/raid1/www/Hosts/bankrupt/TCRLA

/raid1/www/Hosts/bankrupt/TCRLA_Public/041122.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 Monday, November 22, 2004, Vol. 5, Issue 231 Headlines A R G E N T I N A ARENAS BLANCAS: Enters Bankruptcy on Court Orders BANCO FRANCES: Sells All 103M Ordinary Shares CASA SINEBEAN: Trustee Ends Verification Phase CAR & MEL: Claims Check Nears End CINCO LADOS: Verification Cut-Off Approaches DECARL S.A.: Begins Liquidation Process DOMINGUEZ VIAJES: Liquidates Assets to Pay Debts EDENOR: Fitch Ratings Comments on Cash Tender Offer GIACO MAROC: Initiates Bankruptcy Proceedings RAC S.A.: Court Orders Liquidation SYCON ARGENTINA: Court Grants Reorganization Plea TALCY S.A.: Trustee to Close Verifications Tomorrow TELECOM ARGENTINA: S&P Maintains `raD' Rating on Bonds B E R M U D A GLOBAL CROSSING: Settlement Restores $79M for Retirement Plans B R A Z I L ARACRUZ CELULOSE: S&P Issues Ratings Report CEMIG: Summons Debenture Holders to December 3 Meeting ELETROBRAS: S&P Issues Ratings Update GERDAU: Unit Announces Over-Allotment Option PROPEX FABRICS: Moody's Assigns First Ratings TAM: Endeavors to Ward Off Low-Cost Rival in Fast-Growing Market USIMINAS: Shareholders to Get Healthy Dividends VARIG: Uruguay Still Evaluating Bids for Stake in Pluna VASP: Canceling Under-booked Flights C H I L E COEUR D' ALENE: Prices Public Offering at $4.50 per Share D O M I N I C A N R E P U B L I C EDEESTE: CDEEE Raises Legal Issues on Share Sale E C U A D O R PETROECUADOR: Begins Calling for Crude Supply Bids M E X I C O AHMSA: Banamex Argues Right Over Shares BALLY TOTAL FITNESS: Membership Grows 11% in Third Quarter P E R U MILPO: WestLB Extends $10M Loan * PERU: Fitch Upgrades Sovereign Rating To 'BB' V E N E Z U E L A PDVSA: Expects Revenues of $26B From Oil Sales in 2004 - - - - - - - - ================= A R G E N T I N A ================= ARENAS BLANCAS: Enters Bankruptcy on Court Orders ------------------------------------------------- Court no. 6 of Mar del Plata's civil and commercial tribunal declared Arenas Blancas S.R.L. bankrupt after the Company defaulted on its debt payments. The bankruptcy order effectively places the Company's affairs as well as its assets under the control of Court-appointed trustee Alejandra Garate. As trustee, Ms. Garate is tasked with verifying the authenticity of claims presented by the Company's creditors. The verification phase is ongoing until December 30, 2004. Infobae reports that Clerk no. 2 assists the Court on this case that will end with the disposal of the Company's assets in favor of its creditors. CONTACT: Arenas Blancas S.R.L. San Martin 2627 Mar del Plata Ms. Alejandra Garate, Trustee Hipolito Yrigoyen 3347 Mar del Plata BANCO FRANCES: Sells All 103M Ordinary Shares --------------------------------------------- Argentine bank BBVA Banco Frances (BFR) sold Wednesday all the 103 million ordinary shares as anticipated, reports Dow Jones Newswires. Banco Frances' parent company, Spanish financial firm Banco Bilbao Vizcaya Argentaria SA (BBV), acquired a majority of these new ordinary shares, exercising more than 232 million preferred rights in early November to acquire more than 65 million shares of the 103 million total. BBVA paid for the shares by forgiving a loan of US$77.7 million, plus interest of about US$21,000 accrued through the date it exercised the rights. This resulted in a capital infusion of ARS230.6 million for Banco Frances. The addition of the 103 million new shares will increase the Company's share capital by 28%. Minority holders are likely to see their holdings fall from 20.5% to about 16%. CONTACT: BBVA Banco Frances S.A. Reconquista 199, 1006 Buenos Aires Phone: 54-11-346-4310 Web Site: http://www.bancofrances.com.ar/ CASA SINEBEAN: Trustee Ends Verification Phase ---------------------------------------------- The verification of creditors' claims for the Casa Sinebean Hogar S.A. liquidation case ends tomorrow, November 23, 2004. Creditors must submit proof of their claims to trustee Jose Antonio Planas by the said date to be included under the Company's distribution plan. Court no. 7 of Buenos Aires' civil and commercial tribunal handles this case with the assistance of clerk no. 14. CONTACT: Casa Sinebean Hogar S.A. Alvarez Jonte 2104 Buenos Aires Mr. Jose Antonio Planas, Trustee Paraguay 631 Buenos Aires CAR & MEL: Claims Check Nears End --------------------------------- Trustee Daniel Macri is set to end the verification of creditors' claims for the Car & Mel S.R.L. bankruptcy case tomorrow. Failure to submit the required documents within the prescribed period will mean disqualification from the post- liquidation distributions to be made. Judge Dieuzeide of Buenos Aires' civil and commercial tribunal Court no. 1 has Jurisdiction over this case. Dr. Fernandez Garello, Clerk no. 1, assists the Court with the proceedings. CONTACT: Car & Mel S.R.L. Lope de Vega 3215 Buenos Aires Mr. Daniel Macri, Trustee Simbron 5742 Buenos Aires CINCO LADOS: Verification Cut-Off Approaches -------------------------------------------- Buenos Aires-based Cinco Lados S.A. will complete an important phase in its liquidation with the closing of the claims verification period tomorrow, November 23, 2004. Creditors must present proof of their claims to trustee Carlos Erasmo Moreno by the said date to qualify for any post- liquidation distributions that will be made. Court no. 16 of the city's civil and commercial tribunal handles this case. Clerk no. 31 assists the Court with the proceedings. CONTACT: Mr. Carlos Erasmo Moreno, Trustee Tucuman 1658 Buenos Aires DECARL S.A.: Begins Liquidation Process --------------------------------------- Decarl S.A. (formerly Petrone Hnos S.A.) of Buenos Aires will begin liquidating its assets after Court No. 13 of the city's civil and commercial tribunal declared the Company bankrupt. Infobae reveals that the bankruptcy process will commence under the supervision of Court-appointed trustee Sergio Rapaport. The trustee will review claims forwarded by the Company's creditors until December 22. The city's Clerk no. 26 assists the Court with the proceedings. CONTACT: Mr. Sergio Rapaport, Trustee Rodriguez Pena 434 Buenos Aires DOMINGUEZ VIAJES: Liquidates Assets to Pay Debts ------------------------------------------------ Buenos Aires-based Dominguez Viajes S.R.L. will begin liquidating its assets following the bankruptcy pronouncement issued by the city's civil and commercial Court No. 18. The ruling places the Company under the supervision of Court- appointed trustee Xilef Irureta. The trustee will verify creditors' proofs of claims until December 29. The validated claims will be presented in Court as individual reports on March 11, 2005. The trustee will also submit a general report, containing a summary of the Company's financial status as well as relevant events pertaining to the bankruptcy, on April 26, 2004. The bankruptcy process will end with the disposal Company assets in favor of its creditors. CONTACT: Mr. Xilef Irureta, Trustee Parana 145 Buenos Aires EDENOR: Fitch Ratings Comments on Cash Tender Offer --------------------------------------------------- Empresa Distribuidora y Comercializadora Norte S.A. (Edenor) has launched a $65 million cash tender offer for a portion of its outstanding debt. Fitch rates Edenor as follows: --Foreign currency rating 'D'; --Local currency rating 'DD'; --National rating 'D(arg)'. Fitch will maintain Edenor's 'D' rating until the Company restructures all of its debt. Following the completion of the restructuring process, Fitch is expected to assign a rating to the new debt. Edenor launched a $65 million cash offer to buy back a portion of its eligible debt, totaling $420 million. The eligible debt is made up of the bonds class 2 ($162 million as of Sept. 30, 2004), fiduciary titles gain trust ($140 million as of Sept. 30, 2004), and other dollar-denominated debt. The offer will expire on Dec. 10, 2004. The purchase price for each $1,000 of principal will be determined by a modified Holland bidding process, with an expected price range between $700 and $750. The Company will not pay accrued interest (including punitive interest or