/raid1/www/Hosts/bankrupt/TCRLA_Public/050530.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, May 30, 2005, Vol. 6, Issue 105
Headlines
A R G E N T I N A
EDENOR: Court Ruling Obscures Planned Sale to Dolphin
GRAN HOTEL: Court Orders Bankruptcy to Begin
LOGISTICA Y SERVICIOS: Bankruptcy Ruling Means Liquidation
MATERIALES CORDOBA: Court Authorizes Reorganization
SERIOUS BUSINESSES: Court Rules for Liquidation
* ARGENTINA: Wants US Lawyers' Representation in ICSID Cases
B E L I Z E
BELIZE: Ratings Reflect Weak External Liquidity
B E R M U D A
BERMUDA BAKERY: Pearman Quits Director Post; AGM Agenda Set
FAIRMOUNT STABLES: Names Andrew Martin as Liquidator
SEA CONTAINERS: Redeems 13% Senior Notes Due 2006
THE ASSET MANAGEMENT: Butterfield Resigns; New Liquidator Placed
B O L I V I A
* BOLIVIA: World Bank Approves $43.4M to Support Projects
B R A Z I L
BANCO BRADESCO: Releases Terms of Perpetual Preferred Securities
CSN: Board Approves Share Buyback, Cancellation
EASTMAN KODAK: To Close Brazilian Plant to Improve Bottom Line
C O L O M B I A
TRANSGAS DE OCCIDENTE: S&P Affirms 'BB' FC Rating on $240M Notes
H O N D U R A S
MILLICOM INTERNATIONAL: Increases Ownership of Celtel
J A M A I C A
CABLE & WIRELESS: Records First Profit in 3 Years
M E X I C O
CEMEX: Moody's Ups Ba1 Ratings Outlook To Positive From Stable
MERIDIAN AUTOMOTIVE: Extends Interim Access to DIP Financing
PEMEX: Seeks to Prepay $994M Notes in June
SATMEX: Noteholders File Involuntary Chapter 11 Petition
VISTEON CORP.: Ford Moves to Assist Ailing Unit
P U E R T O R I C O
DORAL FINANCIAL: Provides Data, Updates Restatement Process
R&G FINANCIAL: Investors Sue Over Securities Violations
U R U G U A Y
BANCO COMERCIAL: Government to Sue Three Banks in Uruguay
V E N E Z U E L A
PDVSA: Moody's Confirms B1 Local Currency Issuer Rating
- - - - - - - - - -
=================
A R G E N T I N A
=================
EDENOR: Court Ruling Obscures Planned Sale to Dolphin
-----------------------------------------------------
Electricite de France's (EdF) plans to sell its controlling
stake in Argentine power company Edenor were put on hold after a
federal court froze ARS150 million in assets belonging to the
local unit. Dow Jones Newswires reports that a federal judge in
the city of Campana ordered late Tuesday to freeze Edenor's
assets. In addition to freezing Edenor assets, the Campana judge
also issued a fine of ARS500,000 against each of the three
company officials named in the case.
The ruling follows a complaint filed in 2000 by a mother who
alleged that her son died of leukemia caused by PCB pollution
from Edenor operations.
The court also issued embargoes of ARS1 million and ARS250,000
against two officials at the national electricity regulator,
ENRE, for allegedly failing to serve the public.
An Edenor spokesman said the Company has appealed the ruling to
a federal court in San Martin, although it was unclear when the
higher court would take up the matter.
The ruling came just as Edenor disclosed in a filing with the
Buenos Aires Stock Exchange Tuesday that EdF has entered into
exclusive negotiations with Argentina's Grupo Dolphin SA over
the sale of the Company.
CONTACT: EDENOR S.A.
Azopardo Building
Azopardo 1025 (1107) Capital Federal
Phone: (54-11) 4346-5000
Fax: (54-11) 4346-5300
E-mail: to ofitel@edenor.com.ar
Web Site: http://www.edenor.com.ar
GRAN HOTEL: Court Orders Bankruptcy to Begin
--------------------------------------------
Gran Hotel Tacuari S.A. enters bankruptcy protection after Court
No. 3 of Buenos Aires' civil and commercial tribunal, with the
assistance of Clerk No. 5, ordered the Company's liquidation.
The order effectively transfers control of the Company's assets
to a court-appointed trustee who will supervise the liquidation
proceedings.
Infobae reports that the court selected Roberto Di Martino as
trustee. Mr. Di Martino will be verifying creditors' proofs of
claim until the end of the verification phase on June 17, 2005.
Argentine bankruptcy law requires the trustee to provide the
court with individual reports on the forwarded claims and a
general report containing an audit of the company's accounting
and business records. The individual reports will be submitted
on Aug. 15, 2005 followed by the general report, which is due on
Sep. 27, 2005.
