/raid1/www/Hosts/bankrupt/TCRLA

/raid1/www/Hosts/bankrupt/TCRLA_Public/031024.mbx T R O U B L E D C O M P A N Y R E P O R T E R L A T I N A M E R I C A Friday, October 24, 2003, Vol. 4, Issue 211 Headlines A R G E N T I N A ADPROM ARGENTINA: Claims Verification Period Ends ANNUIT COEPTIS: Court Assigns Receiver to Oversee Bankruptcy BAIDAL: Claims Verification To End November 10 BODEPES: Individual Reports Filing Expected Today CABLEVISION: Extends Debt Offer Terms to October 27 CALPO: Receiver Verifies Creditors' Claims in Bankruptcy CASA LOPEZ: Initiates Bankruptcy On Court Order CERAMICAS ZANON: Judge Fires Board, Appoints Official Receivers CIT: Fitch Rates $400M of Bonds `CCC(arg)' COLORIN: Moody's Rates $47M of Bonds `D' CONSTRUCCIONES HELIC: Creditor's Petition For Bankruptcy Approved ECCO: Sale To Swiss Medical Group May Collapse EUROMAYOR: $10M of Bonds Get Moody's `D' Rating GARDONE: Files Voluntary Bankruptcy Petition GATIC: Consumers Complain as Financial Difficulty Worsens IMAGEN SATELITAL: Moody's Assings Default Ratings To Bonds LANZA AIR: Court Orders Bankruptcy SAN BERNARDO: Seeks Court Approval For Reorganization Plans SOLBO: Proof of Claim Filing Period Ends Today TALLERES INDUSMAR: Files Motion to Reorganize TELEFONICA DE ARGENTINA: Fitch Upgrades Debt Ratings B E R M U D A LORAL SPACE: Court Approves Agreements DIRECTV, Panamsat Deals SOCIETY EXPEDITIONS: Creditor Files Bankruptcy Petition in US B R A Z I L BCP: Seeks Debenture Payment Restructuring UOL: Grupo Abril To Trim Assets Amid Continued Losses C H I L E ENERSIS: Initiating Next Phase of Equity for Debt Deal MASISA: Changes Accounting Currency to US Dollars E L S A L V A D O R MILLICOM INTERNATIONAL: Announces Improved 3Q03 Financial Results J A M A I C A C&W JAMAICA: 11 Real Estate Properties Up For Bid M E X I C O AEROMEXICO: Dispute With ASSA Delays Fleet Modernization Program BURLINGTON INDUSTRIES: Creditors Approve Restructuring Plan CONE MILLS: Moves Forward Asset Sale to WL Ross & Co. GRUPO TMM: Court to Grant Preliminary Injunction Against Company P E R U * Fitch Revises Peru Outlook to Stable from Negative U R U G U A Y * Fitch Rates Uruguay Sovereign UI Bond 'B-' - - - - - - - - - - ================= A R G E N T I N A ================= ADPROM ARGENTINA: Claims Verification Period Ends -------------------------------------------------- Mr. Carlos Alberto Lausi, receiver for Buenos Aires-based Adprom Argentina S.A., closes the credit verification process for the Company's bankruptcy today. Verifications were done to examine the nature and amount of the Company's debts. The city's Court No. 15 holds jurisdiction over the case, the Troubled Company Reporter - Latin America reported earlier. The court requires the receiver to prepare the individual reports on the results of the verifications. However, local sources did not mention the deadlines for the submission of these reports. CONTACT: Carlos Alberto Lausi Ave. de Mayo 633 Buenos Aires ANNUIT COEPTIS: Court Assigns Receiver to Oversee Bankruptcy ------------------------------------------------------------ Buenos Aires Court No. 19 assigns Mr. Andres Landro as receiver for the bankruptcy of Annuit Coeptis S.A., according to a report by local news portal Infobae. Credit verifications will be done until October 31 this year. The receiver will prepare the individual reports on the results of the verification process and present it to the court on December 15 this year. The general report will be submitted to the court on February 27 next year. This is prepared after the individual reports are processed at court. CONTACT: Annuit Coeptis S.A. Vicente Lopez 1031 Buenos Aires Andres Landro Scalabrini Ortiz 215 Buenos Aires BAIDAL: Claims Verification To End November 10 ----------------------------------------------- Buenos Aires accountant Mario Rafael Cabrosi takes charge as receiver for local company Baidal S.A., which is currently undergoing a bankruptcy process. Local news portal Infobae relates that the credit verification process will end on November 10 this year. The city's Court No. 19 ordered the receiver to hand in the individual reports on December 23 this year. These reports are to be prepared upon completion of the verification process. The general report must also be submitted on March 8 next year, the source adds. The Company's assets will be liquidated at the end of the process to reimburse its creditors. Those who fail to have their claims validated by the receiver would be disqualified from any payments the Company would make. CONTACT: Baidal S.A. Pedro Goyena 1555 Buenos Aires Mario Rafael Cabrosi Uruguay 390 Buenos Aires BODEPES: Individual Reports Filing Expected Today ------------------------------------------------- Mr. Oscar Adolfo Sanchez, receiver for Argentine company Bodepes S.A, is required to submit the individual reports for the Company's bankruptcy today. After these reports are processed at court, the receiver will prepare the general report, which is to be submitted to the court on December 5 this year. Court No. 6 of the Civil and Commercial Tribunal of Mar del Plata handles the Company's case, according to a previous report by the Troubled Company Reporter - Latin America. CONTACT: Bodepes S.A. Acha 890 Mar del Plata Oscar Adolfo Sanchez Avenida Colon 2991 Mar del Plata CABLEVISION: Extends Debt Offer Terms to October 27 --------------------------------------------------- Argentine cable company Cablevision SA informed the Buenos Aires stock exchange Tuesday that it has again extended its debt- restructuring offer on US$797 million in defaulted debt until Oct. 27, relates Dow Jones. The offer was originally set to end on Oct. 10, but the Company extended it to Oct. 20 after receiving approval from holders of $265.8 million of the potential $725 million worth of eligible bonds. In its latest filing with the bourse, Cablevision said that as of Oct. 20, bondholders representing about US$270.4 million have agreed to its debt proposal. The offering needs two-thirds approval by all bondholders to move forward. In its debt-restructuring plan, the Company offered to buy back up to US$270 million of the debts at 37% of their original value. According to Dow Jones, Cablevision's two main shareholders, Hicks, Muse, Tate & Furst and Liberty Media Corp., are contributing US$45 million for the buyback, and Cablevision has offered to put up US$54.9 million of its own cash. CALPO: Receiver Verifies Creditors' Claims in Bankruptcy -------------------------------------------------------- Creditors of Calpo S.A. must have their claims verified by the Company's receiver before October 27 this year in order to take part in any payments the Company might make at the end of its bankruptcy process. The verifications are done to determine the amount and nature of the Company's debts. After the verifications are closed, the receiver, Mr. Juan Carlos Caro, will prepare the individual reports, which are to be submitted to the court on December 10 this year. The general report must follow on February 24 next year. Argentine news source Infobae reveals that Buenos Aires Court No. 19 issued the bankruptcy order. Clerk No. 38 assists the court on this case. CONTACT: Calpo S.A. Moliere 1366 Buenos Aires Juan Carlos Caro San Martin 793 Buenos Aires CASA LOPEZ: Initiates Bankruptcy On Court Order ----------------------------------------------- Casa Lopez Silver S.A., which is domiciled in Buenos Aires, enters bankruptcy on orders from the city's Court No. 22, reports Argentine newspaper Infobae, adding, Clerk No. 44 aids the court on the case. The Company's receiver, Mr. Alberto Antonio Vilela, is verifying creditors' claims until December 5 this year. After that date, he will prepare the individual reports, which are to be submitted to the court on February 23 next year. The receiver will also prepare a general report after the individual reports are processed at court. This report, a consolidation of the results in the individual reports is to be handed over to the court on April 6 