any additional charges) on the debt to be purchased. As of Sept. 30, 2004, Edenor's total past due debt was $320.2 million, of which $232.5 million were bonds. As of September 2004, the Company had $88.4 million in cash and marketable securities. If the offer is successful, the maximum nominal value of the debt to be paid off is expected to be between $92.9 million and $86.7 million, implying a discount over the face value of 30% and 25%, respectively. About $300 million will remain to be restructured. Fitch will maintain Edenor's 'D' rating until the Company restructures all of its debt. Following the completion of the restructuring process, Fitch is expected to assign a rating to the new debt. Edenor suspended its principal payments in September 2002 but stayed current interest payments (excluding penalty payments). Edenor has retained JP Morgan to develop its debt-restructuring plan. Edenor was created in 1992 after the privatization of the Empresa Servicios Electricos del Gran Buenos Aires S.A. (SEGBA). Edenor distributes electricity to the northwestern half of the greater Buenos Aires area and the northern portion of the federal capital-within the city of Buenos Aires under an exclusive concession granted by the Argentine government until 2087. The shareholders of the Company are Electricidad Argentina S.A. (EASA) (51%), a holding Company controlled by EDF International (100%), EDF International (39%), and employees (10%). CONTACT: Ana Paula Ares +54 11 4327 2444 x38, Buenos Aires, Fernando Torres +54 11 4327 2444 x51, Buenos Aires Giovanny Grosso +1-312-368-2074, Chicago MEDIA RELATIONS: Brian Bertsch +1-212-908-0549, New York GIACO MAROC: Initiates Bankruptcy Proceedings --------------------------------------------- Court no. 2 of Buenos Aires' civil and commercial tribunal declared Giaco Maroc Argentina S.A. "Quiebra," reports Infobae. Mr. Francisco Jose Granja, who has been appointed as trustee, will verify creditors' claims until December 28 and then prepare the individual reports based on the results of the verification process. The individual reports will be submitted in Court on March 29, 2005, followed by the general report on May 10, 2005. The city's Clerk no. 2 assists the Court on the case that will close with the liquidation of the Company's assets to repay creditors. CONTACT: Mr. Francisco Jose Granja, Trustee Parana 467 Buenos Aires RAC S.A.: Court Orders Liquidation ---------------------------------- Rac S.A. prepares to wind-up its operations following the bankruptcy pronouncement issued by Court No. 18 of Buenos Aires' civil and commercial tribunal. The declaration effectively prohibits the Company from administering its assets, control of which will be transferred to a Court-appointed trustee. Infobae reports that the Court appointed Ms. Lea Beatriz Aljanati as trustee. She will be reviewing creditors' proofs of claims until December 23. The verified claims will be the basis for the individual reports to be presented for Court approval on March 8, 2005. Afterwards, the trustee will submit a general report on April 21, 2005. Clerk No. 35 assists the Court on this case that will end with the disposal of the Company's assets to repay its liabilities. CONTACT: Ms. Lea Beatriz Aljanati, Trustee Honorio Pueyrredon 1576 Buenos Aires SYCON ARGENTINA: Court Grants Reorganization Plea ------------------------------------------------- Sycon Argentina S.A., a Company operating in Buenos Aires, begins reorganization proceedings after Court No. 15 of the city's civil and commercial tribunal granted its "concurso preventivo" petition. During the reorganization, the Company will be able to negotiate a settlement proposal for its creditors so as to avoid a straight liquidation. According to Argentine news source Infobae, the reorganization will be conducted under the direction of Mr. Bernardino Alberto Margolis, the Court-appointed trustee. Creditors with claims against the Company must present proofs of the Company's indebtedness to the trustee before February 4, 2005. These claims will constitute the individual reports to be submitted in Court on March 18, 2005. The Court further requires the trustee to present an audit of the Company's accounting and business records through a general report due on April 29, 2005. Creditors are scheduled to ratify the Company's settlement plan during the informative assembly on October 11, 2005. CONTACT: Mr. Bernardino Alberto Margolis, Trustee Parana 426 Buenos Aires TALCY S.A.: Trustee to Close Verifications Tomorrow --------------------------------------------------- Ms. Andrea Cetlinas, the trustee supervising the liquidation of local Company Talcy S.A., is scheduled to conclude the verification of creditors' claims tomorrow, November 23, 2004. Creditors are required to submit proof of their claims to the trustee by the said date to qualify for any post-liquidation distributions. Court no. 2 of Buenos Aires' civil and commercial tribunal has jurisdiction over this case. The city's Clerk no. 3 assists the Court with the proceedings. CONTACT: Ms. Andrea Cetlinas, Trustee Lavalle 1678 Buenos Aires TELECOM ARGENTINA: S&P Maintains `raD' Rating on Bonds ------------------------------------------------------ Standard & Poor's International Ratings, Ltd. Sucursal Argentina affirmed the `raD' ratings previously assigned to a number of corporate bonds issued by Telecom Argentina S.A. (ex Telecom Argentina STET - France Telecom S.A). The affected bonds, according to information from the official Web site of the country's securities regulator, Comision Nacional de Valores (CNV), include: - EUR250 million worth of `Series and/or Class' bonds described as "Serie 1 bajo el Programa Global de ONS (D) vencimiento en septiembre 2004." Maturity of the bonds was not disclosed; - EUR190 million worth of `Series and/or Class' bonds described as "Serie 2 bajo el Programa Global de ONS (D) vencimiento en septiembre 2004." Maturity of the bonds was not disclosed; - US$1.5 billion worth of `Program' bonds described as "Series C por U$S 128 mm, E por U$S 100 mm, F y H por Lit 400.000 mm, I por Euros 200 mm y K por Euros 250 mm, bajo Prog global de ONS vencido agost99" with undisclosed maturity date. The action by S&P was based on Telecom Argentina's financial health as of September 30, 2004. The ratings agency said that a `raD' rating is assigned to financial obligations that are currently in default or whose obligor has filed for bankruptcy protection. The rating may also be issued when interest or principal payments are not made on the date due, even if the applicable grace period has not expired, unless S&P has reason to believe that payments will be made during such grace period. CONTACT: TELECOM ARGENTINA S.A. Alicia Moreau de Justo 50, 10th Floor Capital Federal (1107) Republica Argentina Phone: +54 11 4968 4000 Web Site: http://www.telecom.com.ar Contacts: Mr. Alberto J. Ricciardi Chief Financial Officer Ms. Elvira Lazzati Finance Director Mr. Pedro Insussarry Investor Relations Manager Phone: (5411) 4968-3626/3627 Fax: (5411) 4313-5842/3109 E-mail: inversores@intersrv.telecom.com.ar ============= B E R M U D A ============= GLOBAL CROSSING: Settlement Restores $79M for Retirement Plans -------------------------------------------------------------- A federal district court in New York City has approved a final settlement of $79 million for the benefit of workers and retirees of the Global Crossing retirement plan. "Plan fiduciaries have a responsibility to protect the long- term pension security of their workers," said U.S. Secretary of Labor Elaine L. Chao. "The Court's approval of this settlement restoring millions to pay retirement benefits is a victory for workers, retirees and their families who are covered by the Global Crossing 401(k) plan. This year, the Administration achieved monetary results totaling $3.1 billion for retirement, 401(k), health and other programs." In addition to the restitution that was recovered in the private litigation, the settlement prohibits the Company's executives from acting as fiduciaries to ERISA-covered benefit plans for five years unless the Department of Labor gives prior approval. The settlement