CONTACT: Mr. Roberto Di Martino, Trustee
Avda Callao 449
Buenos Aires
LOGISTICA Y SERVICIOS: Bankruptcy Ruling Means Liquidation
----------------------------------------------------------
Logistica y Servicios S.A. will now enter bankruptcy after Court
No. 22 of Buenos Aires' civil and commercial tribunal declared
it "Quiebra," reports Infobae. With assistance from Clerk No.
44, the court named Mr. Roque Alberto Pepe as receiver. He will
verify creditors' claims until Sep. 12, 2005.
Following claims verification, the receiver will submit the
individual reports, which were prepared based on the
verification results, to the court on Oct. 25, 2005. The general
report is due for submission on Dec. 6, 2005.
The Company's bankruptcy case will close with the liquidation of
its assets to pay its creditors.
CONTACT: Mr. Roque Alberto Pepe, Trustee
Argentina 5785
Buenos Aires
MATERIALES CORDOBA: Court Authorizes Reorganization
---------------------------------------------------
Court No. 11 of Buenos Aires' civil and commercial tribunal
authorized Materiales Cordoba S.R.L. to start its reorganization
process.
According to Infobae, the court, which is assisted by Clerk No.
22, granted the Company's "Concurso Preventivo" motion,
appointing Mr. Daniel Guillermo as receiver.
Creditors have until July 7, 2005 to submit their proofs of
claim to the receiver, who will verify these claims and submit
them to court as individual reports on Sep. 12, 2005. After
these reports are processed in court, the receiver will then
prepare the general report and submit it to court on Oct. 25,
2005.
The informative assembly, the last stage of a reorganization
process, will be held on March 28, 2006.
CONTACT: Mr. Daniel Guillermo, Trustee
Tucuman 1657
Buenos Aires
SERIOUS BUSINESSES: Court Rules for Liquidation
-----------------------------------------------
Court No. 11 of Buenos Aires' civil and commercial tribunal
ordered the liquidation of Serious Businesses S.A. after the
Company defaulted on its obligations, Infobae reveals. The
liquidation pronouncement will effectively place the Company's
affairs as well as its assets under the control of Francisco
Jose Matias Costa, the court-appointed trustee.
Mr. Costa will verify creditors' proofs of claim until Aug. 1,
2005. The verified claims will serve as basis for the individual
reports to be submitted in court on Sep. 13, 2005. The
submission of the general report follows on Oct. 26, 2005.
Clerk No. 22 assists the court on this case, which will end with
the disposal of the Company's assets in favor of its creditors.
CONTACT: Mr. Francisco Jose Matias Costa, Trustee
Avda Las Heras 3807
Buenos Aires
* ARGENTINA: Wants US Lawyers' Representation in ICSID Cases
------------------------------------------------------------
Argentina plans to seek the representation of U.S. lawyers to
handle a mounting caseload of claims against it in international
arbitration proceedings, Dow Jones Newswires reports, citing
Osvaldo Guglielmino, the government's Attorney of the Treasury.
"First, let me clarify that the quality of lawyers in Argentina
is very good. But we need a foothold there" in the U.S., said
Guglielmino, who handles the second highest position at the
Justice Ministry.
"We need to lobby, we need to make the arbitrators know what is
happening in Argentina, to exchange information," Guglielmino
added.
The idea about seeking US lawyers floated up after the first
ICSID decision came down against the government earlier this
year. ICSID ordered the government to pay US$133 million in
compensation to Michigan-based CMS Energy Corp. (CMS) for breach
of contract relating to its 30% interest in Argentine gas
pipeline operator Transportadora de Gas del Norte SA (TGN02.BA).
Prior to the decision, the government has been conducting its
own defense and contracting with Argentine lawyers in 35
registered cases brought by foreign companies claiming a breach
of bilateral treaties.
===========
B E L I Z E
===========
BELIZE: Ratings Reflect Weak External Liquidity
-----------------------------------------------
Credit Ratings
Local currency CCC+/Negative/C
Foreign currency CCC/Negative/C
Major Rating Factors
Strengths:
* A strong real economy.
Weaknesses:
* Weak external liquidity.
* High general government debt.
* Vulnerability to adverse external developments.
Rationale
The ratings on Belize reflect weak external liquidity that has
been exacerbated by the sovereign's impaired ability to access
external financing (both official and commercial) and the
government's worsening debt trajectory.
The ratings are constrained by:
* Weak external liquidity. The public sector's liquidity
position looks especially dire for 2005, hampered by massive
amortization needs (as compared to available assets) and a
limited ability to access external financing. Public sector
amortization for May-December 2005 is estimated at US$85.5
million, compared with usable international reserves of US$69
million. Access to external financing is limited and continues
to suffer from the unstable political situation. On a country
level, the financing gap for the remainder of 2005 (current
account deficit + principal amortization + short-term debt) is
estimated at US$322 million, or 469% of usable reserves-one of
the highest ratios among rated sovereigns.
