanges differences, mainly due to
the construction of Ralco hydro plant, accounted as operating
income in the "expenses capitalized" caption. Should this effect
be disregarded, operating income in generation in Chile would
have decreased by 19.8%, in line with the US$ devaluation against
Euro in the same period.
Financial results
Financial results showed a net loss of Euro 347 million in the
first half 2003, this is Euro 971 million lower than the same
period of 2002.
Debt Reduction
In the first half 2003 ENDESA reduced its debt by Euro 4,728
million over the debt reported in December 2002. As a
consequence, debt fell to Euro 18,019 million as of June 30th
2003.
Debt reduction was the result of the following:
-- Transactions carried out during the first half of 2003
resulted in a debt reduction of Euro 1,877 million. Items 5 and 6
below show the sources and uses of funds that resulted in such
reduction.
-- Preferred Securities issue by ENDESA Capital Finance LLC for
an amount of Euro 1,500 million representing a Euro 1,388 million
cash inflow.
-- The subscriptions of ENERSIS' capital increase by shareholders
other than ENDESA for an amount of Euro 580 million that
increased the minority interests and reduced debt by such amount.
-- Variation in the exchange rates against the Euro of the
currencies in which the debt of the consolidated affiliates is
denominated have resulted in a Euro 651 million decrease of the
total consolidated debt.
-- A Euro 232 million reduction of the debt of the companies sold
during this period.
It is important to highlight the significant improvement on
leverage. Results from operations and subscriptions from
shareholder other than ENDESA facilitated debt reduction and an
increase in minority interests. Hence, total debt over equity and
minorities ratio decreased to 128% on June 30th 2003 from 203% at
year-end 2002.
Net financial expenses
Average cost of debt for the first half of 2003 was 5.2%,
approximately the same as in the first six months of 2002, while
average cost of debt for ENDESA, excluding ENERSIS, was 4.3%.
Lower debt and similar average cost enabled a reduction in net
financial expenses of Euro 54 million, an 8.3% decrease against
the first half 2002.
Foreign Exchange Differences
Net foreign exchange differences for the first half 2003 resulted
in Euro 169 million net gain, mainly corresponding to a 20.8%
revaluation in the Argentinean Peso against US dollar in such
period.
However, ENDESA has not reflected in net income the net positive
differences generated by its subsidiaries in Argentina since,
following conservative accounting procedures, an additional
provision was allocated.
Equity income
On June 30th 2003, losses attributable to ENDESA under the equity
method were Euro 14 million, a Euro 50 million improvement over
the first half 2002.
The main component of this item corresponds to the shareholdings
in telecommunications affiliates.
This positive operating performance of Auna enabled a remarkable
improvement Auna's income corresponding to ENDESA, that in the
first half of 2003 amounted to Euro 28 million net loss, while in
the same period of 2002 amounted to Euro 82 million net loss.
On June 30th 2003, Auna had more than 7.2 million mobile
telephony customers (770,000 more than on December 30th 2002) and
more than 600,000 cable customers, a 19% increase over the same
period of 2002.
Moreover, EBITDA of Chilean mobile telephone operator Smartcom
amounted to Euro 10 million in the first half of 2003. Negative
income corresponding to ENDESA improved to Euro 17 million in the
first half 2003, from Euro 32 million in the same period 2002.
On June 30th 2003 Smartcom had over one million customers, a 11%
increase over year-end 2002 with a 16.2% market share.
Extraordinary results
Extraordinary results for ENDESA in the first half 2003 were Euro
646 million.
Its main components were the following:
-- The sale of the Spanish mainland transmission network that
resulted in a Euro 514 million capital gain.
-- The sale of certain real estate assets in Spain with a Euro
152 million capital gain.
-- The sale of a 7% of Red Electrica de Espana that generated a
Euro 44 million capital gain.
-- Euro 8 million capital losses from the sale of the stake in
REPSOL.
