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/raid1/www/Hosts/bankrupt/TCRLA_Public/040318.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 Thursday, March 18, 2004, Vol. 5, Issue 55 Headlines A R G E N T I N A BANCO SUQUIA: Bidding Terms Expected for Auction CORREO OFICIAL: Officials Reiterate Re-Privatization Plans MULTICANAL: US Court Throws Out ARC's Motion TRANSENER: Dolphin Fund Acquires Additional Stake * Argentina Gets Into Another Round of Conflict With IMF * Argentine Central Bank Steadfast On Monetary Policy B E R M U D A CENTRE SOLUTIONS: S&P Lowers Ratings, On CreditWatch Developing CENTRE SOLUTIONS: A.M. Best Lowers Strength Ratings GLOBAL CROSSING: Expands Existing Wavelength Agreement LORAL SPACE: Immediate Repayment Doubtful for Secured Creditors LORAL SPACE: Satellite Crash May Hinder Brazilian Operations LORAL SPACE: Reaches Settlement Agreement with PanAmSat B R A Z I L AES CORP.: Board Nominates Three New Independent Directors EMBRATEL: Weil, Gotshal & Manges Advises MCI Sale to TELMEX EMBRATEL: Fitch Affirms TELMEX Ratings After Acquisition EMBRATEL: Assumes Eletropaulo's Services GERDAU: Fitch Forecasts Ratings Likely to Improve PARMALAT BRASIL: Sends Workers Home as Sales Drop PARMALAT FINANZIARIA: Outlines Industrial, Debt Plan VARIG: Aerolineas Signs LoI to Buy Pluna Stake C H I L E INVERLINK: SVS Head Disappointed With Final Ruling TELEFONICA CTC: Subtel Announcement Puts Pressure on Stock Price E C U A D O R PETROECUADOR: In Oil Supply Talks With PDVSA, Ecopetrol M E X I C O CYDSA: Restructures $192.6M Debt EMPRESAS ICA: Ratings Remain on CreditWatch Positive TFM: KCR Braces For Further Rating Cuts N I C A R A G U A PARMALAT NICARAGUA: Loan Saves Assets From Impending Auction U R U G U A Y ANCAP: Regulator Scrutinizing LPG Distribution Proposal V E N E Z U E L A PDVSA: Dir. Urges US, Industry Leaders to Up Refinery Capacity - - - - - - - - - - ================= A R G E N T I N A ================= BANCO SUQUIA: Bidding Terms Expected for Auction ------------------------------------------------ Banco Nacion has come up with some bidding rules for the upcoming auction of local bank Nuevo Banco Suquia, say sources inside Argentina's federal bank. Nacion, which took over Suquia after French bank Credit Agricole abandoned Argentina during the 2002 financial crisis, has developed a points system that will be used to evaluate the technical conditions; the plan to maintain personnel; the integration of capital; and the plan of negotiation and adaptation, according to sources. "The scheme leaves open the possibility of improving the offer," say sources. Some local investors have already expressed interest in the sale, approaching Banco Nacion for auction details. Majority of these interested investors are concerned whether how different the upcoming auction will be from the last one, which was abandoned as the submitted bids were deemed unacceptable. CORREO OFICIAL: Officials Reiterate Re-Privatization Plans ---------------------------------------------------------- The Argentine government is maintaining its plan to reprivatize the state-run postal service formerly known as Correo Argentino SA in May, Dow Jones reports, citing Correo's official receiver Eduardo Di Cola. Mr. Di Cola said that Correo Oficial Argentino - as it is currently known - is set to return to private ownership within the 180-day deadline set when the government revoked private company Correo Argentino SA's concession in November 2003. A mixed system, in which the state retains a partial stake, would be best, Mr. Di Cola suggested. In the meantime, Mr. Di Cola declined to give more details on the prospective parties or the tender process. However, he said the future ownership structure "should avoid a monopoly." Correo Argentino SA's market share is about 38%. "A monopoly would not be good," Mr. Di Cola said. "Let's avoid all possibility of a market where one player dominates." The official's comments suggest that he would prefer a buyer other than Correo Argentino SA's main competitor, OCA, which also has a 38% market share. OCA hasn't made any public statements about whether it is interested in bidding for Correo Argentino's former postal services. MULTICANAL: US Court Throws Out ARC's Motion -------------------------------------------- Argentine cable operator Multicanal SA overcame one of several hurdles in its efforts to restructure US$500 million in debt. Dow Jones reports that a U.S. bankruptcy court ditched Tuesday a motion filed by one of Multicanal's bondholders, Argentinian Recovery Company LLC (ARC), to dismiss a Section 304 petition filed by Multicanal in January. The Section 304 petition allows foreign debtors to ask a court to stay actions against companies or assets in the U.S. ARC, which holds US$157 million or 31% of Multicanal's US$500- million debt, sought to dismiss the petition arguing that Multicanal sold its bonds in the U.S. with the promise that it would settle any conflicts over the obligations in U.S. courts. Even before Multicanal filed the protective Section 304 petition, ARC had filed an action in New York state court asking to have its federal bondholder rights declared. The state court action, which has since been replaced by the Section 304 proceeding, was a direct challenge to Multicanal's out-of-court agreement, or APE as it is known by its Spanish acronym, which requires two-thirds creditor agreement under Argentine law before it can achieve judicial approval. In a filing to the Buenos Aires stock exchange Tuesday, Multicanal said the federal judge determined in a March 12 ruling that ARC's U.S.-based creditor rights can't be affected by a "foreign bankruptcy proceeding." This refers to the Argentine APE process, which ARC has decried as a mechanism that violates its rights and gives Multicanal an unfair advantage in the restructuring. In an APE, two-thirds creditor agreement and subsequent legal approval allows a company to impose its restructuring terms on all creditors, even hold-outs. Multicanal's APE has come under fire from its bondholders, since the Company obtained a special reading of the bankruptcy law that allowed it to take a vote from creditors who attended a meeting in Buenos Aires, rather than a vote from the entire universe of creditors. The Argentine judge overseeing Multicanal's APE is currently reviewing formal objections filed by seven creditors, including ARC. Those objections are seen focusing on the way the company counted its votes. Also remaining in play is an involuntary bankruptcy petition that ARC and two other bondholders filed in the U.S. in response to Multicanal's Section 304 petition. ARC is composed of US-based private equity funds, pension funds and individual bondholders. W.R. Huff is the group's financial advisor and is at the same time one of Multicanal's most important creditors. TRANSENER: Dolphin Fund Acquires Additional Stake ------------------------------------------------- Argentine investment group Dolphin Fund Management SA has agreed to acquire an additional 42.49% stake in local electricity transporter Transener SA. Dolphin, a founding shareholder of Argentine property development company IRSA-Inversiones Representaciones SA, already owns 7.14% of Transener and is about to take a controlling interest in the electricity transporter by taking National Grids 42.49% stake. The deal is believed to be valued between US$13 million and US$16 million. Transener's other large shareholder is Argentine energy company Petrobras Energia SA. Transener is Argentina's leading transporter of high voltage electricity. When Brazilian energy giant Petroleo Brasileiro SA, or Petrobras, bought Argentine energy company Perez Company SA in 2003, Petrobras agreed to divest its 49.9% Transener holding to soothe the Argentine government's concerns of an important power company passing into foreign hands. Petrobras has not set a timeframe for the Transener sale, citing the Argentine governments longstanding freeze on power rates as a complication. Transener has to renegotiate US$470 million in debt, in default since April 2002. * Argentina Gets Into Another Round of Conflict With IMF -------------------------------------------------------- In what is seen as the beginning of the next round in negotiations to secure US$12.55 in aid, Argentina publicly quarreled with the International Monetary Fund Tuesday over the country's budgetary spending levels, reports Reuters. Argentina, said Acting IMF head Anne Krueger Tuesday, needs to raise its primary budget surplus to over 3 percent of gross domestic product to guarantee growth and a return to world markets. "An increase in the primary surplus will help growth," Krueger told Argentine daily Clarin in an interview, indicating the budget surplus target agreed for 2004 of 3 percent of GDP -- which excludes debt interest payments -- was a minimum figure. The government, which has joined Brazil in calling for more flexible fiscal targets