* High general government debt, with a deteriorating
profile. The government debt's upward trajectory has been
difficult to reverse due to persistent fiscal slippages and,
more recently, the government's assumption of Development
Finance Corporation's (DFC) debt as a result of the bank's
financial distress. DFC-related liabilities (including mortgage-
backed securities transactions initiated by DFC) are estimated
at 9% of GDP and are considered (starting in 2004) the
government's direct, rather than contingent, liability. As a
result, general government debt increased to 97% of GDP in 2004
(91% on a net basis)from 85% in 2003. More than 85% of general
government debt is external, and more than 64% of external
public debt is owed to commercial creditors. Such debt positions
are not sustainable, especially in the context of a fixed
exchange-rate regime.
* Vulnerability to adverse external developments. Rising oil
prices and imminent price cuts for sugar exports (15% of
Belize's merchandise exports) are putting a strain on the
already-soaring external current account deficit (20% of GDP on
average over the last four years). Belize is also prone to
weather-related disasters (hurricanes and tropical storms). The
most recent hurricanes caused damages amounting to 34% and 19%
of GDP in 2000 and 2001, respectively.
On the positive side, the ratings reflect:
* A strong real economy. Healthy growth in most sectors,
continuous private investment despite political turbulence, and
improving (albeit still narrow) economic and export structure
reflect ongoing diversification efforts.
Outlook
The negative outlook reflects the heightened risk of default,
given Belize's tight external liquidity position and difficult
political situation. While the liquidity stance has been
enhanced by the release to the government of the proceeds
(roughly US$93 million) of the private placement that it
undertook in February 2005, the destabilized political situation
puts increasing pressure on the ratings. The government's
decisionmaking ability and political capital have been severely
impaired due to the loss of public confidence. In addition, the
disruptions in economic activity (e.g., strikes, irregular
supply of important utilities services) will negatively affect
Belize' s economic and fiscal performance in 2005. If not
reversed, the worsened political climate could negatively impact
tourism due to security concerns, reduce private investments,
and lower the tax intake.
While liquidity pressures may subside over the next two years,
the massive debt burden will limit the sovereign's
creditworthiness. The ratings may fall further if the government
does not succeed in boosting international reserves, which could
result if it (among other things) fails to receive proceeds from
the sale of Belize Telecommunication Limited (BTL) shares or if
external imbalances increase pressure on the Belizean peg. On
the other hand, if the government surmounts its liquidity crunch
this year and takes decisive effort to consolidate its fiscal
position and stabilize the political environment by addressing
the issues of public discontent (lack of transparency, poor
financial management) and restore the confidence of the
financial markets, the outlook may be revised to stable.
Primary Credit Analyst: Olga Kalinina, CFA, New York (1) 212-
438-7350; olga_kalinina@standardandpoors.com
Secondary Credit Analyst: Helena Hessel, New York (1) 212-438-
7349; helena_hessel@standardandpoors.com
=============
B E R M U D A
=============
BERMUDA BAKERY: Pearman Quits Director Post; AGM Agenda Set
-----------------------------------------------------------
The board of Bermuda Bakery Ltd. has accepted the resignation of
director James A. Pearman. Glenn M. Titterton will fill the
vacancy until the next annual general meeting, scheduled for
June 2, 2005.
The AGM will be held at the Bakery's new office located at 69
Pitts Bay Road, Pembroke (upstairs of Oliver's Deli & Catering)
at 10:30 a.m.
A G E N D A:
1. To appoint a Chairman of the meeting.
2. To consider the minutes of the last meeting of Members.
3. To receive the President's Report to the Members.
4. To receive the financial statements of the Company for the
financial year ended 31st December 2004, together with the
Auditor's report thereon.
5. To determine the number of Directors for the ensuing year.
6. To elect Directors.
7. To consider fees payable to Directors.
8. To consider the appointment of an auditor for the forthcoming
year.
FAIRMOUNT STABLES: Names Andrew Martin as Liquidator
----------------------------------------------------
IN THE MATTER OF THE COMPANIES ACT 1981
and
IN THE MATTER OF Fairmount Stables Ltd.
These resolutions were adopted on the May 6, 2005 by written
consent of the Sole Member of Fairmount Stables Ltd.:
1) the Company be wound up voluntarily pursuant to the
provisions of The Companies Act 1981; and
2) Andrew A. Martin, be and is hereby appointed Liquidator for
the purposes of such winding-up, such appointment to be
effective forthwith.