next year. CONTACT: Alberto Antonio Vilela Rodriguez Pena 431 Buenos Aires CERAMICAS ZANON: Judge Fires Board, Appoints Official Receivers --------------------------------------------------------------- Judge German Paez Castaneda, who oversees Ceramicas Zanon's formal restructuring proceeding, has dismissed the Company's board and appointed two official receivers to take charge of the tile manufacturer. The judge claimed that the members of the board had committed several offenses, including hiding assets valued at over ARS1 million, omission and misrepresentation of information. The company's employees applauded the measure and said they would ask the judge to give them control of the Company. "The removal of directors paves the way for our recognition as administrators. Now everything is limited to a political decision," said Raul Godoy, worker at Zanon and head of the tiles union. The recent decision would put an end to a process that started two years ago, when Zanon's workers took over the plant located in the province of Neuquen. Some months later, judge Elizabeth Rivera de Taiana issued a lockout sentence and then the workers assumed the operation of the plant. They have been in charge of the production and commercialization with great success. CIT: Fitch Rates $400M of Bonds `CCC(arg)' ------------------------------------------ A total of US$400 million of corporate bonds issued by Companis Internacional de Telecomunicaciones received junk ratings from Fitch Argentina Calificadora de Riesgo S.A., recently. The Company's finances as of June 30 this year served as basis for the given rating. According to Argentina's securities regulator, the Comision Nacional Valores, the following bonds were rated `CCC(arg)': -- US$225 million of bonds called "Clase A bajo el Programa de US$800 milliones" -- US$175 million of bonds called "Clase B bajo el Programa de US$800 milliones" Both set of bonds were classified under "Series and/or class". Both their maturity dates, however, were not indicated. Fitch said that the rating denotes an extremely weak credit risk relative to other issues in Argentina. Capacity for meeting financial commitments is solely reliant upon sustained, favorable business and economic conditions. COLORIN: Moody's Rates $47M of Bonds `D' ---------------------------------------- Moody's Latin America Calificadors de Riesgo S.A. assigned default ratings to corporate bonds issued by Argentine company Colorin Industria de Materiales Sinte. The `D' rating was based on the Company's finances as of the end of June this year. Some US$47 million of bonds, which the Comision Nacional de Valores described as "Obligaciones Negociables" were affected. The bonds are classified under "Simple Issue and would come due on March 31, 2006. CONSTRUCCIONES HELIC: Creditor's Petition For Bankruptcy Approved ----------------------------------------------------------------- Judge Paez Castaneda, insolvency judge in Court No. 21, approves a petition for the bankruptcy of local construction company Construcciones Helic S.A., relates La Nacion. The Company's creditor filed the petition for nonpayment of debt. Buenos Aires accountant Mabel Mansanta is the Company's receiver. She will verify creditors' claims until May 5 next year. The receiver's duties also include the preparation of the individual and general reports, whose deadlines were not mentioned by the source. CONTACT: Construcciones Helic S.A. 1st Floor, Room A Malabia 495 Mabel Mansanta 9th Floor, Room C Tucuman 14828 Buenos Aires ECCO: Sale To Swiss Medical Group May Collapse ---------------------------------------------- The sale of the Cordoba province-based emergency medicine company Emergencias Cardio Coronarias Ecco to the healthcare services holding Swiss Medical Group is unlikely to take place because both parties have not been able to reach an agreement on the amount of the deal. The companies had subscribed a preliminary accord last July, but the due diligence carried out by Swiss Medical would not have shown good figures. Ecco is about to finish a formal restructuring proceeding started in December 2002 through an out-of-court agreement (APE). But in case the operation finally takes place, Swiss Medical Group will cover all the areas of healthcare. It already owns the prepaid medicine firms Swiss Medical, Qualitas, Medicien and Nuvial, as well as the clinics Maternidad Suizo Argentina, Sanatorio Agote and San Luis. The holding has 270,000 customers and holds a 12% share in the private healthcare business. Ecco started operations in 1984 in Rosario (province of Santa Fe). In March 1998, it was taken over by US firm Rural/Metro Corporation. At that time, the Company used to bill some US$45 million a year and had 700,000 customers. A few years later, in October 2002, Metro Corporation decided to withdraw from Argentina due to the crisis that hit the country and gave its stake to the local management of the company, in exchange for the assumption of US$3 million in debt. But things did not go as expected and Ecco decided to file for protection under the bankruptcy law in December 2002. EUROMAYOR: $10M of Bonds Get Moody's `D' Rating ----------------------------------------------- Corporate bonds issued by Argentine company Euromayor S.A. de Inversiones were rated `D' by Moody's Latin America Calificadora de Riesgo S.A. last week. The bonds, called "Primera Serie por 10 millones de U$S dentro de un Programa Global" matured in April in year. The rating given was based on the Company's finances as of the end of July this year. Moody's said that the `D' rating is given to financial commitments that are currently in default. The affected bonds were worth a total of US$10 million, and were classified under "Series and/or Class". The CUSIP, however, was not revealed. GARDONE: Files Voluntary Bankruptcy Petition -------------------------------------------- Buenos Aires' Court No. 15 received a voluntary petition for bankruptcy from local company Gardone S.A., relates Argentine newspaper La Nacion. The Company, involved in the restaurant and theater business, stopped making debts payments in July 2001. Judge Di Noto handles the Company's case, the source adds. The city's Clerk No. 29, Dr. Tevez, assists the court on the case. CONTACT: Gardone S.A. Chile 802 Buenos Aires GATIC: Consumers Complain as Financial Difficulty Worsens --------------------------------------------------------- The deep crisis that is hitting Argentine textile firm Gatic, which has its eight plants paralyzed, is starting to be noticed among consumers. Sportswear outlets are almost out of stock of clothes and footwear manufactured by the Company. Gatic's situation is really serious. The Government would only aid the firm provided that Bakchellian leave the Company, said a source related to the textile industry. Employees at one of the most important sportswear retailers pointed out they had noticed the lack of footwear the most, since Gatic used to make several lines. We have started to replace their products by other brands, even second-class brands, the sources added. The undersupply even reached football teams. Some of them had to use old T-shirts because Gatic failed to supply them with new outfit and are considering canceling the contracts with the firm if it does not solve the supply issue. Gatic has been facing an important crisis that deepened in recent years. In October 2001, the firm initiated a formal restructuring proceeding, with ARS340 million in debt (US$118.47 million at the current exchange rate). A few months later, it lost the exclusivity contract to manufacture Adidas in Argentina. This brand used to represent 50% of Gatic's income. Its plants are in need of cash to pay overdue salaries and purchase inputs. Fabian Bakchellian, its current CEO, had promised to reopen two of the plants on October 20, but this promise couldn't be fulfilled and the Company informed its operations will continue to be paralyzed. Nevertheless, Bakchellian confirmed he has been in talks with the government