in loan accords that do not stymie economic expansion, immediately decried Krueger's comments. "We agreed on a 3 percent (of GDP) surplus for 2004 and we ought to keep this 3 percent for 2005," Interior Minister Anibal Fernandez told local TV. Fernandez often acts as a spokesman for the government. President Nestor Kirchner has previously said the government does not want to change the 3 percent budget surplus target in the coming years. Ms. Krueger's remarks is seen as a sign that Latin America's No.3 economy will face increasing pressure from the IMF to raise the surplus going forward as a condition for the three-year, $12.55 billion aid package from the fund. U.S. and German government officials have also called for a wider surplus, which would be a vital sign of the government's capacity to pay its foreign debt. The government is facing a third review in June of its economic policy. The IMF board is likely to pass a second review this month, but only after weeks of tense talks in which Argentina threatened a damaging default with the lender. In January 2002, Argentina defaulted on US$88 billion in debt and talks to repay creditors are another issue seen as a condition for continued loan deals with the IMF, one of the country's last sources of aid. Meanwhile, President Kirchner has complied with one of the IMF's demands by signing a decree naming three international investment banks to help manage its $88 billion debt restructuring. The banks are Barclays Capital (BARC), UBS AG (UBSN) and Merrill Lynch (MER). * Argentine Central Bank Steadfast On Monetary Policy ----------------------------------------------------- Despite the Argentinean Government's payment Tuesday of US$3.1 billion to the International Monetary Fund (IMF) that resulted in the reduction of its reserves, the Argentine Central Bank will not modify its monetary policy. The government, according to a BAE report, believes that funds channeled to the IMF will likely reappear within two weeks, thus allowing the country's monetary framework to return to levels prior to March 9. The payment also caused a ARS3.34-billion drop in the monetary base - the total amount of pesos circulating in the domestic economy - due to the fact that part of the resources used to pay the IMF came from the Treasury. With the excess of liquidity in the system, the Central Bank explained, the fall in the monetary base will not alter its balance, so the foreseen dollar purchase scheme and the issue of Central Bank Letters (Lebac) will not be modified. As the demand for transactional funds are still covered, the prospect that the debt payment will generate pressure on interest rates has already been ruled out by the Central Bank. ============= B E R M U D A ============= CENTRE SOLUTIONS: S&P Lowers Ratings, On CreditWatch Developing --------------------------------------------------------------- On March 16, 2004, Standard & Poor's Ratings Services lowered its counterparty credit and financial strength ratings on Centre Solutions (Bermuda) Ltd. and related operating companies (collectively referred to as Centre) to 'BBB-' from 'A-'. These ratings remain on CreditWatch with developing implications. At the same time, Standard & Poor's removed from CreditWatch its financial strength rating on Centre Reinsurance (U.S.) Ltd. (CRUS) and raised it to 'A+' from 'A-' to reflect the receipt from Zurich Insurance Co. of a guarantee of all CRUS payment obligations arising under the terms of any and all insurance and reinsurance contracts issued by CRUS. Because of the guarantee, Standard & Poor's also withdrew the 'A+' counterparty credit rating on CRUS. The outlook on CRUS is stable. In addition, Standard & Poor's lowered its financial enhancement ratings on Centre Solutions (Bermuda) Ltd., ZC Specialty Insurance Co., Centre Solutions (U.S.) Ltd., Centre Insurance International Co., and Centre Solutions (Asia) Ltd. to 'BBB-' from 'A-' and then withdrew them. All of these ratings were placed on CreditWatch on Sept. 16, 2003, pending the resolution of the form of explicit parent support by one of Zurich Financial Services group's core operating entities. Standard & Poor's lowered the ratings on Feb. 18, 2004, because of Centre's poor operating performance, weakened capitalization, and Standard & Poor's continued concerns about Centre's reserve adequacy. The ratings previously reflected the expectation that Zurich Insurance Co. (ZIC) would provide explicit support in the form of a net worth maintenance agreement or guarantee of all rated subsidiaries. The ratings on Centre were lowered Tuesday because ZIC has elected to only guarantee one subsidiary, Centre Reinsurance (U.S.) Ltd. The ratings on Centre reflect Standard & Poor's present view of the consolidated financial strength of the group and are subject to change as the companies' assets and liabilities are evaluated on a stand-alone basis. The ratings remain on CreditWatch with a developing outlook pending the assignment of stand-alone ratings and further evaluation of forms of capital support that are expected to remain in place. Major Rating Factors -- Explicit support from ZIC. ZIC has provided a guarantee for obligations of Centre Reinsurance (U.S.) Ltd. Notwithstanding the withdrawal of the financial enhancement ratings on Centre companies, Standard & Poor's continues to expect ZIC to ensure that contracts written to date under the financial enhancement rating will be honored and paid on a timely basis, irrespective of legal precedents and commercial disputes. ZIC is not committed to retaining all of Centre's businesses. -- Poor operating performance. Centre's operating performance over the past two years has been poor, with net losses of $625 million wiping out cumulative retained earnings at the beginning of 2002. Through the third quarter of 2003, Centre realized a net loss of $432 million, including reserve charges of $485 million. -- Liquidity risk related to trigger event exposure. Centre has ratings trigger exposures in its balance sheet. -- Severely weakened capital position. Centre's shareholders' equity declined to $620 million as of Sept. 30, 2003, from $914.9 million at year-end 2002, notwithstanding capital contributions of $225 million received through the third quarter of 2003. ZIC funded an additional $250 million in the first quarter of 2004. The quality of capital is also weak because the balance sheet has high amounts of deferred acquisition costs, deferred tax assets, and reinsurance recoverables. -- Concerns about reserve adequacy. Based on considerable 2003 reserve strengthening, concerns about Centre's reserve adequacy persist. -- Uncertain business position. The commitment of ZFS to Centre's already much reduced business is uncertain, and large parts of the business are in run-off. Ratings List TO FROM Centre Insurance Co. Centre Reinsurance International Co. Centreline Reinsurance Ltd. Centre Reinsurance Ltd. Centre Life Insurance Co. Counterparty credit rating BBB-/Watch Dev/-- A-/Watch Dev/-- Financial strength rating BBB-/Watch Dev A-/Watch Dev ZC Specialty Insurance Co. Centre Insurance International Co. Centre Solutions (Asia) Ltd. Centre Solutions (U.S.) Ltd. Counterparty credit rating BBB-/Watch Dev/-- A-/Watch Dev/-- Financial strength rating BBB-/Watch Dev A-/Watch Dev Financial enhancement rating NR A-/Watch Dev Centre Solutions (Bermuda) Ltd. Counterparty credit rating BBB-/Watch Dev/-- A-/Watch Dev/-- Financial strength rating BBB-/Watch Dev A-/Watch Dev Financial enhancement rating NR A-/Watch Dev Centre Reinsurance (U.S.) Ltd. Counterparty credit rating NR A-/Watch Dev/-- Financial strength rating A+/Stable A-/Watch Dev CENTRE SOLUTIONS: A.M. Best Lowers Strength Ratings --------------------------------------------------- On March 12, A.M. Best Co. downgraded the financial strength rating to B+ (Very Good) from A- (Excellent) of Centre Solutions (Bermuda) Ltd (Hamilton, Bermuda) (Centre) and its operating subsidiaries. The under review status for all ratings has been changed to negative from developing. On November 24, 2003, A.M. Best downgraded Centre's financial strength rating to A- (Excellent) from A (Excellent) and changed the under review implications to developing. At that time, A.M. Best had expressed concerns with regard to the adequacy and nature of capital support to be provided to Centre from its parent company, Zurich Financial Services Group (ZFS) (Zurich, Switzerland). Subsequently, ZFS did provide an additional $250 million of capital to Centre, increasing its overall shareholders' equity to approximately $900 million as of February 29, 2004. However, in A.M. Best's opinion, while the additional capital provided improvement to Centre's risk-adjusted capitalization, the company may continue to be exposed to further adverse loss reserve development from discontinued classes of business. A.M. Best believes that additional capital may be necessary to insulate Centre from its historical business