covers the two former inside directors of Global Crossing, Thomas Casey (former Chief Executive Officer) and Gary Winnick (former Chairman of the Board), as well as the three former members of the Employee Benefits Committee, Dan J. Cohrs, Joseph Perrone, and John Comparin. The Secretary entered into settlement with Global Crossing's former officers and directors in connection with the private class action lawsuit filed on behalf of the plan participants. The 401(k) plan lost tens of millions of dollars when its extensive stock holdings in Global Crossing stock became virtually worthless after the Company filed for bankruptcy in 2002. The settlement resolves the Labor Department's investigation of the Global Crossing Retirement Savings Plan. The department's EBSA regional office in Los Angeles and the Office of the Solicitor conducted a comprehensive investigation of Global Crossing's ERISA plans. The investigation was coordinated through President Bush's Corporate Fraud Task Force. =========== B R A Z I L =========== ARACRUZ CELULOSE: S&P Issues Ratings Report ------------------------------------------- Ratings Under Review ISSUER CREDIT RATING To From Corporate Credit Rating Local currency BBB-/Stable/-- BBB-/Stable/-- Corporate Credit Rating Foreign currency BB-/Stable/-- B+/Positive/-- Rationale The foreign currency rating on Aracruz Celulose S.A. (Aracruz) mirrors the foreign currency rating assigned to the Federative Republic of Brazil. The local currency rating on Aracruz reflects its above-average ability to remain protected against the idiosyncrasies of the Brazilian economy because of the Company's sales to the external market, its strong competitive position in the market pulp business as a low cost producer, and its free cash flow generation from 2005 on. On the other hand, Standard & Poor's Ratings Services also considers that a prolonged economic crisis in Brazil could potentially curtail the Company's financial flexibility in the medium term, as its ability to sustain cash generation at current strong levels and to execute adequate investment decisions to support its long- term growth could be impaired. The continuity of Brazil's improving economic and political environment provides Aracruz with more stable conditions under which to manage its financial position. Aracruz's accumulated third-quarter figures in 2004 (year-to- date (YTD) September 2004) mostly mirror the higher output derived from the consolidation of the Aracruz Gua�ba plant after its acquisition in 2003. In the first nine months of 2004, the Company reached a total output of 1.75 million tons of market pulp compared to 1.51 million tons in 2002. The higher volume sold and the fairly stable average list prices in the global market were both responsible for the 20% increase in revenues for YTD September 2004 compared with those of YTD September 2003. However, EBITDA (US$418 million in YTD September 2004 and US$376 million in YTD September 2003) only grew about 11% in the same period, as a result of the local currency (Real) appreciation affecting Aracruz's cost position linked to Real. Still in YTD September 2004, EBITDA to gross interest coverage remained stable at 4.70x, but funds from operations (FFO) to total gross debt significantly improved to 33%; the latter picked up compared to 25% in the same period last year. Aracruz's higher FFO in YTD September 2004 of US$346 million (US$257 million in YTD September 2003) stems from the same reason as the EBITDA growth, plus a reduced amount of income tax paid in the period. The credit measures in September 2004 are in line with Standard & Poor's expectations. On a partially consolidated basis including 50% of Veracel's debt and revenues, even under a conservative pulp price scenario and higher costs, Standard & Poor's expects that Aracruz (partially consolidated with Veracel) will continue to show strong operating margins from 2005 on, with an EBITDA margin of approximately 48%. During 2004 and 2005, the EBITDA-to-gross interest coverage ratio should be about 4.5x, and FFO to debt should be close to 26%; however, both ratios are expected to steadily improve from 2006 on to about 5.5x and 35%, respectively, because of the full output coming from Veracel. Total gross debt (again, including 50% of Veracel's debt) to EBITDA is expected to continue at about 2.8x in 2004, and to gradually improve to 1.9x by 2006. Considering the total debt net by cash holdings, those ratios would be at 2.21x and 1.50x, respectively. Aracruz is the world's leading producer of bleached eucalyptus Kraft pulp (BEKP), accounting for some 28% of the global supply, or some 2.4 million tons per year. After the Fiberline C project came on stream, Aracruz is no longer self-sufficient in its fiber needs. However, the Company's higher wood requirements are being supplied by the Veracel project. The Company has already invested in its self-sufficiency projects and is expected to be self-sufficient in fiber again by 2006. Liquidity Liquidity remains comfortable and is one of the key rating factors that sustains Aracruz's average financial risk. The long-term profile of its debt and capacity to repay maturities with free cash flow allowed Aracruz to face the credit crunch and volatility that affected most Brazilian corporates in 2002 without any significant impact on its debt profile or cost of debt. The Company has already resolved its financing needs to fund most of its significant capital investments in the next two years with long-term debt instruments in line with the return of the projects. One significant investment was Aracruz's acquisition of its mill from Klabin (Gua�ba), which led its formerly average debt position to increase about US$400 million in the second semester of 2003. Even though Aracruz has focused on the international credit markets, it also enjoys strong access to the local credit market (though bank lines are not committed in Brazil) and benefits from a "flight-to-quality" during a stressed macroeconomic environment. As of third-quarter 2004, about 60% of Aracruz's debt was its export future flow securitization, and the remaining were long- term trade finance and BNDES transactions, with a comfortable amortization schedule. According to Standard & Poor's projections, total gross debt is expected to remain at US$1.5 billion until 2006 (or about US$1 to 1.1 billion when considering the total debt net of cash holdings) when it will gradually start to decline, including guaranteed debt at Veracel. Even though Aracruz USGAAP's financial statements do not proportionally consolidate the Veracel project, for analytical purposes, Standard & Poor's projections consider the incorporation of 50% of Veracel's projected results and 50% of its debt (namely "guaranteed debt"). The debt increase in the projections and the consequent increase in Aracruz's leverage ratios were expected and are in line with the Company's expansion movements (the Veracel project and the Gua�ba mill acquisition). From 2006 on, Aracruz will face higher debt amortization amounts, but the Company should benefit from larger cash generation as a result of the Veracel full output coming on stream. Standard & Poor's projections indicate that Aracruz should become free cash flow positive from 2005 on, considering Aracruz's portion of investments to be completed at the Veracel project. The Company is expected to use all its free cash in the period of 2005-2007 to amortize long-term debt. It is also part of Aracruz's financial strategy to seek to stretch the total debt amortization schedule, which is aimed at strengthening the Company's financial flexibility. This action is already seen as of the third-quarter 2004 figures that present a ratio of short- term to total debt of 14%, when this ratio had usually averaged 35% in the past. Outlook The stable outlook on Aracruz's foreign-currency rating reflects that of the sovereign rating of the Federative Republic of Brazil. The stable outlook on the local-currency rating reflects the expectation that the current economic, financial, and political conditions in Brazil will allow Aracruz to sustain strong profitability and access to long-term funding either