/raid1/www/Hosts/bankrupt/TCRLA

/raid1/www/Hosts/bankrupt/TCRLA_Public/040310.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 Wednesday, March 10, 2004, Vol. 5, Issue 49 Headlines A R G E N T I N A ACINDAR: Argentine Judge Commences Debt Review ACINDAR: Reports Positive Results in 2003 ARENALES CONSTRUCCIONES: Court Declares Company "Quiebra" BELLSOUTH CORP.: Agrees to Sell Its LatAm Ops to Telefonica BELLSOUTH CORP.: Fitch Comments on Sale of its LatAm Assets BELLSOUTH CORP.: S&P May Still Cut Ratings DISCO: New Owner To Receive Company Debt-Free FRANCIONI: Judge Approves "Concurso Preventivo" Motion HANDYPLAST: Declared Bankrupt by Court NII HOLDINGS: Closes Tender Offer SIDERAR: Evaluating Maintenance Plans for No. 1 Blast Furnace * Argentina Struggles To Circumvent New Debt Default B E R M U D A ANNUITY & LIFE: Reports Full Year 2003 Net Loss of $132M BERMUDA FIRE: Liquidators Seek to Revise Scheme Of Arrangements SEA CONTAINERS: Reports $111.4M Full Year 2003 Net Earnings B R A Z I L CFLCL: Responds to Notice Issued by Shareholders EMBRATEL: MCI Execs Meet With Fixed-Line Telephone Firms' Reps USIMINAS: Ratings Unaffected by 2003 Results, Says S&P C O L O M B I A AVIANCA: Judge Delays Hearing Over Request for Extension AVIANCA: Union to Carry On Go-Slow Operation M E X I C O DESC: Announces Resolutions Adopted at its Shareholders Meetings GRUPO MEXICO: Fitch Removes Rating from Watch Negative HYLSAMEX: Forecasts 1Q04 Ebitda of Up to $80M V E N E Z U E L A PDVSA: VP Leaves Post, Yet to Name Replacement TELCEL BELLSOUTH: No Regulatory Issues to Block Telefonica Deal - - - - - - - - ================= A R G E N T I N A ================= ACINDAR: Argentine Judge Commences Debt Review ---------------------------------------------- Argentine steelmaker Acindar Industria Argentina de Aceros (ACIN.BA) informed that a local judge commenced on Feb. 26 a review process to approve the Company's restructuring of about US$230 million in debt, relates Dow Jones. When the deal gets legal approval, its terms can be imposed on holdout creditors as well. Acindar defaulted in November 2001 and gained creditor agreement for its new repayment terms in December 2003. The Company's debt restructuring involves repaying its debts over the next nine years. There is no nominal "haircut" on the debt, and the Company will pay 4% interest during 2004. After 2004, Acindar will pay a progressively higher interest rate tied to Libor that will reach Libor plus 3 percentage points by 2007. Buenos Aires-based Acindar, Argentina's largest long steelmaker with installed capacity of nearly 1.35Mt/y, is owned by the Acevedo family (20%), Brazilian long steelmaker Belgo-Mineira (20%), the World Bank's IFC (7%) and the rest is floated on the stock market. CONTACT: ACINDAR INDUSTRIA ARGENTINA DE ACEROS SA 2739 Estanislao Zeballos Beccar Buenos Aires Argentina B1643AGY Phone: +54 11 4719 8500 Fax: +54 11 4719 8501 Home Page: http://www.acindar.ar.com Jose I. Giraudo, Investor Relations Manager Tel: (54 11) 4719 8674 Andrea Dala, Investor Relations Officer Tel: (54 11) 4719 8672 ACINDAR: Reports Positive Results in 2003 ----------------------------------------- Acindar managed to return to black in 2003 with a net income of ARS599.9 million ($1=ARS2.935) from a net loss of ARS250.4 million in 2002. The Company, which exports much of its production, has benefited from the January 2002 peso devaluation, which made its goods relatively more competitive on international markets, and Argentina's overall economic recovery in 2003. Net sales totaled ARS1.347 billion in 2003, up from ARS1.068 billion in 2002. Operating profit jumped to ARS463 million in 2003 from ARS236.4 million a year earlier. One of the more notable boosts to Acindar's 2003 results was in financing and holding results, where the Company reported a ARS102.4 million gain, compared with a ARS534.7 million loss in 2002. The Company said the 2003 result included income of ARS128.6 million from foreign exchange movements and ARS64.3 million from its ongoing debt restructuring. Acindar saw its total shipments rise to 1.2 million tons from 998,871 tons in 2002. This improvement was carried by the domestic market, where shipments jumped to 855,884 tons from 610,215 tons. Exports fell to 303,470 tons in 2003 from 388,656 tons one year before. In peso terms, internal sales brought in ARS1.07 billion for 2003, compared with ARS663.2 million in the previous year. Exports totaled ARS304.1 million, down from ARS426.3 million in 2002. ARENALES CONSTRUCCIONES: Court Declares Company "Quiebra" --------------------------------------------------------- Buenos Aires Court No. 15 declared local company Arenales Construcciones S.R.L. "Quiebra," reports Infobae. The court, assisted by Clerk No. 30, assigned Mr. Hector Jorge Garcia as receiver, who will examine and authenticate creditors' claims until May 5, 2004. The deadlines for the submission of the individual and general reports are yet to be set. The Company's bankruptcy case will close with the liquidation of its assets to repay creditors. CONTACT: Hector Jorge Garcia, Receiver Montevideo 734 Buenos Aires BELLSOUTH CORP.: Agrees to Sell Its LatAm Ops to Telefonica ----------------------------------------------------------- BellSouth Corp. (NYSE: BLS) has signed a definitive agreement with Telefonica Moviles, the wireless affiliate of Telefonica, S.A. (NYSE: TEM) to sell its interests in its 10 Latin American operations. The purchase price is based on a total enterprise value of the 10 Latin American companies of $5.85 billion. BellSouth will receive after tax cash proceeds of approximately $4.2 billion and reduce consolidated debt by $1.5 billion. BellSouth and its partners operate 10 wireless companies in Latin America (Argentina, Chile, Colombia, Ecuador, Guatemala, Nicaragua, Panama, Peru, Uruguay and Venezuela). Telefonica has operations in seven Latin American countries (Brazil, Mexico, Argentina, Peru, Chile, El Salvador and Guatemala). With the acquisition, Telefonica will add six additional countries to its footprint and 10.5 million new customers. According to Duane Ackerman, Chairman and CEO of BellSouth, "the sale of our Latin American operations enables us to continue to strengthen our domestic businesses. This transaction improves our flexibility as we focus on our growth opportunities." The transaction is subject to due diligence, governmental approvals and other closing conditions. It is expected to close in stages as closing conditions are satisfied, with the final closing expected to occur in the second half of 2004. BellSouth expects to record a gain on the transaction based on the book value at closing. Based on current book value, the after-tax gain would be approximately $1.9 billion. About BellSouth Corporation BellSouth Corporation is a Fortune 100 communications services company headquartered in Atlanta, Georgia. BellSouth serves nearly 50 million local, long distance, Internet and wireless customers in the United States and 12 other countries. Consistently recognized for customer satisfaction, BellSouth provides complete communications solutions to the residential and business markets. In the residential market, BellSouth offers DSL high-speed Internet access and long distance, advanced voice features and other services. The company's BellSouth Answers(SM) package combines local and long distance service with an array of calling features; wireless data, voice and e-mail services; and high-speed DSL or dial-up Internet service and Cingular Wireless. In the business market, BellSouth serves small, medium and large businesses providing secure, reliable local and long distance voice and data networking solutions. BellSouth also provides online and directory advertising services through BellSouth(R) RealPages.com(SM) and The Real Yellow Pages(R). BellSouth owns 40 percent of Cingular Wireless, the nation's second largest wireless company, which provides innovative wireless voice and data services. BELLSOUTH CORP.: Fitch Comments on Sale of its LatAm Assets ----------------------------------------------------------- BellSouth Corp. (BellSouth) announced that it has signed a definitive agreement to sell its Latin American operations