of the Buenos Aires province in an attempt to outline a reorganization plan based on a high profitability industrial model. Even though no further details of the release were revealed, business daily Infobae says the plan under analysis had to do with the creation of a financial structure to inject capital in Gatic and reopen the plants that manufacture sportswear for Signia, Adidas, Nike, LA Gear, Asics, Reef and Arena. In the meantime, Gatic's shareholders are also holding negotiations with two investors that would be interested in acquiring a stake in the firm. According to market sources, the talks would be in an initial stake and subject to the progress of the negotiations with the provincial government. IMAGEN SATELITAL: Moody's Assings Default Ratings To Bonds ---------------------------------------------------------- Using Imagen Satelital S.A.'s finances as of June 30 this year as basis, Moody's Latin America Calificadora de Riesgo S.A. rated US$80 million of the Company's corporate bonds `D' recently. Moody's said that the rating is assigned to obligations that are currently in default. The Comision Nacional de Valores, Argentina's securities regulator described the affected bonds as "obligaciones negociables". These were classified under "Simple issue", and matures on May 5, 2005. LANZA AIR: Court Orders Bankruptcy ---------------------------------- Argentine airline Lanza Air Transport S.A. enters bankruptcy on orders from Buenos Aires Court No. 18. A report by local newspaper La Nacion indicates that the court approved a motion for the Company's bankruptcy filed by its creditor for nonpayment of debt. Mr. Alfredo Rodriguez, an accountant from Buenos Aires, was assigned as the Company's receiver. Creditors must have their claims validated before March 19 next year, when the receiver starts preparing the individual reports. The receiver is also required to prepare a general report on the process. However, the source did not mention whether the court, which works with Clerk No. 35, Dr. Estevarena, has set the deadlines for the filing of these reports. CONTACT: Lanza Air Transport S.A. 5th Floor, Room B Ave Callao 2068 Buenos Aires Alfredo Rodriguez MT Alvear 1171 Buenos Aires SAN BERNARDO: Seeks Court Approval For Reorganization Plans ----------------------------------------------------------- San Bernardo S.R.L., which is domiciled in Buenos Aires, submitted a motion for "Concurso Preventivo" at the city's Court No. 1, seeking the court's permission to reorganize. Argentine newspaper La Nacion relates Judge Dieuzeide handles the Company's case with assistance from Dr. Pasina, Clerk No. 2, the source adds without revealing whether the motion is likely to be approved. CONTACT: San Bernardo S.R.L. Rosetti 1623 Buenos Aires SOLBO: Proof of Claim Filing Period Ends Today ---------------------------------------------- Today is the last day for credit verifications of the bankruptcy of Buenos Aires company Solbo S.A.. The Company's receiver, Ms. Raquel Pollack, will start preparing the individual reports. The Troubled Company Reporter - Latin America earlier reported that Dr. Gutierrez Cabello, the insolvency judge in Buenos Aires' Court No. 7 issued the bankruptcy order for the local car dealer. Clerk No. 14, Dr. Giardinieri, assists the court on the case. The bankruptcy order came after the Company's creditor, Coafi S.A., sought for the Company's bankruptcy for failing to meet its obligations on some US$90,906 in debt. CONTACT: Solbo S.A. Ave. Constrituyentes 6000 Buenos Aires Raquel Pollack 4th Floor Room 16 Lavalle 1527 Buenos Aires TALLERES INDUSMAR: Files Motion to Reorganize --------------------------------------------- Argentine company Talleres Indusmar S.A. is seeking to undergo a reorganization process. A report by local news portal La Nacion indicates that the Company, which repairs naval machineries, filed a "Concurso Preventivo" motion at the city's Court No. 11. Judge Bargallo handles the Company's case, while Dr. Sanchez Cannavo, the city's Clerk No. 22 assists. The report, however, did not indicate whether the court is likely to approve the motion. CONTACT: Talleres Indusmar S.A. Necochea 743 Buenos Aires TELEFONICA DE ARGENTINA: Fitch Upgrades Debt Ratings ---------------------------------------------------- Fitch Ratings has upgraded the international scale foreign and local currency senior unsecured ratings of Telefonica de Argentina S.A. (TASA) to 'B-' Outlook Stable from 'DD', of Compania Internacional de Telecomunicaciones S.A. (Cointel) to 'CC' from 'DD', and of Telefonica Holding de Argentina S.A. (Telefonica Holding) to 'CCC' from 'CC'. The rating actions reflect the improvement in the debt maturity profile of TASA following the successful completion of the debt exchange completed during August 2003. The debt exchange allowed TASA to lengthen its debt maturities and Cointel to reduce the amount of notes held by third parties maturing during 2004. Nevertheless, TASA and particularly Cointel still face significant debt maturities over the next year. TASA faces the maturity of US$81 million in outstanding senior notes due 2004 while Cointel faces the maturity of US$225 million series A notes due 2004 and Ps175 million series B notes due 2004. Approximately US$110 million of the two Cointel notes are held by third party noteholders, while the remaining portion are held by indirect parent company Telefonica Internacional. The ratings of all three companies incorporate a level of implicit support from controlling shareholder Telefonica S.A. of Spain, which has provided flexibility in the intercompany loans to all three companies. These intercompany loans, which are primarily short-term, have been continually rolled over the past two years. TASA's ratings reflect its solid business position in the Argentine telecommunications sector. While TASA's financial flexibility and credit profile have been affected by the Argentine economic crisis, TASA continues to generate annual EBITDA of around US$400 million, which is sufficient to cover annual interest expense of approximately US$160 million (including interest on intercompany debt). TASA's debt maturity of US$81 million during 2004 appears manageable given the company's cash flow generation. TASA's outstanding public notes include bonds newly-issued during the debt exchange, such as US$189.7 million 11.875% senior notes due 2007, US$220 million 9.125% senior notes due 2010, and US$148.1 million 8.85% senior notes due 2011. TASA's public notes also include US$81 million 11.875% senior notes due 2004, US$125.6 million 9.125% senior notes due 2008, and US$71.4 million 9.875% senior notes due 2006. TASA's profitability has been significantly affected by the various emergency measures implemented following the sovereign default in early 2002, including devaluation, 'pesofication' of tariffs, and prohibition of tariff adjustments. These measures have dramatically affected the financial condition of TASA due to the imbalance between the company's peso revenues and its debt, which is largely dollar denominated. Cointel's ratings reflect its limited capacity to meet financial obligations since its subsidiary TASA is not currently paying dividends. Dividends received from TASA were historically Cointel's main source of funds. Since 2002, Cointel has been able to meet interest payments on its debt only after it received intercompany loans from indirect parent company Telefonica Internacional. Cointel continues to face significant refinancing risk since it has US$110 million of third party debt maturing in 2004. Cointel's outstanding public notes include US$225 million series A notes due 2004 and Ps175 million series B notes due 2004. Telefonica Holding, Cointel's direct parent company, only has US$7 million in outstanding public notes; the majority of its debt is comprised of intercompany loans. Until 2001, Telefonica Holding's main source of funds was dividends received from Cointel. Because Cointel has not paid dividends since 2001, Telefonica Holding's