/raid1/www/Hosts/bankrupt/TCRLA

/raid1/www/Hosts/bankrupt/TCRLA_Public/040123.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, January 23, 2004, Vol. 5, Issue 16 Headlines A R G E N T I N A AGUAS ARGENTINAS: Government Demands Boost in Capital Expansion CTI MOVIL: Signs Accord With Finland's Nokia EL PAZ: Court Approves Reorganization Petition EMED: Reorganization Process Initiated METROGAS: Extends Debt Offer Terms to February 10 PARMALAT ARGENTINA: Seeks To Revise Loan Payment Schedules TELECOM ARGENTINA: Fitch Issues Comment on Debt Restructuring TGS: Moving to Increase Pipeline Capacity TRANSENER: Dolphin Fund Wants Full Participation TRANSPORTE TRASA: Court Declares Company Bankrupt B E R M U D A LORAL SPACE: To Initiate Limited Service On Satellite In March B O L I V I A * Bolivia - Releases IMF Statement at Donors' Meeting B R A Z I L BANCO SANTOS: S&P Downgrades Ratings to 'B'; Outlook Negative PARMALAT BRASIL: FIDC Unattached to Parmalat SpA PARMALAT BRASIL: Unibanco Exposure Totals BRL20 Mln PARMALAT BRASIL: Committee To Begin Research Probe Today C H I L E COCA-COLA EMBONOR: Fitch Affirms 'BBB-' International Rating D O M I N I C A N R E P U B L I C * IMF Welcomes Monetary Policy Action in the Dominican Republic E C U A D O R ANDINATEL/PACIFICTEL: One Bidder Left in Contracts Tender J A M A I C A KAISER ALUMINUM: To Sell Alpart Interests in Jamaica M E X I C O DESC: Fitch Assigns `B+' Senior Secured Rating GRUPO TMM: Details Related Issues to VAT Certificate INDUSTRIAS UNIDAS: S&P Rates Proposed $175M Notes 'B+' MEXICANA: Strikes Codeshare Agreement With American Airlines TFM: KCS Releases TFM Details of 1997 Tax Audit Summary XIGNUX: Moody's Cuts Debt Ratings T R I N I D A D & T O B A G O BWIA: TTSE Rejects Request For Share Suspension U R U G U A Y PARMALAT URUGUAY: Seeks to Reschedule Bank Loan Payments - - - - - - - - - - ================= A R G E N T I N A ================= AGUAS ARGENTINAS: Government Demands Boost in Capital Expansion --------------------------------------------------------------- Argentina's President Nestor Kirchner told local water utility Aguas Argentinas to increase its investments, otherwise, the government would react, relates Dow Jones. "Unfortunately, the water service has been privatized, but if they want to conserve it (the privatization), let them invest and, if not, we'll start talking to them in a different way," Mr. Kirchner said. No company "can be placing conditions during any negotiation on the provision of such a fundamental good as water and the government knows on what side it has to be: not one foot here and the other there, but two feet on the side of the people," the President added. Last month, Kirchner's government demanded that Aguas Argentinas, which is owned by French giant Suez SA (SZE), present a formal plan of investments for 2004. According to local press reports, Aguas Argentinas had been told to invest ARS100 million ($1=ARS2.89) in 2004 or the government will cancel its concession contract, but the company later denied that. Aguas Argentinas has also been handed some ARS10.7 million in fines in recent months because of a range of service problems over the past couple of years. CTI MOVIL: Signs Accord With Finland's Nokia -------------------------------------------- Finnish cellular telecommunications equipment manufacturer Nokia signed a contract to set up a telecommunications network for Argentine wireless telecommunications firm CTI Movil, Argentine daily La Nacion reveals. Financial details of the deal were not provided. CTI, a unit of Mexican America Movil, recently obtained approval from the court for its out-of-court debt agreement (APE). As a result, the accord subscribed between CTI and the majority of the holders of a US$262.8-million bond issue will be mandatory to all of the holders of these notes. CTI offered to repurchase debt for cash at 13% of face value, price that grew to 14.1% adding certain due interest payments. Even though this was an aggressive offer, it was accepted by almost 99% of the bondholders. Through this process, the Company managed to reduce its debt by US$263 million paying only US$37 million. EL PAZ: Court Approves Reorganization Petition ---------------------------------------------- Court No. 1 of the Civil and Commercial Tribunal of Necochea in Argentina approved a motion for "Concurso Preventivo" filed by local company El Paz S.A., reports local news portal Infobae. The court assigned local accountant Armando Antonelli as the Company's receiver. The credit verification period ends on April 30 this year. Creditors must present their claims to the Company's receiver before the said date. The receiver will prepare the individual and general reports, which contain the results of the verification process. The informative assembly, which is one of the last parts of a reorganization process, will be on December 12 this year. CONTACT: El Paz S.A. Calle 517 No. 2851 Necochea Armando Antonelli Calle 57 No. 3028 Necochea EMED: Reorganization Process Initiated -------------------------------------- EMED Emergiencias Medicas S.R.L. will undergo reorganization with Mr. Jose Ignacio Lluna as receiver. Argentine news source Infobae indicates that Court No. 1 of the Civil and Commercial Tribunal of Necochea approved the Company's motion for "Concurso Preventivo". Creditors are required to file their claims before March 3 this year. The Company's receiver will examine the claims and prepare the individual and general reports. The source, however, did not mention whether the court has set the deadlines for the filing of these reports. The informative assembly will be held on September 8 this year. This is one of the last parts of the reorganization process. CONTACT: E.M.E.D. Emergencias Medicas S.R.L. Calle 69 No. 836 Necochea Jose Ignacio Lluna Calle 56 Nro. 2863 Necochea METROGAS: Extends Debt Offer Terms to February 10 ------------------------------------------------- Argentine natural gas distributor Metrogas SA (METR.BA) (NYSE: MGS) informed the Buenos Aires stock exchange that it has again moved the deadline forward for its offer to clean up about US$440 million in debt. The offer, in the form of an out-of-court settlement known as an APE by its Spanish acronym, was scheduled to expire on Jan. 20. However, the said deadline failed to see the required approval to go to the courts prompting Metrogas to extend it to Feb. 10. As of Jan. 20, creditors representing about US$101.6 million, or 23% of the debt burden, had signed on to the proposal. The figure is higher than the US$100.5 million the Company reported as of Dec. 22 but far from the two-thirds needed to go to the courts. The Company is offering to buy back up to US$100 million of its debts at face value. Creditors can also swap their debt for new notes coming due in nine years that pay 3% interest for the first two years, 4% for the next two years, 5% for the following two years and 6% for the remaining years. The recent extension is the third since the Company launched a proposal with new repayment terms on Nov. 7. PARMALAT ARGENTINA: Seeks To Revise Loan Payment Schedules ---------------------------------------------------------- Parmalat Argentina S.A. seeks to reschedule loan payments with banks, Bloomberg News reports, citing a company statement. The move comes after its Italian parent Parmalat Finanziaria S.p.A. filed for bankruptcy protection after revealing a multibillion- dollar gap in its finances. "With respect to the financial situation of the local unit, we've already started contact with creditor banks for renegotiation of the most immediate obligations," Bloomberg quoted the Company's statement as saying. Eliana Hansen, the Argentine unit's spokesperson declined to reveal more details. TELECOM ARGENTINA: Fitch Issues Comment on Debt Restructuring ------------------------------------------------------------- Fitch Ratings views Telecom Argentina Stet-France Telecom S.A.'s (Telecom) recently announced plan as a concrete step towards the completion of its debt restructuring. On Jan. 9 2004, Telecom announced a proposal to restructure all of its outstanding unsecured debt, totaling $2.6 billion, under the framework of an Acuerdo Preventivo Extrajucial (APE). The APE is an out of court restructuring agreement governed by Argentine law that requires a minimum participation by two-thirds of a company's creditors. In addition, Telecom's wireless subsidiary Telecom Personal S.A. (Telecom Personal) announced a proposal to restructure all of its unsecured debt, totaling $590 million. Successful completion of its debt restructuring under the current terms would significantly improve the credit quality of Telecom as it would reduce debt levels and lengthen maturities. Under the terms of the proposal, Telecom's consolidated debt levels after the restructuring would decline to $1.8 billion from $3.2 billion. These debt levels should be manageable because Telecom is expected to continue to generating annual EBITDA of approximately $600 million. Under the proposal, noteholders who participate in the restructuring will be offered three options to exchange their notes. For each $1,058 of principal (including the capitalization of accrued but unpaid interest expense), each noteholder would receive either: a) a combination of $169 principal amount of 4- year floating notes due 2008, $730 principal amount of 10-year step up notes due 2014, and $159 principal amount of paid-in-kind notes due 2017; b) a combination of $541 principal amount of 5- year fixed rate notes due 2009 and a cash payment of $338; or c) a cash payment of between 65% and 75% of $1,058 to be determined under a 'modified Dutch auction' process. Each of the three options offered under the APE will be subject to specific limits. Completion of the APE under the current terms will require Telecom to use $700 million of cash ($601 million under options b and c, $55 million for unpaid interest accrued between December 2003 and June 2004, and $25 million for restructuring fees). At September 2003, Telecom had $652 million of cash balances. Telecom Argentina defaulted on its debt in the first half of 2002. The company restructured a small portion of its defaulted debt on June 2, 2003 by repurchasing notes with cash at a 45% discount. This transaction reduced debt levels by $289 million ($209 million held by Telecom and $80 million by Telecom Personal). Fitch currently maintains international scale debt ratings of 'DD' for Telecom. Fitch will continue to monitor progress of the restructuring and its ultimate impact on the credit quality of Telecom. Telecom is one of the largest diversified telecommunication providers, offering fixed-line, wireless, internet and data services. At September 2003, the company had 3.6 million fixed- lines in service (a 45% market share), 2.4 million wireless subscribers and 194,000 internet users. CONTACT: Fitch Ratings Guido Chamorro Chicago Phone: 312-368-5473 Dolores Teran Buenos Aires Phone: 4327-2444 Media Relations: James Jockle New York Phone: 212-908-0547 TGS: Moving to Increase Pipeline Capacity ----------------------------------------- Argentine gas transporter TGS will expand the capacity of its 940km Gasoducto Cordillerano pipeline by 11.8% to 1.3 million cubic meters of natural gas a day (mcm/d), says local newspaper El Cronista. The project, which awaits President Nestor Kirchner's approval by supreme decree, will require an investment of ARS22 million (US$7.56mn). However, the utility need not worry about where to get funds as the government will finance 100% of the project as repayment for a ARS22-million debt with TGS. President Kirchner is expected to sign the supreme decree "in the next few days," a TGS spokesperson said. Workers hired by TGS and its suppliers will start work on the expansion "immediately" after the decree is published and construction should take five months, ready for the increased gas demand during the winter. TRANSENER: Dolphin Fund Wants Full Participation ------------------------------------------------ Argentine investment fund, Dolphin Fund, is looking to take full control of the Transaner. The fund recently became a minority owner in local electricity company Transener. Dolphin Fund recently completed the acquisition of a 7.14% stake in Citelec, owner of Transener, from a private equity fund called The Argentine Investment Company (Taico) in a US$4-million deal. Transener is Argentina's leading transporter of high voltage electricity. Its two largest shareholders are Argentine energy company Petrobras Energia SA and Britain's National Grid Transco PLC. Unnamed sources say the two shareholders are interested in divesting their Transener holdings. Transener is battling with debts totaling US$250 million. TRANSPORTE TRASA: Court Declares Company Bankrupt ------------------------------------------------- Transporte Trasa S.R.L. entered bankruptcy on orders from the Civil and Commercial Tribunal of Salta in Argentina. Court No. 2 handles the Company's case, reports Infobae. The Company's receiver, Estudio F.C.F. y Asociados, will examine and authenticate creditors' claims until February 6 this year. The individual reports are due at the court on March 24, followed by the general report on May 10. The individual reports contain the results of the verification process, while the general report is a consolidation of the individual reports. The Company's assets will be liquidated at the end of the bankruptcy process to repay its creditors. Payments will be based on the results of the verification process. CONTACT: Transporte Trasa S.R.L. Ave V Zambrano 120 Salta Estudio F.C.F. y Asociados 20 de Febrero 631 Salta ============= B E R M U D A ============= LORAL SPACE: To Initiate Limited Service On Satellite In March -------------------------------------------------------------- Loral Space & Communications (OTCBB: LRLSQ) will begin limited service on its Telstar 14/Estrela do Sul 1 satellite in March. As previously reported, the Telstar 14/Estrela do Sul 1 communications satellite fully deployed its South solar array but only partially deployed its North solar array. An investigation into the cause of the anomaly and the implementation of any corrective actions is ongoing. Space Systems/Loral, the manufacturer of the satellite, is raising the satellite to geostationary orbit. Telstar 14/Estrela do Sul is generating enough power to operate a minimum of 17 Ku- band transponders, making it capable of meeting immediate customer requirements, as well as Brazilian government requirements. The satellite, to be operated by Loral Skynet do Brasil at 63 degrees West longitude, was sent into space on January 10, 2004 on a Boeing Sea Launch Zenit-3SL rocket from the Odyssey Launch Platform, positioned on the equator in the Pacific Ocean. It is insured for partial and total losses up to a maximum of $250 million. Loral Space & Communications is a satellite communications company. 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 for commercial and government applications including direct-to-home television, broadband communications, wireless telephony, weather monitoring and air traffic management. CONTACT: Jeanette Clonan John McCarthy (212) 697-1105 Web site: www.loral.com ============= B O L I V I A ============= * Bolivia - Releases IMF Statement at Donors' Meeting ----------------------------------------------------- Anoop Singh Director, Western Hemisphere Department Washington, D.C. Introduction 1. The IMF welcomes very much this first meeting of the Bolivia Support Group. Against the background of recent political and economic instability in Bolivia, and the continuing risks in these areas, this group has the urgent task of providing timely and appropriate international support for the authorities' efforts to stabilize the economic and financial situation in Bolivia and pave the way for sustained growth with reduced poverty. 2. The challenges are compelling. Bolivia is the poorest country in South America, with real GDP per capita having fallen over the past five years. Social indicators regressed over this period. Bolivia's poverty rate of almost two-thirds remains the highest in South America, with more than a third of the population in extreme poverty, especially the sizable indigenous population. Open unemployment has been rising and about half the labor force is under-employed. 3. Both external and domestic factors explain Bolivia's deterioration following the period of economic reforms and recovery in the early 1990s. A succession of external shocks in recent years combined with persisting macroeconomic vulnerabilities and stalled reforms to produce a vicious circle of economic decline, rising social discontent, reform fatigue, and political fragmentation. 4. Bolivia's new government is now trying to reverse these trends. It needs to succeed for the sake of the Bolivian population and also for the sake of regional stability. Reversing the economic and social trends, and establishing a new basis for growth and equity will take time. International support will be crucial for this process to take hold. Experience in 2003 5. Let me begin by briefly recalling the events of 2003. Bolivia faced social and political instability in February as well as, more recently, in October. Despite these systemic events, the authorities acted quickly on both occasions to restore financial stability, helped by international support. In particular, the IMF's Stand-By Arrangement of March 2003 has provided a framework for macroeconomic stabilization, continuing reforms, and international support. 6. Thus, despite the political and social setbacks, the authorities were able to make significant progress in key economic areas. Two important reform measures were passed: a new tax code and a new law for corporate restructuring. More recently, the authorities acted quickly to resolve insolvencies in two banks, succeeding in restoring financial stability. However, fiscal pressures increased during the year, especially in the wake of the October unrest, and the fiscal deficit rose significantly above the program target to 8 percent of GDP. Nevertheless, helped by international support, macroeconomic stability has been broadly maintained-with inflation still in the low single-digit range-and growth remained positive for the year as a whole (although, at 2� percent, below the program target). 