The Liquidator informs that:
- Creditors of Fairmount Stables Ltd. are required on or before
the June 27, 2005 to send their full names, their addresses and
descriptions, full particulars of their debts or claims, and the
names and addresses of their solicitors (if any) to the
Liquidator of the said Company, at Reid House, 31 Church Street,
Hamilton HM 12, and if so required by notice in writing from the
said Liquidator personally or by their attorneys, to come in and
prove their debts or claims at such time and place as shall be
specified in such notice, or in default thereof they will be
excluded from the benefit of any distribution made before such
debts are proved.
- A final general meeting of the Member of Fairmount Stables
Ltd. will be held at Reid House, 31 Church Street, Hamilton HM
12 on June 27, 2005 at 10.00 a.m. for the following purposes:
1) receiving an account showing the manner in which the winding-
up of the Company has been conducted and its property disposed
of and hearing any explanation that may be given by the
Liquidator;
2) by resolution determining the manner in which the books,
accounts and documents of the Company and of the Liquidator
shall be disposed of; and
3) by resolution dissolving the Company.
CONTACT: Mr. Andrew A. Martin, Liquidator
Reid House, 31 Church Street
Hamilton HM 12, Bermuda
SEA CONTAINERS: Redeems 13% Senior Notes Due 2006
-------------------------------------------------
Sea Containers Ltd. (NYSE: SCRA and SCRB), marine container
lessor, passenger and freight transport operator, and leisure
industry investor, announced Thursday that it is exercising its
right to redeem all of its outstanding 13% Senior Notes due 2006
in the aggregate principal amount of $22,475,000. The 13% Senior
Notes are listed on the New York Stock Exchange under the symbol
SCR.J06 (CUSIP No. 811371 AL 7).
The redemption date will be July 1, 2005. Holders of the 13%
Senior Notes will be entitled to $1,000 per $1,000 principal
amount on the 13% Senior Notes. The semi-annual installment of
interest due on July 1, 2005 will be paid separately in the
usual manner. The applicable redemption price is payable on the
presentation and surrender of Note certificates at the office of
The Bank of New York at the following address:
By Hand or Overnight Mail:
The Bank of New York
111 Sanders Creek Parkway
East Syracuse, NY 13057
By Registered or Certified Mail:
The Bank of New York
P. O. Box 396
East Syracuse, NY 13057
To Confirm by Telephone or
for Information Call: (800) 548-5075
CONTACT: Sea Containers Ltd.
Head Office
Tel: 1 (441) 295 2244
Fax: 1 (441) 292 8666
Regional Office
Tel: 44 (0) 20 7805 5000
Fax: 44 (0) 20 7805 5900
THE ASSET MANAGEMENT: Butterfield Resigns; New Liquidator Placed
----------------------------------------------------------------
IN THE MATTER OF THE COMPANIES ACT 1981
And
IN THE MATTER OF The Asset Management Group Limited
The Member of The Asset Management Group Limited, acting by
written consent without a meeting on March 31, 2005 passed the
following Resolutions:
i) THAT the resignation of the Liquidator of the Company, Mr.
Malcolm Butterfield c/o KPMG Financial Advisory Services
Limited, Crown House, 4 Par-la-Ville Road, Hamilton HM 08,
Bermuda be accepted;
ii) THAT Thomas MacNeil of In a Garden, 2 Tuckers Town Road, St.
Georges HS 02, Bermuda be and is hereby appointed the Liquidator
of the Company with full power and authority to conduct the
winding-up of the company in accordance with the Companies Act
1981 and the Companies (Winding-Up) Rule 1982.
CONTACT: Mr. Thomas P. MacNeil, Liquidator
In A Garden
2 Tuckers Town Road
St. George's HS02
Bermuda
=============
B O L I V I A
=============
* BOLIVIA: World Bank Approves $43.4M to Support Projects
---------------------------------------------------------
The World Bank approved Thursday two interest-free credits for a
total of $43.4 million to improve market access of poor rural
producers in Bolivia, and to support good social sector policies
in the country to improve health, education, and water and
sanitation programs.
The first credit approved Thursday is the Rural Alliances
Project, for $28.4 million, aimed at improving accessibility to
markets for poor rural producers in selected rural regions of
Bolivia by promoting productive alliances between different
economic players at the local level. The second one, for $15
million, is the Second Social Sector Programmatic Development
Policy Credit, which seeks to support social sector policies in
the country.
"These two loans support the efforts of the Government of
Bolivia to reduce poverty and improve the quality of life for
all," said Marcelo Giugale, World Bank Director for Bolivia,
Ecuador, Peru and Venezuela. "Providing economic opportunities
in the rural areas and improving the quality and access to
social programs will be key to protect and provide opportunities
for the most vulnerable."