exposures. The current downgrade reflects the lack of adequate and timely capital support to maintain Centre's previous A- (Excellent) rating. As a result, A.M. Best believes there is increased uncertainty regarding Centre's future as a viable underwriting entity within ZFS. Furthermore, in A.M. Best's opinion, Centre's operations are now ancillary to ZFS and are essentially in run off. Resolution of the current under review status is predicated on the completion of further due diligence by A.M. Best on Centre's current loss reserve and liquidity positions. The following financial strength ratings have been downgraded to B+ (Very Good) from A- (Excellent): -- Centre Solutions (Bermuda) Ltd -- Centre Insurance International Company -- Centre Reinsurance International Company -- Centre Reinsurance Limited -- Centre Solutions (US) Ltd -- CentreLine Reinsurance Limited -- Centre Solutions (Asia) Ltd -- Centre Insurance Company -- ZC Specialty Insurance Company -- Centre Life Insurance Company A.M. Best Co., established in 1899, is the world's oldest and most authoritative insurance rating and information source. For more information, visit A.M. Best's Web site at www.ambest.com. GLOBAL CROSSING: Expands Existing Wavelength Agreement ------------------------------------------------------ Building on its three-year relationship with Limelight Networks, a leading end-to-end digital delivery network, Global Crossing (NASDAQ: GLBC) announced Tuesday that it is providing a seven- location wavelength delivery network to support Limelight Networks' growing media distribution services. By selecting Global Crossing's Wavelength Service, Limelight Networks gains reliable, uninterrupted and virtually jitter-free delivery for its rich content delivery. Limelight Networks provides digital delivery for many of the world's leading media, entertainment and Internet companies, including IFILM, BuyMusic.com, Musicmatch, Real Networks, RadioFree Virgin, Valve Software, and Quepasa.com, as well as leading television and radio broadcast networks. "The digital media experience is predicated on uninterrupted, high-speed delivery, and Global Crossing's Wavelength Service enables us to offer our customers an outstanding listening, viewing, or gaming experience," said Nathan Raciborski, Limelight Networks' co-founder and network architect. "With our ongoing relationship and Global Crossing's network quality, they became an obvious choice to build our private backbone as part of our migration to a single-AS worldwide." "Our relationship with Limelight Networks continues to grow along with their success as a digital delivery provider," said Ted Higase, Global Crossing's executive vice president, carrier sales. "Our network and solutions are designed to enable providers like Limelight Networks to meet the stringent demands of delivering rich media today." Global Crossing's Wavelength Service is a flexible alternative to dark fiber and traditional capacity services, providing bandwidth on demand, expanded market coverage and increased speed to market, cost-effectively. It supports applications including MPLS based IP, SONET and ATM while eliminating unnecessary overhead and functional duplication across the network. Limelight Networks has been using Global Crossing's IP Transit for content transport since 2001. Global Crossing's IP Transit leverages Global Crossing's worldwide Tier One, Single AS number network, which utilizes more than 195 private peering points with capacity of more than 75 Gbps for high-performance, always- on, easily scalable high-speed connectivity to the Internet. As a corporate connectivity provider, Limelight Networks also benefits from Global Crossing's uCommandr Customer Service Portal. uCommandr is a unique offering that delivers 24x7 self- service autonomy to customers. This secure, private Web-based network management tool allows Limelight Networks to order data services, monitor its network, create utilization reports, establish end-user and product accounts, and view monthly billing reports. All of Global Crossing's services are delivered through a streamlined global delivery model that offers customers prompt procurement and provisioning. Premier dedicated customer service is provided from state-of-the-art network operations (NOCs) and call centers worldwide on a 24-hour basis, seven days a week. This delivery model supports Global Crossing's mission to become the market leader of global data and IP services building upon Global Crossing's unique network and technology advantages. ABOUT LIMELIGHT NETWORKS Privately-held Limelight Networks is the first comprehensive digital delivery network, providing essential media routing and distribution solutions that include live and on-demand streaming media, content delivery, storage and hosting as well as Tier-1+ bandwidth services. Leveraging an efficient network architecture with strategic distribution points around the globe combined with powerful content management and reporting tools, Limelight Networks enables some of the industry's top content providers, webcasters and enterprise customers to reduce the cost and complexity of delivery while ensuring unmatched performance. Limelight Networks' innovative delivery platform has been proven to dramatically cut the costs associated with e-commerce, distance learning, online entertainment and corporate connectivity. Web site: www.llnw.com ABOUT GLOBAL CROSSING Global Crossing (NASDAQ: GLBC) provides telecommunications solutions over the world's first integrated global IP-based network. Its core network connects more than 200 cities and 27 countries worldwide, and delivers services to more than 500 major cities, 50 countries and 5 continents around the globe. The company's global sales and support model matches the network footprint and, like the network, delivers a consistent customer experience worldwide. Global Crossing IP services are global in scale, linking the world's enterprises, governments and carriers with customers, employees and partners worldwide in a secure environment that is ideally suited for IP-based business applications, allowing e- commerce to thrive. The company offers a full range of managed data and voice products including Global Crossing IP VPN Service, Global Crossing Managed Services and Global Crossing VoIP services, to more than 40 percent of the Fortune 500, as well as 700 carriers, mobile operators and ISPs. LORAL SPACE: Immediate Repayment Doubtful for Secured Creditors --------------------------------------------------------------- Loral Space & Communications Ltd. is highly unlikely to immediately repay its secured debt, the Bermuda-based company's committee of unsecured creditors indicated in documents filed with the US Bankruptcy Court in New York. Citing the documents, Bloomberg News reports that Loral Space will receive US$170 million less from a sale of satellites to Intelsat Ltd. than Loral originally reported. Loral earlier announced through company spokesman John McCarthy that the satellites could go for as high as US$1.1 billion, which the Company had intended to use for the full repayment of almost US$1 billion in secured debt and still have US$160 million in cash left over, the committee said. Labeled by the creditors as a "tremendous disappointment," the price difference means Loral would be unable to repay its secured debt immediately. The committee said it didn't know the reason for the shortfall. "It is inexcusable that the company's management has permitted more than $170 million of proceeds to slip through its fingers," the committee said in court documents. Whether as a result of a failure in understanding its business or a failure to perform, this tremendous loss of value for the estate is directly attributable to the current stewards of the process." The committee also asked the court for permission to file its own restructuring plan to get Bermuda-based Loral out of bankruptcy. For its part, Loral is set to file in court a response to the committee's assertions, according to Steve Karotkin, Loral's bankruptcy lawyer. He, however, declined to give further comment on the matter. Loral has previously asked the bankruptcy court to prevent other parties from filing a restructuring plan. Loral filed for bankruptcy protection in July, after amassing more than USD3 billion in debt and failing to earn a profit since 1997. CONTACT: Jeanette Clonan John McCarthy (212) 697-1105 LORAL SPACE: Satellite Crash May Hinder Brazilian Operations ------------------------------------------------------------ With the partial failure of its Telstar 14/Estrela do Sul-1 satellite, Loral Space & Communications Ltd. said the problem could impact the rollout of its Brazilian business, reports Dow Jones. The satellite's failure to fully deploy one of its two solar arrays means the craft could only generate enough power to operate 10 to 14 of its 41 transponders, which would be enough to meet immediate customer demand, but would