7. However, there were important costs from the events of 2003. Fiscal distortions and pressures have increased, necessitating recourse to central bank financing. The banking system remains vulnerable. Delays associated with public opposition to a project to build an LNG pipeline to export to the U.S. market has resulted in the loss of this prospect-as the buyer has entered into a long-term contract with another country-and Bolivia will need to find new markets for its abundant natural gas reserves to assure medium-term viability. The Government's Objectives and Strategy for 2004 8. Fund staff is now discussing with the Bolivian authorities the policies and objectives for 2004 that could be supported by an extension of the SBA through September 2004. The extension of the SBA is intended to provide a framework to catalyze urgent external assistance, while giving the authorities time to develop a full set of medium-term policies that could be supported by a new three-year PRGF arrangement-whose timeframe, structure, and concessionality are better suited to addressing Bolivia's needs. 9. The key goals for 2004 include further progress toward fiscal consolidation at a pace calibrated to take account of the serious political constraints on the government while giving increased priority to pro-poor spending; further progress toward corporate restructuring; and establishing a viable framework for the exploitation of Bolivia's hydrocarbon resources. Macroeconomic Policies 10. The fiscal program for 2004 aims at lowering the fiscal deficit to below 7 percent of GDP-current projections are based on a deficit of 6 3/4 percent of GDP. The authorities recognize the need to raise the fiscal effort in a carefully sequenced way. Revenues in 2004 will benefit from the full-year effects of legislation approved in late 2003, including the new tax code and law 843 (which expanded the tax base of hydrocarbon products), and the tax regularization scheme. In addition, the authorities will seek approval of revisions to the hydrocarbons' law aimed at addressing social concerns about the appropriate level of taxation of oil and gas production, while maintaining Bolivia as an attractive environment for foreign investors. The program also builds in phased increases in excise taxes and increased taxation of the wealthy, with some measures expected to take place in the weeks ahead. 11. On the spending side, the 2004 program aims at increasing pro-poor spending by at least 0.6 percent of GDP to about 12_ percent of GDP, while containing nonpoverty-related spending. It will be particularly important to improve the prioritization and effectiveness of public spending, given that expenditure levels are already high compared with other PRGF-eligible countries. In this context, the authorities intend to appoint a commission to conduct a comprehensive review of expenditures to improve their poverty orientation. Efforts to reduce spending in 2004 would include a temporary wage freeze in the civil service; improved targeting of subsidies; and a major reprioritization of public programs. Reductions in overall spending, however, would be difficult to accomplish because of increases in some components, including: (i) interest payments, owing to the high domestic financing in 2003; (ii) local government spending as implementation capacity improves; and (iii) pension payments, as remaining eligible pensioners are incorporated into the system. As such, despite the planned economies, total spending is projected to remain at about 33 percent of GDP in 2004. Financing of the deficit is discussed below. 12. The authorities are committed to prudent monetary and exchange rate policies. Monetary policy will continue to be geared to ensuring low inflation, while rebuilding international reserves and supporting a continued return of confidence in the banking system. The authorities are confident of maintaining competitiveness in the context of Bolivia's crawling peg regime. Financial and Corporate Policies 13. In coordination with the World Bank, the IDB, and the CAF, as well as the Fund, the Bolivian authorities are developing a strategy to address corporate and financial balance sheet problems, while avoiding public bailouts of shareholders or unviable institutions. In this connection, a new decree is expected to be issued in the weeks ahead, formally creating a fund which will strengthen the solvency of the financial system by assisting banks in merger or acquisition operations, as well as in debt-workout processes. The authorities anticipate applying the new corporate workout framework in a number of key cases. Exploitation of Natural Gas Reserves 14. Against the background of the setback on the LNG pipeline, the authorities are developing an alternative strategy to develop Bolivia's rich hydrocarbon reserves. Following the revisions to the hydrocarbons' law that the government intends to submit to Congress in the weeks ahead, a referendum on gas exports is expected to be held by end-March. Discussions are also underway with a number of other potential buyers on the possibility of alternative energy projects. Financing Requirements in 2004 and Debt Sustainability 15. Based on the fiscal framework outlined above, and after exhausting available non-inflationary sources of domestic financing, Bolivia faces a net external budgetary financing need of at least US$462 million, above that of 2003 (see attached Table 1). This estimate assumes upfront implementation of revenue measures and, for that reason, should be regarded as a minimum estimate, given the risks that the authorities are weighing before deciding on the precise sequencing of the implementation of the revenue measures. Given scheduled amortization of US$222 million, our best estimate of required gross disbursements in 2004 is, therefore, at least US$684 million. Of this amount, about US$579 million has already been identified, leaving a minimum of US$105 million still to be secured. Needless to say, given Bolivia's debt situation, the remaining financing need should be met as far as possible on highly concessional terms, preferably in the form of grants. 16. The importance of increased levels of grant financing is underlined by Bolivia's highly indebted situation and the prospects for achieving medium-term sustainability. Against the background of recent setbacks, these prospects will depend critically on Bolivia putting together a strong domestic consensus to exploit its abundant gas reserves, as well as finding alternative markets for such exports. 17. At this stage, we have revised our medium-term projections based on a cautious assumption on the likely scale of such gas exports. On this preliminary basis, Bolivia's public debt is projected to increase further in net present value terms from 48.4 percent of GDP at end-2003 to almost 55 percent of GDP by 2008, before beginning to decline steadily over the medium term to below 50 percent of GDP by 2015. The results are highly dependent on three critical assumptions: (i) a steady reduction of the fiscal deficit to 4 percent of GDP by 2007 (in part through the implementation of an expenditure reform, starting in 2005) and to about 1-2 percent in the outer years of the projection; (ii) financing the bulk of the fiscal deficit with highly concessional resources; and (iii) implementing energy projects that generate additional fiscal revenues of about 1 percent of GDP by 2008. Program Risks 18. Before closing, let me discuss briefly a number of significant risks to the program mainly associated with the highly fragile social and political conditions. In particular, - High expectations on the part of large segments of the population for rapid progress in addressing social grievances and turning around the economy may easily be disappointed in a context of significant financial constraints. - Moreover, the authorities' limited political support in congress could complicate the implementation of the reform agenda. - There are also risks associated with the exploitation of Bolivia's hydrocarbon resources, which is critical for medium- term viability. A negative outcome of the referendum on gas exports cannot be ruled out. Moreover, even with a positive outcome, having lost the California market, the authorities will face significant challenges to create the conditions for large energy projects to be implemented in the next few years. 