to Telefonica Moviles. The sale, when completed, will provide BellSouth with $4.2 billion in after-tax cash proceeds, and remove $1.5 billion in debt from its consolidated balance sheet. Telefonica Moviles will assume debt associated with the acquired operations. The transaction is expected to close in the second half of 2004. Fitch Ratings (Fitch) currently rates BellSouth's senior unsecured long-term debt 'A+' and the securities are on Rating Watch Negative. The Rating Watch status was designated on Feb. 17, following the announcement that Cingular Wireless, a joint venture between BellSouth and SBC Communications, will acquire AT&T Wireless in a $41 billion cash transaction. The Rating Watch also applies to the existing long-term debt of subsidiaries that no longer issue debt--BellSouth Telecommunications and BellSouth Capital Funding--as BellSouth has consolidated its financing activities at the parent level. The 'F1' commercial paper rating of BellSouth is not under review. BellSouth's credit profile is not expected to change solely as the result of the sale of the Latin American operations. Fitch will take into account the positive effect of the Latin American sale on BellSouth's final ratings when it reviews the leveraging impact of the Cingular/AT&T Wireless transaction on BellSouth's overall credit profile. Fitch notes that the cash proceeds from the asset sale would reduce the original estimated $10 billion in external funding BellSouth would have needed to complete Cingular's acquisition of AT&T Wireless. In 2003, BellSouth's debt-to-EBITDA was approximately 1.5 times (x). To maintain its current 'A+' rating, Fitch would like to see BellSouth's debt-to-EBITDA return to the 1.5-1.6x level within 12-18 months following the close of the Cingular/AT&T Wireless transaction. CONTACT: John Culver, CFA +1-312-368-3216, Chicago Bill Densmore +1-312-368-3125, Chicago MEDIA RELATIONS: James Jockle +1-212-908-0547, New York BELLSOUTH CORP.: S&P May Still Cut Ratings ------------------------------------------ Standard & Poor's Ratings Services said Monday that its ratings for BellSouth Corp. (A+/A-1) remain on CreditWatch with negative implications following the company's announcement of a definitive agreement to sell its Latin American wireless assets to Spanish telecommunications carrier Telefonica S.A. After-tax cash proceeds of about $4.2 billion are expected to be used to partially pay BellSouth's 40% share of the proposed purchase by Cingular Wireless LLC of AT&T Wireless. However, the continued CreditWatch listing reflects the fact that BellSouth will still have to fund another estimated net $10 billion related to its share of the transaction. This requirement will likely include a significant debt component. On Feb. 17, 2004, Standard & Poor's placed the ratings of regional Bell operating companies (RBOCs) SBC Communications Inc. (A+/A-1) and BellSouth Corp. (A+/A-1), as well as wireless carrier Cingular Wireless LLC (A+/A-1), on CreditWatch with negative implications. At the same time, the CreditWatch listing for AT&T Wireless Services Inc. (BBB/A-2) was revised to positive from developing. These actions reflected the announced agreement by Cingular to acquire AT&T Wireless' stock for $41 billion in cash, plus the assumption of AT&T Wireless' $10 billion of debt. The CreditWatch listing reflects the potential impact of additional debt incurrence. In addition, Standard & Poor's will assess the effect on these companies' business risk profiles that the acquisition will have, including integration risk, as well as greater scale and other synergistic benefits. Given that there will still be five major national wireless players after this transaction, industry competition and pricing pressures may not be markedly reduced from this combination. In fact, pricing pressures may be exacerbated if Cingular chooses to be more aggressive. The ratings for Cingular were placed on CreditWatch because the company is rated with its parents. The CreditWatch listing for AT&T Wireless reflects the company's potential acquisition by the higher-rated Cingular entity. DISCO: New Owner To Receive Company Debt-Free --------------------------------------------- Chilean supermarket operator Cencosud, which agreed Friday to buy Argentine supermarket chain Disco from Dutch peer Royal Ahold NV (AHO), expects to receive Disco debt-free once the US$315-million deal closes, Dow Jones reports, citing Cencosud chief executive Laurence Goldborne. According to Cencosud Chairman Horst Paulmann, the deal will close in roughly five to seven months. "There is no fixed deadline" for the transaction to be completed, he added. Cencosud will have to wait for Ahold to resolve the legal issues that for months have troubled Ahold's attempt at selling the Argentine unit. In the meantime, Cencosud will already have a say in running Disco, Goldborne said. FRANCIONI: Judge Approves "Concurso Preventivo" Motion ------------------------------------------------------ Judge Ottolenghi of Buenos Aires Court No. 4 approved a "Concurso Preventivo" motion filed by local company Francioni S.A., reports Infobae. With assistance from Dr. Juarez, Clerk No. 7, the court named Silvia Amanda Fernandina as receiver who will oversee the Company's reorganization process. The receiver will authenticate creditors' claims until March 26, 2004. Following authentication of the claims, the receiver will then prepare the individual reports and submit these reports to the court on May 12, 2004. Submission of the general report follows on June 25, 2004. The informative assembly, one of the last parts of the reorganization process, will be held on December 17, 2004. The Company, which manufactures eyeglasses, is seeking to reorganize after failing to meet its financial obligations to creditors. CONTACT: Francioni S.A. 1st Floor, Room B Parana 777 Buenos Aires Silvia Amanda Fernandina, Receiver Asuncion 4642 Buenos Aires HANDYPLAST: Declared Bankrupt by Court -------------------------------------- Judge No. 7 of the Civil and Commercial of San Martin, Argentina declared local company Handyplast S.A. "Quiebra," reports Infobae. The court appointed Estudio Polistina, Rancano to be the Company's receiver, who will verify creditors' claims until March 24, 2004. The deadlines for the submission of the individual and general reports have been set for May 20, 2004 and July 20, 2004, respectively. The Company's bankruptcy case will close with the liquidation of its assets to repay creditors. CONTACT: HANDYPLAST S.A. Lamadrid 2063 San Martin Estudio Polistina, Rancano - Receiver Pueyrredon 2700 Villa Maipu San Martin NII HOLDINGS: Closes Tender Offer --------------------------------- NII Holdings, Inc. (Nasdaq: NIHD) announced Monday that the previously announced offer to purchase and consent solicitation by its wholly owned subsidiary, NII Holdings (Cayman), Ltd. ("NII Cayman"), relating to all of NII Cayman's 13% Senior Secured Discount Notes due 2009 (the "13% Notes," ISIN No. USG6520PAA33), had expired and that NII Cayman had purchased $180,767,577 principal face amount, or 99.97%, of the 13% Notes for $210,594,227. NII Holdings, Inc. also announced that the amendments to the indenture under which the 13% Notes were issued, as set forth in the Supplemental Indenture dated February 18, 2004, had become operative. The amendments to the indenture eliminated substantially all restrictive covenants and certain event of default provisions. About NII Holdings, Inc NII Holdings, Inc., a publicly held company based in Reston, Va., is a leading provider of mobile communications for business customers in Latin America. NII Holdings, Inc. has operations in Argentina, Brazil, Mexico and Peru, offering a fully integrated wireless communications tool with digital cellular service, text/numeric paging, wireless Internet access and Nextel Direct Connect(R), a digital two-way radio feature. NII Holdings, Inc. trades on the Nasdaq market under the symbol NIHD. Visit the Company's website at http://www.nii.com. Nextel, the Nextel logo, Nextel Online, Nextel Business Networks and Nextel Direct Connect are trademarks and/or service marks of Nextel Communications, Inc. CONTACT: Investor Relations: Tim Perrott