-- Euro 110 million capital gains from ENERSIS's sale of Rio
Maipo.
Its worth noting that this transaction did not have any positive
effect in ENDESA's net income since the 65% portion of ENDESA in
this capital gain, amounting to Euro 71 million, was accounted in
"Extraordinary Results" in order to amortize goodwill for the
same amount. The balance, increased the minority shareholders
account.
-- Euro 157 million provisions to cover risks related to the
domestic electricity business.
-- Euro 133 million provisions to cover risks related to the
Latin American electricity business.
Of this amount, Euro 82 million were allocated to cover the risk
arising from investments in Argentina, in addition to the Euro
145 million provisioned in 2002.
This additional provision was a consequence of the revaluation in
the Argentinean peso that enabled positive results in ENDESA's
affiliates in this country. ENDESA, following conservative
accounting criteria, has provisioned these positive results to
maintain zero book value in the Argentinean investments as well
as its share in the direct and indirect intercompany loans in
Argentina.
Cash Flow and Investments
Cash flow from operations amounted to Euro 1,842 million during
the first half 2003, a 15.5% increase versus the same period of
2002.
This cash flow more than covered investments which amounted to
Euro 961 million, payment of the interim dividend to ENDESA's
shareholder on January 2nd 2003 for an amount of Euro 280 million
and to minorities in the amount of Euro 68 million as well as
payment of previously provisioned commitments, such as early
retirements, in the amount of Euro 260 million.
In the first six months of 2003 the asset sales amounted to Euro
2,355 million.
Of this amount, Euro 535 million were cashed in 2002 and Euro 49
million corresponding to the sale of Infraestructura 2000 in
Chile was due on June 30th 2003.
As mentioned above, total investments in the first half of 2003
amounted to Euro 961 million, a 27.3% decrease over the same
period of 2002 following ENDESA's 2002-2006 Strategic Plan.
It is important to highlight that first half 2003 capital
expenditures were approximately the same as depreciation and
amortization, amounting to Euro 816 million reflecting the
conservative investment profile of the company.
It is important to point out that following the 2002-2006
Strategic Plan, capital expenditures in the domestic business
grew by 43.1% in the first half 2003 over the same period in
2002.
This increase corresponds to 110% and 9.3% higher investments in
generation and distribution respectively.
Regarding ENDESA's asset generation portfolio, is important to
highlight that in the first half of 2003 the Tarragona 400 MW
combined cycle was completed, as well as Son Reus 70 MW gas
turbine that concludes this 226 MW combined cycle in the Balearic
Islands.
Likewise, 49 MW of new capacity have been added to Granadilla
(Canary Islands) power plant, 12 MW in Ceuta and Melilla, 74 MW
in new wind farms and 16 MW in biomass recycling facilities.
Additionally, ENDESA has approved the plan to transform the As
Pontes (La Coruna) 1,400 MW power plant in order to burn imported
coal.
On the other hand, during the first half of 2003 ENDESA Italia
continued with the implementation of the repowering plan of its
thermal generation portfolio. This allowed the initiation of the
testing period for the Ostiglia 800 MW power plant and the Fiume
Santo 320 MW power plant.
Financing activity
Financing activity wise, in the first half of 2003 ENDESA made
long-term financing transactions for an amount of Euro 2,250
million and an average life of 6.2 years.
Moreover, ENDESA significantly strengthened its financial
structure through the preferred notes issue of ENDESA Capital
Finance LLC for an amount of Euro 1,500 million, resulting in an
increase of the minority interests and a decrease of the net debt
for the same amount.
Liquidity of ENDESA in Spain on June 30th 2003, that is,
available lines of credit and cash, amounted to Euro 5,005
million, more than covering ENDESA's debt maturing in Spain in
the following two years and a half.
In Latin America, on June 30th 2003 ENERSIS successfully closed
the first subscription period of its US$ 2 billion capital
increase with a 90% of such amount already subscribed.
Shareholders other than ENDESA subscribed Euro 580 million.