locally or internationally. Rating stability also considers the Company being able to sustain coverage ratios (EBITDA to gross interest) in the area of 5x and total gross debt to EBITDA of lower than 2.5x. The rating would be lowered if projected cash flow from new businesses proves to be weaker than anticipated, leading to higher leverage or worsened cash flow protection measures when compared to those incorporated in Standard & Poor's projections or if Aracruz becomes more exposed to short- term debt. Business Description Aracruz is the world's leading producer of bleached eucalyptus hardwood market pulp, accounting for 28% of the global supply. The Company's leading cost position derives from its full integration with forests and port, and the high productivity of its forests. The Company is also self-sufficient in energy in its two mills. Aracruz concentrates 83% of its production in the Barra do Riacho pulp mill, which is located in the state of Esp�rito Santo and which has three production lines. The Barra do Riacho mill is next to its 51%-owned port terminal, which is Brazil's largest port specializing in pulp exports. The remaining 17% of production comes from the Gua�ba pulp mill in the Southern state Rio Grande do Sul. The Company owns 247,000 hectares of productive eucalyptus forests within an average distance of 180 kilometers from the mill. Aracruz also promotes the production of eucalyptus trees in more 58,000 hectares owned by small farmers in the region, who sell 100% of their production to Aracruz. Business Profile Aracruz's average business profile reflects its position as a very low cost producer of pulp. The commodity market pulp business is very cyclical, resulting in significant price volatility. Consequently, low cost and diversified producers have a competitive edge as they have the ability to weather down cycles while other producers are obliged to take temporary shutdowns or incur cash losses. While Aracruz is mostly a single product Company, its very low cash production cost allows for sustainable profitability even during the worst price scenarios. The Company's cost competitiveness derives from its access to low-cost wood supply and integration of the pulp mill with forests and port facilities for both mills (Barra do Riacho and Gua�ba). Favorable climate and soil conditions in Brazil, which allow for the fast harvest rotation of eucalyptus trees--generally seven years--excellence in forestry technologies (forest yield of 42m3/hectare/year that ranks among the highest yields in the world), historical self-sufficiency in supply, and short average radius to access wood supply, explain Aracruz's low wood costs. However, since the start-up of Fiberline C production, Aracruz signed a supply contract to purchase 3.5 million m3 of wood from Veracel in order to fill in the momentary self-sufficiency gap due to higher wood requirements from Fiberline C, and should resume self-sufficiency again by 2006. The concentration of 83% of production in the Barra do Riacho mill site allows for significant economies of scale but offers minimal geographic diversity. However, the three pulp lines are fairly independent and could continue to operate in case of an accident or interruption on a specific line. In addition, after the Veracel project start-up in 2005, this production concentration in Barra do Riacho will be reduced to about 70%, considering the 50% Aracruz's stake in the project. As 98% of production is exported, such concentration does not impose a disadvantage in terms of access to customers. Pulp exports are directed to Europe (42%), North America (32%), and Asia (23%), and main end uses are tissue (55%), specialty papers (19%), coated woodfree (15%), and uncoated woodfree (11%). Despite the commodity characteristics, through a consistent development in product differentiation to focus on less commodity end users, Aracruz tries to avoid operating in the pulp spot market. Even though the long-term supply contracts that Aracruz has with its customers are not bidding, they demonstrate customers' reliance on Aracruz's quality and capacity to deliver. Sales concentration in huge clients is increasing as a result of the paper industry consolidation, but the credit quality of the portfolio remains very comfortable. Even though Aracruz is the largest producer of eucalyptus market pulp, the global market pulp industry (including all types of fibers) is still highly fragmented, as the largest supplier of market pulp is Weyerhaeuser with 5.5% of share (Aracruz is the second with some 5%). Anticipating a consolidation of the pulp industry, since 2002 Aracruz has taken some decisions in order to expand: the Company invested $800 million in the Fiberline C project, adding 700,000 tons in Barra do Riacho site, carried over the Veracel project that will have a total output of 900,000 tons (Aracruz has a 50% stake), and acquired the 400,000 tons-mill Gua�ba from Klabin. Veracel was also a strategic move to guarantee access to wood to supply the Fiberline C. Upon the Veracel start-up, in which Aracruz has a 50% production stake, the Company will reach a total nominal capacity of some 2.9 million tons of pulp by 2005. After these moves, no further merger and acquisition activity is likely -- only an already- approved US$50 million-expansion of 30,000 tons in the Gua�ba site to come on stream by 2006. Financial Profile Aracruz has been able to maintain a moderate financial profile even during periods of extreme volatility and thus credit scarcity in Brazil. The Company is expected to maintain a comfortable cash cushion but very limited short-term debt position. Aracruz maintains active hedge activity regarding its exposure to the local currency. Although revenues are denominated in dollars and this is also the Company's functional currency, about 15% of the total gross debt and 60% of the total costs are denominated in local currency. For analytical purposes and because Veracel is seen as a strategic investment, Standard & Poor's proportionally consolidates Veracel due to guarantees provided by Aracruz in 50% of its debts. Profitability and cash flow Aracruz is one of the lowest-cost producers of market pulp in the world, which explains its ample and steady margins despite the volatility of pulp prices. As Aracruz directs 98% of sales to exports, revenues are mostly collected in dollars. As 60% of total costs are tied to the local currency, the Company can be negatively affected by an appreciation of the local currency or by inflationary pressures that do not translate into a depreciation of the currency, which is unlikely to happen in a floating exchange-rate regime and has not happened since 1996. Since 2002 with the full capacity production of the Fiberline C project, the Company has been able to post EBITDA margins near 50%, from a 43% figure achieved in fiscal year-end (FYE) 2002. Currently, the YTD numbers of September 2004 show that Aracruz has already consolidated the Gua�ba mill acquisition in 2003 and EBITDA margin hit 49.4% in the period. Assuming a new total nominal capacity of 2.4 million tons, Aracruz is expected to maintain EBITDA margins in the 50% range (all projected numbers assume net pulp prices to be maintained at US$450/ton). EBITDA to gross interest coverage has also improved since 2002, stepping up in the higher-end range of 4. In YTD September 2004, EBITDA to gross interest coverage was 4.70x, fairly stable when compared with the YTD September 2003 4.96x ratio, but materially higher than the 3.26x reached in FYE 2002. In YTD September 2004, FFO improved to US$346 million compared with US$257 million in the same period last year, fueled by a 16% increase in volume sold and rather stable average prices as well as reduced income tax cash payment in the period. Prior to merger and acquisition activities, Aracruz was expected to generate free cash flow of US$250 million per year, but now the forecast for the longer run is a generation of US$500 million. However, due to significant capital investments in 2003 of about US$570 million related to the Gua�ba plant acquisition, Aracruz posted a negative free operating cash flow (FOCF) in that year, but