current source of cash flow is management fees from TASA of US$17 million during 2002, which are sufficient to meet annual interest payments on its notes. The management fee contract with TASA was recently renewed for an additional five- year period. TASA is an operating company that provides local-exchange, long- distance, residential Internet access and directory publishing services in Argentina. Telefonica S.A. of Spain controls either directly or indirectly 98% of TASA. Cointel is a holding company whose primary asset is a 64.8% equity stake in TASA. Telefonica Holding is a holding company whose primary asset is a 50% equity stake in Cointel. CONTACTS: FITCH RATINGS Guido Chamorro, +1-312-368-5473, Chicago Paola Briano, +011 541 14 327-2444, Buenos Aires Matt Burkhard, +1-212-908-0540, New York, Media Relations ============= B E R M U D A ============= LORAL SPACE: Court Approves Agreements DIRECTV, Panamsat Deals -------------------------------------------------------------- Loral Space & Communications announced Wednesday that the U.S. Bankruptcy Court for the Southern District of New York has authorized Loral subsidiary Space Systems/Loral (SS/L) to execute an existing contract with DIRECTV, Inc., as amended, to complete and deliver the DIRECTV 7S satellite. The court also approved the binding authorizations to proceed (ATPs) issued to SS/L for the construction of two satellites for DIRECTV (DIRECTV 8 and DIRECTV 9S), and one satellite for PanAmSat Corporation (Galaxy 16). PanAmSat also has an option to order an in-orbit spare for one of its existing satellites from SS/L on terms to be agreed upon. The aggregate value of the three new awards is in excess of $320 million. DIRECTV will make advance payments of $25 million on each of its two new satellite orders and PanAmSat will make an advance payment of $25 million on its new satellite order, for a combined non-refundable cash advance of $75 million. SS/L now has received orders for a total of four satellites this year. Also, EchoStar Communications Corporation sought to purchase the nearly complete DIRECTV 7S, a transaction to which Loral was opposed. DIRECTV agreed to increase the total contract value for the construction of DIRECTV 7S by $25 million to approximately $165 million. Space Systems/Loral is a premier designer, manufacturer, and integrator of powerful satellites and satellite systems. SS/L also provides a range of related services that include mission control operations and procurement of launch services. Based in Palo Alto, Calif., the company has an international base of commercial and governmental customers whose applications include broadband digital communications, direct-to-home broadcast, defense communications, environmental monitoring, and air traffic control. SS/L is ISO 9001:2000 certified. For more information, visit www.ssloral.com. Loral Space & Communications is a satellite communications company. Through its Skynet subsidiary, it owns and operates a global fleet of telecommunications satellites used by television and cable networks to broadcast video entertainment programming, and by communication service providers, resellers, corporate and government customers for broadband data transmission, Internet services and other value-added communications services. Loral also is a world-class leader in the design and manufacture of satellites and satellite systems through its Space Systems/Loral subsidiary. For more information, visit Loral's web site at www.loral.com. This document contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. In addition, Loral Space & Communications Ltd. or its representatives have made or may make forward-looking statements, orally or in writing, which may be included in, but are not limited to, various filings made by the company with the Securities and Exchange Commission, press releases or oral statements made with the approval of an authorized executive officer of the company. Actual results could differ materially from those projected or suggested in any forward-looking statements as a result of a wide variety of factors and conditions. These factors include those related to the filing, on July 15, 2003 by Loral and certain of its subsidiaries, of voluntary petitions for reorganization under Chapter 11 of Title 11 of the United States Code in the United States District Court for the Southern District of New York and parallel insolvency proceedings in the Supreme Court of Bermuda in which certain partners of KPMG were appointed as joint provisional liquidators. Additional factors and conditions are also described in the section of the company's annual report on Form 10-K for the fiscal year ended December 31, 2002, entitled "Certain Factors That May Affect Future Results," and the company's other filings with the Securities and Exchange Commission. The reader is specifically referred to these documents. CONTACT: Jeanette Clonan John McCarthy (212) 697-1105 SOCIETY EXPEDITIONS: Creditor Files Bankruptcy Petition in US ------------------------------------------------------------- On Friday, October 3, 2003 creditors of Society Expeditions Cruise Line filed an involuntary Chapter 7 bankruptcy petition in the U.S. Bankruptcy Court for the Western District of Washington (Case Number 0322896). Patrician Cruises, Ltd., a UK corporation and the major creditor, states that the current bankruptcy filing in the United States will be supplemented with ancillary involuntary insolvency filings in Bremen, Germany and Hamilton, Bermuda, against the other remaining Society Expeditions companies. The claims have arisen over the past two years from the failure of Society Expeditions to meet its required vessel charter and commission payments for the new "World Discoverer," a luxury expedition cruise vessel. As a result the ship, which was owned by Patrician Cruises, was seized by the Bank in June of 2003 and is now owned by an affiliate of the Sembawang Shipyard Pte Ltd of Singapore, previously a major creditor of the vessel. In an interview with the major US-controlled shareholder of Society Expeditions, it was stated that the current financial crisis was the result of poor sales after the events of 9/11 and the failure of the current management team, led by Heiko Klein, to compensate. Klein, a German national representing the other shareholder, and his executive team have not been able to maintain sufficient sales levels, particularly in the US market, to cover the current financial requirements of the company. The US-controlled shareholder believes that over the last 30 years Society Expeditions has built a reputation of high quality/high value expedition cruising throughout the world. It is their intent to reorganize the company under new management and to return the company to its core US customer base. Meaningful discussions over a reorganization plan between the company's two shareholders have been stymied over the last few months by Heiko Klein and the current management. CONTACT: PATRICIAN CRUISES, LTD. Bruce Fischer, Ph.D., Director USA Operations HQ 10230 East Riverside Drive Bothell, WA 98011 Tel: 206-679-9644 Email: brucef@terrasolve.com =========== B R A Z I L =========== BCP: Seeks Debenture Payment Restructuring ------------------------------------------ Brazilian mobile-phone operator BCP SA plans to renegotiate payments on some of its debentures, Valor Economico reports. In a filing with the market regulator, BCP indicated that it wants to extend the period for interest payments that are due and haven't been paid since August 2002. According to the newspaper, debenture holders have until Oct. 27 to file comments or complaints. Meanwhile, Brazil's telecommunications regulator is reviewing the proposed purchase of BCP by America Movil SA, Latin America's largest wireless operator. America Movil, part of the empire of tycoon Carlos Slim, inked a deal in late August to buy BCP. The regulator's approval would formalize the exit of U.S. phone company BellSouth, which owned part of BCP, from Brazil's fiercely