Moreover, ENERSIS and ENDESA of CHILE successfully closed the
bank debt refinancing for an amount of US$ 2,330 million.
As of June 30th 2003, liquidity of ENERSIS Group amounted to Euro
966 million.
For additional information please contact Jacinto Pariente at NY
Investor Relations Office, tel. 212 750 7200.
ENERSIS: S&P Comments on Endesa S.A.'s A Rating
-----------------------------------------------
Standard & Poor's Ratings Services said Wednesday that the
ratings on Spain-based electricity utility Endesa S.A.
(A/Negative/A-1) would remain unchanged following the company's
release of its half-yearly figures. The outlook on the ratings
will remain negative, despite satisfactory debt reduction
resulting from the significant divestments made. Endesa's
performance in Spain was strong, and its Latin American
operations, through its subsidiary Enersis S.A. (BBB-/Stable/--),
appear to have stabilized. The negative outlook reflects the
Company's still weak financial profile for its 'A' rating.
Analysts' E-mail Addresses: karl_nietvelt@standardandpoors.com
peter_kernan@standardandpoors.com
ENERSIS: Concludes Management Shake-up
--------------------------------------
The reshuffling of senior management at Chilean electricity
holding Enersis SA is now complete. Citing a company release, Dow
Jones reports that Pablo Yrarrazaval will remain as president,
while Mario Valcarce, formerly chief financial officer, will
become Enersis' chief executive. Also reporting to Yrarrazaval
will be Francisco Herrera, who will become Chief auditor,
replacing Jose Maria Raventos.
Enersis launched a restructuring program in order to deal with
the effects of the economic crisis that hit Argentina and Brazil
last year. As part of the program, the Company, a unit of Spanish
utility Endesa SA, will become the financial holding vehicle,
leaving operations of Endesa's Latin American generation assets
to Empresa Nacional de Electricidad SA and the distribution
business to Chilectra SA.
Endesa Chile's Chief Financial Officer Alfredo Ergas will succeed
Valcarce as Enersis' chief financial officer, reporting to
Valcarce, adds Dow Jones.
CONTACT: Enersis SA
Avenida Kennedy Vitacura No 5454
Santiago Chile 1557
Phone: +56 2 353 4400
Fax: +56 2 378 4768
Home Page: http://www.enersis.cl
Contacts:
Engr Alfredo Llorente Legaz, Chairman
Engr Rafael Miranda Robredo, Vice Chairman
ENERSIS: Informs Regulator August Dividend Suspended
----------------------------------------------------
Enersis informed Chile's stock market regulator that its board of
directors unanimously agreed not to pay out an interim dividend
planned for August. The Company didn't provide details to explain
the decision but in a statement to the regulator, the Company
said that the "conditions had not been met" for such a payment.
According to Reuters, Enersis' policy is to pay shareholders
dividends equal to a minimum of 30% of net earnings.
===============
C O L O M B I A
===============
VALORES BAVARIA: Sale Of Portfolio Firms Helps Reduce Net Loss
--------------------------------------------------------------
Colombian conglomerate Valores Bavaria SA reported a 72%
reduction in net loss in the first half of 2003, to COP16.6
billion, from COP59.7 billion in the same period last year,
according to Dow Jones Business News.
"These results reflected income generate from the sale of several
portfolio companies, better performance of the investment
portfolio as a whole; and provisions, principally related to the
investment in (airline group) Alianza Summa," the Company said in
a statement.
Operating income in the first six months of this year stood at
COP99.5 billion, up from COP4.2 billion in the same period last
year. At the end of June 2003, the Company registered total
assets of COP1.8 trillion, down from COP2.1 trillion at the end
of June 2002.
Valores Bavaria is controlled by the powerful Santo Domingo
family, which also runs beer and beverage giant Bavaria SA
(E.BAV).