Rural Alliances
The Rural Alliances Project will promote productive partnerships
between different economic players at the local level, empower
rural producers through the strengthening of self-managed grass-
root organizations, increase access to productive assets and
technology, and promote more effective, responsive and
accountable service organizations at the local level.
To achieve these goals, the project will finance the following
three components:
-Institutional Support to provide technical assistance and
training for the creation of productive alliances at the local
level focusing on the development of the institutional capacity
of small producers to become partners in new marketing
arrangements with the private sector.
-Implementation of Rural Productive Alliances by providing
support for the implementation of the rural alliances prepared
under the first component.
-Project Management for an efficient and effective coordination
of the project and a monitoring and evaluation system that can
measure the improved access to markets by poor producers, and
growth in rural incomes.
"This project will benefit some 125,000 families of poor rural
producers living in 54 municipalities," says Ethel Sennhauser,
World Bank task manager for the project. "The benefits include
increased market sales to existing and new markets, increased
access to higher end markets, improved product quality,
employment generation, production cost savings and reduction of
post harvest losses."
Social Sector
The $15 million, Social Sector Programmatic Development Policy
Credit II (SSPDPC II) is the second of a three-phase program in
support of Bolivia's efforts to achieve the Millennium
Development Goals (MDGs) in the areas of health, education,
water and sanitation. The MDGs are the eight goals agreed on by
the international community by the year 2015, such as achieving
universal primary education.
In addition, the loan seeks to protect the positive results
reached in the last decade of increasing access to and quality
of health and nutrition, education, water and sanitation, and
social protection, and to strengthen the capacity of both the
Government and civil society to monitor and evaluate policies,
increasing accountability and effectiveness.
Specifically, the SSPD II will support the following actions:
Health and nutrition: Expand coverage of primary-level health
care to underserved groups, provide better health service to
indigenous people, and improve the functioning of the health
service network.
Education: Create a Bolivian Education Strategy agreed on by the
different sectors of society, increase completion rates in
primary education, improve its quality, and improve secondary
education.
Water and sanitation: Strengthen the regulatory framework to
improve the flow of public and private investment resources to
expand coverage of potable water and sewage at a reasonable
cost.
Social Protection: Implement a social protection strategy to
benefit specific vulnerable groups, such as children and the
unemployed.
Accountability and participatory monitoring: Increase citizen
access to information and strengthen the country's capacity to
monitor and evaluate progress in achieving the MDGs.
Some social indicators in Bolivia have improved substantially
over the last decade. Infant mortality, for instance, dropped
from 89 deaths per 1,000 live births in 1989 to 54 in 2003, and
primary completion rates increased from 55 percent in 1992 to 72
percent in 2001, while national coverage of drinking water rose
from 54 percent in 1992 to 72 percent in 2001.
"Bolivia has improved key social indicators over the last
decade," said Daniel Dulitzky, World Bank task manager for the
project. "This loan will help Bolivia to maintain progress in
social sectors, while improving access to social services by the
most vulnerable in order to get closer to meeting the Millennium
Development Goals."
The $28.4 million credit for the Rural Alliances Project, and
the $15 million credit for the Social Sector Programmatic
Development Policy Credit are repayable in 35 years, including
10 years of grace. Both credits are extended by the
International Development Association (IDA), the part of the
World Bank that provides interest-free loans to the countries
most in need.
For more information about the World Bank's work in Bolivia,
please visit http://www.worldbank.org/bo.
CONTACT: World Bank
In Washington:
Alejandra Viveros
Phone: (202) 473-4306
Email: Aviveros@worldbank.org
In La Paz:
Erika Bruzonic
Phone: (591-2) 215-3300
Email: Ebruzonic@worldbank.org
===========
B R A Z I L
===========
BANCO BRADESCO: Releases Terms of Perpetual Preferred Securities
----------------------------------------------------------------
Below are the terms of the perpetual preferred securities issued
by Banco Bradesco S.A. in the Rule 144a market via lead manager
Merrill Lynch & Co. on Thursday:
Amount: US$300 million
Maturity: Perpetual
Coupon: 8.875%
Price: Par
Dividend: 8.875%
Call: Noncallable for five years
Settlement: June 3, 2005 (flat)
Ratings: Ba2 (Moody's Investors Service)
N/R (Standard & Poor's)
According to Dow Jones Newswires, the issue was increased from
an original US$250 million amount.
Banco Bradesco is the largest privately-owned bank in Brazil,
with assets of approximately US$70 billion as of December 2004.
The bank's impressive market share in various business lines and
its strong competitive position are reflected in Moody's "C-"
bank financial strength rating for Bradesco. The bank's dominant
deposit base, solid profitability, and a broad distribution
network accessible throughout the country provide for
substantial franchise value.
CONTACT: Banco Bradesco S.A.