competitive wireless market. CONTACT: BCP S.A. Rua Fl>rida, 1970 4o andar Sao Paulo - SP Tel: 55 11 5509-6428 Fax: 55 11 5509-6257 Home Page: http://www.bcp.com.br UOL: Grupo Abril To Trim Assets Amid Continued Losses ----------------------------------------------------- Nagging losses at Brazil's biggest Internet service provider Universo Online (UOL) prompted Grupo Abril to sell its stake in the former, according to a Gazeta Mercantil report. Grupo Abril, the biggest publishing group in Brazil, said it is selling its 20% stake in UOL. Abril's stake in the UOL portal will pass to UOL Inc., a holding company, whose main shareholder is Folhapar SA, the owner of Folha de S. Paulo newspaper. Abril's exit means Folhapar and Portugal Telecom SGPS SA will increase their stakes in UOL, the newspaper said. UOL's losses have continued even after Portugal Telecom became a shareholder in 2001 and invested US$200 million in the Company, the paper said. In the first quarter of 2003, UOL reported a loss of BRL52.2 million ($18.2 million). ========= C H I L E ========= ENERSIS: Initiating Next Phase of Equity for Debt Deal ------------------------------------------------------ Chilean power sector holding Enersis enters the second stage of a capital increase with an offering to swap bonds for shares. According to Business News Americas, bondholders will be able to exchange their Series B1 and B2 bonds for Enersis stock at CLP60.4202 a share, the same price as the new stock issued during the first stage of the increase earlier this year that raised US$1.88 billion. The subscription period is November 1-15, the company said. Enersis will enter the third and final phase of the capital increase on November 20, when the holding will offer new stock shares to shareholders that are not part of the Endesa Spain group that controls Enersis. This will run through December 20. 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 MASISA: Changes Accounting Currency to US Dollars ------------------------------------------------- Chilean forestry company Masisa announced it has decided to change its accounting currency from Chilean pesos to US dollars. According to an El Diarion report, the Company's share capital now stands at US$273.8 million (1,022.9 million shares). Masisa is South America's largest manufacturer of medium density fiberboard and particle board, in its raw, melamine, laminated, and wood veneer versions, with major market shares in Chile, Argentina, Brazil, and Mexico. It also holds forestry assets in Chile and Argentina. ===================== E L S A L V A D O R ===================== MILLICOM INTERNATIONAL: Announces Improved 3Q03 Financial Results ----------------------------------------------------------------- - 34% increase in EBITDA to $82.9m (Q3 02: $61.7m)* - 18% increase in revenue to $156.7m (Q3 02: $132.8m)* - 23% increase in Asian revenue from Q3 2002 - 29% underlying increase in proportional subscribers excluding El Salvador - EBITDA Margin of 52.9% for Q3* Millicom International Cellular SA, the global telecommunications investor, announced Wednesday results for the quarter and nine months ended September 30, 2003. Marc Beuls, MIC's President and Chief Executive Officer stated: "MIC has continued to grow strongly in the third quarter with a 34% increase in EBITDA from the third quarter of 2002. Revenue growth remains strong, in particular there was an 23% increase in Asia and an 27% increase in African revenues, as these two regions have seen the benefit of increased investment in recent months. Business conditions in Latin America have stabilised, and although there continues to be a general weakness in local currencies in South America, the Group still managed to deliver overall revenue growth across the regions of an impressive 18%. Matching this growth has been MIC's success in further increasing its margins to 52.9%, despite adding 832,006 subscribers in the third quarter, with underlying growth in proportional subscribers excluding El Salvador at a very healthy 29%. On a trading basis MIC had a profitable third quarter, but the results were affected by a couple of one-off items, firstly, the final valuation movement of $20.8 million on the Tele2 shares which now form part of the Mandatory Exchangeable Bond Offering and secondly, some fees relating to the Toronto Dominion facility. We continue to believe that there is an opportunity to increase MIC's rate of growth in all its key markets as penetration levels are still extremely low and our recent successes suggest that there is now a growing momentum building behind MIC's low cost brand offering. Further we continue to migrate our networks to GSM and this will add impetus to our marketing, as it is now the preferred technology. The falling prices in GSM hardware mean that this conversion can be made at a lower cost than had been originally anticipated. Therefore we believe that it should be possible to increase our profitability going forwards." FINANCIAL AND OPERATING SUMMARY SUBSCRIBER GROWTH: - An annual increase in worldwide gross cellular subscribers of 43% to 5,303,841 as at September 30, 2003* - 30% underlying annual growth in gross subscribers excluding El Salvador - An annual increase in worldwide proportional cellular subscribers of 46% to 3,806,646 as at September 30, 2003* - 29% underlying annual growth in proportional subscribers excluding El Salvador - In the third quarter of 2003 MIC added 832,006 net new gross cellular subscribers including some 460,000 for Telemovil, MIC's operation in El Salvador which was re-consolidated in September 2003. Underlying subscriber additions for the quarter excluding El Salvador were the highest on record. - Proportional prepaid subscribers increased to 3,341,001 from 2,263,975 as at September 30, 2002* - Excluding El Salvador, proportional prepaid subscribers increased by 33% from September 2002 FINANCIAL HIGHLIGHTS*: - Revenue for the third quarter of 2003 was $156.7 million, an increase of 18% from the third quarter of 2002 _ EBITDA increased by 34% in the third quarter of 2003 to $82.9 million, from $61.7 million for the third quarter of 2002 - The Group EBITDA margin was 53% in the third quarter of 2003 increasing from 46% in the third quarter of 2002 - Total cellular minutes increased by 30% for the three months ended September 30, 2003 from the same quarter in 2002, with prepaid minutes increasing by 54% in the same period. - The offering by MIC's subsidiary, Millicom Telecommunications S.A. of approximately SEK 2,556 million (US$310 million) of secured Notes mandatorily exchangeable into Series B shares of Tele2 AB, closed in August 2003. The Notes, which will mature in August 2006, carry a coupon of 5% per annum, which is secured by the acquisition of securities, and the exchange premium has been set at 30% with a reference price of SEK 285. - MIC used part of the proceeds of the Mandatory Exchangeable Bond offering to retire $167 million of its 11% Senior Notes due 2006, following the repayment of its $60.4 million debt facility with Toronto Dominion Bank and the prepayment of interest for the Exchangeable Bond. The results for the third quarter 2003, include a final charge of $20.8 million reflecting the adjustment of the Tele2 share price to the reference price of SEK 285 of the Mandatory Exchangeable Bond. - MIC has announced it is to host a meeting of holders of the Mandatory Exchangeable Notes on November 11, 2002, in order to seek their approval of certain changes to the terms of the Exchangeable Notes and Deutsche Bank AG London Branch, to make certain technical amendments to the documentation relating to the Exchangeable Notes. - From September 15, 2003 MIC recommenced consolidating Telemovil, its operation in El Salvador, following the successful resolution of the shareholder disputes with its local partners. - As at September 30, 2003, MIC reports total net debt, after cash and time deposits, excluding the 5% Mandatory Exchangeable Bond and the 2% PIK Notes, of $612.4 million, a reduction