affect its Brazilian operations and lower operating revenues until a replacement satellite is built, Loral said in its annual report. Telstar 14 was intended to replace the Brazil 1T satellite, which isn't currently generating revenue, Loral said in its 10K filing. The satellite was launched into space in early January. Later that same month, Loral reported that the Northern solar array hadn't fully deployed, and that it would only be supplying limited service. At that time, the company said it was looking into what caused the malfunction and whether any corrective actions could be taken. The satellite has a book value of $253 million and is insured for $250 million, the 10K filing said. LORAL SPACE: Reaches Settlement Agreement with PanAmSat ------------------------------------------------------- Loral Space said it reached a settlement agreement earlier this month with PanAmSat, Dow Jones reports, citing the Company's annual report. The agreement is expected to resolve a dispute between the companies over two satellites built by Loral for PanAmSat. The dispute went to arbitration in 2003, where PanAmSat sought US$23.7 million related to power failure problems with the PAS 7 and PAS 8 satellites. No details of the settlement, which is still subject to bankruptcy court approval, were provided by Loral in its annual report. However, the company said it recorded a charge of US$8 million in the fourth quarter of 2003. =========== B R A Z I L =========== AES CORP.: Board Nominates Three New Independent Directors ---------------------------------------------------------- The AES Corporation (NYSE:AES) announced Tuesday that the AES Board of Directors has nominated Kristina Johnson, John Koskinen, and Sandra Moose for election with the current Board members at the company's Annual Meeting on April 28, 2004. Kristina Johnson is the chief academic and administrative officer (Dean) of the Edmund T. Pratt, Jr., School of Engineering at Duke University. John Koskinen is the former President and CEO of the Palmieri Company and, most recently, Deputy Mayor and City Administrator for the District of Columbia. Sandra Moose is the President of Strategic Advisory Services and former Senior Vice President of The Boston Consulting Group. "The newly nominated Directors will add impressive capabilities in management, technology and strategic planning," said Richard Darman, Chairman of the Board of Directors. "We look forward to their joining the Board." President and Chief Executive Officer Paul Hanrahan added, "These nominee Directors' perspectives will be very valuable as we return to growth following our successful turnaround. I look forward to working closely with these Directors." Election of the three nominees and the re-election of the current Board members at the Annual Meeting would bring the total number of Directors to 12, of which 10 would be considered independent under standards established by the New York Stock Exchange and the Sarbanes-Oxley Act. Full biographical information on each nominee Director follows. Biographical Information on AES Board of Directors Nominees March 15, 2004 Kristina M. Johnson Kristina M. Johnson is the chief academic and administrative officer (Dean) of the Edmund T. Pratt, Jr., School of Engineering at Duke University. She joined Duke in July 1999. Prior to joining Duke, Dr. Johnson served on the faculty at the University of Colorado from 1985-1999 as a Professor of Electrical and Computer Engineering, and as a co-founder and Director (1993-1997) of the National Science Foundation Engineering Research Center for Optoelectronic Computing Systems Center. Dr. Johnson received her BS with distinction, MS and PhD from Stanford University in Electrical Engineering. She is an expert in liquid crystal electro-optics and has over forty patents or patents pending in this field. Dr. Johnson currently serves on the Boards of Directors of Dycom Industries, Inc., Minerals Technologies, Inc., and Guidant Corporation. John A. Koskinen Mr. Koskinen served as Deputy Mayor and City Administrator for the District of Columbia from January 2000 to August of 2003. Since 2001, Mr. Koskinen has served as a Director of the US Soccer Foundation and serves on the Foundation's audit committee. Prior to his election as Deputy Mayor, he occupied several positions with the U.S. Government, including service from 1994 through 1997 as Deputy Director for Management, Office of Management and Budget. From 1998 to 2000, he served as Assistant to the President (President Clinton) and Chaired the President's Council on Year 2000 Conversion. Prior to his most recent service with the U.S. Government, in 1973, Mr. Koskinen joined the Palmieri Company, which specialized in turnaround management, as Vice President and later served as President and CEO from 1979 through 1993. Mr. Koskinen graduated with a J.D. from Yale University School of Law and a BA in physics from Duke University. Sandra O. Moose Dr. Moose is President of Strategic Advisory Services and previously was a Senior Vice President of The Boston Consulting Group ("BCG"). She joined BCG in 1968, was a director since 1975, and a Senior Vice President through 2003. She managed BCG's New York Office from 1988-1998 and was appointed Chair of the East Coast. Dr. Moose received her PhD and MA in economics from Harvard University and BA summa cum laude in economics from Wheaton College. Dr. Moose serves on the Boards of Directors of Verizon Communications, Rohm and Haas Company, the Alfred P. Sloan Foundation and CDC Nvest Funds. CONTACT: The AES Corporation Scott Cunningham, 703-558-4875 EMBRATEL: Weil, Gotshal & Manges Advises MCI Sale to TELMEX ----------------------------------------------------------- Weil, Gotshal & Manges LLP, one of the world's leading law firms, advised WorldCom, Inc. (MCI) in its definitive agreement to sell MCI's investment in Embratel Participacoes to Telefonos de Mexico (TELMEX) for $360 million in cash. Completion of the sale is subject to approval by the U.S. Bankruptcy Court and Brazilian regulatory authorities. The TELMEX offer was approved by both the MCI Board of Directors and the Official Committee of Unsecured Creditors. WorldCom, Inc. (WCOEQ, MCWEQ), which, together with its subsidiaries, currently conducts business under the MCI brand name, is a leading global communications provider, delivering innovative, cost-effective, advanced communications connectivity to businesses, governments and consumers. TELMEX is Mexico's leading telecommunication company, with 15.4 million lines in service, 2.2 million lines for data transmission and 1.4 million Internet access accounts. Embratel is a leading telecommunications provider in Brazil offering local and long distance telephony, data transmission and satellite communication services. Weil, Gotshal & Manges LLP is an international law firm of more than 1,100 attorneys, including approximately 300 partners. Weil Gotshal is headquartered in New York, with offices in Austin, Boston, Brussels, Budapest, Dallas, Frankfurt, Houston, London, Miami, Munich, Paris, Prague, Silicon Valley, Singapore, Warsaw and Washington, D.C. FOR THE SELLERS: WorldCom (MCI) internal counsel Stasia Kelly - General Counsel; Nicole Jones - VP, Corporate & Securities; Roland Behm - Director, International Corporate/M & A; Bob Lacy - VP, WorldCom Latin America Weil, Gotshal & Manges LLP Corporate, New York Partner: Frederick S. Green Associates: Stuart C. Hirsch, Andrew J. Yoon, Cinthia J. Trajtenberg Business Finance and Restructuring, New York Partners: Marcia L. Goldstein, Lori R. Fife Counsel: Sharon Youdelman Associates: Scott E. Cohen, Jessica L. Fink Tax, New York and Washington, DC Partners: Stuart J. Goldring and Mark Hoenig (New York); David I. Bower (Washington, DC) Associates: Michael Hoernlein (New York) EMBRATEL: Fitch Affirms TELMEX Ratings After Acquisition -------------------------------------------------------- Fitch Ratings has affirmed the 'BBB-' unsecured foreign currency debt rating and the 'A-' unsecured local currency debt rating to Telefonos de Mexico, S.A. de C.V.'s (Telmex) following the announcement that it will acquire a 51.8% voting stake and a 19.3% economic stake equity stake in Brazilian long distance operator Embratel Participacoes S.A. (Embratel) for $360 million in cash. The Rating Outlook is Stable. The acquisition is expected to be financed with Telmex's cash balances of $1.6 billion and is not expected to significantly alter the company's credit quality. The rating action applies to approximately $3.3 billion in outstanding securities, including convertible notes due 2004 and senior notes due 2006 and 2008. The Embratel acquisition is the second transaction that Telmex has undertaken over the last six months as part of its strategy of geographical diversification. The first transaction was the acquisition of AT&T Latin America for $207 million. While Telmex is expected to continue generating the large majority