Tel: +1-703-390-5113 E-mail: tim.perrott@nii.com Media Relations: Claudia E. Restrepo Tel: +1-786-251-7020 E-mail: claudia.restrepo@nii.com SIDERAR: Evaluating Maintenance Plans for No. 1 Blast Furnace ------------------------------------------------------------- Argentine flat steelmaker Siderar is in the middle of evaluating maintenance plans for its No. 1 blast furnace, Business News Americas reports, citing company spokesperson Guillermo Etchepareborda. The maintenance plans will require putting its No. 2 furnace into operation as backup according to the official. However, he maintains that since the No. 1 furnace is operating normally, "We are not thinking of increasing capacity." He also adds that blast furnace No. 2 also requires some investment, and that the project is being evaluated separately. Mr. Etchepareborda also states that no definitive decision on the project will be taken this year. Buenos Aires based Siderar is Argentina's biggest flat steelmaker with an installed capacity of 2.2Mt/y. The Company, which is controlled by the Techint group, posted an income of ARS422.2 million in 2003 from ARS40.7 million in 2002, owing to a huge increase in domestic shipments. Net sales were also up last year at ARS2.731 billion. * Argentina Struggles To Circumvent New Debt Default ---------------------------------------------------- Talks between Argentina and the International Monetary Fund were making headway Monday as the embattled government makes its last-ditch attempt to avoid a new debt default, Reuters reports. However, sources close to the talks said the two sides remained deadlocked on two main issues. "There was some progress," one source close to the talks told Reuters on condition of anonymity, referring to a meeting between Economy Minister Roberto Lavagna and IMF official John Dodsworth in Buenos Aires on Monday. "Work is ongoing." The two sides were discussing steps the lender wants Argentina to take to keep a loan deal on track, sources said. Argentina is facing a US$3.1 billion debt deadline with the International Monetary Fund on Tuesday. Sources close to the talks said that both camps remained stuck on IMF demands that Argentina rubber-stamp its choice of banks to restructure its US$88 billion of defaulted debt and raise the bar on how many creditors must accept its debt offer to deem it a success. Argentina is refusing to look into some US$15 billion in international reserves to repay US$3.1 billion due to the IMF on Tuesday, saying the fund must first promise it will effectively reimburse it. "The president has made his decision clear," a presidential spokesman said on Monday, referring to President Nestor Kirchner's repeated refusal to pay unless the IMF yields first and signals it will approve the second review of a three-year US$13.3 billion loan program, which would release US$3.1 billion to Argentina. Argentine Central Bank President Alfonso Prat Gay was seeking to drum up support from peers among the Group of Seven rich nations -- the IMF's main shareholders -- at a meeting of central bank heads in the Swiss city of Basel, a bank source said. If Argentina defaults, like it did on a similar payment to the fund in September, the IMF will effectively suspend relations with Buenos Aires, halting any use of IMF resources and further disbursements until the arrears are paid. A default would also jeopardize any new aid from other multilateral lenders like the World Bank and Inter-American Development Bank (IADB). Argentina, the IMF's third-largest debtor after Brazil and Turkey, currently owes around $7.47 billion to the World Bank, around $8 billion to the IADB and about $15 billion to the IMF. But even if Argentina and the IMF work things out, Argentina still has to deal with angry bondholders, from German dentists to Wall Street fund managers to Japanese and Italian pensioners, who are clamoring for their governments to act to protect their investments. Bondholders want to recover at least 65% of their original investments, and debt talks have been at an impasse for months. Argentina, on the other hand, has proposed to repay just 25% of the US$88 billion it defaulted on in January 2002, in the throes of its worst-ever economic crisis. ============= B E R M U D A ============= ANNUITY & LIFE: Reports Full Year 2003 Net Loss of $132M -------------------------------------------------------- Annuity and Life Re (Holdings), Ltd. (NYSE: ANR) reported Monday its financial results for the three and twelve month periods ended December 31, 2003. In addition, it reported that it would restate its third quarter 2003 financial results to correct an accounting error related to its annuity reinsurance contract with Transamerica. While preparing its financial statements for the fourth quarter of 2003, the Company discovered an error in its previously reported results for the third quarter of 2003. In the third quarter, the Company incorrectly released approximately $3.8 million of liabilities associated with its Transamerica annuity reinsurance contract. The Company plans to file an amended Form 10-Q later this week. The amended filing will reflect an increase in previously reported liabilities and will reduce previously reported net income of $33,392 to a loss of $3,786,905, or a $3,820,297 reduction. Because the Company's policy is not to increase deferred acquisition costs previously amortized, the restatement of the third quarter financial results will not increase the amount of the deferred acquisition costs asset recorded by the Company at September 30, 2003 or at December 31, 2003. The Company also reported a net loss of $7,177,423 or $0.28 per fully diluted share for the three month period ended December 31, 2003 as compared to a net loss of $99,879,901 or $3.88 per fully diluted share for the three month period ended December 31, 2002. The net loss in the fourth quarter of 2003 was primarily the result of a $3.5 million loss from MetLife's recapture of its life reinsurance agreement with the Company, $1.6 million of reported claims in excess of those anticipated at the time of recapture on certain life reinsurance agreements that were recaptured earlier in the year, an increase in the Company's reserves for GMDB/GMIB exposure of $0.8 million, and the establishment of a $0.6 million reserve for estimated exposure to claims that have initially been denied by the Company's ceding companies but may ultimately be paid. These items were partially offset by a $1.8 million favorable change in the fair value of the embedded derivative associated with one of the Company's annuity reinsurance agreements. Net realized investment losses for the three month period ended December 31, 2003 were $101,432 or $0.00 per fully diluted share as compared with net realized investment gains of $8,935,951 or $0.35 per fully diluted share for the three month period ended December 31, 2002. The Company also reported a net loss of $132,155,584 or $5.11 per fully diluted share for the twelve month period ended December 31, 2003 as compared to a net loss of $128,887,285 or $5.01 per fully diluted share for the twelve month period ended December 31, 2002. The net loss for the twelve months ended December 31, 2003 includes the restatement of the Company's third quarter results discussed above. Unrealized gains on the Company's investments declined to $1,840,849 as of December 31, 2003 from $2,211,223 at September 30, 2003. The Company's investment portfolio currently maintains an average credit quality of AA. Cash used by operations during 2003 was $112,176,985 compared to $33,187,656 for 2002. At December 31, 2003, virtually all of the Company's invested assets were pledged as collateral for the benefit of its U.S. based cedents. Book value per share at December 31, 2003 and September 30, 2003 was $5.11 and $5.39, respectively. Tangible book value, which the Company defines as GAAP book value excluding deferred acquisition costs, was essentially unchanged at $2.50 at December 31, 2003 as compared to $2.56 at September 30, 2003. The figures provided for September 30, 2003 reflect the restatement described above. Jay Burke, Chief Executive Officer of the Company, commented, "This quarter's results, while a loss, reflect significant