CONTACT: VALORES BAVARIA SA
No 7A-47 Calle 94
Santafe de Bogota DC
Colombia
Phone: +57 1 600 2100
Home Page: http://www.bavaria.com.co/
Contacts:
Javier Aguirre Nogues, Chairman
Leonor Montoya Alvarez, President
Victor Alberto Machado Perez, Secretary
=================
G U A T E M A L A
=================
*S&P Assigns 'BB-' Rating to Guatemala's $300M Bond
---------------------------------------------------
Standard & Poor's Ratings Services said Wednesday that it
assigned its 'BB-' long-term foreign currency sovereign credit
rating to the Republic of Guatemala's US$300 million bond due
2013. At the same time, Standard & Poor's affirmed its 'BB' long-
term local, 'BB-' long-term foreign, and 'B' short-term currency
sovereign credit ratings on the republic. The outlook on the
ratings remains stable.
The bond issue helps to close Guatemala's moderate financing gap,
estimated at US$600 million (about 2.6% of GDP) for 2003. The
government's financial program also includes domestic market
issuance to meet its 2003 funding needs.
"Standard & Poor's May 9, 2003, downgrade of its long-term
ratings on Guatemala reflected the negative effect of political
polarization on the government's implementation of economic
policy," said sovereign analyst Sebastian Briozzo. "This process
is exacerbated by the political cycle in Guatemala, with
presidential elections scheduled for November 2003," he added.
Standard & Poor's recently published a commentary on recent
political trends in Guatemala and their effect on the country's
creditworthiness (see "Guatemala: Political Polarization
Undermines Economic Policy Implementation," July 7, 2003,
available on RatingsDirect and at www.standardandpoors.com).
According to Mr. Briozzo, in addition to the political
developments the ratings continue to be constrained by
Guatemala's poor per capita growth prospects, given its rapidly
increasing population, and the country's narrow tax base. He
explained that the polarized political environment will continue
to constrain the government's ability to move closer to the tax
revenue target of 12% of GDP, set by the 1996 peace agreements,
from the current 10.7%. Nonetheless, a stable macroeconomic
framework with low inflation, only moderate fiscal deficits, and
relatively small debt levels should limit the effects of the
political discord on creditworthiness.
"The stable outlook on Guatemala's ratings balances the political
difficulties with the country's sound macroeconomic framework and
low debt levels. While Standard & Poor's does not expect the
political situation to improve significantly over the next year,
the International Monetary Fund agreement (over the short term)
and prospects of a free trade agreement with the U.S. (over the
medium term) will somewhat offset the negative effect of
political developments in the conduct of economic policy," Mr.
Briozzo said. "The ratings could come under pressure if political
tensions inhibit the government's ability to implement its
economic agenda," he concluded.
ANALYSTS: Sebastian Briozzo, New York 212-438-7342
Joydeep Mukherji, New York (1) 212-438-7351
=============
J A M A I C A
=============
AIR JAMAICA: Relocating Some Operations To Cut Costs
----------------------------------------------------
As part of an effort to stay afloat financially following the
September 11 terrorist attacks, Jamaican national airline Air
Jamaica is relocating its marketing, sales and reservations
departments from Miami to Jamaica, reports RadioJamaica.Com.
While the changes - due to be implemented during the fourth
quarter of this year - are expected to result in displacements
for some members of staff, it will mean greater efficiency for
the airline, CEO Christopher Zacca said.
The executive didn't state how many persons will lose their jobs.
CONTACT: Air Jamaica
4 St. Lucia Avenue
Kingston 5,
Jamaica
Phone: 876/922-3460
Fax: 929-5643
E-mail: webinfo@airjamaica.com
C&WJ: Cuts Incoming Int'l Calls To Rival on Illegal Activity
------------------------------------------------------------
Cable & Wireless blocked incoming international calls to
Jamaica's third largest cellular provider. Citing a Cable &
Wireless statement, the Associated Press reports the restriction
follows an investigation that indicated mobile provider Oceanic
Digital Jamaica was receiving international calls through Cable &
Wireless' network even though its interconnectivity agreement
only covers domestic traffic.