of its cash flows from Mexico, the company is expected to increasingly look beyond its borders for future growth opportunities. The Mexican local service market is profitable but is also relatively mature. Because Telmex has a solid financial position and generates strong free cash flow, it could complete additional acquisitions in the region without significantly impacting its credit quality. The acquisition allows Telmex to expand into Brazil, the largest telecommunications market in Latin America. Embratel maintains the largest market share position in long distance and data, although the Brazilian market is becoming increasingly competitive. In particular, Embratel has experienced market share pressure in the long distance segment since the three incumbent local service operators Telemar, Telesp and Brasil Telecom received regulatory approval to introduce these services. Embratel generated revenues of $2.3 billion and EBITDA of $581 million during 2003. Revenues were comprised of domestic long distance service (58%), international long distance (12%), data (25%) and other services (5%). The company also maintained a moderate liquidity position with cash balances of $595 million and $1.6 billion in debt at Dec. 31, 2003. Telmex's ratings continue to reflect the company's position as the leading provider of fixed line telecommunications services in Mexico. Telmex holds leading market positions in local service (estimated 95% market share); long-distance (68%); and data and Internet services (55%). Telmex's incumbent market position, economies of scale and extensive experience should enable the company to withstand potential competitive risks. The company's integrated telecommunications business includes a significant level of cash flow from its lower risk local service business, which reduces cash flow volatility and business risk. The local service business comprised 46% of revenues during 2003. Regulatory and legal risks are moderate and are incorporated into the ratings. Any regulatory change would not likely represent a dramatic shift in regulation. Ongoing regulatory/legal issues include the potential unbundling of network elements, the establishment of a universal telecom tax, the repeal of the 49% foreign ownership limit on Mexican companies, and potential future decreases in international long distance settlement rates. The company's strong cash flow and solid debt structure should provide ample cushion to service debt obligations on a timely basis. Annual EBITDA generation should remain between US$5.5-$6 billion over the foreseeable future. Although EBITDA margins have recently trended downward as a result of weaker traffic and pricing, they remain strong at around 50%. Expected downward pressure on margins should continue to be partially offset by cost-containment programs and efficiency gains. Credit-protection measures have improved as a result of lower interest rates and an overall reduction in debt levels. As result, the EBITDA to gross-interest-expense ratio strengthened to 10.8 times (x) during 2003 versus 9.8x during 2002. During the same period, debt to EBITDA remained stable at 1.1x. Fitch Ratings anticipates credit protection measures to remain relatively stable over the medium term. Debt was US$6.4 billion at Dec. 31, 2003, 87% of which is dollar denominated. Telmex is the largest telecommunications company in Mexico, providing local service, public telephony, domestic and international long-distance, data transmission, Internet access and directory services. The company had 15.7 million lines in service at Dec. 31, 2003. The company is indirectly controlled by Carlos Slim and his family via its control of Carso Global Telecom, which owns 66% of the voting shares of Telmex. CONTACT: Fitch Ratings Guido Chamorro, 312-368-5473 (Chicago) Sergio Rodriguez, CFA, 528 18 335-7179 (Monterrey) Media Relations: James Jockle, 212-908-0547 (New York) EMBRATEL: Assumes Eletropaulo's Services ---------------------------------------- Brazilian telecoms operator Embratel (NYSE: EMT), which was recently sold to Mexico's Telmex, announced it has signed up Sao Paulo electric power distributor Eletropaulo for its local and long distance telephony services, reports Business News Americas. In a statement, Embratel said it will also start providing 0800 customer services for Eletropaulo, which were previously being handled by Telesp - the incumbent fixed line operator in Sao Paulo. Eletropaulo is Brazil's largest electric power distributor. GERDAU: Fitch Forecasts Ratings Likely to Improve ------------------------------------------------- An executive of Fitch Ratings in Brazil suggested that long steelmaker Gerdau (NYSE: GGB) could obtain an investment-grade rating due to the diversity of its international operations, relates Business News Americas. "Gerdau has the ... profile of a candidate that could get an investment-grade rating," Rafael Fernandes Guedes, managing director of Fitch Ratings in Brazil, said adding that the steelmaker is comparable to Mexican phone company Telmex. Telmex has an investment-grade because it has operations in several countries. "Telmex has cash generation in several countries. And although those countries have a rating below investment grade, the revenue sources are diversified enough to reduce risk," he said. Most Brazilian companies are limited by Brazil's sovereign rating of B-, two slots below investment grade. CONTACT: Press Office +55(51) 3323-2170 imprensa@gerdau.com.br www.gerdau.com.br PARMALAT BRASIL: Sends Workers Home as Sales Drop ------------------------------------------------- Parmalat Brasil Industria de Alimentos said Tuesday it has laid off more than 100 personnel at its Sao Paulo headquarters due to slumping sales, Reuters reports. Although the layoffs account for less than 2 percent of Parmalat Brasil's 6,200-strong workforce, they are the result of the unit's sinking sales, said Keyler Carvalho Rocha, who was appointed by a Sao Paulo judge to run the company only last month. "We are reducing our office size so it has less floors since the company's activities have decreased. The sales area has less merchandise to sell, so we don't need so many salespeople," he said. Parmalat Brasil, the main Brazilian unit of Italian food group Parmalat (PRFI), has had to progressively scale back its operations in Brazil after the discovery of a multibillion-euro hole in its parent company's accounts in December. The Parmalat accounting fraud has set off an extensive investigation in Italy, which has led to the arrest of 19 people. Since Parmalat Brasil depends on its parent company for funds, the loss-making unit, with added pressure being applied by creditors and suppliers, had to file for bankruptcy protection in late January. Parmalat subsidiaries in Chile, the Netherlands and the United States have also sought bankruptcy protection. On Feb. 11, a Sao Paulo judge put Parmalat Brasil under control of the court and appointed Rocha to run it. Lawyers for Parmalat have tried to regain control of the unit for the Italian group, to no avail. Rocha said production at the group's factories was increasing and that he had been able to secure financing for the unit with some Brazilian banks, although he would not detail which ones. PARMALAT FINANZIARIA: Outlines Industrial, Debt Plan ---------------------------------------------------- Meetings with major creditors, the relevant authorities and trade unions to discuss the outline. The reorganization plan is expected to will take place shortly. Parmalat Finanziaria SpA, under Extraordinary Administration, ("Parmalat" or "the Company") communicates that a meeting between the Company and the Surveillance Committee appointed by the Minister for Productive Activities according to article 45 of Legislative Decree no. 270/1999, took place Tuesday. During the meeting Parmalat's Extraordinary Commissioner, Dr. Enrico Bondi, presented the following to the Surveillance Committee: - An outline of the developments in the Parmalat Group in recent months; - An initial overview of the Parmalat Group's financial debt situation with third parties; - An initial overview of the Parmalat Group's 2003 revenues and EBITDA; - An outline Programme for the Industrial and Debt Restructuring ("the Plan") of the Parmalat Group; - The timeline for the presentation of the Plan to the Minister of Productive Activities and for the achievement of a concordat with the Group's creditors; - The current situation and proposed meetings with the Group's major creditors to discuss the Plan. 1. Principle developments affecting the Parmalat Group in recent months The Surveillance Committee was taken through the main developments that have impacted the Parmalat Group in recent months, as follows: 1.1 Initial context It is less than three months since the scale and seriousness of the crisis facing the Parmalat Group began to emerge. The Group's situation at the outset of the Extraordinary Administration on 24 December 2003 was characterised by the limited availability of any reliable financial information or documentation, by serious deficiencies in financial controls and in the Group's organizational structures as well as a widespread liquidity crisis. This notwithstanding, actions have been taken during this period that have created the conditions for the development and presentation of the outline Plan. 1.2 Extension of the Extraordinary Administration to other Parmalat Group companies Given their state of insolvency it was decided to extend Parmalat SpA's Extraordinary Administration status to the controlling company Parmalat Finanziaria SpA as well as other Group companies as follows: Eurolat SpA, Lactis SpA, Parmalat Netherlands BV, Parmalat Finance Corporation BV, Parmalat Capital Netherlands BV, Dairies Holding International BV, Parmalat Soparfi SA, Olex SA, Parma Food Corporation BV, Eurofood IFSC Ltd, Contal Srl, Geslat Srl e Parmaengineering Srl. The possibility of extending further the Extraordinary Administration to other minor Group companies is also currently under consideration. 