FOCF is expected to become positive again from 2005 on. Benefiting from higher volumes and increased profitability from 2003 on, Aracruz is expected to show comfortable cash flow protection measures even with the increase in bank debt to fund the acquisition of the Gua�ba plant. EBITDA to gross interest coverage is expected to improve to 5.5x in 2006 compared to 3.3x in 2002. Capital structure and financial flexibility As of third-quarter 2004, about 60% of Aracruz's debt was its export future flow securitization, and the remaining are from long-term trade finance and BNDES transactions, with a comfortable amortization schedule. According to Standard & Poor's projections, total gross debt is expected to remain at US$1.5 billion until 2006 (or about US$1 to 1.1 billion when considering the total debt net of cash holdings) when it starts to gradually decline, including guaranteed debt at Veracel. Even though Aracruz's USGAAP financial statements do not proportionally consolidate the Veracel project, for analytical purposes, Standard & Poor's projections consider the incorporation of 50% of Veracel's projected results and 50% of its debt (namely "guaranteed debt"). The debt increase in the projections and the consequent increase in Aracruz's leverage ratios were expected and are in line with the Company's expansion movements (the Veracel project and the Gua�ba mill acquisition). From 2006 on, Aracruz will face higher debt amortization amounts, but the Company should benefit from larger cash generation as a result of the Veracel full output coming on stream. The long-term profile of its debt and capacity to repay maturities with free cash flow allowed Aracruz to face the credit crunch and volatility that affected most Brazilian corporates in 2002 without any significant impact on its debt profile or cost of debt. One significant investment was Aracruz's acquisition of its mill from Klabin (Gua�ba), which led its formerly average debt position to increase about US$400 million in the second semester of 2003. Even though Aracruz has focused on the international credit markets, it also enjoys strong access to the local credit market (although bank lines are not committed in Brazil) and benefits from a "flight to quality" during a stressed macroeconomic environment. The Company is expected to use all its free cash in the period of 2005-2007 to amortize long-term debt. It is also part of Aracruz's financial strategy to seek to stretch the total gross debt amortization schedule, aiming at strengthening the Company's financial flexibility. This action is already seen as of the third-quarter 2004 figures that present a ratio of short- term to total gross debt of 14%, when this ratio had usually averaged 35% in the past. With the average increase in bank debt of about $400 million in 2003 and Standard & Poor's partial consolidation of Veracel in the financial projections, in the FYE 2004, FFO to debt and total gross debt to EBITDA are expected to reach 25% and 2.8x, respectively. However, those ratios should improve based on the revenues from Veracel's total output from 2006 on, showing FFO to total gross debt of 35% and total gross debt to EBITDA of 1.9x. PRIMARY CREDIT ANALYST: Marcelo Costa, Sao Paulo (55) 11-5501-8955; marcelo_costa@standardandpoors.com SECONDARY CREDIT ANALYST: Milena Zaniboni, Sao Paulo (55) 11-5501-8945; milena_zaniboni@standardandpoors.com CEMIG: Summons Debenture Holders to December 3 Meeting ------------------------------------------------------ CONVOCATION TO GENERAL MEETING OF DEBENTURE HOLDERS of the 1st Public Issue of Debentures by Companhia Energetica de Minas Gerais - Cemig in the total amount of R$ 625,000,000. Companhia Energetica de Minas Gerais - Cemig, as Issuer of the above debentures, pursuant to Sections 71 and 124 of Law 6404 of 15 December 1976, as amended, hereby calls all holders of the debentures of its first Public Issue of Non-convertible Debentures (in two series, without guarantee nor preference), in the total amount of R$ 625,000,000, with issue date 1 Nov 2001 ("the Debentures" and "the Issue", respectively), to a General Meeting of Holders of Debentures of that Issue to be held on 3 December 2004, at 10 a.m., at the head office of the Fiduciary Agent, Planner Corretora de Valores S.A., at Avenida Paulista 2439, 11th floor, Sao Paulo city, Sao Paulo state, to decide on the following agenda: a) alterations of the characteristics of the Debentures, and of the rights and obligations relating to them, due to the process of de-verticalization ("unbundling") required by Law 10848 of 15 March 2004; b) approval of an Amendment to the Debenture Deed; c) authorization to the Fiduciary Agent to sign the Amendment to the Issue Deed and any other instruments necessary for the decisions to be taken by the General Meeting of Holders of Debentures of this Issue; d) other subjects related to the items on this agenda, and other matters of interest to the Debenture Holders. CONTACT: Companhia Energetica de Minas Gerais - CEMIG Av.Barbacena, 1200 Santo Agostinho - CEP 30190-131 Belo Horizonte - MG - Brasil Fax (0XX31)3299-3934 Phone: (0XX31)3299-4524 ELETROBRAS: S&P Issues Ratings Update ------------------------------------- Rationale Eletrobras - Centrais Eletricas Brasileiras' local currency rating reflects its strategic role in both the financing of the electric power industry in Brazil, and management of federal assets in generation, transmission, and distribution. As a result, its rating is closely linked to that of its 58.4% direct and indirect owner, the Federative Republic of Brazil (foreign currency BB-/Stable/--; local currency BB/Stable/--), which has a strong influence on the Company's business planning, and large incentives to support it. The Company is also exposed to the evolving regulatory environment in Brazil, which can affect the credit quality of its loan portfolio, as well as the performance of its subsidiaries, which might require financial support from Eletrobras. Eletrobras is one of the main financial agents for the Brazilian electricity sector, and lends to its own subsidiaries as well as other electric power companies. The funding for its financing activities comes from a combination of internally generated cash and access to the international capital markets. The stability of the revenue stream from the repayment of interest and principal of its loans, as well as Eletrobras' low leverage, is also a key factor. The inflow of receivables covers annual debt obligations by at least 2x, and cash flow protection measures are strong for the rating category, with EBITDA to total debt and total debt to EBITDA at 59% and 1.7x, respectively. The holding Company is also responsible for supporting the expansion and development of the electric system, as well as social programs through the administration of federal programs and funding. In addition, Eletrobras manages and operates all federal assets in Brazil's electricity sector. Interest income from loans granted to the energy sector accounted for about BrR2 billion in the first six months of 2004 (R3.6 billion in December 2003), improving 10.5% compared with the same period in 2003. Such improvement is related to the 7.5% devaluation of the Brazilian Real against the dollar during that period, which had a positive effect on the Company's result. Funds from operations (FFO) reached about BrR700 million in June 2004. The annualized FFO interest coverage and FFO to total debt were 3.7x and 36%, respectively, in first-quarter 2004. Projection indicates an average cash generation (FFO) of Br1.5 billion per year. Liquidity Liquidity is adequate for the rating category. As of June 30, 2004 the Company's total debt reached BrR5.2 billion, of which BrR1.7 billion matures in the short term. Main debt maturities include a $300 million international bond in June 2005 and a $157 million of a syndicated loan due in April 2005. The remaining is due to multilateral institutions, which represent around 40% of the total debt and are guaranteed by the federal government. These maturities are comfortably covered by Eletrobras' cash position (BrR1 billion) and internal cash generation (FFO expected to reach