Cable & Wireless said it has already warned Oceanic Digital, in a
July 4 letter, to halt the "illegal activity," which it estimates
has cost the Company $40 million (US$689,000).
The restriction will stay in effect until the two sides arrive at
a new agreement, according to company spokesman Everald Edwards.
===========
M E X I C O
===========
GRUPO MEXICO: Reports $3.6M Net Loss In 2Q03
--------------------------------------------
Grupo Mexico, the world's third-largest copper producer, reported
a US$3.6-million net loss in the second quarter of the year,
against a profit of US$65 million in the same period last year.
The Company attributed negative results to waning output and
sales.
The Mexico City-based company pointed at cutbacks in operations
at the Mission mine in the United States and a labor strike at a
top Mexican operation, Mexicana de Cananea, as factors that
lowered output.
As of June 30, 2003, total debt outstanding was US$2.984 billion.
With cash on hand of US$417 million, net debt stood at $2.567
billion.
Grupo Mexico, burdened by the financing of its 1999 purchase of
Asarco Inc., defaulted on more than US$1.3 billion of debt in the
past two years after copper prices fell to record lows. The
Company has since persuaded dozens of banks, hundreds of
bondholders and the U.S. State Department to stretch out payments
as it struggles to return to profit.
CONTACT: GRUPO MEXICO S.A. DE C.V.
Avenida Baja California 200,
Colonia Roma Sur
06760 Mexico, D.F., Mexico
Phone: +52-55-5264-7775
Fax: +52-55-5264-7769
Home Page: http://www.gmexico.com
Contacts:
Germ n Larrea Mota-Velasco, Chairman and CEO
Xavier Garca de Quevedo Topete, President and COO
Alfredo Casar P,rez, COO, Ferrocarril Mexicano
Daniel Ch vez Carre>n, COO, Industrial Minera M,xico
Daniel Tellechea Salido, VP and Administration and
Finance President
MAXCOM TELECOMUNICACIONES: Announces Improved 2Q03 Results
----------------------------------------------------------
- Revenues increased 40% over 2Q02, and 7% over 1Q03
- Positive EBITDA: Ps$24.8 million, which represents a 14% margin
- Lines in service increased 48% over 2Q02, and 4% over 1Q03
- Number of customers grew 62% over 2Q02, and 2% over 1Q03
Maxcom Telecomunicaciones, S.A. de C.V., a facilities-based
telecommunications provider (CLEC) using a "smart build" approach
to focus on small- and mid-sized businesses and residential
customers in the Mexican territory, announced Wednesday its
unaudited results for the second quarter of 2003.
LINES:
The number of lines in service at the end of 2Q03 increased 48%
to 134,659 lines, from 91,009 lines at the end of 2Q02, and 4%
when compared to 129,982 lines in service at the end of 1Q03. Out
of the total outstanding lines at the end of 2Q03, 6,020 lines or
4.5% were from Wholesale customers, which compares to 3,930 lines
or 4.3% at the end of 2Q02, and 5,090 lines or 3.9% at the end of
1Q03.
During 2Q03, line construction was lower by 89% at 2,749 lines,
from 24,035 constructed lines in the same period of last year;
and higher by 47% when compared to 1,873 constructed lines during
1Q03. Inventory of constructed lines for sale at the end of the
quarter was 53,334 lines.
During 2Q03, 13,930 new lines were installed, 2% below the 14,272
(15,288 as reported)(1) lines installed during 2Q02. When
compared to 1Q03, the number of installations decreased 7% from
14,911 lines.
During 2Q03, the monthly churn rate was 2.7%, which compares
favorably to 3.3% (3.6% as reported)(1) monthly average churn in
2Q02. When compared to 1Q03, churn rate decreased from 2.9%.