19. Addressing these risks will require that the government reach out to the Bolivian people through a process of national dialogue to explain their program, including the importance of fiscal discipline and the efficient exploitation of the country's natural resources to pave the way for a sustained revival of the economy. It will also be important for the government to intensify its efforts to strengthen social safety nets and to prioritize pro-poor spending. The provision of external financing that would provide room for the government to carefully phase in adjustment measures would also reduce the political risks associated with the program. Concluding Remarks 20. The Fund remains committed to working with the Bolivian authorities and international donor community to put in place a program that would ensure fiscal sustainability, growth, and poverty reduction. The Bolivian authorities are making their best efforts to implement an ambitious program in a very difficult political environment. Strong support by donors is urgently required to support such a program. At a minimum, US$105 million is required to meet financing needs in 2004, and a higher amount would provide some necessary latitude for the authorities to phase the adjustment in more gradually, thus reducing risks. Based on sufficient indications of financing forthcoming at today's meeting and good progress in implementing the necessary measures, the Fund would be able to complete the next review and program extension and augmentation by end-February. CONTACT: IMF EXTERNAL RELATIONS DEPARTMENT Public Affairs: Phone: 202-623-7300 Fax: 202-623-6278 Media Relations: Phone: 202-623-7100 Fax: 202-623-6772 =========== B R A Z I L =========== BANCO SANTOS: S&P Downgrades Ratings to 'B'; Outlook Negative ------------------------------------------------------------- Standard & Poor's Ratings Services lowered the foreign currency long-term credit rating on Banco Santos S.A. to 'B' from 'B+'. The outlook remains negative. The downgrade of Banco Santos' rating reflects the worsening in the quality of the loan portfolio, marked by significant (though gradually reducing) concentration and its track record of unstable earnings generation, mainly due to the bank's nonrecurring gains. Although some specific losses have been mitigated by direct or indirect shareholder support, the bank's need to rely on such support is a negative factor. The outlook remains negative, incorporating the risks associated with its partial dependence on results from treasury operations and a further deterioration in asset quality. The credit quality of Banco Santos' portfolio, of loans mainly to middle market companies, deteriorated substantially until September 2003. The transition from lower to higher risk classifications (credits classified as C, D, and E--as per local regulations) was more intense in 2003. Credits classified as D to H, for instance, went up by 155% when compared with December 2002. The nonperforming loans (NPL) ratio based on loans classified from E to H reached 5.9% in September 2003 (from 3.6% in 2002 and 0.2% in December 2001). Banco Santos reacted to this deterioration by securitizing Brazilian real (BrR) 120 million of problem loans in the fourth quarter of 2003. This will allow a recovery in the ratios on the December 2003 balance sheet. Nevertheless, the bank's recent lending track record remains relevant. Furthermore, the loan portfolio has shown a continuous growth trend, with an above-average increase of 15% in September 2003 and 40% in December 2002, which adds to concerns about the quality of the new loans. Banco Santos has had major fluctuations in profitability and has a track record of constant capital injection needs. While the bank is still expected to report full-year 2003 profits at a level similar to those of 2002, this should be bolstered by nonrecurring gains, including the gain on the sale of problem loans. At year-end 2002, there was a reduction in the bank's capital (unrealized losses) of BrR85 million, due to the price fluctuation in the market and the new mark-to-market rules. This was offset by a cash capital injection by the shareholder of about BrR90 million. In 2001, the bank had losses of BrR57 million in its trading operations, which was offset by the sale of a subsidiary to the holding company under the shareholder--an indirect capital injection. Even though these movements reveal the benefits of continuous commitment from the shareholder, it also shows the difficulty of generating more stable, recurring profits. Santos shows a risk-weighted assets-to-capital ratio of 12.2%, which is above minimum requirements from local regulators of 11%. Nevertheless, the intrinsic quality of the capital is negatively affected by the group's high double leverage--measured by permanent assets at the bank's parent company to its equity. The double leverage resulted from the shareholder's decision to capture funds at the parent company level, and subsequently inject capital in the bank in 2001. Its double leverage is in a downtrend (it reduced to 1.2x in 2003 from 1.4x in 2001), and the restoration of the bank's capital base quality may depend on future positive net income generation and/or further capital injections. Santos is a small to midsize bank, supported by ongoing investments in technology and product innovation--which differentiates it from its competitors. All senior executives have good experience within both the Brazilian and foreign financial markets. ANALYST: Claudio Gallina Sao Paulo Phone: (55) 11-5501-8938 Daniel Araujo Sao Paulo Phone: (55) 11-5501-8939 PARMALAT BRASIL: FIDC Unattached to Parmalat SpA ------------------------------------------------ In the wake of the default of Italy's Parmalat SpA, certain questions arise regarding the fate of the rating on the Brazilian credit receivables fund, Parmalat - Fundo de Investimento em Direitos Creditorios (the Parmalat FIDC), by Standard & Poor's Ratings Services. Standard & Poor's downgraded Parmalat Finanziaria SpA and Parmalat SpA (Parmalat Italy) to 'D' and withdrew their ratings, as well as those of related entities, Dec. 19, 2003. On Dec. 22, 2003, however, Standard & Poor's affirmed its 'brAAAf' Brazilian national scale fund rating on the Parmalat FIDC. The affirmation was based on the lack of direct impact that these events had on the creditworthiness of the Parmalat FIDC. How is this possible? The following answers to FAQs shed light on the relationship between the Parmalat FIDC and the Italian company, Parmalat SpA. FAQs What Is a Brazilian Fundo de Investimento em Direitos Creditorios (an FIDC)? An FIDC is a financial vehicle that works under the financial structure and administrative shell of a fund, in both open- and closed-end types, but is a bankruptcy- remote entity that demonstrates uniqueness of both structured transactions and investment funds. Additionally, each fund manager can incorporate a combination of credit portfolios (representing at least 50% of the fund's total assets) and debt securities as an underlying asset of the fund. Compared with fixed-income securities, FIDCs do not promise investors (shareholders) specific interest payments or principal repayments. Thus, each shareholder only expects to receive a targeted return on their investment (in the case of the Parmalat FIDC, the targeted return is the Brazilian Spot Depositos Interfinanceiros index plus 1.7%), and based on the performance and the characteristics of the fund they can choose at any time to redeem their shares. The legal and administrative framework for credit receivables funds was created Dec. 17, 2001, by the Security Exchange Commission of Brazil's (Comissao de Valores Mobiliarios) regulation Instrucao 356. What Distinguishes Brazilian National Scale FIDC Ratings From Other Standard & Poor's Ratings? Standard & Poor's assigns credit quality ratings to FIDCs, fixed- income funds, and other managed pools of fixed-income assets. The credit quality rating assigned to a fund addresses the level of protection its portfolio holdings provide against losses from credit defaults. Standard & Poor's Brazilian national scale credit quality ratings, which range from 'brAAAf' (highest level of protection) to 'brCCCf' (least protection), are based on an analysis of the fund's overall portfolio credit quality, interest rate risk, credit quality, liquidity, concentration, and currency risk. Standard & Poor's Brazilian national scale credit ratings carry a "br" prefix to denote "Brazil" and the scale's focus on Brazilian financial markets. The Standard & Poor's Brazilian national credit rating scale is not directly comparable with Standard & Poor's global scale or with any other national rating scale operated by Standard & Poor's or its affiliates, reflecting its unique structure that is tailored to the needs of the Brazilian financial markets. On the other hand, a Standard & Poor's credit rating on a debt obligation addresses an issuer's ability to pay interest and principal on the obligation, according to the terms and conditions of the obligation. This applies to ratings on debt securities in the U.S. and across the globe, including emerging markets. Standard & Poor's role when rating a debt obligation is to analyze associated credit risks and any protections for those credit risks to assess the likelihood that an issuer will meet all of its promised payment obligations. Standard & Poor's credit quality and credit ratings do not address market risks such as the risk of early repayment of principal or early redemption of shares to investors. What Are the Key Analytical Considerations Factored Into the Rating on the Parmalat FIDC? The Parmalat FIDC is a closed-ended fund whose main underlying assets originally consisted of trade receivables directly originated by Parmalat Brasil S.A. and Batavia S.A., both indirectly controlled subsidiaries of Parmalat SpA, in