1.3 Key steps undertaken to preserve the value of the Parmalat Group in the interests of all creditors From the outset of Parmalat SpA's Extraordinary Administration (24 December 2003) the xtraordinary Commissioner and his advisors have acted, where possible, to maintain the integrity of the Group, with the objective of preventing any single creditor action from damaging the interests of creditors as a whole. These efforts have resulted, amongst others, in the following initiatives being undertaken in a number of countries where the Parmalat Group operates. USA In the USA it was decided to request Chapter 11 bankruptcy protection for the Group's dairy activities with the objective of avoiding operational and financial disruption. This also enabled the business to secure a USD 35 million financing package required to cover the short term requirements of its ongoing business and to create the conditions necessary to explore strategic alternatives for the business' future development. This includes a possible sale in relation to which negotiations are currently in progress with interested parties. Brazil With regard to the Parmalat Group's Brazilian activities, a request was made by Parmalat for the establishment of a local procedure to reach an agreement with the business' creditors. Since then, however, the Group's Brazilian activities have been placed under the control of the Brazilian judicial authorities, who have nominated their own Commissioners to run the business. Other Countries In other countries, the Administration has taken action under local regulations and/or reached agreements with local creditors in order to mitigate, where possible, any negative impact on the Group's businesses and therefore on the value of the relevant companies. 1.4 Financing Parmalat SpA has secured from a pool of banks a EUR105.8 million financing that also includes `privileged' creditor status to the lenders under Italian law. The financing is divided into two tranches: the first for EUR52.4 million is in the form of an overdraft facility. The second tranche of EUR53.4 million is issued against advanced trade receivables. The financing has a 364 day duration and will cover the working capital needs of Parmalat SpA as well as addressing the financing requirements of subsidiaries by way of intercompany loans. 2. Overview of the Group's financial debt situation with third parties The Surveillance Committee was given an initial overview of the state of the Group's indebtedness with third parties on the basis of the currently available information. This overview indicates gross financial debt of EUR14.8 billion, of which approximately EUR4.2 billion relates to loans from Italian and international banks, approximately EUR9.4 billion relates to bonds issued via public and private placements and approximately EUR1.2 billion relates to liabilities in connection with derivatives (provisionally calculated on a mark to market basis at the end of 2003), securitisations and promissory notes. These numbers are based on preliminary data for the 2003 financial year that are still under review and subject to more detailed investigation, in particular as regards a series of upward and downward adjustments that would bring the total level of financial indebtedness to EUR14.2 billion. 3. Overview of the Group's 2003 revenue and EBITDA The Surveillance Committee was also presented with an initial overview of the Group's 2003 situation at the revenue and EBITDA levels. These are preliminary numbers that are still subject to more detailed verification in light of the work underway on the reconstruction of all the Group companies' balance sheets. From this overview an aggregate, non-certified figure - including a series of adjustments to remove the impact of some atypical activities (such as Parma AC) - of EUR5.8 billion for Group revenues has been established, with an EBITDA figure of approximately EUR0.2 billion. 4. Plan Perimeter The outline Plan covers the operating activities of the Parmalat Group and excludes the following companies that are also subject to the Extraordinary Administration procedure: Parmatour SpA, Coloniale SpA, Hit International SpA, Nuova Holding SpA and Hit SpA. Separate solutions are being developed for these companies that do not form part of the outline Plan. Details of these will be the subject of future announcements. 5. Outline Plan 2004 - 2007: industrial aspects It is envisaged that the New Parmalat will be an Italian group with a multinational strategy, centrally co-ordinated, a leaner, more competitive and more efficient business whose primary objective will be the creation of value for its shareholders. The outline Plan aims to position Parmalat as one of the world's leading players in the high added value foods sector, based on products with a strong nutritional and healthy lifestyle focus. The new Group will aim at maintaining and adding leadership positions in certain product categories, based around a number of strong brands targeting high potential markets. The Group intends to concentrate its activity on beverages (milk and fruit juice) and milk related products. This will entail a concentration on 30 brands, 6 of which currently account for some 80% of the Group's sales. This compares with the current figure of 120 brands across the Group. The principal brands will be: - The Global brands: Parmalat and Santal; - A number of strong local brands such as: Berna, Lactis and Centrale Latte Roma in Italy; Clesa and Cacaolat in Spain; Astro and Lactantia in Canada; Pauls in Australia; Bonnita in South Africa; La Campina in Venezuela. - A number of new international brands such as: Chef (cream- based sauces), Kyr (probiotic products); Sensational Soy (soya- based drinks). With regard to the Group's geographic presence the intention is to concentrate activities on those countries with high potential in the chosen product categories, characterised by strong demand for health food, a willingness to pay a premium price for Parmalat brands and the availability of leading edge technology. A review of the Group's geographic portfolio is in progress with the objective of selecting those countries and businesses that meet the above requirements. Those activities considered non- core will be divested. All transactions will be carried out according to transparent procedures aimed at securing maximum value by generating the greatest possible level of interest amongst potential acquirers. The Company intends shortly to appoint an industrial advisor that will have the role of reviewing the outline Plan from a strategic viewpoint. The process is already underway to make this selection. The implementation of the above industrial strategy during the Plan period of 2004-2007 is expected to result in the achievement of an EBITDA level in line with that of the Group's major international competitors that currently achieve a margin of approximately 10% on sales. 6. Outline Plan 2004 - 2007: debt restructuring The work carried out to date indicates that continuing the Group's business will be beneficial to creditors. The means by which this benefit will be transferred to the Group's creditors are in an advanced state of development and will be the subject of successive announcements. It is currently envisaged that a debt for equity swap, with creditors receiving shares that would be tradable on a regulated exchange, would likely be the most effective way of achieving the above objective. Whatever the outcome, the chosen mechanisms will also take into account the possibility of maximising any benefits resulting from legal actions that are currently being considered. 7. The new structure of the Parmalat Group The Plan will entail the rationalisation of the Parmalat Group and the creation of robust and efficient corporate control structures, the strengthening of the Group's management and the introduction of international best practice corporate governance standards. 