Voluntary churn in 2Q03 resulted in the disconnection of 2,658
lines, a rate of 0.7%, equivalent to that registered in 1Q03 with
2,697 disconnected lines. Involuntary churn resulted in the
disconnection of 7,525 lines, a rate of 2.0%, which compares
favorably to 8,073 disconnected lines, or 2.2% during 1Q03.
During 2Q03, net additions for Wholesale customers were 930
lines, which compares to 380 net disconnections during 2Q02 and
610 net additions during 1Q03.
(1) As of the third quarter of 2002, Maxcom started reporting
results for each of its three business units: Voice, Data and
Wholesale separately. Revenues from Data and Wholesale are
reported separately and do not contribute to ARPU; Wholesale
lines in service are reported separately from Voice lines. For
comparative purposes and where applicable, this report includes
adjusted numbers after these changes as well as the originally
reported numbers (for a broader explanation, see: "Maxcom
Telecomunicaciones Announces Third Quarter Unaudited Results,"
released on October 29, 2002).
CUSTOMERS:
Total customers grew 62% to 95,410 at the end of 2Q03, from
58,772 at the end of 2Q02, and 2% when compared to 93,702
customers as of the end of 1Q03.
The growth in number of customers by region was distributed as
follows: (i) in Mexico City customers increased by 65% from 2Q02
and were flat when compared to 1Q03; (ii) in Puebla the increase
was 52% from 2Q02 and 4% from 1Q03; and in Queretaro the increase
was 7% from 1Q03; we did not have operations in Queretaro in
2Q02.
The change in the number of customers by category was the
following: (i) business customers decreased by 2% from 2Q02 and
also 2% from 1Q03; and, (ii) residential customers increased by
67% from 2Q02 and 2% from 1Q03.
REVENUES:
Revenues for 2Q03 increased 40% to Ps$180.8 million, from
Ps$128.8 million reported in 2Q02. Voice revenues for 2Q03
increased 39% to Ps$159.8 million, from Ps$114.8 million during
2Q02, mainly driven by a 48% increase in voice lines, and
partially offset by an 11% decrease in ARPU. Data revenues for
2Q03 were Ps$5.1 million and contributed 3% of total revenues;
during 2Q02 data revenues were Ps$2.3 million. Wholesale revenues
for 2Q03 were Ps$15.9 million, a 36% increase from Ps$11.7
million in 2Q02.
Revenues for 2Q03 increased 7% to Ps$180.8 million, from Ps$169.6
million reported in 1Q03. Voice revenues for 2Q03 increased 9% to
Ps$159.8 million, from Ps$147.2 million during 1Q03. Data
revenues in 2Q03 increased 26% to Ps$5.1 million, from Ps$4.0
million during 1Q03. During 2Q03, revenues from Wholesale
customers decreased 13% to Ps$15.9 million, from Ps$18.4 million
in 1Q03.
COST OF NETWORK OPERATION:
Cost of Network Operation in 2Q03 was Ps$65.1 million, a 33%
increase when compared to Ps$48.9 million in 2Q02. This increase
was generated by: (i) Ps$15.6 million, or 51% increase in network
operating services, mainly driven by higher calling party pays
charges and long distance reselling costs due to higher traffic
from a higher number of lines in service; (ii) Ps$1.9 million or
16% increase in technical expenses; (iii) a decrease in
installation expenses; and (iv) a decrease in the cost of
disconnected lines in the amount of Ps$1.4 million collectively
for items (iii) and (iv).
Cost of Network Operation was flat quarter-over-quarter when
compared to Ps$65.0 million in 1Q03. While network operating
services decreased Ps$0.3 million or 1%, and installation
expenses and cost of disconnected lines decreased Ps$1.6 million
or 26%, technical expenses increased Ps$1.9 or 16%.