of 46% compared with total net debt of $1,141.9 million as at December 31, 2002, and a reduction of 54% compared with total net debt of $1,337.7 million as at September 30, 2002. - In August 2003, 2% PIK Notes with a value of $937,000 were converted by their holders into 87,161 new MIC shares. REVIEW OF OPERATIONS SUBSCRIBER GROWTH* At September 30, 2003, MIC's worldwide cellular subscriber base increased to 5,303,841 cellular subscriber from 3,715,731 as at September 30, 2002. Excluding El Salvador, which MIC recommenced consolidating in September 2003, total subscribers increased by 30% in the year to September 30, 2003. Particularly significant percentage increases were recorded in Ghana, Senegal, Pakistan, Cambodia and Vietnam. MIC's proportional cellular subscriber base increased to 3,806,646 from 2,601,769 at September 30, 2002. Excluding El Salvador, total proportional subscribers increased by 29% in the year to September 30, 2003. Within the 3,806,646 proportional cellular subscribers reported at the end of the third quarter 2003, 3,341,001 were pre-paid customers. Pre-paid subscribers currently represent 88% of gross reported proportional cellular subscribers. FINANCIAL RESULTS FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2003* Total revenues for the three months ended September 30, 2003 were $156.7 million, an increase of 18% from the third quarter of 2002. This increase, following three successive quarters with growth of over 10%, reflects the increasing trend of growth in MIC's operations. MIC recorded revenue growth in Asia of 23% in the third quarter of 2003 compared with the same period in 2002, with Pakcom in Pakistan producing growth of 36%, and revenues for Africa for the third quarter of 2003, increased by 27% to $21.2 million from the same period last year. Third quarter revenues for Latin America increased by 12% from the third quarter of 2002 or by 2% if El Salvador is stripped out, demonstrating the increased stabilization of the region. The Central American market continued to perform strongly with Guatemala producing a revenue increase of 17% from the third quarter of 2002. EBITDA for the three months ended September 30, 2003 was $82.9 million, an increase of 34% from the quarter ended September 30, 2002. EBITDA for Asia increased by 34% from the third quarter of 2002 to $42.9 million, with a particularly strong increase produced by Pakcom in Pakistan, which recorded growth from the third quarter of 2002 of 61%. The EBITDA margin in Asia increased from 56% in the third quarter of 2002 to 62% in 2003. MIC Africa produced impressive EBITDA growth of 107% from the third quarter of 2002 to $8.9 million, a record for the region. EBITDA for Latin America increased by 21% from the third quarter of 2002 to $30.7 million. If El Salvador is stripped out, the increase is 12%, demonstrating the positive impact of cost cutting in Latin America. The EBITDA margin in the region increased from 45% for the third quarter of 2002 to 48%. The main contributor to EBITDA increase was Guatemala, which recorded an increase of 61% from the third quarter of 2002. MIC recorded a charge of $20.8 million in the three months ended September 30, 2003, reflecting the adjustment of the Tele2 share price to the reference price of SEK 285 of the Mandatory Exchangeable Bond. FINANCIAL RESULTS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2003* Total revenues for the nine months to September 2003 were $439.2 million with revenues for Asia and Africa increasing by 24% and 28% to $201.4 million and $57.6 million respectively, relative to the nine months ended September 2002. Revenues for Latin America for the period increased by 1% to $171.3 million. EBITDA for the period was $225.2 million, an increase of 28% over the nine months ended September 2002. Most notably Africa recorded a 80% increase in EBITDA for the period. The respective increases for Asia and Latin America were 36% and 10%. The EBITDA margin for the nine months to September 30, 2003 was 51%, an increase over the 46% recorded for the same period in 2002, with a notable increase from 30% to 42% in Africa. Total cellular minutes increased by 32% for the nine months to September 2003 compared with the same period in 2002. Millicom International Cellular S.A. is a global telecommunications investor with cellular operations in Asia, Latin America and Africa. It currently has a total of 16 cellular operations and licenses in 15 countries. The Group's cellular operations have a combined population under license of approximately 382 million people. In addition, MIC provides high- speed wireless data services in five countries. CONTACTS: Millicom International Cellular S.A., Luxembourg Marc Beuls, President and Chief Executive Officer Telephone: +352 27 759 101 Shared Value Ltd, London Andrew Best, Investor Relations Telephone: +44 20 7321 5022 Web site: http://www.millicom.com ============= J A M A I C A ============= C&W JAMAICA: 11 Real Estate Properties Up For Bid ------------------------------------------------- Cable & Wireless (C&W) has put on the block 11 real estate properties that are spread across nine locations, reports the Jamaica Observer. The properties, which represent dormant investment that the Company wants to cash in, have an estimated combined value $492 million, according to Mark Harris managing director at Property Consultants Ltd, C&W's agent handling the sale. In a release, C&W said that it was selling because it had outgrown some of these premises, while it no longer needed others for development of its network. "Much of the land was acquired many years ago when the technology of the period required large land space for network development," said C&W. "The premises slated for disposal currently house C&W operations, arrangements are being made for suitable alternative accommodation." =========== M E X I C O =========== AEROMEXICO: Dispute With ASSA Delays Fleet Modernization Program ---------------------------------------------------------------- The conflict between Aeromexico and the United Association of Flight Attendants (ASSA) continues to hold back the Mexican airline's fleet modernization project, according to an article released by Notimex. Aeromexico has been planning to renovate its fleet for the purpose of reducing the average age of its planes from 13.5 to 7 years. As part of the plan, Aerom�xico will replace its DC-9 planes with 15 Boeing 737-700 New Generation aircraft. The new planes were expected to begin arriving this month and continue through 2004, but due to labor issues, Aeromexico may have to suspend some of its purchases. According to the regulations of the Civil Aviation Law and the Collective Labor Contract with ASSA, the crew of the Boeing 737- 700 New Generation planes should include three flight attendants. Aerom�xico plans to assign three attendants to flights without hot meals and seven on flights where hot meals are served. ASSA, however, has requested that no less than four flight attendants be on every flight taken with the new 124-passenger planes. The two sides met Tuesday but no agreement was made to solve this conflict, said Alejandro Yberri, marketing and customer service director of the airline company. CONTACT: AEROMEXICO Mayte Sera Weitzman of AeroMexico, +1-713-744-8446, or mweitzman@aeromexico.com BURLINGTON INDUSTRIES: Creditors Approve Restructuring Plan ----------------------------------------------------------- WL Ross & Co. LLC announced Wednesday that creditors had voted overwhelmingly in favor of its purchase of Burlington Industries upon its reemergence from Chapter 11 reorganization now targeted for November 10, subject to prior Bankruptcy Court approval and named a new senior management team for Burlington going forward. The management structure will consist of Wilbur L. Ross as Chairman and Joseph L. Gorga as President and Chief Executive Officer. Mr. Gorga (51) joined Burlington in 2002 as Executive Vice President North American Operations. Previously he had been General