progress toward stabilizing our Company. We incurred a charge from the MetLife recapture, but have now put the MetLife contract and its related expense and resource drain behind us. While we received more death claims than we anticipated on a few treaties that were recaptured earlier this year, exposure to any additional deterioration on these treaties should be minimal. The MetLife recapture was effective May 5, 2003 so we already have seven months of claims reported to us. We regret that we had to restate our third quarter 2003 financial results. While the restatement increases our loss for the year, it is important to note that the restatement does not change our view that the Transamerica contract should breakeven or produce a very small profit in the future. We are still holding a large portion of our general account investment portfolio in very short duration assets because of the low interest rate environment and the risk that interest rates may rise. The low interest rate environment is hindering our ability to restructure our portfolio to improve our yield. We plan to continue to hold a relatively large portion of our assets in very short duration investments until interest rates rise or we conclude they are not going to rise in the foreseeable future. We expect our expense reduction efforts to begin taking hold in the second quarter of 2004. As of December 31, 2003 our unsecured letter of credit facility at Citibank stood at approximately $15.0 million. In February 2004, we fully secured our outstanding letters of credit with Citibank. We thank Citibank for their support through our more difficult times. Also in February, we paid Transamerica substantially all amounts it claimed were owed by the Company, subject to a $5.0 million offset for investment related expenses we felt were owed to us by Transamerica. Transamerica has demanded arbitration, asserting that the $5.0 million offset is not justified and that the Company owes interest on the amounts that Transamerica alleged were due. I continue to caution that the Company continues to face other significant issues as well. We still have the pending shareholder litigation, GMDB/GMIB exposure and unresolved collateral demands associated with our reinsurance agreement with CIGNA, and, while we have narrowed the gap in our dispute with Transamerica, we still have the economic exposure from that agreement to contend with. Now that the MetLife arbitration is resolved, we have begun a review of potential products that we may be able to market in the future. While we are in the early stages of assessing whether we can, should, or will begin selling new products, and while it may take time to come to fruition, the good news is we feel we are now in a position to at least consider the possibility. If we can reposition our general account investment portfolio to achieve a substantially higher yield within our investment guidelines, successfully defend ourselves against the shareholder class action suit, and improve the long run returns on the Transamerica portfolio, we believe we can achieve breakeven or a very modest profit in 2004. Our failure to achieve any one of these objectives could have a material adverse effect on our financial condition and results of operations." Life Segment Results Life segment loss for the three month period ended December 31, 2003 was $6,530,547, as compared with a segment loss of $71,034,774 for the comparable prior period of 2002. As mentioned above, major contributors to the current quarter's loss include a $3.5 million loss from Met Life's recapture of its life reinsurance agreement, $1.6 million of reported claims in excess of those anticipated at the time of recapture on certain life reinsurance agreements that were recaptured earlier in the year, and the establishment of a $0.6 million reserve for estimated exposure to claims that have initially been denied by the Company's ceding companies but may ultimately be paid. Annuity Segment Results Annuity segment income was $4,996 for the three month period ended December 31, 2003, as compared with a loss of $33,191,785 for the comparable prior period of 2002. The major contributor to the current quarter's income was a favorable change in the fair value of embedded derivatives of $1.8 million offset in part by an increase of $0.8 million in reserves for GMDB/GMIB exposure. Corporate Segment Results Corporate segment loss for the three month period ended December 31, 2003 was $651,872, as compared with segment income of $4,346,658 for the comparable prior period of 2002. The primary reason for the significant decline in income was a decrease in realized capital gains from $8,935,951 in the fourth quarter of 2002 to a realized loss of $101,432 in the current quarter. The fourth quarter of 2002 also includes approximately $4.5 million in costs associated with efforts to raise capital. To see financial statements: http://bankrupt.com/misc/ANNUITY_&_LIFE.pdf CONTACT: Annuity & Life Re (Holdings), Ltd. Jay Burke 441-296-7667 BERMUDA FIRE: Liquidators Seek to Revise Scheme Of Arrangements --------------------------------------------------------------- Over $200 million worth of claims by creditors of The Bermuda Fire & Marine Company Ltd could be settled sooner than expected, as its liquidators are set to propose for a change in the scheme of arrangements, the Royal Gazette reports. The proposal, which will be filed on April 1 in the High Court in Bermuda and on March 31 in London, will lay the legal foundation needed to make the earlier-than-expected payouts. Bermuda Fire, which went bankrupt in 1993 and led to one of the biggest corporate scandals in the Island's history, was said to owe approximately $1 billion to creditors at the time of its collapse. Creditors were expected to wait beyond 2015 to be paid as much of the recovered cash as possible. In the new proposal, the settlement date is put forward by nine years, from 2015 to 2006. Company liquidators want to pay out creditors early some $222 million within the next three years. This will take the total amount paid out to creditors to $300 million. They also put the estimate of ultimate liabilities--or the amount owed by the failed Bermuda Fire--at $823 million, down from the $1.2 billion registered in 1998, said the legal documents. "The liquidators and committee of inspection believed the proposed closure mechanism... provides the opportunity for scheme creditors to participate in the final settlement of all their respective claims against the company and will allow payment, in present value terms, of the maximum sum to the scheme of creditors in within the minimum appropriate time scale," the proposal states. Should the proposed changes get legal approval, a creditors meeting is scheduled to take place at the Fairmont Hamilton Princess on May 18 at 10 a.m., where they will vote on the early payout. According to the documents issued by the liquidators, creditors of Bermuda Fire have been paid out $84 million since July 1997, and a further $199 million is cash reserved for future distribution. The documents also state that they have realised assets of $222 million. BF&M directors paid out fifty million dollars in December 1999 as an out-of-court settlement when the liquidators sued the directors of the company. BF&M's directors accepted no wrongdoing for the case. The documents also state that reinsurance recoveries to date, including $51 million collected in the first quarter of 2004, total $283 and approximately 88 percent of the reinsurance programme has now been collected or commuted. The liquidators say that the current rate of distribution of funds is 33 percent and for 2006 it would be in the range of 53 to 63 percent. The Royal Gazette recalls that the Bermuda Fire & Marine Company Ltd. was incorporated in Bermuda through the Bermuda Fire and Marine Insurance Company Act in 1903 as a joint stock company with limited liability. In a controversial move in 1991, its local and international business were split, creating BF&M as the local insurance division, which still operates today, and leaving the debt- ridden international segment with the original name. Its international business was primarily reinsurance written