Brazil. These receivables were originated through the sale of shipped products to specified obligors, cash, and other specified investments. Senior shares of the fund total Brazilian reais (BrR) 110.5 million and were sold to investors Nov. 27, 2003. Subordinated shares amount to BrR19.5 million and were retained by the originators. The fund has a defined final maturity of three years, which began Nov. 27, 2003. Under the terms and conditions of the Parmalat FIDC, the fund's manager is able to include credit receivables and other fixed-income securities in the fund's portfolio at any time. The credit enhancement mechanism determined for the 'brAAAf' rating affords credit support for the Parmalat FIDC's senior shares and is provided in the form of structural subordination. The subordination level was originally set by the fund's sponsor at 15%, while Standard & Poor's requirement consisted of the larger of a floor subordination of 12% and a variable (dynamic) subordination calculated regularly. The key strengths of the Parmalat FIDC's senior shares observed during Standard & Poor's rating analysis were the following: -- The experience of Parmalat Brasil and Batavia as trade receivables originators; -- The robust cash flow structure in the form of senior/subordinated shares; -- The credit quality of the trade receivables supporting the senior shares, which have a good historical performance record in terms of payment; -- The dynamic reserve (credit enhancement mechanism) included in the structure to cover related credit risks (initial subordination of 15% for the senior shares); -- The capability of Banco Itau S.A., as custodian of the transaction, to manage and perform servicing and reporting on the transaction; and -- The legal structure of the transaction, which has adequate provisions for legally safeguarding the shareholders. Has the Recent Default of Parmalat SpA Affected the Performance of the Parmalat FIDC? The Dec. 19, 2003, default of Parmalat SpA has not directly affected the performance or creditworthiness of the Parmalat FIDC. The Parmalat FIDC is a bankruptcy-remote Brazilian credit receivables fund that has no legal or direct financial connection with Parmalat SpA or any of its subsidiaries. The fund has sufficient receivables isolated from the originators to provide the appropriate level of credit enhancement for a 'brAAAf' rating. Other factors that keep the creditworthiness of the Parmalat FIDC unaffected by Parmalat SpA's default are: -- The servicer of the receivables is Banco Itau, an entity unaffiliated with the originators (which are not rated by Standard & Poor's); -- The receivables represent sales of products that have already been delivered; -- The fund stopped purchasing new receivables Dec. 19, 2003; -- The fund's outstanding receivables (representing less than 10% of the fund's portfolio as of Jan. 14. 2004) are short-term in nature and are due to be paid within approximately 15 days; and -- The fund manager is now allocating all collections to the fund's permitted investments. What Has Happened Since the Jan. 6, 2004, Parmalat FIDC Shareholder Meeting? Because of the events that affected Parmalat SpA and its subsidiaries, the fund's sponsor, Intrag DTVM Ltda, called for an extraordinary shareholders' meeting to take place Jan. 6, 2004. The only resolution reached during that meeting was that another meeting would be held Jan. 19, 2004, during which shareholders will decide whether the fund should continue operating or be redeemed early (repayment of shareholders). Since the Parmalat FIDC started operating Nov. 27, 2003, Standard & Poor's has been receiving several servicing reports and additional portfolio information from the servicer, as requested. These reports confirm that the fund's portfolio performance is in line with the historical payment performance of the originators' client base. Additionally, no early amortization or liquidation event has occurred. As of the date of the present report, credit receivables represent less than 10% of the fund's total assets. The remaining holdings of the fund are permitted investments not related to Parmalat SpA or any of its subsidiaries. These permitted investments consist of overnight investments in 'brAA' rated financial institutions, government bonds, or shares of other fixed-income funds rated or assessed by Standard & Poor's. What Could Happen to the Rating on the Fund After the Upcoming Jan. 19, 2004, Shareholders' Meeting? Standard & Poor's opinion of the Parmalat FIDC's credit risk has not changed significantly since its Dec. 22, 2003, rating affirmation. Nevertheless, the impact of Parmalat SpA's default could affect the originators' ability to continue generating healthy receivables to be sold to the fund. In addition, the originators' ability to generate new receivables depends on the potential for recovery of their credit and financial situation, which at the moment remains uncertain. Consequently, Standard & Poor's would likely lower its rating on the Parmalat FIDC significantly if the fund's shareholders decide during the Jan. 19, 2004, meeting to continue with the fund's operations and purchase new receivables from Parmalat Brasil and Batavia. The downgrade would reflect the uncertainty of the true credit and legal risks of the new receivables. Nevertheless, it is Standard & Poor's opinion that the Parmalat FIDC's shareholders are likely to liquidate the fund, in which case the rating would be maintained until liquidation and then withdrawn, assuming there are no other changes to the fund's performance or Standard & Poor's opinion of its future performance. Contact: Structured Finance Latin America in New York Juan P. De Mollein Phone: (1) 212-438-2536 Email: juan_demollein@standardandpoors.com Diane Audino Phone: (1) 212-438-2388 Email: diane_audino@standardandpoors.com Sergio Garibian, Investment Services, Sao Paulo Phone: (55) 11-5501-8944 Email: sergio_garibian@standardandpoors.com PARMALAT BRASIL: Unibanco Exposure Totals BRL20 Mln --------------------------------------------------- Unibanco-Uniao de Bancos Brasileiros SA (Unibanco), one of Brazil's four largest privately-owned banks, said Wednesday its total exposure to Parmalat Brasil Industria de Alimentos comes to BRL20 million (US$ 1= BRL 2.84), relates Dow Jones. Unibanco's statement came in response to reports that its exposure to Parmalat Brasil was BRL300 million. The bank, which is one of Parmalat Brasil's smallest creditors, further said it had already provisioned against the value. PARMALAT BRASIL: Committee To Begin Research Probe Today -------------------------------------------------------- Brazil's lower house set up a committee to dig into the accounts of Parmalat Brasil, reports Bloomberg News. The committee, which will be made up of 21 legislators, was set up after Parmalat group's jailed accountant in Italy said some of the missing funds may be in Brazil. According to deputy Waldemir Moka, who requested for the creation of the committee, the investigation will begin today. ========= C H I L E ========= COCA-COLA EMBONOR: Fitch Affirms 'BBB-' International Rating ------------------------------------------------------------ Fitch Ratings affirmed the 'BBB-' foreign and local international currency credit ratings of Coca-Cola Embonor (Embonor). Approximately $160 million of notes due in 2006 are affected by this rating action. The Rating Outlook for Embonor's international ratings remains Stable. In conjunction with this rating action, Fitch downgraded Embonor's national scale rating to 'A- (Chl)' from 'A (aChl)'. The series B ($40 million) Chilean peso denominated bonds are affected by this rating action. These rating actions follow the announcement by Embonor that it has reached an agreement to sell its 60.45% stake in the Peruvian bottler of Coca-Cola products, Embotelladora Latinoamericana S.A. (ELSA), to Corporacion Jose R. Lindley S.A. (JRL) for $130 million. Proceeds from the sale of the company's stake in ELSA are expected to be used to reduce outstanding debt of Embonor to slightly less than $200 million from $305 million. On a pro forma basis, which accounts for the debt reduction plus the loss of cash operating profits (EBITDA) from Peru, this would improve the company's EBITDA-to-total debt ratio to about 4.2x from approximately 5.3x during 2003. Net debt-to-EBITDA would also improve to about 4.1x from 5x. While the sale of the company's operations in Peru positively affects Embonor's credit protection measures, Fitch views this transaction to be slightly negative in terms of the company's overall credit quality because it diminishes the strategic importance of the company to The Coca-Cola Company (KO or Coca- Cola). Fitch Ratings believes, however, that KO, which paid approximately US$300 million to acquire a 45.5% economic stake in Embonor, would provide financial support to the company if needed to preserve its reputation for supporting bottlers in which it has a significant economic stake. Absent Coca-Cola's large ownership stake in the company, it is likely the international bonds would be rated below investment grade given the pro forma credit measurements. The investment grade