Predio Novo - 4 ANDAR
Cidade de Deus
S/N, Osasco
Sao Paulo, 06029-900
Brazil
Phone: 55-11-3684-9229
Web site: http://www.bradesco.com.br
CSN: Board Approves Share Buyback, Cancellation
-----------------------------------------------
The Board of Directors of COMPANHIA SIDERURGICA NACIONAL
authorized, on May 26, 2005, (i) the cancellation of 14,849,099
shares currently held in treasury, in order to liquidate the
shares of the Company held in treasury; and (ii) the acquisition
of up to 15,000,000 shares issued by the Company, in order to be
held in treasury and to be further sold or cancelled.
This acquisition shall observe the following limits and
conditions, according with the provisions of Instrucao CVM n§
10/80:
I- Purpose of the Company in the transaction: to maximize the
shareholders' value by means of an efficient management of the
capital structure.
II- Quantity of shares to be acquired: up to 15,000,000 shares.
III- Deadline for the performance of the authorized
transactions: May 26, 2006.
IV- Quantity of shares currently negotiated at the market:
155,781,281.
V- Place of Acquisitions: Sao Paulo Stock Exchange (Bolsa de
Valores de Sao Paulo - BOVESPA).
VI- Maximum Price of the Shares: the acquisition price of the
shares shall not exceed its own quotation at the stock exchange.
VII- Brokerage Firms: Itau Corretora de Valores S.A., Pactual
CTVM S.A. and Credit Suisse First Boston CTVM S.A.
EASTMAN KODAK: To Close Brazilian Plant to Improve Bottom Line
--------------------------------------------------------------
Eastman Kodak Co. plans to close the manufacturing facility in
Sao Jose dos Campos, Brazil. This facility supplies color
photographic paper for the Latin American markets. This action
reflects the Company's plan to manage its manufacturing plants
as worldwide assets based on global capacity requirements. The
Company had earlier announced the transfer of other operations
performed in Sao Jose to Manaus, Brazil, and to facilities in
the U.S.
In conjunction with the closure of this facility, the Company
will incur restructuring-related charges of approximately $48
million. Included in these charges is accelerated depreciation
on buildings and plant equipment of approximately $28 million
(through December 31, 2005), employee severance of approximately
$11 million, and other exit costs of approximately $9 million.
The severance and other exit costs require the outlay of cash,
while the accelerated depreciation represents a non-cash charge.
This action is a part of the Company's restructuring program
that was announced on January 22, 2004. The Company expects that
it will continue to consolidate its worldwide manufacturing
operations in order to eliminate excess capacity.
CONTACT: Eastman Kodak Co
343 State Street
Rochester, NY 14650
Phone: (585) 724-4000
Fax: (585) 724-0663
Web Site: http://www.kodak.com/
===============
C O L O M B I A
===============
TRANSGAS DE OCCIDENTE: S&P Affirms 'BB' FC Rating on $240M Notes
----------------------------------------------------------------
AFFIRMED RATING
- US$240 million 9.79% notes due 11/01/2010 BB/Stable
Rationale
The 'BB' foreign currency rating on natural gas pipeline
TransGas de Occidente S.A.'s US$240 million notes due 2010
reflects the risk of a single source of bond repayment--the
monthly tariff paid to TransGas by Ecopetrol S.A. In addition,
the rating reflects sluggish natural gas demand in the Republic
of Colombia, which may affect economic incentives to operate the
TransGas project. Furthermore, the transaction's structure
contains a performance-driven tariff and refinancing risk
triggers under ownership change.
The surplus of the hydroelectric power industry adversely
affects Transgas because thermal power plants, which are the
pipeline project's major consumers, are not consuming gas at the
levels originally expected. Currently, TransGas's utilization
rate is only 30%. Although the low throughput does not affect
TransGas's performance and the transportation tariff schedule,
it appears to make the project less economic for Ecopetrol than
anticipated.
Positive factors that mitigate the project's risks are a tariff
that is linked to the pipeline's availability, which is 100%,
and protective clauses that either cancel or lessen risks
derived from dispute resolution and exchange risk.
Bond repayment ranks pari passu with all other present and
future indebtedness of TransGas, and it depends fully on
Ecopetrol's tariff payments. Credit comfort derives from a debt-
service reserve of up to six months of interest and principal
payments, as well as a contingency subaccount of the debt-
service reserve equivalent to $5 million, which can be used to
cover cash shortfalls. There are no other alternative sources of
repayment other than the revenues associated with the
Transportation Services Contract (TSC) with Ecopetrol.
Notwithstanding the aforementioned strengths, Ecopetrol's
obligations under the TSC are not guaranteed, secured, or
otherwise supported by the Colombian government.