between 1969 and 1983 through both Weavers and Driver underwriting agents in the UK, and between 1978 and 1985 through Bermuda London Underwriting Agency Ltd., underwriting agent in Bermuda. Bermuda Fire & Marine Company also wrote a smaller book of international business in Bermuda from 1964 to 1990. The principal type of business underwritten was liability insurance and reinsurance, including general and product liability for manufacturers, fidelity, directors' and officers', and in later years professional indemnity and medical malpractice. Following restructuring in 1991, the Company continued the run- off of its international business, paying agreed claims in the normal course, but over the next two years the company's financial position deteriorated and it ceased paying claims on October 15, 1993. The run-off of Bermuda Fire is managed by KWELM Management Services Ltd., a management company that was formed in December, 1992 to administer the run-off of the KWELM Companies. Bermuda Fire participated in the underwriting pools of HS Weavers (Underwriting) Agencies Ltd and CR Driver & Co. Ltd. between the years of 1969 and 1983; and between 1978 and 1985 through Bermuda London Underwriting Agency. Bermuda Fire also wrote a smaller book of international business in Bermuda from 1964 to 1990 CONTACT: J.C. McKenna, G.H. Hughes and L.A. Joaquin BFMIC Liquidators John Stow House 18 Bevis Marks, London EC3A 7JB UK Phone: +44 (0) 20 7645 4995 Fax: +44 (0) 870 600 7582 Clifford Chance LLP 10 Upper Bank Street, London E14 5JJ, UK Appleby Suprling & Kempe Canons Court 22 Victoria Street, PO Box HM 1179 Hamilton, Bermuda SEA CONTAINERS: Reports $111.4M Full Year 2003 Net Earnings ----------------------------------------------------------- Sea Containers Ltd. (NYSE: SCRA and SCRB, www.seacontainers.com) passenger and freight transport operator, marine container lessor, and leisure industry investor, announced Monday its results for the quarter and year ended December 31, 2003. For the quarter net earnings were $11.6 million ($0.54 per common share diluted) on revenue of $433.2 million, compared with net earnings of $14 million ($0.67 per common share diluted) on revenue of $409.7 million in the prior year period. For the year ended December 31, 2003 net earnings were $111.4 million ($5.20 per common share diluted) on revenue of $1.68 billion, compared with net earnings of $41.9 million ($2.08 per common share diluted) on revenue of $1.43 billion in 2002. Excluding gain on sale of ferry assets and non-recurring charges, net earnings in 2003 were $57.4 million, up 37% over 2002. EBITDA in 2003 was $319.5 million compared with $247.3 million in 2002. Mr. James B. Sherwood, President, said that results from passenger and freight transport operations at the EBIT level were $10 million less in 2003 than in 2002 as a result of sale of the Isle of Man Steam Packet Company in July, 2003, however, savings in finance costs were $10.6 million as a result of debt reduction through elimination of the Steam Packet debt and retirement of $136 million of senior notes using the proceeds from the sale. Silja's profits at the EBIT level declined from $54.1 million in 2002 to $42.9 million in 2003, partially as a result of consolidating 100% of the equity in that unit for all of 2003 while consolidating only 50% in the first four months of 2002 which is a loss making period. 2002 also benefited from a cruise ship charter termination payment and an arbitration award. GNER's profits at the EBIT level increased in 2003 to $84.1 million from $68.9 million in 2002 as a result of increased passenger volumes and compensation payments by Network Rail. 15.1 million passengers were carried, a record in the eight year period of the present franchise. EBIT from container leasing and related activities rose from $23.5 million in 2002 to $36 million in 2003, an increase of 53%. GE SeaCo, the company's 50-50 joint venture with GE Capital, placed on lease $204 million of new containers in 2003 and Sea Containers' fully owned factory, depot and service operations enjoyed greatly improved results. The company's property, plantations and publishing division reported profits at the EBIT level of $6.6 million, up 47% from $4.5 million in 2002. Land sales at the port of Newhaven and increased profits from the company's table grape plantation in Brazil were largely responsible for this improvement. The company's investment in Orient-Express Hotels Ltd. contributed $10.9 million to net earnings in 2003 compared with $14.7 million in 2002 as a result of lower earnings in the year and a lower shareholding compared with 2002. Sea Containers currently owns 14.4 million common shares in Orient-Express Hotels which have a current market value of approximately $270 million. Long term debt obligations declined from $1.8 billion at the end of 2002 to $1.6 billion at the end of 2003. Mr. Sherwood highlighted some current events which affect the company. First, discussions are at an advanced stage with the U.K. Strategic Rail Authority to pay them part of the settlement reached in 2003 with Network Rail with respect to Network Change arising from the Hatfield rail accident in October, 2000. This payment has been taken into account in the earnings reported by GNER for 2003. The proposed agreement would also release approximately $53 million of cash to Sea Containers which is being held to secure franchise obligations. Second, Sea Containers has reached an agreement in principle to acquire seven container businesses in Australia and New Zealand from the Owens Group and to sell its interest in the Westfield Container Depot in Auckland, New Zealand for a net amount of NZ$11.5 million (US$8 million). This investment is being made at an EBITDA multiple of about 3.5x and will greatly strengthen the company's participation in the refrigerated and tank container service and transport businesses in Australasia which are outside the GE SeaCo joint venture. Looking forward to 2004, Mr. Sherwood said that the following developments could be significant: 1. A severe shortage of steel in China has forced new container prices up by 25% in recent months and higher lease rates should follow both for new containers and existing containers. New containers are being rationed by manufacturers to all buyers, whether leasing companies or ocean carriers. Container lease rates for older containers are expected to rise rapidly until steel availability improves. This situation will probably reduce the on-take of new containers by GE SeaCo from the $204 million level achieved in 2003 to perhaps only $150 million in 2004. 2. Fuel prices are running at higher than expected levels although the company has generally been able to buy low sulphur heavy fuels for its fleet at acceptable prices. Of greater concern is the cost of gasoil which is used by the fast ferries and the gas turbine ship Finnjet in the second and third quarters of 2004. 3. The company is actively engaged in bidding for the new Integrated Kent commuter rail franchise as well as re-bidding for the GNER franchise which terminates in April, 2005. New franchise decisions are expected by the end of 2004. 4. The company is currently evaluating three possible additions to its ferry business portfolio. 5. The benefits of moving to seasonal fast ferry operation in the British Isles services will be realized in 2004. 