credit ratings also take into consideration Embonor's relatively strong business position in its Chilean and Bolivian territories. The company had market shares of approximately 58.4% and 53.3% in these markets during 2003. Embonor accounts for approximately 35% of KO's sales in Chile and approximately 95% of its sales in Bolivia. The slight weakening of the overall credit quality in Fitch's opinion has resulted in a downgrade of the company's national scale rating to 'A- Chl' from 'A Chl' given the more robust nature of the national rating scale, in which the top-tiered Chilean corporates are rated between 'AAA' and 'A-'. ELSA accounted for 95% of Coca-Cola's sales in Peru during 2002. KO has shown significant interest in improving its position in Peru since 1999 when it purchased a 20% stake in JRL, the largest bottler of Inca Cola, which is the second most popular soft drink in Peru. At the time KO purchased its stake in JRL, it also formed a strategic partnership with Inca Kola. The agreement between Coca-Cola and Inca Kola requires the partnership to distribute and market Inca Kola and its affiliated brands in Peru, and calls for The Coca-Cola Company to distribute and market these brands globally. In conjunction with this agreement, KO purchased a 50% stake in Inca Kola's brands. CONTACT: Fitch Ratings Joe Bormann Chicago Phone: 312-368-3349 Rina Jarufe Chile Phone: +56-2-206-7171 Media Relations: James Jockle New York Phone: 212-908-0547 =================================== D O M I N I C A N R E P U B L I C =================================== * IMF Welcomes Monetary Policy Action in the Dominican Republic --------------------------------------------------------------- Marcelo Figuerola, the IMF Mission Chief for the Dominican Republic, made on Wednesday the following statement: "The Central Bank has embarked on a strengthening of monetary control to increase demand for peso-denominated assets and reduce the inflation rate significantly in 2004. Auctions of Central Bank certificates are helping reverse the significant expansion of the monetary base experienced in recent months. In addition, the Central Bank has, this week, raised its policy interest rates to make them generally positive in real terms, and we welcome this action which will be further supportive of the authorities' inflation-control efforts. "Recent monetary policy actions need to be seen in the broader context of the authorities' efforts to stabilize the economy and restore sustained growth. Thus, the authorities are making significant progress in implementing measures in other policy areas aimed at early conclusion of the first review of the country's Stand-By Arrangement with the Fund." CONTACT: INTERNATIONAL MONETARY FUND 700 19th Street, NW Washington, D.C. 20431 USA IMF EXTERNAL RELATIONS DEPARTMENT Public Affairs: Phone: 202-623-7300 Fax: 202-623-6278 Media Relations: Phone: 202-623-7100 Fax: 202-623-6772 ============= E C U A D O R ============= ANDINATEL/PACIFICTEL: One Bidder Left in Contracts Tender --------------------------------------------------------- The tender of three-year contracts to manage Ecuador's state- owned telecoms operators Andinatel and Pacifictel is left with only one potential bidder, Business News Americas reports, citing a spokesperson for the state holding company Fondo de Solidaridad (FS). The Eurocom consortium, which is made up of Telecom Management Partner (TMP), a subsidiary of Norway's Telenor (Nasdaq: TELN), and local telecoms company Fononet, submitted qualification documents to FS on Monday. Earlier, the tender had attracted seven bidders, one of which is Interstate. But Eurocom took over Interstate's participation. This mechanism for taking over participations was established in the bidding rules, which is why some law firms had originally registered, presumably on behalf of other potential bidders, the FS spokesperson said. Another former potential bidder, Telecom International Management Group, withdrew from the tender after FS rejected its request for a 30-day extension. The said bidder had asked the extension saying it needed extra time to find a new partner after the Philippine Long Distance Telephone Company withdrew from its consortium. The other five potential bidders - Telecom Italia, Spain's Telefonica, Colombia's Empresas Publicas de Medellin, and law firms Corral & Rosales and Baesuno - withdrew for "technical" reasons, the spokesperson said, without providing further details. FS has extended until January 30 the deadline for qualifying Eurocom, which, if successful, will have to present its economic bid for the contracts on February 5, the spokesperson said. If the economic bid is accepted, Eurocom would take over operations at the two companies on March 1. The privatization of the companies is part of the conditions for a loan package from the International Monetary Fund (IMF). ============= J A M A I C A ============= KAISER ALUMINUM: To Sell Alpart Interests in Jamaica ---------------------------------------------------- Kaiser Aluminum & Chemical Corporation signed an agreement to sell its 65% interest in Alpart, a partnership that owns bauxite mining operations and an alumina refinery in Jamaica, to Glencore AG. Net cash proceeds are expected, at a minimum, to be in the range of $160 million to $170 million, subject to certain closing and post-closing adjustments. The transaction, which is subject to several closing conditions as noted below, includes the interests of Kaiser and certain of its subsidiaries in Alpart and also may include certain alumina sales contracts that are typically sourced from Kaiser's share of alumina production at Alpart. The purchase price could increase significantly depending on which contracts, if any, are ultimately included in the transaction. Kaiser will be responsible for prepayment of its approximately $14 million share of Alpart's outstanding CARIFA loan, which becomes due in full upon consummation of the transaction. The agreement also provides for Glencore to supply Kaiser with alumina of up to 200,000 metric tonnes in 2004 and up to 100,000 metric tonnes in 2005 at an agreed percentage of London Metal Exchange aluminum prices. Kaiser expects that, at the minimum end of the expected range of proceeds, the transaction will result in a pre-tax book loss in the range of $50 million. The transaction is subject to approval by the United States Bankruptcy Court for the District of Delaware, where Kaiser plans to file a related motion and a copy of the agreement as promptly as practicable. Kaiser anticipates requesting the Court to rule on the motion during a regularly scheduled hearing on Feb. 23, 2004. The transaction is also conditioned upon approval by the lenders under Kaiser's Post-Petition Credit Agreement, as more fully discussed in the company's most recent Quarterly Report on Form 10-Q. Subject to the satisfaction of these and certain other conditions, Kaiser expects the transaction to close late in the first quarter or early in the second quarter of 2004. Until such time as the transaction closes, Kaiser will retain management responsibility for Alpart and will involve appropriate Glencore personnel on transitional issues. Separately, under Alpart's existing partnership arrangement, Hydro Aluminium a.s., which currently owns the remaining 35% of Alpart, will have 30 days following Kaiser's receipt of Court approval to elect to purchase Kaiser's interests at the price specified in the agreement. If Hydro were to exercise this right, Glencore would be entitled to receive from Kaiser reimbursement of certain expenses incurred in negotiating the agreement, subject to a limit of $250,000. "This is another step toward our stated goal of emerging from Chapter 11 in mid 2004," said Jack A Hockema, president and chief executive officer of Kaiser Aluminum. "Our relationship with the Government of Jamaica, the people of Jamaica and, particularly, two generations of Alpart employees has been a rewarding experience," he said. "In light of Glencore's extensive investments in the alumina industry, including its interests in Jamaica, and its strong financial profile, we believe this transaction will give Alpart employees and other constituents a sound opportunity for future investment and growth." The Alpart refinery has substantially completed an expansion program to increase the plant's capacity to 1.65 million metric tonnes per year. It also controls bauxite reserves having an annual production capacity of 3.5 million metric tonnes, which it mines through a joint venture. Approximately 1,200 employees are involved in refinery and mining operations. Glencore AG is a subsidiary of Glencore International AG, a privately owned company organized under the laws of Switzerland. Together with its subsidiaries, Glencore is a leading, diversified natural resources group with worldwide activity in the mining, smelting, refining, processing and marketing of metals and minerals, energy products and agricultural products. These activities are supported by strategic investments in industrial assets. Kaiser Aluminum & Chemical Corporation is a leading producer of fabricated aluminum products, alumina