Manager for the automotive and elastic fabrics businesses for Milliken and Company, one of the world's largest textile concerns, as well as CEO of CMI Industries Inc. He also has served previously as the Vice Chairman of the American Textile Manufacturing Institute (ATMI) and Chairman of the National Textile Association (NTA) and is currently a Director of NTA. The current Burlington senior management team will be leaving the Company to pursue other opportunities, including George W. Henderson, III, Chairman and CEO, John D.Englar, Senior Vice President Corporate Development and Law, Charles E. Peters, Jr, Senior Vice President and CFO, Judith J. Altman, Senior Vice President Global Operations Support and CIO, Robert A. Wicker, Vice President & General Counsel and James M. Guin, Vice President Human Resources and Corporate Communications. Mr. Ross also announced that Burlington's Nano-Tex LLC affiliate has now had its stain repellent, NANO-CAREr, accepted nationwide for pants and shirts by Gap and Old Navy Stores and by Brooks Brothers for a variety of programs, and NANO-DRYr enhanced fabrics adopted by Nike, Inc. for Tiger Woods golf pants. He added that Burlington has entered into a new licensing arrangement with Kayser Roth Corporation, the leading U.S. producer of footwear for a series of new items under the Burlington BT label. He continued, "With these encouraging developments and under Joe Gorga's leadership, Burlington will enhance its already powerful brand name and will continue to develop textile applications for cutting edge technological innovations. He also will manage the operations to make the Company more cost competitive." Mr. Gorga said, "I am excited by the challenge of leading Burlington back to success. Despite the fiercely competitive nature of the global textile industry, the Nano-Tex progress and Kayser Roth opportunity both suggest, positive momentum in that direction already is building." Mr. Gorga holds a BS in Textile Engineering from Philadelphia University and an MS in Textile Engineering from the Institute of Textile Technology in Charlottesville, Virginia. He and his wife, Carolyn, have two children and reside in Greensboro, North Carolina. WL Ross & Co. sponsors global private equity and hedge fund investments on behalf of major institutional investors and has committed more than $2 billion of equity since its founding in April, 2000. With operations in the United States, Mexico and India and a global manufacturing and product development network based in Hong Kong, Burlington Industries is one of the world's most diversified marketers and manufacturers of soft goods for apparel and interior furnishings. CONE MILLS: Moves Forward Asset Sale to WL Ross & Co. ----------------------------------------------------- Cone Mills Corporation moved forward Wednesday with the process of a sale of the corporation to WL Ross & Co. in accordance with Section 363 of Chapter 11 of the U.S. Bankruptcy Code. Cone Mills' Board of Directors formally approved the definitive agreement with WL Ross & Co., which is subject to higher or better offers, at a meeting held late last week. Under the agreement, WL Ross & Co. will purchase substantially all of the assets of Cone Mills for $46 million in cash and the assumption of the company's outstanding Debtor-in-Possession loans and selected other liabilities, for a total purchase price valued in excess of $90 million. The agreement provides for a closing not later than December 31, 2003. WL Ross & Co. would receive a $1.8 million breakup fee if a higher bid for the company is accepted. Approval of the break-up fee and bidding procedures is subject to Bankruptcy Court approval. WL Ross & Co.'s agreement to purchase Cone Mills for $90 million sets a floor for other bids and is subject to higher or better offers. If any competing bids are received by a bidding deadline to be established by the Bankruptcy Court, an auction will be held involving the competing bidders. The bid process will be coordinated by the company's Chief Restructuring Officer, Michael D'Appolonia of Nightingale and Associates, LLC, and the company's investment banker, Jefferies and Company. John L. Bakane, Chief Executive Officer of Cone Mills, said, "For many years, we have followed a strategy aimed at recapitalizing the company and establishing access to lower cost denim manufacturing capacity; the WL Ross and Co. proposal is consistent with that strategy. With the infusion of resources from a sale, as well as the steps we've taken to reconfigure our denim manufacturing operations to increase their efficiency and cost competitiveness, we believe we can meet the challenge presented by the unprecedented and continuing onslaught of low- cost textile imports, while also continuing to provide substantial manufacturing employment opportunities in the U.S., particularly in the Carolinas. We believe these actions will make Cone Mills a strong and long-term partner for our customers." "Our definitive agreement with WL Ross & Company is an important step toward completing this process expeditiously within the framework of Chapter 11," Mr. Bakane added. "Once we have an approved transaction, we will be able to focus on recapitalizing the company, accessing low-cost production, and ensuring that Cone Mills remains a strong participant in the intensely competitive global textile marketplace." About Cone Mills Founded in 1891, Cone Mills Corporation, headquartered in Greensboro, NC, is the world's largest producer of denim fabrics and one of the largest commission printers of home furnishings fabrics in North America. Manufacturing facilities are located in North Carolina and South Carolina, with a joint venture plant in Coahuila Mexico. http://www.cone.com GRUPO TMM: Court to Grant Preliminary Injunction Against Company ---------------------------------------------------------------- Kansas City Southern announced Wednesday that Chancellor William B. Chandler III of the Court of Chancery of the State of Delaware has, in a ruling from the bench, stated his intention to grant KCS' motion seeking a preliminary injunction to preserve the status quo pending resolution of KCS' dispute with Grupo TMM, S.A. ("TMM"), and its subsidiaries TMM Holdings, S.A. de C.V. ("Holdings") and TMM Multimodal, S.A. de C.V. ("Multimodal"). In his ruling, Chancellor Chandler stated that he would issue a written order enjoining TMM, Holdings and Multimodal from taking any action in violation of the terms of the April 20, 2003, Acquisition Agreement pending resolution of the dispute between KCS, TMM, Holdings and Multimodal in accordance with the terms of the dispute resolution procedures set forth in the Acquisition Agreement. KCS expects the written ruling to be issued by the Court within the next few days. In accordance with the terms of the Acquisition Agreement, KCS will initiate arbitration to resolve the dispute as soon as possible following the expiration of the 60-day informal negotiation period called for under the Acquisition Agreement. That period commenced on August 29, 2003, with KCS' delivery of its notice of dispute to TMM, Holdings and Multimodal. The arbitration will be held in New York, New York, and will be governed by Delaware law and the rules of the American Arbitration Association. KCS is a transportation holding company that has railroad investments in the United States, Mexico and Panama. Its primary holding is The Kansas City Southern Railway Company (KCSR). Headquartered in Kansas City, Missouri, KCSR serves customers in the central and south central regions of the U.S. KCS' rail holdings and investments are primary components of a NAFTA Railway system that links the commercial and industrial centers of the United States, Canada and Mexico. CONTACT: Kansas City Southern Warren K. Erdman Phone: 816-983-1454 Email: warren.k.erdman@kcsr.com ======= P E R U ======= * Fitch Revises Peru Outlook to Stable from Negative ---------------------------------------------------- Fitch Ratings, the international rating