The transaction contains a feature in the TransGas trust
indenture that stipulates that if TransCanada PipeLines Ltd. (A-
/Negative/--), through its wholly owned subsidiary, reduces its
ownership of TransGas below 25%, the notes will be redeemable at
the option of any noteholder at par plus accrued interest, plus
a make-whole premium. However, TransCanada continues to maintain
a 46.5% stake in TransGas, and Standard & Poor's Ratings
Services does not expect material ownership changes to occur.
TransGas is a 344-kilometer (215 miles), 20-inch diameter
natural gas trunk line running from Mariquita in the central
region of Colombia to Cali in the southwest of the country. It
has 47 lateral lines totaling about 430 kilometers (267 miles)
along the trunk line with metering stations to connect with
distribution networks. The pipeline has a design capacity of
about 234 million cubic feet per day without compression. The
two major sponsors are TransCanada subsidiary TCPL Marcali and
BP Colombia, a subsidiary of BP PLC (AA+/Stable/A-1+).
TransGas was formed to build, operate, and maintain the pipeline
along with the associated lateral lines and, after 20 years,
Ecopetrol has the option to purchase the pipeline for 1% of the
construction cost. The project is part of the Colombian
government's strategy to substitute the use of electricity and
fuel oil with natural gas, formally known as the Gas Plan.
Outlook
The stable outlook reflects the foreign currency rating and
outlook of the Republic of Colombia. Reduced support from the
Colombian government for its Gas Plan or another unforeseen
event that could jeopardize complete and timely payments to the
project would result in a negative rating action by Standard &
Poor's.
Transportation Services Contract
Under the TSC, Ecopetrol must pay TransGas a monthly gas
transportation service tariff regardless of the actual amount of
gas designated for throughput by Ecopetrol. The monthly tariff
allows TransGas to meet all operating and financing costs, and
to recover a return on equity for the shareholders. The tariff
is adjusted downward if TransGas fails to provide an
availability level as specified under the TSC. The base tariff
is also adjusted for inflation. Under the terms of the contract,
TransGas benefits from the fact that Ecogas and Ecopetrol bear
commodity risk: risks that derive from natural gas reserves,
production, and marketing. In addition, Ecopetrol assumes
responsibility for several uncontrollable risks, such as
currency exchange-rate risk, changes in inflation rates, and
revisions of environmental or tax laws.
Market/Competitive Position
The government owns all of the oil and gas in the country, thus
eliminating competition from other suppliers. However,
Colombia's hydro-based electricity accounts for roughly two-
thirds of the country's power generation, while natural gas is
the second source, capturing about 30% of the market.
Natural gas reserves, which can provide low-cost energy, and
reforms to promote exploration and production are being pursued
through the Gas Plan. However, the plan faces a market that
needs to provide more incentives to producers, distributors, and
consumers. In addition, although domestic natural gas facilities
have increased, the market is not developing rapidly as service
coverage is not sufficient to boost demand.
As Colombia's river system does not provide future development
prospects for hydro projects, even though hydroelectricity is
usually the least expensive form of electricity production, it
is likely that other sources of energy will be required to meet
long-term consumer demand.
Insurance
TransGas contracted with a Colombian insurance company to cover
pipeline damage. Accordingly, TransGas contracted business-
interruption insurance covering 12 months of expected revenues,
anticipating any contingencies that could stop Ecopetrol's
payments to TransGas. In addition, TransGas also contracted an
insurance policy in cases in which third-party liability arises.
Structure
The combined equity share of TransCanada and BP Colombia is
66.5%. The TransCanada subsidiary must maintain at least 25%
ownership in the project at all times. The rated notes are
secured by a pledge of the pipeline, assignment of the TSC,
equity undertakings, and project accounts.
Covenants
As of March 2005, TransGas was in compliance with the key
financial covenants of the transaction, which include:
* A debt-service reserve fund equal to six months of debt
service;
* An operating reserve fund that serves to assure the
availability of adequate funds for the project's proper
operation and equals three months operating costs;
* A US$5 million contingency subaccount of the debt-service
reserve account that has been fully funded;
* A distribution test that allows distributions of excess
cash to the shareholders after complying with the required 1.25x
of debt-service coverage; and
* Limitations on additional indebtedness. Borrowing for
project expansions subject to governmental approval-debt-service
coverage during four preceding quarters must be at least 1.25x,
and a rating affirmation must be issued. Subordinated debt to
affiliates and other nonrecourse debt not to exceed 10% of
TransGas's tangible assets; both are required to mature after
the bonds have been paid off, and payments in respect of such
indebtedness are also subject to the distribution test.
Operations
Currently, gas throughput has not reached the Colombian
government's forecast, with a pipeline utilization rate of only
30% due to continuous rainfall that has created a surplus in the
hydroelectric industry. During 2004, the pipeline's availability
was at 100%, with TransGas's revenues being received in full.