and primary aluminum. It is the operating subsidiary of Kaiser Aluminum Corporation (OTCBB:KLUCQ). CONTACT: Kaiser Aluminum Corporation 5847 San Filipe, Ste, 2500 Houston, TX 77057-3268 Phone: 713-267-3777 Fax: 713-267-3701 Home page: http://www.kaiseral.com Contact: Scott Lamb Phone: 713-332-4751 George T. Haymaker Jr., Chairman Jack A. Hockema, President & CEO John T. La Duc, EVP & CFO =========== M E X I C O =========== DESC: Fitch Assigns `B+' Senior Secured Rating ---------------------------------------------- Fitch Ratings assigned a senior secured foreign and local currency rating of 'B+' to Desc, S.A. de C.V. (Desc) and downgraded the senior unsecured debt rating to 'B' from 'B+'. Fitch also downgraded Desc's national scale rating to 'BBB-'(mex) from 'BBB'(mex). Fitch took all of Desc's ratings off of Rating Watch Negative. The Rating Outlook is Stable. The rating actions reflect the conclusion of a debt refinancing process with bank creditors for approximately US$720 million or 70% of the company's debt. The restructuring agreements will refinance the majority of Desc's short-term debt and prior syndicated loans. The final terms of the restructuring include a five-year tenor with a 30-month grace period beginning in January 2004, a US$40 million pre-payment to bank creditors and higher interests rates, which may be reduced based on improvements in financial ratios. Under the new loan agreements, Desc has granted security in the form of fixed assets and equity shares of the holding and operating companies. Under contractual covenants of credit agreements with the International Finance Corporation and under the dine senior notes due 2007, creditors of Desc's under these agreements will also be granted security so that the majority of Desc's existing debt will be secured. The new national scale rating on Desc's medium term notes (Pagares de Mediano Plazo) due 2006 and 2007 considers the structural subordination of these instruments to the reminder of Desc's indebtedness. Desc is one of Mexico's largest industrial conglomerates, with operations in automotive parts, chemicals (petrochemicals, phosphates, laminates, additives and particleboard), food (production and sale of pork and branded food products) and real estate (acquisition and development of land for upper-income commercial, residential and tourism). CONTACT: Giovanna Caccialanza, CFA New York Email: +1-212-908-0898 Alberto Moreno Monterrey, Mexico Phone: +528-18-335-7239 Media Relations: James Jockle New York Phone: +1-212-908-0547 GRUPO TMM: Details Related Issues to VAT Certificate ---------------------------------------------------- Grupo TMM, S.A. (NYSE:TMM and BMV:TMM A, or "the Company") announced Tuesday that the "Servicio de Administracion Tributaria" or "SAT" ("Tax Administrative Entity") made a provisional attachment of the Special VAT Certificate that the Mexican Treasury delivered to its subsidiary TFM, S.A. de C.V. on January 20, 2004, in compliance with the August 13, 2003, Mexican Federal Tribunal of Fiscal and Administrative Justice ("Fiscal Court") resolution. The fiscal authorities state that the documents that support the amount that the Special VAT Certificate represents do not comply with applicable tax requirements. It is important to note, that it was the Federal Government of Mexico, through the authorities in charge of the privatization process of the Mexican Railroad System who delivered the same documents at the time of the privatization. The Company will oppose through all possible legal means the SAT's action, as it is arbitrary, lacks consistency and puts at risk the rule of law of Mexico for taxpayers, which should be the pillar of the fiscal system in Mexico, as well as the rights of and legal certainty to individuals that participate in bidding processes of public assets or services. Headquartered in Mexico City, Grupo TMM is a Latin American multimodal transportation company. Through its branch offices and network of subsidiary companies, Grupo TMM provides a dynamic combination of ocean and land transportation services. Grupo TMM also has a significant interest in TFM, which operates Mexico's Northeast railway and carries over 40 percent of the country's rail cargo. CONTACT: GRUPO TMM Brad Skinner (Investor Relations) Phone: 011-525-55-629-8725 203-247-2420 Email: brad.skinner@tmm.com.mx INDUSTRIAS UNIDAS: S&P Rates Proposed $175M Notes 'B+' ------------------------------------------------------ Standard & Poor's Ratings Services assigned Wednesday its 'B+' rating to Industrias Unidas S.A. de C.V.'s (IUSA) proposed 10- year $175 million notes due 2014. The company's 'B+' local and foreign currency long-term corporate credit ratings were affirmed. The outlook is negative. "The notes benefit from the joint and several guarantee of IUSA's restricted subsidiaries that represent 92% of the company's total assets and 40% of the company's EBITDA as of Sept. 30, 2003," said Standard & Poor's credit analyst Jose Coballasi. "Proceeds will be used to pay existing debt." IUSA is one of Mexico's largest diversified industrial companies, offering a large variety of products through integrated manufacturing and distribution operations located principally in Mexico and the U.S. The company's operations are conducted by seven principal business groups: copper tubing, wire and cable, copper alloys, electrical products, watt-hour meters, valves and controls, and diversified assets group. IUSA's efforts to increase its market share have resulted in lower average prices for its products and higher working capital requirements, which have led to an increase in the use of debt and a reduction in the company's operating cash flow generation. The impact of the aforementioned factors in the company's financial performance is reflected in the trend of its key financial ratios. For the past 12 months ended Sept. 30, 2003, IUSA posted EBITDA interest coverage, total debt to EBITDA, and FFO to total debt ratios of 1.8x, 4.2x, and (1.0%), respectively. IUSA's liquidity is tight given its weak free operating cash flow generation. During 2003, the company's free operating cash flow generation has been negative and has resulted in an increased use of debt. Nevertheless, the proposed issue will provide the company additional financial flexibility through a more comfortable maturity schedule and the prepayment of secured debt issued in the Mexican capital markets in 2002. As of Sept. 30, 2003, the company had about $18 million in cash and equivalents and faced short-term debt maturities of $85 million, which include the company's CP program. As a result, IUSA depends on its efforts to refinance its short-term debt maturities successfully. The outlook is negative. Continued weakness in the company's key financial indicators and liquidity could lead to a downgrade. Nevertheless, a sustained improvement in its financial and operating performance, particularly its free operating cash flow generation and overall liquidity, could lead to a stable outlook. ANALYST: Jose Coballasi Mexico City Phone: (52) 55-5279-2014 Santiago Carniado Mexico City Phone: (52) 55-5279-2013 MEXICANA: Strikes Codeshare Agreement With American Airlines ------------------------------------------------------------ Two of the world's major airlines -- American Airlines and Mexicana de Aviacion -- will enter into a new, robust codesharing arrangement in April that will offer customers around the globe better options for travel between the United States and Mexico. Mexicana has been serving the United States for more than 70 years. American has been serving Mexico for more than 60 years. Once linked, the two airlines will build upon the pioneering spirit that has made them the premier airlines in their respective marketplaces. The two carriers will also enter into a reciprocal frequent-flyer arrangement that will enable members to accrue and redeem miles in American's AAdvantage(R) program or Mexicana's Frecuenta(R) program on each other's network, including more than 500 round- trip flights per week between both countries. "American's vast network is one of the primary reasons people choose us for their travel needs," said Gerard Arpey, American's president and CEO. "Through this agreement with Mexicana, we're further strengthening the breadth of our route system and increasing flight options for our passengers. In cooperation with Mexico's finest airline, we're able to further honor our commitment to providing our customers with the products and services they value." "We're very pleased to announce the leading alliance in North America," said Fernando Flores, Mexicana's chairman and CEO. "Our commitment to our passengers has always been to offer the best services and connectivity. Now that we are working with American Airlines, I'm confident that Mexicana will solidify its longstanding stature as the leading Mexican international airline." The agreement, which is pending governmental approval, provides for codesharing on transborder flights, connecting service to points within Mexico and the U.S., and select international flights beyond the United States. Through this relationship with American Airlines, Mexicana