agency, revised Wednesday the Rating Outlook on the Republic of Peru's sovereign ratings to Stable from Negative. The revision is supported by the sovereign's capacity to meet its annual government financing requirement under stressful social and political conditions obtaining in 2002 and 2003. The outlook change also reflects increased flexibility in public financing sources generated by improved access to the domestic debt market. Peru's long-term foreign currency rating was affirmed at 'BB-' and local currency rating at 'BB+'. Despite social and political turmoil in the last two years that have resulted in major cabinet reshuffles, a curtailment of privatization, and public wage concessions, the government has readily met its annual financing needs by accessing international and domestic capital markets. In 2002, riots in Arequipa province followed privatization initiatives. In 2003, the government declared a four-week state of emergency following national strikes and transport disruptions, which were later peacefully ended. Yet international issuance has met 40% and 27%, respectively, of 2002 and 2003 estimated public financing needs. Furthermore, after domestic Treasury issuance was cut short in the third quarter of last year, the government in early 2003 successfully resolved prior concerns regarding the transparency and liquidity of domestic issuance. As a result, domestic government bonds will meet 19% of 2003 financing needs. Public debt remains heavy at 46.7% of GDP and 275% of revenues, yet public financing needs will remain low at 4.3% of GDP in 2003- 2005. Fitch believes that the executive's success in securing temporary expedited powers to pass tax reform is a positive political signal and may provide the government greater flexibility in meeting near-term fiscal demands. Public finances are constrained by a low tax take (12% of GDP in 2002), reflecting a low per capita income, large informal sector, and a narrow base. Recent measures increasing collection efficiency could yield an added 0.8% of GDP in 2003, yet pressures on expenditures remain high. Pending tax reforms could yield an additional 0.6%-0.7% in annual revenues beginning 2004, providing some breathing room to meet additional social demands. Further increases in tax revenue from the elimination of regional exemptions will be needed if the sovereign is to increase public investment, which reached a low of 2.8% of GDP in 2002. That the executive obtained legislative approval is the first major success of the new cabinet and may signal improved governing relations. Yet relations between the executive and legislature, and within the governing party and coalition could again come under strain. Upcoming tests will be obtaining approval of the 2004 budget and law governing regional tax exemptions. Fitch cautions that these recent enhancements to creditworthiness do not imply smooth sailing. The inability of political institutions to adequately mediate social tensions is responsible for past periods of social turmoil and threatens to slow, if not derail the reform process going forward. Fitch will continue to monitor the government's performance in eliminating tax exemptions, achieving a fiscally-neutral decentralization, and advancing economic reforms. CONTACT: Fitch Ratings New York Therese Feng Phone: 212-908-0230 Theresa Paiz-Fredel Phone: 212-908-0534 Media Relations Matt Burkhard Phone: 212-908-0540 ============= U R U G U A Y ============= * Fitch Rates Uruguay Sovereign UI Bond 'B-' -------------------------------------------- Fitch Ratings assigned a 'B-' rating to Uruguay's UI Bonds payable in U.S. dollars issued Oct. 16. The rating is equal to the long-term foreign currency rating of Uruguay's senior unsecured debt. The Rating Outlook is Stable. The bond issue marks Uruguay's first foray into international debt markets since the reprofiling of its foreign currency debt in June which Fitch marked as a default under its distressed debt exchange criteria. Though payable in U.S. dollars, principal and interest payments will be adjusted for Uruguayan inflation and a reference USD/UYU exchange rate. The government is expected to use the proceeds primarily to repurchase USD-denominated Treasury bills issued in the local market. Uruguay's credit profile was improved by the debt exchange earlier this year, in large part because it alleviated near-term refinancing requirements. Looking forward, however, considerable credit risk remains, as public sector debt is over 90% of GDP and payable largely in foreign currency. Macroeconomic indicators have shown signs of stabilization in recent months, but the environment remains fragile. Gross international reserves increased to US$1.7 billion (with net reserves at US$240 million) at mid-October on disbursements from multilaterals and from a small current account surplus ($18 million January-June). The banking sector accumulated a net increase of $281 million in deposits in the year through June, a particularly important improvement because $530 million in deposits were unfrozen during that period and could have fled the system but did not, for the most part. Authorities have also made progress toward their ambitious fiscal adjustment targets which seek to raise the primary surplus to 3.2% of GDP in 2003 from 0.5% of GDP in 2002. Most of the adjustment is expected to come from expenditures, particularly wages, which are budgeted to be squeezed by 1.3% of GDP, though favorable tax collection has eased pressures on spending somewhat. In spite of recent stabilization, political risks are likely to increase over the next year and could prevent the country from consolidating a path toward dynamic economic growth and debt sustainability. On Dec. 7, voters will consider a referendum to repeal a 2002 law authorizing the state-owned oil company to enter into a joint venture and to relinquish its existing monopoly in 2006. The state still plays a large role in Uruguay's productive sector, a factor which has limited its investment and growth potential. Next year, parliamentary and presidential elections will be held in which the traditional ruling Nacional and Colorado parties could be challenged by the leftist Frente Amplio, which received 40% of the votes in the first round of the 1999 presidential elections. It holds a similar proportion of seats in each of the houses Congress. Recently, the Frente Amplio has criticized certain austerity measures and has opposed increased private sector participation in sectors reserved for state-owned companies including petroleum and telecommunications. Absent a firm commitment to maintain medium-term fiscal prudence and to increase the role of the private sector, the sustainability of Uruguay's debt burden beyond the 2004 elections would be more difficult. Given that more than 90% of public sector market debt now contains collective action clauses, future adjustments to maturities and coupons may be perceived as less politically costly in the event of refinancing difficulties. CONTACT: Fitch Ratings Morgan C. Harting Phone: +1-212-908-0820 Roger M. Scher New York Phone: +1-212-908-0240 Media Relations Matt Burkhard Phone: +1-212-908-0540 *********** S U B S C R I P T I O N I N F O R M A T I O N Troubled Company Reporter - Latin America is a daily newsletter co-published by Bankruptcy Creditors' Service, Inc., Fairless Hills, Pennsylvania, USA, and Beard Group, Inc., Frederick, Maryland USA. John D. Resnick, Edem Psamathe P. Alfeche and Oona G. Oyangoren, Editors. Copyright 2003. All rights reserved. ISSN 1529-2746. This material is copyrighted and any commercial use, resale or publication in any form (including e-mail forwarding, electronic re-mailing and photocopying) is strictly prohibited without prior written permission of the publishers. Information contained herein is obtained from sources believed to be reliable, but is not guaranteed. The TCR Latin America subscription rate is $575 per half-year, delivered via e-mail. 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