BrR1.5 million for fiscal- year-end 2004). In addition, the Company has a good track record in accessing the international capital markets. Almost 77% of total debt was in foreign currency, and is hedged internally by the Company's large accounts receivables, also in foreign currency (about BrR32.5 million, or 79% of total loans, and where the main creditor is Itaipu Binacional (a joint venture with Paraguay)). The Company's major cash commitment is to fund the investment program of its subsidiaries, which is budgeted at about BrR4.3 billion for 2004 and BrR4.6 billion for 2005. Outlook The stable outlook on foreign currency reflects that of the Federative Republic of Brazil. The stable outlook on the local currency reflects the expectation that Eletrobras will continue to play an essential role in Brazil's electricity sector. Financial performance is expected to adequately cover debt service obligations. Standard & Poor's expects that the government would provide direct or indirect forms of support to Eletrobras, if necessary. PRIMARY CREDIT ANALYST: Juliana Gallo, Sao Paulo (55) 11-5501- 8948; juliana_gallo@standardandpoors.com SECONDARY CREDIT ANALYST: Milena Zaniboni, Sao Paulo (55) 11- 5501-8945; milena_zaniboni@standardandpoors.com GERDAU: Unit Announces Over-Allotment Option -------------------------------------------- Gerdau Ameristeel Corporation (TSX: GNA.TO, NYSE: GNA) announced Thursday that the underwriters of its recent public offering of common shares have exercised their over-allotment option to purchase an additional 4,381,000 common shares of Gerdau Ameristeel at the initial public offering price of Cdn. $5.90 per share. As agreed to in a subscription agreement with Gerdau Ameristeel, Gerdau S.A. is purchasing the same number of additional common shares as the underwriters' pursuant to the exercise of their over-allotment option at $4.70 per share, the U.S. dollar equivalent of the public offering price. The gross proceeds to the Company upon exercise of the over- allotment option total Cdn.$25,847,900 and the gross proceeds to the Company upon Gerdau S.A.'s additional purchase total $20,590,700. Merrill Lynch, Pierce, Fenner & Smith Incorporated and BMO Nesbitt Burns Inc. were joint book-running managers for the public offering in the United States and Canada. CIBC World Markets Corp., J.P. Morgan Securities Inc. and Morgan Stanley & Co. Incorporated acted as underwriters. A registration statement relating to the public offering was declared effective by the U.S. Securities and Exchange Commission. This press release shall not constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of these securities in any province, state or other jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any province, state or other jurisdiction. A copy of the prospectus relating to the public offering may be obtained on request without charge from Gerdau Ameristeel at 5100 West Lemon Street, Suite 312, Tampa, Florida, U.S.A. 33609, telephone no. (813) 286-8383, attention: Secretary or electronically at www.sedar.com and www.sec.gov. CONTACT: Gerdau S.A. Avenida Farrapos 1811 Porto Alerge, RS 90220-005 Brazil Phone: +55 3323 2000 Website: http://www.gerdau.com.br PROPEX FABRICS: Moody's Assigns First Ratings --------------------------------------------- For the first time, Moody's Investors Service assigned ratings to Propex Fabrics, Inc., a leading global manufacturer of primary and secondary carpet backing and synthetic polypropylene fabrics. Moody's assigned B3 to US$175 million Guaranteed Senior Secured Credit Facility due 2012 and Caa1 to US$150 million issue of Senior Notes due 2012. In addition, Moody's assigned a Senior Implied Rating of B3 and an Issuer Rating of Caa2. The rating outlook is stable. Upon the determination of the financial covenant tests under the credit facility, a speculative grade liquidity rating will be assigned. According to Moody's, the ratings reflect the high pro forma leverage and the weak cash flow to service that debt. Pro forma total debt to last twelve months ended September 30, 2004 EBITDA is 5.3 times (or 6 times as adjusted for $33.4 million unfunded pension liability). Likewise, pro forma cash from operations less capex for the last twelve months ended September 30, 2004 to total debt adjusted for the unfunded pension liability is weak at 6.3% and Moody's estimates that this measurement will decline to roughly 3% for fiscal 2005. The rating outlook is stable. Any degradation in the quality or amount of free cash flow generation relative to total leverage could put negative pressure on the ratings. However, a sustainable improvement in operating margins, cash flow generation, and the EBIT-based fixed charge coverage, along with a reduction in debt adjusted for unfunded pension liabilities to about 4.25 times, could lead to a positive outlook. Propex Fabrics, Inc., is based in Austell, Georgia and has manufacturing operations in North America, Europe and Brazil. TAM: Endeavors to Ward Off Low-Cost Rival in Fast-Growing Market ---------------------------------------------------------------- TAM Linhas Aereas SA, Brazil's second-biggest airline, expressed confidence that it can drive away no-frills airline Gol Linhas Aereas Inteligentes in the rapidly growing Brazilian market by holding its fares within 10% of its rival's, reports Reuters. President Marco Antonio Bologna, reportedly said Wednesday, "The main driver is that we have a better network." He said business passengers in particular were willing to pay just under 10% more -- "say 9.99%" -- for the convenience of direct flights that he said Gol does not yet provide. Gol, which is modeled on low-fare operators like Southwest Airlines and Ireland's Ryanair, has grown rapidly since setting up business in 2001 with the aim of offering cheap airfares. As of October, TAM led the domestic market with a 39% share of passengers. Gol, on the other hand, ended September with a 22% market share. CONTACT: TAM - Linhas Aereas Av. Jurandir, 856 Jd. Aeroporto - Sao Paulo - SP Zip code: 04072-000 PABX: (011) 5582-8811 Web site: http://www.tam.com.br USIMINAS: Shareholders to Get Healthy Dividends ----------------------------------------------- Believing that profits would continue to increase in light of growing steel prices, the chief financial officer of Brazilian steel Company Usinas Siderurgicas de Minas Gerais SA (Usiminas) assured shareholders of healthy dividends in coming quarters, says Dow Jones Newswires. "Company policy is to pay out as dividends 30-40% of net income," said CFO Paulo Penido. "You can expect very decent dividend payments in the near future for simple reasons: our profit is increasing and we are in a comfortable part of the steel cycle." Usiminas recently reported a record-breaking third quarter net profit of BRL1.0 billion ($1=BRL2.78) as rising steel prices lifted quarterly net revenue to BRL3.29 billion. Steel prices are soaring in Brazil and abroad as steady growth in China pushes up demand across the globe. CONTACTS: Mr. Bruno Seno Fusaro e-mail: brunofusaro@usiminas.com.br Phone: +55 (31) 3499-8710 Mr. Paulo Esteves e-mail: paulo.esteves@thomsonir.com.br Phone: + 55 (11) 3897-6466/6857 VARIG: Uruguay Still Evaluating Bids for Stake in Pluna ------------------------------------------------------- The Uruguayan government is still in the process of evaluating bids for Brazilian airline Varig's 49% stake in the Uruguayan carrier Pluna, Reuters reports, citing Pluna Chief Executive Jorge Neves. The offers being evaluated by the Uruguayan government - the other main stakeholder in Pluna - come from Argentine flagship Aerolineas Argentinas and Britain's Ashmore Global Fund. Pluna owns seven planes that fly to Madrid, Santiago, Buenos Aires, Asuncion, Rio de Janeiro, Sao Paulo and Porto Alegre. Varig is putting its stake in Pluna up for sale as it battles with debts of more than US$2 billion, owed mostly to government- run firms. CONTACT: VARIG (Viacao Aerea Rio-Grandense, S.A.) Rua 18 de Novembro No. 800, Sao Joao 90240-040 Porto Alegre, Rio Grande do Sul, Brazil Phone: (51) 358-7039/7040 (51) 358-7010/7042 Fax: +55-51-358-7001 Home Page: www.varig.com.br/english/ Contacts: Dorival Ramos Schultz, EVP Finance and CFO E-mail: dorival.schultz@varig.com.br Investor Relations: Av. Almirante Silvio de Noronha, n 365-Bloco "B" - s/458 / Centro Rio de Janeiro, Brazil VASP: Canceling Under-booked Flights --------------------------------- Financially troubled Brazilian airline Vasp begun canceling flights when reservation levels dipped below 50%, a spokesman said Wednesday. The spokesman said passengers are usually accommodated on later flights when such cancellations occur. The practice began "within the last few days," the spokesman said. Vasp has been experiencing financial difficulties since the 2001 recession that hit the industry. The Company has vowed to present a comprehensive debt payment plan before the end of the year. Vasp is currently operating on a six-month "emergency" license granted by the federal government pending presentation of the comprehensive plan. Ealier this week, a monthly report by the Civil Aviation Department, or DAC, showed that Vasp's market share fell dramatically, to 4.4% in October compared with 11% in October 2003. ========= C H I L E ========= COEUR D' ALENE: Prices Public Offering at $4.50 per Share --------------------------------------------------------- Coeur d'Alene Mines Corporation (NYSE: CDE) announced Thursday the pricing of its previously announced public offering of 25,000,000 shares of common stock. Under an underwriting agreement between Coeur and the underwriters entered into on November 18, 2004, Coeur will sell the shares to the public at $4.50 per share. Coeur expects to receive net proceeds, after payment of the underwriters' discount, of approximately $106.9 million prior to any exercise of the over allotment option. Coeur has granted the underwriters a 30-day option to purchase up to an additional 2,500,000 shares of common stock at the public offering price to cover over allotments, if any. CIBC World Markets and JP Morgan are acting as joint book- running managers for the common stock offering, with Bear Stearns & Co., Inc. and Harris Nesbitt acting as co-managers. A copy of the prospectus related to the offering can be obtained from CIBC World Markets Corp., 417 Fifth Avenue, New York, NY, 10016, by fax at 212-667-6136 or by e-mail at useprospectus@us.cibc.com, or J.P. Morgan Securities Inc., Prospectus Department, One Chase Manhattan Plaza, Floor 5B, New York, NY 10081, Ph. 212-552-5164. Coeur d'Alene Mines Corporation is the world's largest primary silver producer, as well as a significant, low-cost producer of gold. The Company has mining interests in Nevada, Idaho, Alaska, Argentina, Chile and Bolivia. This press release shall not constitute an offer to sell or the solicitation of any offer to buy the securities described above, nor shall there be any sale of these securities in any jurisdiction in which such an offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of such jurisdiction. CONTACT: Mr. Tony Ebersole Director of Investor Relations Phone: 1-800-523-1535 =================================== D O M I N I C A N R E P U B L I C =================================== EDEESTE: CDEEE Raises Legal Issues on Share Sale ------------------------------------------------ The administrator of the Dominican Republic state power company CDEEE is questioning the legality of the sale of AES Corp.'s (NYSE: AES) shares in the local power distributor EdeEste to the Dominican Energy Holdings. El Caribe relates that AES Dominicana, a unit of AES Corp., says it notified authorities regarding the sale. In letters addressed to Superintendent of Power Francisco Mendez and CDEEE administrator Radhames Segura dated 3 September and 10 September respectively, AES Dominicana president Julian Nebreda indicated that the Company contemplated transferring the totality of its shares in AES Distribution East LLC and AES Distribution East LTD to the possession of Dominican Energy Holdings. The letter explained that the leading shareholder of the Company is TCW Energy Advisor LLC, a subsidiary of TCW Asset Management Company. But Segura argues that while he received the notification of the Company's interest in transacting the sale, the Company failed to offer them first to its partner, the CDEEE, as the contract signed with AES requires. The CDEE administrator told El Caribe that they are currently studying the sales transaction from a legal standpoint. ============= E C U A D O R ============= PETROECUADOR: Begins Calling for Crude Supply Bids -------------------------------------------------- Ecuador's state oil firm Petroecuador said it began calling for bids on Wednesday for 10 one-year contracts to buy from the Company 12,000 barrels a day of crude each, reports Business News Americas. According to a Petroecuador spokesperson, the Company will receive bids on Nov. 23. The Company aims to award the contracts as soon as possible for loading in the first week of December. The Company had planned to call for bids on the contracts in early November, but delayed doing so while it studied options to obtain the best price for the crude. Petroecuador has changed the formula for the tender, the spokesperson said, without going into details. In October, foreign buyers of Ecuador's Oriente crude "phased out" their contracts with Petroecuador after rejecting the Company's proposed price differential for November. Buyers had rejected Petroecuador's proposal to sell Oriente at a US$13.95/barrel discount to US benchmark crude West Texas Intermediate (WTI). The Companies were reportedly seeking a discount of between US$16.30 and US$16.50 below WTI, but Petroecuador opted for a "political" price differential, which was the same discount offered in October, because of pressure from the government to reduce the spread. =========== M E X I C O =========== AHMSA: Banamex Argues Right Over Shares --------------------------------------- Local bank Banamex asserted its right over an estimated US$175 million worth of Ahmsa shares, saying that it is entitled to hold them as guarantee against the steelmaker's debt. Business News Americas reports that Ahmsa had earlier asked for the return of the 61.8 million shares or, alternatively, the reimbursement for the value of the shares. In a statement to the Mexican bourse, the Company cited a Court ruling affirming its right over the shares. The shares have been with Banamex since a 1999 debt dispute estimated to be worth US$175 million. Ahmsa's default on a total debt of US$2 billion led the Company into bankruptcy more than four years ago. BALLY TOTAL FITNESS: Membership Grows 11% in Third Quarter ---------------------------------------------------------- HIGHLIGHTS: - Gross committed membership fees grew 11% in the third quarter 2004 vs. 2003. - Number of new joining members increased 14% in the third quarter over the prior year quarter. - Same club gross committed membership fees grew 4% during the third quarter, 10% for the nine months ended September 30, 2004. - Company expects to report net loss for the third quarter 2004. Bally Total Fitness Holding Corporation (NYSE: BFT) announced Thursday selected operating data for the third quarter ended September 30, 2004. Membership sales trends continued to show improvement during the quarter with gross committed membership fees growing 11% during the third quarter of 2004 and 16% for the nine months ended September 30, 2004 over the comparable prior year periods. New membership joins increased 14% during the third quarter of 2004 and grew 23% for the nine months ended September 30, 2004 over the comparable prior year periods. October 2004 gross committed membership fees increased 12% over the prior year period while the number of new joining members increased 21%. The Company expects to report a net loss for the three and nine months ended September 30, 2004. Total members grew 2% to 4,040,000 at September 30, 2004 from 3,956,000 at December 31, 2003. As of November 18, 2004, the Company had no outstanding advances under the $100 million revolving credit portion of its $275 million credit facility, except for $8.7 million in letters of credit. On November 15, 2004, the Company announced that it has commenced the solicitation of