8. Timeline for presentation and approval of the Plan The Extraordinary Commissioner outlined to the Surveillance Committee the timeline objectives for the presentation of the final Plan to the Minister of Productive Activities and for the achievement of a concordat to be voted on by the Group's creditors. The intention is to begin immediately a series of meetings with major creditors, the relevant authorities and trade union bodies to discuss the outline Plan, prior to finalising the Plan for presentation to the Minister of Productive Activities followed by a concordat to be presented to creditors for their approval. It is expected that the Plan could require approximately two months of discussion, with the aim of presenting it in final version by May/June of this year. This is in line with the 180 day legally binding limit period (which can eventually be extended by a further 90 days) by which the Plan must be presented to the Minister of Productive Activities. From the point at which the Plan is finally presented to the Minister of Productive Activities and to creditors, a period of time is granted to carry out those technical steps necessary for the Plan's approval by the Minister and then for the concordat to be approved by the Group's creditors. 9. Recognition of Creditors The Court of Parma, in co-operation with the Company, is reviewing the means by which creditors can be recognised as such by the companies in Extraordinary Administration. Once defined by the Court the steps that need to be taken will be communicated in the appropriate way. VARIG: Aerolineas Signs LoI to Buy Pluna Stake ---------------------------------------------- Argentina's flagship airline Aerolineas Argentinas signed Tuesday a letter of intent with Brazil's Varig to take over the latter's 49% stake in Uruguayan airlines Pluna, reports EFE. Aerolineas spokesman Julio Scaramella said Aerolineas' auditors would travel to Montevideo in the next several days to review Pluna's accounts. "Before making a concrete offer, we need to know what we're buying," said Scaramella, referring to the amount the Spanish- owned Argentine carrier can expect to pay to buy out Varig. He said crucial accounting work remains to be done. "Pluna is a very good brand" and will fit in with Aerolineas' plans, Scaramella said. The Argentinean airline, which is under the control of private Spanish consortium Air Comet, is seeking to buy Pluna as part of its expansion operations in Latin America. Varig's commercial director Alberto Fajerman earlier said that Pluna registers a monthly turnover of about US$6,500, equivalent to a day's revenue for Varig. Other Pluna shareholders include the Uruguayan government with 48% and a private investor with 2%. The remaining 1% is owned by Pluna's employees. ========= C H I L E ========= INVERLINK: SVS Head Disappointed With Final Ruling -------------------------------------------------- Five former executives of intervened Chilean financial group Inverlink got out of prison last week on accumulated bail of CLP10 million, reports Business News Americas. Their release spurred negative comments from the head of Chile's securities & insurance regulator SVS. According to SVS head Alejandro Ferreiro, the final sentence imposed on the former Inverlink executives should reflect the severity of the crimes committed. These officials were originally charged last year in relation to the theft of tens of millions of dollars of deposits from state business development agency Corfo and fraud at the country's central bank. The SVS is not unduly concerned at the low level of bail granted to the disgraced financial group's former executives, only that the final court ruling in the case acts as a suitable deterrent to individuals intent on committing such crimes in the future, Ferreiro said. But he believes that the suspects in the Inverlink case could still end up behind bars. TELEFONICA CTC: Subtel Announcement Puts Pressure on Stock Price ---------------------------------------------------------------- The announcement by Chile's telecoms regulator Subtel on Friday that it wants to cut the price of locals calls by 36% sent shares of the country's dominant fixed line operator Telefonica CTC Chile plummeting Monday. Business News Americas reports that Telefonica CTC's A and B series shares on the Santiago stock exchange were suspended early Monday afternoon, after early trading brought the A shares down 12.7% to CLP2,050. In New York, CTC's American Depositary Receipts (ADRs) fell sharply in the morning, also forcing a halt in trading. They ended the day off 15.2% at US$13.56. Investment banks JP Morgan, Merrill Lynch and Morgan Stanley each lowered their respective ratings on CTC stock. "Subtel's stance should again remind investors just how unattractive the telecom industry structure is in Chile, eclipsing macro fundamentals in the near-term. Not only should perception take a turn for the worse, valuation impact could be material," Merrill Lynch telecoms analyst Whitney Johnson wrote in a report, cutting her recommendation on CTC to "sell." Subtel suggested cutting the price of fixed line calls within its network to CLP7.98/minute from CLP12.5/minute, excluding Chile's 19% value-added tax, according to the rates counterproposal published Friday evening. In its proposal in November, CTC had asked for a 60% hike in the rate to CLP22.2/minute. CTC is expected to ask for a panel of independent experts to examine Subtel's proposal. Based on the results of that panel's report, the final rates decree will be published May 5, and will be valid for five years. CONTACT: TELEFONICA CTC CHILE Sofia Chellew - Veronica Gaete M.Jose Rodriguez - Florencia Acosta Tel: 562-691-3867 Fax: 562-691-2392 E-mail addresses: schelle@ctc.cl - vgaete@ctc.cl mjrodri@ctc.cl - macosta@ctc.cl ============= E C U A D O R ============= PETROECUADOR: In Oil Supply Talks With PDVSA, Ecopetrol ------------------------------------------------------- With its Sote pipeline undergoing major repairs, Ecuador's state-run oil firm Petroecuador said in a statement Tuesday it is negotiating for the purchase of 360,000 barrels of oil from Petroleos de Venezuela SA and Colombia's Ecopetrol to supply its refineries, relates Business News Americas. Despite the possibility of shipping some crude from the slightly-damaged OCP pipeline, Petroecuador said it only has enough crude to supply its refineries for 15 days. The repair work on the Sote pipeline is expected to take 30 days. At present, the Esmeraldas, La Libertad and Amazonas refineries are operating at normal levels, processing a total 167,000 barrels of crude a day (b/d). However, Colombian and Venezuelan crude will be needed at its La Libertad and Esmeraldas refineries within 15 days, the statement said. The statement also said the Company expects to receive three shipments of 220,000b each of diesel by the first week of April and two shipments of the same amount of high-octane gasoline in order to maintain fuel supplies in the country. Petroecuador declared a state of emergency on the Sote pipeline and force majeure on crude exports last week after a landslide ruptured the Sote and damaged the OCP pipeline. =========== M E X I C O =========== CYDSA: Restructures $192.6M Debt -------------------------------- Cydsa, S. A. de C.V. (CYDSA) and its subsidiaries signed Tuesday an agreement with creditor banks extending principal payments on US$192.6 million of the Company's debt. The agreement establishes escalating principal amortizations beginning on March 31, 2004, and ending in 2011. This agreement provides for the updating of all of CYDSA's financial commitments with creditor banks. Creditor banks signing the agreement are Banco Nacional de Mexico, S.A.; Citibank, NA; BBVA-Bancomer, S.A.; California Commerce Bank; and Comerica Bank. CYDSA continues negotiations with holders of US$159 million of Euro-Medium-Term-Notes (EMTN's). CONTACT: CYDSA, S.A. DE C.V., IN MEXICO Jesus Montemayor, Treasury Director +011-528-18-152-4585 E-mail: jmontemayor@cydsa.com EMPRESAS ICA: Ratings Remain on CreditWatch Positive ---------------------------------------------------- On March 16, 2004, Standard & Poor's Ratings Services said that its 'CCC' corporate credit rating for Empresas ICA Sociedad Controladora S.A. de C.V. (ICA) remains on CreditWatch with positive implications. The CreditWatch update follows the issuer's announcement on March 15, 2004, that it has made the payment of the final US$92 million outstanding on its subordinated convertible bond, which was originally issued in 1994. "The announcement is considered a positive development by Standard & Poor's and will be an important consideration during its review of ICA's financial policy," Mr. Coballasi. "ICA's CreditWatch listing will be resolved upon the completion of a review of ICA's restructuring process