customers will soon be able to enjoy enhanced service to the most important markets in the United States, Europe and Asia as well as new destinations in the Caribbean. American passengers will soon see new flight availability for up to 21 new cities in Mexico, including such popular destinations as Merida, Oaxaca, Veracruz and Tampico. Additionally, American will be able to place its code on 27 new, nonstop transborder markets. "This agreement will not only support our current network but also future growth opportunities into Mexico," Arpey said. "In fact, we will be launching new service from our Dallas/Fort Worth hub to Cozumel and Ixtapa/Zihuatanejo on Jan. 31 as well as adding more frequencies on our service to Los Cabos in Baja California Sur." "Mexicana has always responded to the needs of its passengers and the dynamics of the marketplace," said Flores. "While our comprehensive agreement with American is of extreme importance to us, we will continue to develop our network in the United States, and the rest of the continent, to offer travelers our extensive system of bilateral alliances around the world. Furthermore, our fleet renovation program continues in order to offer our clients the best flight experience." Mexicana de Aviacion is Mexico's leading international airline. Its fleet is considered to be one of the youngest in the world. It also offers more than 55 destinations in North, Central and South America and the Caribbean. Mexicana offers great benefits in accruing and redeeming miles, access to Executive Lounges (Salones Ejecutivos), wide possibility for connections and coordinated timetables in an extensive route network. American Airlines is the world's largest carrier. American, American Eagle and the AmericanConnection regional carriers serve more than 250 cities in over 40 countries with more than 3,900 daily flights. The combined fleet numbers more than 1,000 aircraft. American's award-winning Web site, AA.com, provides users with easy access to check and book fares, plus personalized news, information and travel offers. American Airlines is a founding member of the oneworld Alliance. CONTACT: Mexicana de Aviacion Adolfo Crespo, or Nayeli Garcia, Public Relations Phone: +011-5255-5448-3000 x2678 American Airlines Gus Whitcomb or Martha Pantin, Corporate Communications Phone: +1-817-967-1577 Home page: http://www.amrcorp.com TFM: KCS Releases TFM Details of 1997 Tax Audit Summary ------------------------------------------------------- Kansas City Southern (KCS) (NYSE:KSU) announced Wednesday that TFM, S.A. de C.V. ("TFM") was served on January, 20, 2004, with an official letter notifying TFM of the Mexican Government's findings and conclusions arising from its tax audit of TFM's tax return for the fiscal year ended December 31, 1997 ("Tax Audit Summary"). In the Tax Audit Summary, the Mexican Government notified TFM of its conclusion that the documentation provided by TFM in support of the value added tax payment and depreciation of the TFM Concession Title and the assets reported on TFM's 1997 tax return do not comply with the formalities required by the applicable tax legislation. The Tax Audit Summary also creates a provisional administrative attachment of the value added tax refund certificate received by TFM on January 19, 2004, from the Mexican Federal Treasury in the amount of 2,111,111,790.00 pesos. By the terms of the Tax Audit Summary, TFM has 20 business days to present evidence to the Mexican Government in support of its position. KCS is currently reviewing the Tax Audit Summary with its legal advisors and with TFM officers. KCS will, following the completion of its legal review of the Tax Audit Summary, take the appropriate actions to support TFM's right to claim on its 1997 tax return depreciation and tax credits arising from the Northeast Railroad Company's, TFM's predecessor in interest, purchase of the assets and concession title from the Mexican National Railway Company as part of the privatization of the Mexican national railway system in 1997. 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. XIGNUX: Moody's Cuts Debt Ratings --------------------------------- Moody's Investor Services downgraded the debt ratings of Monterrey, Mexico-based industrial conglomerate Xignux, and initiated a review of the ratings for possible further downgrade. Below are the ratings downgraded (to/from) and placed under review for further downgrade: To From - Senior Implied Rating B2 B1 - US$126 million outstanding amount of Senior Unsecured Notes due 2004 B3 B2 - Senior Unsecured Issuer Rating Caa1 B3 The rating actions consider the fact that despite recent improvements in operating conditions, Xignux's debt protection measures remain weak with limited free cash flow available for debt reduction, while refinancing risk is high. Moody's explained that Xignux's revised ratings reflect heightened credit risk as a result of a low free cash flow relative to the high debt levels, a high level of short term debt resulting in a tight maturity profile, and a limited liquidity position vis-a-vis near - term cash requirements. Moreover, the company remains exposed to commodity price fluctuations, and a tough competitive environment in all of its core business lines. Conversely, Xignux's ratings are supported by its leading position in key sectors of the Mexican economy, joint ventures with large international partners, and some recent improvement in performance trends. Xignux had total debt of around US$590 million, which at the end of 2003 represented more than 4X consolidated EBITDA. In addition, the free cash flow generation represents around 6% of total debt. ================================= T R I N I D A D & T O B A G O ================================= BWIA: TTSE Rejects Request For Share Suspension ----------------------------------------------- Trinidad national carrier BWIA failed to get an approval from the Trinidad and Tobago stock exchange (TTSE) over a request to suspend trading of its shares, the Trinidad Guardian reports. "The TTSE has considered the application and it has agreed not to comply with the request to have the shares suspended," TTSE chairman Kathleen Dhannyram said without giving any reasons for denying the request. But according to the Trinidad Guardian, the TTSE may approve the request if BWIA can provide additional information to convince the TTSE of the need for the suspension. BWIA made a similar request from the Barbados stock exchange, which, unlike TTSE, immediately suspended the Company's shares. BWIA sought the suspension of the trading of its shares as part of a wider restructuring exercise for the airline. According to it, the suspension would facilitate any necessary shifts in the equity levels held by various shareholders without impacting on the daily operations of the airline. However, sources within financial and aviation circles suggested suspension would be a forerunner to the State regaining control of the cash-strapped carrier. The Government owns 49% of BWIA's shares and holds 15% in trust for the unions that represent the employees. Trade and Industry Minister Ken Valley said the Government thought it was necessary to settle BWIA's share price before it could negotiate with any potential investors while it consults with the airline's shareholders. ============= U R U G U A Y ============= PARMALAT URUGUAY: Seeks to Reschedule Bank Loan Payments -------------------------------------------------------- The Uruguay unit of Parmalat Finanziaria S.p.A. wants to reschedule loan payments with eight banks, Bloomberg News reports, citing the Parmalat Uruguay president Jorge Gutman. The Company's loans came with a guarantee from its Italian parent, which has entered bankruptcy, hence the need to reschedule debt payments. As much as 40% of the Company's US$26 million of debt will come due this year, the source adds. "We are currently negotiating with the banks and have had good acceptance because it's viable business," Bloomberg quoted the executive. The Company posted sales of US$44 million last year, and the figure is expected to climb to as high as US$48 million. Its Italian parent, Parmalat Finanziaria SpA, filed for bankruptcy protection in December 24 after revealing a multibillion-dollar gap in its finances. Prosecutors in Italy and market regulators from the U.S. and Europe are investigating the disappearance of the funds, says Dow Jones. *********** 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 2004. All rights reserved. ISSN 1529-2746. This material is copyrighted and any commercial use, resale or publication in any form (including e-mail forwarding, electronic re-mailing and photocopying) is strictly prohibited without prior written permission of the publishers. Information contained herein is obtained from sources believed to be reliable, but is not guaranteed. The TCR Latin America subscription rate is $575 per half-year, delivered via e-mail. Additional e-mail subscriptions for members of the same firm for the term of the initial subscription or balance thereof are $25 each. For subscription information, contact Christopher Beard at 240/629-3300. * * * End of Transmission * * *