consents to waivers of defaults from holders of its $235 million 10-1/2% Senior Notes due 2011 and $300 million 9-7/8% Senior Subordinated Notes due 2007 under the indentures governing the notes. These defaults relate to the Company's failure to timely file its financial statements with the Securities and Exchange Commission and deliver such financial statements to the trustee under the indentures. No assurances can be given that the Company will obtain the requested waivers or a default under the indentures will not occur in the future. The lenders under the Company's $275 million secured credit facility have foregone any requirement for receipt from the Company of financial statements filed with the SEC. However, the credit agreement provides for a cross-default 10 days after delivery to Bally of a default notice under its indentures. As a result, the delivery of a default notice under its indentures to Bally could ultimately result in acceleration of the Company's obligations under the credit facility and the indentures. About Bally Total Fitness Bally Total Fitness is the largest and only nationwide commercial operator of fitness centers, with approximately four million members and 440 facilities located in 29 states, Mexico, Canada, China, Korea and the Caribbean under the Bally Total Fitness(R), Crunch Fitness(SM), Gorilla Sports(SM), Pinnacle Fitness(R), Bally Sports Clubs(R) and Sports Clubs of Canada(R) brands. With an estimated 150 million annual visits to its clubs, Bally offers a unique platform for distribution of a wide range of products and services targeted to active, fitness- conscious adult consumers. To view selected operating data: http://bankrupt.com/misc/Bally.htm CONTACTS: Bally Total Fitness Holding Corporation Mr. Jon Harris Phone: 773-864-6850 e-mail: jharris@ballyfitness.com OR MWW GROUP Ms. Carreen Winters Phone: 201-507-9500 e-mail: cwinters@mww.com Web Site: http://www.ballyfitness.com ======= P E R U ======= MILPO: WestLB Extends $10M Loan ------------------------------- German commercial bank WestLB granted Peruvian mining Company Milpo a US$10 million loan intended to refinance another existing loan with the bank. Business News Americas reports that the new loan, payable in six years with a two-year grace period at Libor plus 3.25%, will pay off the remainder of the US$60 million loan extend by WestLB in 2002. Milpo's operations in South America include the Ivan-Zar copper mine in Chile and a polymetallic mine located in Peru's Pasco department. * PERU: Fitch Upgrades Sovereign Rating To 'BB' ----------------------------------------------- Fitch Ratings, the international rating agency, upgraded Peru's long-term foreign currency rating to 'BB' from 'BB-', reflecting the passage last week of pension reform and robust macroeconomic and fiscal performance. Other rating actions by Fitch include the following: --Long-term local currency affirmed at 'BB+'; --Country ceiling upgraded to 'BB'; --Short-term rating affirmed at 'B'; --The Rating Outlook is Stable. 'Passage of civil servant pension reform boosts the credibility of fiscal management in Peru,' said Therese Feng, Director, Sovereign Group, Fitch Ratings 'By lowering future pension outlays, this reform could provide room for the pursuit of other important public policy goals, such as upgrading infrastructure and education.' Since 2002, fiscal deficit reduction has proceeded in the face of a challenging domestic political environment. This has helped stabilize Peru's public debt burden, which remains high, forecast at 264% of revenues and 47% of GDP this year. The general government deficit, which has declined from 2.7% of GDP in 2002 to 1.7% in 2003, is likely to fall to 1.4% of GDP this year. Fitch also believes that election-related fiscal slippage will be limited in 2005. Reform of the preferential civil servant pension regime, called 'Cedula Viva,' will improve medium-term fiscal prospects. By closing the program to new entrants, empowering the legislature to reduce existing benefits, eliminating benefit indexation, and making it more difficult to raise future benefits, the reform boosts the long-run sustainability of the public pension system and frees up fiscal resources in the future. Even if no near- term fiscal savings are obtained, the actuarial deficit of the pension system is expected to decline by 10% of GDP to 55% of GDP. Peru's improving sovereign creditworthiness is also underpinned by solid GDP growth, forecast at 4.5% in 2004, and following growth above 4% in the prior two years, buoying tax receipts during this period. A revival in private investment has broadened from mining and energy to include the consumer goods sector. A solid balance of payments performance continues to diminish Peru's vulnerability to external shocks, reflected in continuing international reserve accumulation and Peru's low external financing needs of 27% of reserves. Peru's high net external debt is forecast to fall to 142% of external receipts this year from 176% in 2000. Relative to comparably-rated sovereigns, Peru needs to maintain higher reserve holdings because of its heavy commodity dependence, narrow export base, high dollarization of its financial sector, and reliance on external sources of financing. Peruvian politics have posed risks to the economic policy framework in the past. President Alejandro Toledo's low popularity in the polls, localized social unrest, and divisions in the Peruvian Congress have resulted in frequent cabinet changes, difficulty implementing reforms, and the perception that the president would not complete his term. With the 2006 general election in view, the political parties have been supporting prudent policy settings and modest reforms to enhance their credibility with the electorate. Likewise, this has made it increasingly likely that President Toledo will serve out his full term. Nevertheless, political uncertainty and not infrequent social unrest deter private investment which, at 18.5% of GDP in 2003, remains below the 22% median for comparably-rated sovereigns. Both the long-run sustainability of growth and the further expansion of Peru's narrow export base depend vitally on attracting broader-based investment. While Fitch maintains a Stable Rating Outlook, the question of who will prevail in the spring 2006 presidential election will increasingly weigh on sovereign risk perceptions over time. ================= V E N E Z U E L A ================= PDVSA: Expects Revenues of $26B From Oil Sales in 2004 ------------------------------------------------------ Venezuela's state oil firm Petroleos de Venezuela PDVSA estimates that revenues from crude oil and by-products in the domestic and foreign markets will exceed US$26 billion this year. PDVSA's Commerce and Supply director Asdr�bal Ch vez revealed that through September this year, PDVSA had sales of US$19.4 billion. "This will be an exceptional year for PDVSA," he said, due to the stabilization of oil production at around 3.15 million barrels a day and the high prices in international markets. Venezuela's oil sales -including strategic partnerships- have averaged 2.7 million barrels a day of crude oil and by-products, but PDVSA insists that oil output stands at 3.1 million bpd. International reports indicate that Venezuelan oil output is at 2.5 million bpd, below the country's 3.1 million bpd OPEC quota. *********** 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 Lucilo Junior M. Pinili, Editors. Copyright 2004. All rights reserved. ISSN 1529-2746. This material is copyrighted and any commercial use, resale or publication in any form (including e-mail forwarding, electronic re-mailing and photocopying) is strictly prohibited without prior written permission of the publishers. Information contained herein is obtained from sources believed to be reliable, but is not guaranteed. The TCR Latin America subscription rate is $575 per half-year, delivered via e-mail. Additional e-mail subscriptions for members of the same firm for the term of the initial subscription or balance thereof are $25 each. For subscription information, contact Christopher Beard at 240/629-3300. * * * End of Transmission * * *