and its operating and financial prospects." ANALYST: Jose Coballasi, Mexico City (52) 55-5081-4414 TFM: KCR Braces For Further Rating Cuts --------------------------------------- Moody's Investors Service slashed the ratings of the following securities issued by Kansas City Southern Railway (KCR): (To/From) - (KCR) Senior implied B1 Ba3 - (KCR) Senior unsecured B2 Ba3 - (KCR) Senior unsecured shelf (P)B2 (P)Ba3 - (KCR) Subordinated shelf (P)B3 (P)B2 - Kansas City Southern Industries Convertible Perpetual Preferred Caa1 B3 The rating outlook is negative. Moody's downgraded the ratings in view of the continued high indebtedness of KCR and the weak coverage and cash flow leverage metrics, the Company's weak operating ratio relative to other major railroads, and its high operating cost structure that limits meaningful upside potential even as the industrial economy improves. The ratings also consider KCRs geographically attractive rail property, significant asset protection for KCRs secured debt, and the relatively high level of balance sheet cash at present. The negative outlook reflects the expectation of modestly negative to breakeven free cash flow from operations over the near term, and the ongoing dispute between KCS and TMM (Caa1, negative) regarding their joint investment in TFM (B1, review for downgrade). KCR's ability to generate a cash return on its investment in TFM will be limited until, among other things, the dispute with TMM is resolved. The rating could be downgraded further if: the Mexican Government exercises the put option on its 20% interest in TFM causing additional cash calls on KCR, or if the company's operating performance further weakens, including EBITDA to interest expense falling below 2x, or failure to generate positive free cash flow by at least 2005. The rating outlook could be stabilized if: KCR obtains full control of TFM at a price no worse than that contemplated by its 2Q, 2003 agreement with TMM, the put on the TFM shares and the Value Added Tax (VAT) dispute with the Mexican Government are resolved favorably for KCR, and operating performance of the railroad improve so that Adjusted Debt to EBITDAR falls below 4:1. While the proposed financings will extend KCRs debt maturity profile and improve liquidity, KCR continues to have high level of financial leverage, said Moody's. ================= N I C A R A G U A ================= PARMALAT NICARAGUA: Loan Saves Assets From Impending Auction ------------------------------------------------------------ The Nicaraguan unit of collapsed Italian food group Parmalat was saved from creditors Monday after a financial services company agreed to lend the unit US$5.4 million, says Reuters. Parmalat Nicaragua, the only large milk company in the poverty stricken Central American nation, owes US$5 million to Tower Bank and Nicaragua's Banco de America Central. It presented a debt-for-equity swap on Friday but the two creditor banks rejected the proposal and said it would start auctioning off the Company's plant, industrial machinery and vehicles on Monday in order to collect the debt. However, just a few hours before the creditor banks were to start the auction, Parmalat Nicaragua was granted a loan from Latin American Financial Services (Lafise), allowing the embattled unit to keep hold of the assets that were slated to go under the hammer Monday. "What we did was structure a financing with Parmalat assets as guarantees," Lafise President Roberto Zamora said during a press conference held together with executives from the Italian food company. "This financing will have the possibility of being converted into stocks in a period of time that will be determined." The credit was supplied by Nicaragua's Bancentro bank, which is owned by Lafise, and would give the financial services company a 49% stake in Parmalat Nicaragua. But according to Parmalat Italy, administrative control of the Company would stay in the hands of the food group. "The Lafise group sees Parmalat as partner in the medium and long term," said Carlo Frau, sent to Nicaragua last week to negotiate on behalf of the Parmalat subsidiary. ============= U R U G U A Y ============= ANCAP: Regulator Scrutinizing LPG Distribution Proposal ------------------------------------------------------- Paraguayan state-owned company Ancap's proposal to associate with private companies Riogas and Acodike to distribute liquefied refinery gas in Uruguay may face regulatory hurdles, reports El Observador Economico. Sector regulator Ursea is still evaluating the proposal. The agency's regulation prevents associations that could lead partners to a dominant market position distorting the market. Ancap, a producer and distributor of LPG, also owns two gas LPG plants managed by Riogas and Acodike. CONTACT: Administracion Nacional de Combustibles, Alcohol y Portland (ANCAP) Central Administration Paysando s/n esq. Avenida del Libertador Montevideo, 11100 Uruguay P.O. Box 1090 Phones: +598(2) 902 0608 902 3892 902 4192 Fax +598(2) 902 1136 902 1642 Telex ANCAP UY 23168 E-mail: info@ancap.com.uy Home Page: www.ancap.com.uy Contact: Benito E. Pi eiro, Chief Executive Officer Phone +598(2) 900 2945 +598(2) 902 0608 Ext. 2253 Fax +598(2) 908 9188 ================= V E N E Z U E L A ================= PDVSA: Dir. Urges US, Industry Leaders to Up Refinery Capacity -------------------------------------------------------------- Venezuelan hydrocarbons vice-minister and Petroleos de Venezuela SA director Luis Vierma last week urged the US government and industry leaders to expand US refinery capacity, reports Dow Jones. Speaking at the Energy Council's 2004 Conference in Washington, DC last week, Mr. Vierma warned that "It becomes urgent to discuss and seek agreement on the matter of energy policy and investment required to increase refining capacity in the Atlantic basin, for the purpose of meeting a growing oil products demand, especially in the US," according to a company press release dated Monday. "The decision to undertake the task of overcoming this imminent deficit in refining capacity should be taken shortly, because it takes from 3 to 5 years to build a new refinery," Mr. Vierma added. "The US particularly has little room for maneuver in increasing its processing capacity and, moreover, in meeting operational contingencies in their refining plant." Mr. Vierma's remarks come as prices of international crude register record-highs, which could also mean that gasoline and diesel prices are bound to rise steeply. National monthly average regular unleaded gasoline prices may reach a peak of about USD1.83/gal this spring. Summer (April to September) gasoline prices now are expected to average about USD1.74/gal for 2004. These are the figures projected in the US Energy Information Administration's latest monthly analysis. The EIA also says that even if unexpected major refinery or pipeline disruptions are avoided, the figures could still hold, which would be a record in nominal dollar terms and the highest inflation-adjusted summer average since 1985. For 2004 as a whole, national regular gasoline pump prices are now expected to average $1.67/gal, 10�/gal higher than its previous projection. EIA said about half of the increase reflects higher crude oil prices, with the remainder reflecting the impact of low inventories, robust demand, and uncertain availability of gasoline imports." Venezuela is typically one of the US's top four crude and product importers and is the world's fifth largest oil and gas exporter. PDVSA says it supplies the US nearly 15% of its crude oil and refined product imports. Mr. Vierma also sought to allay supply concerns, urging US policymakers to forge a stronger bond with Venezuela despite the US government's disapproval of President Hugo Ch vez's socialist government. "[Vierma] reiterated Venezuela's wish to keep open all available communications and contact channels on energy with the United States, with the aim of reinforcing the safety and reliability of hydrocarbons supplies," the PDVSA release said. "And [he] referred to the efforts already being made in this direction by the Ministry of Energy and Mines and the Venezuelan Embassy in Washington, where Ambassador Bernardo Alvarez and Minister Counselor for Energy Affairs Fadi Kabboul maintain an intense and ongoing agenda of contacts with government, legislative, financial, and business leaders in the US." Vierma's remarks followed a decision by PDVSA's top management to shift its corporate structure back toward the way business units were organized before last year's strike aimed at removing President Chavez from power. Though the strike did not depose President Ch vez, it succeeded in crippling production and dramatically cutting back US imports for a few months last year. PDVSA now says it has recovered and remains committed to supplying the US. *********** 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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