6. The entry of the Baltic States into the European Union in May, 2004 is likely to increase passenger carryings on Silja's services to those countries and the Finnjet will inaugurate its new service between Germany, Estonia and Russia in mid year. 7. The outlook for Orient-Express Hotels is for an improved profit in 2004. "In sum, the earnings prospects for 2004 are encouraging," he concluded. Mr. Daniel J. O'Sullivan, Chief Financial Officer, highlighted positive financial news by reporting that Silja's $67 million of bonds falling due in February, 2004 have been redeemed with syndicated bank debt. He said Sea Containers plans to sell up to $150 million of new 10 year unsecured senior notes in April, 2004 to retire as soon as practicable $80 million of 12.5% debentures which mature in December, 2004 but which can be called today without premium. The balance of the funds has been earmarked for acquisitions, failing which it will be used for debt reduction or other corporate purposes. He said the roadshow in connection with the sale of the new notes would be helpful in bringing the company to the attention of new equity investors. Mr. O'Sullivan said that an additional $6 million non-recurring charge had been recognized in the fourth quarter of 2003 for old refrigerated containers which the company has decided not to refurbish for continued use. Mr. O'Sullivan noted that at the December, 2003 presentations to investors he had indicated the company's plan to reduce long term debt to $800 million by the end of 2006. He said this program was still achievable despite the planned new note issue if the market price of Orient-Express Hotels rises to $30 by then, which he considered a reasonable target. He confirmed that the company met all its financial lending covenants at the end of 2003. No registration statement or other qualification document relating to an offering of the proposed senior notes referred to in this news release has been filed with the U.S. Securities and Exchange Commission or any other securities regulatory authority. The senior notes may not be sold nor may any offer to buy be accepted prior to the time a registration statement or other qualification document has been filed and become effective or an applicable exemption from registration or qualification is available to Sea Containers. This news release does not constitute an offer to sell or a solicitation of an offer to buy in any jurisdiction. Also there can be no offer or sale of the senior notes in a state of the United States where the offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any state. Management believes that EBITDA (earnings before interest, tax, depreciation and amortization) is a useful measure of operating performance, to help determine the ability to incur capital expenditure or service indebtedness, because it is not affected by non-operating factors such as leverage and the historic cost of assets. However, EBITDA does not represent cash flow from operations as defined by U.S. generally accepted accounting principles, is not necessarily indicative of cash available to fund all cash flow needs and should not be considered as an alternative to earnings from operations under U.S. generally accepted accounting principles for purposes of evaluating results of operations. To see financial statements: http://bankrupt.com/misc/Sea_Containers.txt =========== B R A Z I L =========== CFLCL: Responds to Notice Issued by Shareholders ------------------------------------------------ In response to the "Notice" published March 02, 2004 in the "O Globo" newspaper by Fondelec Essential Services Growth Fund, L.P. and The Latin America Energy and Electricity Fund I, L.P. (collectively referred to as "Fondelec"), the company Companhia Forca e Luz Cataguazes-Leopoldina hereby states that: - To the company's surprise, there was no fresh news giving cause for Fondelec to publish the Notice. This was simply a desperate attempt to destabilize the market and to further hidden objectives, to the detriment of the Company, its minority shareholders and the market in general. - The Company refers once again to the Relevant Information it published concerning the sale of assets that generated funds of around R$ 80 million and a profit of some R$ 45.2 million, demonstrating the Company's financial capability to pay dividends in the 2003 fiscal year. - All the proposals submitted to the Extraordinary Shareholders' Meeting ("AGE") held on December 9th, 2003 had been previously analyzed and deemed to be in compliance with corporate law and the regulations governing the distribution of electricity by the respective regulatory agencies: Comissao de Valores Mobili rios - CVM (Brazilian Securities and Exchange Commission) and the Ag�ncia Nacional de Energia El�trica - Aneel (National Electricity Regulatory Agency). - The effectiveness of the aforementioned resolutions has been suspended by temporary legal rulings, which can still be overturned by the appeals that have already been lodged by the company. - Fondelec failed to mention in its Notice the speeches given to the Federal Senate by the right Hon Senator Mr. Eduardo Azeredo (PSDB/MG), on February 11, 2004 and by the right Hon. Senator Mrs. Maria do Carmo Alves (PFL/SE), on February 18, 2004, the first of which condemned the hostile attempt to take over the control of the Company and the second of which expressed concern at the control of the company moving to overseas companies and the maintenance of the services that are essential to the Brazilian population. Both Senators represent states in which the company operates either directly or through its subsidiaries. - It should be noted that a considerable number of minority preferred shareholders, who are traditional investors in the company, have also lodged appeals against the legal ruling, with a view to upholding the resolutions taken at the AGE and receiving their respective dividends. - The company is awaiting its appeals to be analyzed and judged, and has great faith in the Courts of the states of Rio de Janeiro and is confident that Truth and Justice will eventually prevail. CONTACT: In Cataguases Phone: +55 32 3429-6000 Fax: +55 32 3429-6480 / 3429-6317 In Rio de Janeiro Phone: +55 21 2122-6900 Fax: +55 21 2122-6931 Web site: http://www.cataguazes.com.br E-mail to: stockinfo@cataguazes.com.br EMBRATEL: MCI Execs Meet With Fixed-Line Telephone Firms' Reps -------------------------------------------------------------- Executives from MCI, formerly WorldCom Inc., met with representatives of the top three fixed-line telephone operators in Brazil last week to discuss the sale of Embratel Participacoes SA, Reuters reports, citing an unnamed source. MCI put Embratel on the block last November as part of a reorganization plan approved by a U.S. bankruptcy court. Spain's Telefonica , Brazil's Tele Norte Leste Participacoes (nyse:TNE) and Brasil Telecom Participacoes (nyse:BRP) have already said they plan to bid for Embratel's data transmissions division. However, analysts say the three companies may face regulatory challenges from Brazil's National telecommunications Agency (Anatel), or the government's Cade anti-monopoly body should they push on with a bid. Telos, the pension fund of Embratel workers, has also said it wants to buy control of the Company from MCI. Earlier this week, a source from Telmex (TMX.N) (TELMEXL.MX) revealed that Mexico's leading telephone company will bid for a controlling stake in Embratel. CONTACT: Silvia M.R. Pereira, Investor Relations Tel: (55 21) 2121-9662 Fax: (55 21) 2121-6388 Email: silvia.pereira@embratel.com.br invest@embratel.com.br USIMINAS: Ratings Unaffected by 2003 Results, Says S&P ------------------------------------------------------ Standard & Poor's Ratings Services said Monday that prospects for Usinas Sider�rgicas de Minas Gerais (Usiminas) remain in line with expectations and that its ratings on Usiminas will not be affected by the company's 2003 results. Usiminas' consolidated operating profitability remained strong in 2003, thanks primarily to the favorable export market environment (strong demand from China and high international prices). Credit measures improved continually through the past year thanks to stronger cash flow and some debt reduction in dollar terms (with total debt to EBITDA reaching 2.6x by year end). The company's strong cash generation should continue in 2004, even with some cost pressure in coal, coke, and iron ore, as steel prices are expected to remain high for the most part this year and Brazilian demand is also projected to improve gradually. Finally, debt reduction accomplished in 2003 and projected for 2004 will eventually lead to lower interest expenses (positive for credit measures), while initiatives to stretch debt tenors out in first-quarter 2004 will reduce exposure to short-term debt, as has already been factored into the ratings. ANALYST: Reginaldo Takara, Sao Paulo (55) 11-5501-8932 =============== C O L O M B I A =============== AVIANCA: Judge Delays Hearing Over Request for Extension -------------------------------------------------------- U.S. Bankruptcy Court Judge Allan Gropper delayed until March 26 a hearing at which Colombia's flagship airline Avianca will ask for an extension of a period to form a plan for emerging from bankruptcy, reports Reuters. The airline said it needed more time to continue negotiating with potential investors. Avianca attorney John Scott told the judge the airline has not yet received a "concrete proposal" from the investors. Should the request be granted, the deadline for submitting a restructuring proposal, now set for March 30, would be pushed back for the fifth time to April 30. U.S. bankruptcy law automatically gives a company that files for Chapter 11 protection four months to submit a reorganization plan for approval by creditors and the court. A judge may extend the period. Once the deadline has expired, creditors may submit their own plan. Avianca has a U.S. subsidiary, which allowed it to seek Chapter 11 proceedings last March to try to renegotiate at least $269 million in debt while continuing to operate. U.S. law is more generous with debtor companies than Colombian legislation. CONTACT: Aerovas Nacionales de Colombia S.A. Avenida Eldorado, No. 93-30 Bogota, Colombia Phone: +57-1-413-9511 Fax: +57-1-413-9702 Home page: http://www.avianca.com.co Contact: Vytis Didziulis, President Leonor Montoya, Chairman Nelson Gnecco, VP Administration and Finance AVIANCA: Union to Carry On Go-Slow Operation -------------------------------------------- Avianca faces another setback in its attempt to seek a new strategic partner and to present its restructuring plan in a New York bankruptcy court. According to Portafolio, the union representing the airline's pilots decided to resume its go-slow operation at the beginning of April. The decision was prompted by what the union describes as the failure of the Company to fulfill the agreements it entered into with regards to the workforce restructuring. The pilots considered the airline's plan to lay off 38 pilots as excessive and blamed bad administration for the current delays in the operations of Avianca. =========== M E X I C O =========== DESC: Announces Resolutions Adopted at its Shareholders Meetings ---------------------------------------------------------------- DESC, S.A. de C.V. (NYSE: DES; BMV: DESC) announced that the following resolutions were adopted by the applicable shareholders at Desc's Special Shareholders Meeting and General Ordinary and Extraordinary Shareholders Meeting, which were held Monday: 1) Approval of the mandatory conversion of all the issued and outstanding series "C" shares into series "B" shares and the cancellation of the corresponding registration of the series "C" shares in the Mexican National Registry of Securities (Registro Nacional de Valores). This resolution will be effective on March 16, 2004. Starting on such date, Desc's American Depositary Shares (ADSs), which are registered with the U.S. Securities and Exchange Commission and trade on the New York Stock Exchange, Inc., will represent 20 series "B" shares. 2) Approval of the voluntary conversion of series "A" shares into series "B" shares and the voluntary conversion of series "B" shares into series "A" shares, which conversions will be at the request of shareholders. The series "A" shares have not been, and will not be, registered under the United States Securities Act of 1933, as amended, nor under the securities laws of any jurisdiction outside of Mexico. Accordingly, the voluntary conversion will be offered solely in Mexico and shareholders of Desc in the United States will not be permitted to participate in the voluntary conversion. 3) Approval of the amendment to Desc's by-laws to, among other things, eliminate the foreign ownership restrictions on the series "B" shares. 4) Approval of an increase of Desc's capital stock of approximately 2.738 billion pesos (approximately US $248 million) by issuing 912,719,584 shares of common stock. As a result of the capital increase, holders of - series "A" shares will be entitled to subscribe for two series "A" shares for every 3 series "A" shares they own; - series "B" shares will be entitled to subscribe for two series "B" shares for every 3 "B" series shares they own; and - ADSs will be entitled to subscribe for 0.6667 ADS for each ADS such shareholder owns. Fractional ADSs will not be issued, and subscriptions will be rounded down to the next whole ADS. As a result, holders of ADSs will need to own at least two ADSs in order to receive one whole ADS. - The subscription price is 3.00 pesos per share. With respect to the capital increase, Desc entered into a Stock Subscription Cooperation Agreement with Inversora Burs til, S.A. de C.V., Casa de Bolsa, Grupo Financiero Inbursa. Subject to certain conditions, this Agreement establishes that, if shareholders do not subscribe for all of the shares resulting from the capital increase, Desc will offer and Inbursa (on its own or through third parties) will subscribe for such unsubscribed shares up to $2 billion pesos, at the same price of 3.00 pesos per share. The rights to subscribe for additional shares are offered solely in Mexico. The exercise of these rights may be restricted by applicable law in jurisdictions outside Mexico. The company has made it clear that the subscription rights offered or sold have not been and will not be registered in the US under the Securities Act of 1933, as amended. This rights offering is made for the securities of a Mexican company. The offer is subject to the disclosure requirements of a Mexican company that are different from those of the United States. It may be difficult for you to enforce your rights and any claim you may have arising under the federal securities laws, since the issuer is located in Mexico, and some or all of its officers and directors may be residents of Mexico. You may not be able to sue a foreign company or its officers or directors in a foreign court for violations of the U.S. securities laws. It may be difficult to compel a foreign company and its affiliates to subject themselves to a U.S. court's judgment. DESC, S.A. de C.V. (NYSE: DES; BMV: DESC) is one of the largest industrial groups in Mexico, with 2003 sales of approximately US$ 2 billion and nearly 14,000 employees, which through its subsidiaries is a leader in the Automobile Parts, Chemical, Food and Property sectors. CONTACTS: Arturo D'Acosta Ruiz Marisol Vazquez Mellado Jorge Padilla Ezeta Tel: (5255) 5261-8044 E-mail: jorge.padilla@desc.com.mx Maria Barona Melanie Carpenter Tel: 212-406-3690 E-mail: desc@i-advize.com URL: http://www.desc.com.mx GRUPO MEXICO: Fitch Removes Rating from Watch Negative ------------------------------------------------------ Fitch Ratings affirms the 'B-' local and foreign currency ratings assigned to Grupo Mexico S.A. de C.V. (Grupo Mexico) and removes the ratings from Rating Watch Negative. The Rating Outlook is now Stable. In addition, Fitch affirms the following ratings for Grupo Mexico's subsidiaries: Minera Mexico S.A. de C.V. (Minera Mexico) --Senior secured local currency, 'B'; --Senior secured foreign currency, 'B'. Southern Peru Copper Corporation (SPCC) --Senior unsecured foreign currency, 'BB-'. Asarco Inc. (Asarco) --Senior unsecured rating, 'CCC'. Grupo Ferroviario Mexicano, S.A. de C.V. (GFM) --Senior unsecured local currency, 'BBB-'; --Senior unsecured foreign currency, 'BBB-'. In conjunction with these rating actions, Fitch has assigned a 'B' senior unsecured rating to Americas Mining Corporation (AMC), a wholly-owned subsidiary of Grupo Mexico that is the direct parent company of Minera Mexico, Asarco, and Southern Peru Copper Corporation (SPCC). Grupo Mexico's 'B-' rating reflects the company's high leverage. As of Dec. 31, 2003, Grupo Mexico's consolidated debt totaled about $3.1 billion while total EBITDA was $690 million. In 2003, the company's ratio of total debt-to-EBITDA was 3.5 times(x) while interest coverage, as measured by EBITDA/interest expense, was 4.4x. On a non-consolidated basis, Grupo Mexico has about $80 million of bank debt due in 2004-2005. This holding company debt is serviced primarily by the dividends Grupo Mexico receives from its railway