SG&A:
SG&A expenses were Ps$90.9 million in 2Q03, which compares to
Ps$104.0 million in 2Q02. The 13% decrease was mainly driven by:
(i) lower salaries, wages and benefits of Ps$16.4 million; (ii)
lower leasing and maintenance costs of Ps$10.4 million; (iii)
lower advertising expenses of Ps$2.1 million; and (iv) lower
general, administrative expenses and insurance costs of Ps$1.2
million, which were partially offset by: (i) higher bad debt
provisioning of Ps$10.1 million; (ii) higher consulting fees of
Ps$5.2 million; and, (iii) higher external sales commissions of
Ps$1.7 million. The higher external sales commissions were offset
in reductions in in-house sales staff; those savings are included
in item (i) above.
SG&A expenses in 2Q03 decreased 17%, from Ps$108.9 million in
1Q03. This variation was mainly driven by: lower severance costs
of Ps$18.0 million; (ii) lower leasing costs of Ps$10.1 million;
(iii) lower salaries, wages and benefits of Ps$1.0 million; and
(iv) lower advertising expenses of Ps$0.9 million, which were
partially offset by: (i) higher consulting fees of Ps$5.7
million; (ii) higher bad debt provisioning of Ps$5.2 million;
(iii) higher external sales commissions of Ps$0.7 million; and
(iv) higher general, administrative expenses and insurance costs
of Ps$0.4 million.
EBITDA:
EBITDA for 2Q03 was positive Ps$24.8 million, compared to
negative Ps$24.1 million reported in 2Q02 and negative Ps$4.3
million registered in 1Q03. EBITDA margin improved from a
negative 19% in 2Q02 and negative 3% in 1Q03 to positive 14% in
2Q03.
Before severance costs registered in 1Q03, positive EBITDA
increased 81% quarter-over-quarter to Ps$24.8 million in 2Q03
from Ps$13.7 million in 1Q03.
CAPITAL EXPENDITURES:
Capital Expenditures for 2Q03 were Ps$29.9 million, a 76%
decrease when compared to Ps$123.3 million in 2Q02, and an 8%
decrease when compared to Ps$32.5 million in 1Q03.
CASH POSITION:
Maxcom's Cash position at the end of 2Q03 was Ps$59.3 million in
Cash and Cash Equivalents, compared to Ps$520.5 million at the
end of 2Q02. Cash and Cash Equivalents at the end of 1Q03 were
Ps$46.2 million.
A conference call will be held to discuss 2Q03 results on
Thursday, July 31, 2003, at 11:00 a.m. EDT/10:00 a.m. Mexico City
Time. To participate, please dial (719) 457-2637, confirmation
code 625046, ten minutes prior to the start of the call.
A playback of the conference call will be available starting 2:00
p.m. EDT on Thursday, July 31, 2003, until midnight on Wednesday,
August 6, 2003. Please dial (719) 457-0820 or (888) 203-1112,
replay access code: 625046.
Maxcom Telecomunicaciones, S.A. de C.V., headquartered in Mexico
City, Mexico, is a facilities-based telecommunications provider
using a "smart- build" approach to deliver last-mile connectivity
to micro, small and medium- sized businesses and residential
customers in the Mexican territory. Maxcom launched commercial
operations in May 1999 and is currently offering Local, Long
Distance and Internet & Data services in greater metropolitan
Mexico City, Puebla and Queretaro.
To see financial statements:
http://bankrupt.com/misc/MAXCOM_TELECOMUNICACIONES.htm
CONTACT: Maxcom Telecomunicaciones
Jose-Antonio Solbes
Mexico City, Mexico
Phone: (52 55) 5147 1125
Email: investor.relations@maxcom.com
Home Page: http://www.maxcom.com/
Lucia Domville
Citigate Financial Intelligence
New York, NY
Phone: (212) 840-0008 Ext. 268
Email: lucia.domville@citigatefi.com
SATMEX: Expects To Conclude Satmex 6 Financing In September
-----------------------------------------------------------
Mexican satellite operator Satmex expects to wrap up financing in
September for the launch of Satmex 6 satellite, according to
company VP Arturo Gonzalez. Business News Americas recalls that
the operator recently secured US$230 million via the US
government's export financing bank EximBank and French export
credit insurance agency Coface.