subsidiary, Grupo Ferroviario Mexicano, S.A. de C.V. (GFM), which accounted for about 30% of GM's consolidated EBITDA in 2003. GFM's 'BBB-' local and foreign currency ratings are supported by the company's solid competitive position, strong cash flows and modest leverage. As a result of the recent financings, GFM's ratio of total debt-to-EBITDA increased to 2.3x at Dec. 31, 2003, from 1.7x at year-end 2002, and EBITDA to interest expense decreased to 6x at Dec. 31, 2003, from 27x in 2002. The level of total debt of about $480 million is not expected to increase significantly in the future, as both GM and Union Pacific Railroad (Union Pacific), a minority shareholder, believe the company is appropriately capitalized. Union Pacific has indicated to Fitch that it will not approve further debt increases. It has the ability to control through a very restrictive shareholders agreement. Fitch's 'B' rating of AMC, a direct subsidiary of Grupo Mexico, reflects its high leverage as measured by the ratio of total consolidated debt-to-EBITDA of about 5.2x. This company's debt obligations are met primarily with dividends from SPCC. SPCC is the financially strongest and lowest-cost mining asset held by AMC due to its low leverage and very competitive cost structure. This enables SPCC to support AMC's debt obligations with dividends during troughs in the price cycle for copper. AMC is rated one notch higher than its parent, Grupo Mexico, since AMC's largest debt obligation is secured by its 54% stake in SPCC. As of Dec. 31, 2003, AMC's total consolidated debt, including that of its mining subsidiaries, totaled approximately $2.6 billion while consolidated EBITDA totaled approximately $500 million. Debt at the AMC level only, totaled approximately $502 million. During 2003, a year in which copper prices averaged 82 cents per pound, SPCC generated $290 million of EBITDA. The company ended 2003 with $295 million of cash and marketable securities and $350 million of total debt. SPCC's ratio of total debt-to-EBITDA was 1.2x at Dec. 31, 2003 and the ratio of EBITDA-to-interest expense was 16.5x. SPCC should continue to generate healthy cash flows in 2004, especially under the current environment of high prices, as every one-cent rise in copper generates about $8 million in additional EBITDA for the company. Fitch rates SPCC's foreign currency debt 'BB-'. This rating is constrained by the 'BB-' foreign currency rating of Peru. Fitch's 'B' rating of Minera Mexico's obligations continue to reflect the company's high leverage post its debt restructuring in April 2003. At year-end 2003, the company's total debt was approximately $1.3 billion. Minera Mexico's EBITDA improved to $190 million in 2003 from $106 million in 2002. As a result, its ratio of total debt-to-EBITDA decreased to 7.3x from 13x in 2002, while interest coverage, as measured by EBITDA/interest expense increased to 1.8x from 1x in 2002. On average, it is expected that Minera Mexico's EBITDA will increase by about $7 million for every one-cent increase in average copper prices vis-a-vis 2003. On Feb. 3, 2004, Grupo Mexico announced that it had presented a proposal to SPCC shareholders to sell all of its interest in Minera Mexico to SPCC in return for additional shares in SPCC. The proposal is pending discussion and approval by SPCC shareholders and is expected to be a cashless stock-for-stock transaction. The possible acquisition of Minera Mexico by SPCC holds the potential to improve the credit profile of Minera Mexico by facilitating the refinancing of Minera Mexico's currently restrictive debt agreements that were the result of the restructuring completed early last year. Refinancing of this debt, given the current high copper price environment, would provide Minera Mexico with increased financial flexibility and allow it to both reduce its debt and to invest in projects that enhance free cash flow. If the proposed merger transaction were not cashless, and Minera Mexico's debt were rebalanced between it and SPCC, SPCC's underlying credit quality would be weakened considerably. It is not expected that it would be weakened enough, however, to result in a downgrade of the company's foreign currency rating. Fitch's 'CCC' rating of Asarco's debt obligations reflects the substantial uncertainty regarding the company's potential environmental lawsuits, as well as its inability to generate significant cash flow due to its high cash cost of production. In 2003, Asarco generated revenues and EBITDA of $360 million and $17 million, respectively. For each additional one-cent increase in copper prices, Asarco's EBITDA should increase by about $4 million. Currently copper is above $1.30/lb. and has averaged about $1.17/lb. in the first two months of 2004, a dramatic increase over the 2003 average of $0.81/lb. and the 2002 average of just $0.71/lb. CONTACT: Anita Saha, CFA, +1-312-368-3179, Chicago Joe Bormann CFA, +1-312-368-3349, Chicago Alberto Moreno, +55-8-8335-7179, Mexico MEDIA RELATIONS: James Jockle +1-212-908-0547, New York HYLSAMEX: Forecasts 1Q04 Ebitda of Up to $80M --------------------------------------------- Mexican steel company Hylsamex's stock soared 14.72% to finish at MXN9.90 Monday after it said it expected earnings before interest, taxes, depreciation and amortization (EBITDA) to surge in the first quarter of 2004, reports Reuters. Hylsamex said its EBITDA for the first quarter could come in between US$70 million and US$80 million, an increase of between 50 and 70 percent over both the last quarter of 2003 and the year-ago period, boosted by higher steel prices. Monterrey-based conglomerate Alfa SA (ALFA.MX) recently spun off 39% of its 90% stake in Hylsamex, and plans to spin off the rest of the stake in early 2005. On Monday, Hylsamex said that its role as a value-added steel maker is allowing it to fully take advantage of a favorable pricing environment. Hylsamex, which accounted for just over one-quarter of Alfa's sales, was hard hit by the 2000 world steel industry slump and soaring natural gas prices in North America. Last year, the Company completed the restructuring of its US$1 billion debt, and began to benefit from a recovery in global steel markets. "Hylsamex remains cautiously optimistic for the remainder of 2004 as a result of pricing and volume trends observed thus far," the company said Monday. ================= V E N E Z U E L A ================= PDVSA: VP Leaves Post, Yet to Name Replacement ---------------------------------------------- Venezuelan Oil Minister Rafael Ramirez announced that Aires Barreto has resigned from his post as vice president of Petroleos de Venezuela SA (PDVSA) due to personal reasons, Dow Jones Newswires relates. In a statement to the Venpres state news agency, Minister Ramirez explained that Mr. Barreto's resignation "has nothing to do with a political position, but with strictly personal matters." He also thanked Mr. Barreto for standing by the administration of President Hugo Chavez during an oil strike that lasted from December 2002 to February 2003. The strike, which was an attempt to pressure President Chavez out of office, fizzled out and resulted in the layoff of some 19,000 PDVSA employees who have walked off their jobs. A PDVSA spokesman said the Company hasn't yet named a replacement for Barreto, who, according to local press reports, is in India where his father recently passed away. TELCEL BELLSOUTH: No Regulatory Issues to Block Telefonica Deal --------------------------------------------------------------- Telcel BellSouth, the Venezuelan unit of U.S. telecommunications firm BellSouth Corp., sees no regulatory hurdles in Spanish mobile company Telefonica Moviles' (TEM) plan to purchase BellSouth's Venezuelan assets. "There should not be any problems," Aide Cisneros de Salas, Telcel's vice president of public relations, said. "All the regulations in all the countries are being complied with." Venezuelan telecommunications watchdog Conatel wasn't immediately available for comment on the deal. Telcel BellSouth is Venezuela's leading cellular provider, with over 3 million clients at the end of 2003. *********** 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. 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