However, Satmex is seeking another US$70 million. The financing
process is led by foreign banks and is well advanced, Gonzalez
assured. The fresh funds would cover ground equipment, software,
simulators and an insurance policy.
According to CFO Cinthia Pelini, the Company is now finalizing
insurance coverage negotiations for the new satellite with a
local underwriter.
"The commitment of the insurer and the reinsurers is already
there, now the parties just need to sign the policy with the
agreed text," she said.
Industry conventions require Satmex to take out coverage with a
local insurer, backed by a global satellite insurance broker,
which in this case is UK-based Willis, Pelini said. The US$300-
million policy will cover the launch and a year in orbit, with an
annual premium of 16% or some US$50 million.
The Mexican consortium of Principia and Loral controls 75% of
Satmex, while the government has the other 25%.
=================================
T R I N I D A D & T O B A G O
=================================
BWIA: 25 Retrenched Workers To Get Severance Payments This Week
---------------------------------------------------------------
BWIA is due to settle severance payments with 25 retrenched
workers by the end of the week, according to a report released by
the Trinidad Guardian. Clint Williams, spokesman for BWIA, said
the airline was able to set aside $2 million out of its revenue
for the severance payment.
"It is an indication that we have been earning revenues,"
Williams said.
But according to Theo Oliver, president of the Superintendant
Association, the airline informed the union that it had written
to Government requesting an additional $32 million to clear up
the severance payments.
Reluctant to confirm this information, Williams said: "We are
seeking to ensure that we can fulfill the severance payments.
Approximately 195 retrenched workers have received their
severance payments, the Trinidad Guardian reveals.
CONTACT: British West Indies Airways
Phone: + 868 627 2942
E-mail: mailto:mail@bwee.com
Home Page: http://www.bwee.com/
=================
V E N E Z U E L A
=================
*S&P Raises Venezuelan LT FC Rating Raised to 'B-'
--------------------------------------------------
Standard & Poor's Ratings Services said Wednesday that it raised
its long-term foreign currency sovereign credit rating on the
Bolivarian Republic of Venezuela to 'B-' from 'CCC+'. At the same
time, Standard & Poor's assigned its 'B-' rating to Venezuela's
upcoming US$2 billion notes due 2010, which are being issued as
part of a voluntary debt exchange. Standard & Poor's also
assigned its 'B-' long-term and 'C' short-term local currency
sovereign credit ratings to Venezuela, and affirmed its 'C'
short-term foreign currency rating. The outlook on the long-term
ratings is stable.
According to sovereign analyst Richard Francis, the upgrade
reflects improved external liquidity indicators resulting from
the return to normal oil production levels following the
devastating strike of December 2002/January 2003. "International
reserves increased to nearly US$19 billion as of July 29, 2003,
from a low of US$13.6 billion in February 2003, the result of
renewed foreign exchange earnings from oil exports and capital
controls put in place in early 2003," Mr. Francis said. "The
recently completed voluntary external debt exchange will further
improve the government's capacity to service its debt by lowering
external debt amortization over the next four years," he added.
Mr. Francis said that, despite improved oil production and
economic growth prospects, serious political and economic
challenges remain. "The country remains politically polarized and
there is a significant threat of increased social unrest that
could undermine the fragile economic recovery," he noted.
"Furthermore, capital and price controls place significant
constraints on the private sector," Mr. Francis concluded.
Standard & Poor's said that the ratings could come under renewed
pressure if increased social unrest leads to further economic
and/or political turmoil or if oil production or prices decline
significantly. Conversely, diminished political tensions, along
with better economic growth prospects, could lead to improved
creditworthiness.
ANALYSTS: Richard Francis, New York (1)-212-438-7348
Joydeep Mukherji, New York (1) 212-438-7351
***********
S U B S C R I P T I O N I N F O R M A T I O N
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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.
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