The risks associated with the tariff mechanism under the TSC
include operation and maintenance cost overruns, and pipeline
performance below expectations. Since 2000, TransGas has managed
to control operating costs, and Standard & Poor's does not
expect cost overruns to be a problem. In addition, after the
project experienced a four-day pipeline failure in late 1998 as
a result of a landslide 27 miles south of the reception point in
Mariquita, TransGas has not suffered any damages or halts in
operations. There are no records of guerilla attacks against the
pipeline.
Financials
Even though the pipeline's utilization rate is below the
original estimates, TransGas posted adequate results, as
evidenced by a debt-service coverage ratio of 1.38x for year-end
2004. Moreover, TransGas has been able to maintain solid
operating margins close to 80%, which provides financial
flexibility to fulfill all debt obligations.
The cash flow stability that stems from the monthly tariff
structure established in the TSC, the debt-service reserve, and
the additional US$5 million reserve fund that builds up out of
earnings to guard against unforeseen cash shortfalls will allow
TransGas to continue meeting its remaining debt service
obligations in a timely manner. The next debt-service payment is
scheduled for November of this year.
Primary Credit Analyst: Luis Manuel Martinez, Mexico City (52)
55-5081-4462; luis_martinez@standardandpoors.com
Secondary Credit Analyst: Jose Coballasi, Mexico City (52)55-
5081-4414; jose_coballasi@standardandpoors.com
===============
H O N D U R A S
===============
MILLICOM INTERNATIONAL: Increases Ownership of Celtel
-----------------------------------------------------
Millicom International Cellular S.A. ("Millicom") (Nasdaq:MICC)
(Stockholmsborsen and Luxembourg Stock Exchange:MIC) announced
Thursday that it has acquired additional shares of its
subsidiary Telefonica Celular S.A. ("Celtel") in Honduras from
Motorola, Inc., bringing Millicom's ownership to two thirds of
the total outstanding shares. Motorola is selling its entire
equity stake in Celtel. The remaining Motorola stake in Celtel
will be acquired by local minority shareholders.
Marc Beuls, President and CEO of Millicom commented: "This
acquisition is part of our strategy for growth by increasing our
ownership of our existing operations. Central America has seen
an acceleration of growth since the launch of GSM services and
has recently been one of our fastest growing operations. We
believe the prospects in Honduras are excellent."
Millicom International Cellular S.A. is a mobile
telecommunications operator with cellular operations in Asia,
Latin America and Africa. It currently has a total of 16
cellular operations and licenses in 15 countries. The Group's
cellular operations have a combined population under license of
approximately 332 million people.
CONTACTS: Millicom International Cellular S.A., Luxembourg
Marc Beuls
Telephone: +352 27 759 327
President and Chief Executive Officer
Andrew Best
Telephone: +44 20 7321 5022
Investor Relations
Visit our web site at: www.millicom.com
=============
J A M A I C A
=============
CABLE & WIRELESS: Records First Profit in 3 Years
-------------------------------------------------
Announcing the full year results for Cable and Wireless plc for
the year ended 31 March 2005, Cable & Wireless Chairman, Richard
Lapthorne said:
"The 2004/5 financial performance demonstrates our progress. For
the year to 31 March 2005, profit after tax and before
exceptionals and amortisation for the continuing business was
GBP293 million equivalent to 9.3 pence per share. Revenue from
continuing operations was GBP3,023 million, a stable result at
constant currency. The Board has recommended a full year
dividend of 3.8 pence per share, after paying 1.16 pence per
share at the interim stage. This represents a 21 percent
increase in the total dividend, indicating our confidence in the
Group.
"The past 12 months have been a time of transition, as Cable &
Wireless entered a new phase in the three-year programme to
revive the Company. By the end of the year, the Chief Executive
and his new team were no longer preoccupied with the issues of
the Company's past, and had turned confidently to face the
future.
"Over the past year, the management has delivered on the
promises it made in June 2003. We completed our exit from the US
market at substantially lower cost than originally expected.
This allowed the Chief Executive to concentrate on restructuring
our UK business and stabilising its performance. Customer focus
has been central to our new structures. An enormous amount of
work has gone into improving operations and tightening cost
controls in the legacy businesses.
"We are also seeing some excellent groundwork in network
development. A prime example is our investment in Bulldog, the
UK broadband operator, we acquired last May. Bulldog gives us
network access across the 'last mile' to the customer, enabling
us to offer an end-to-end service. Building our customer base in
this way is an important goal as we embark upon investment of
GBP190 million over three years in our UK IP-based Next
Generation Network ('NGN') and systems. The new technology
offers network economies that will benefit our customers and
improve our margins. In this context, we welcome Ofcom's vision
of a UK telecommunications market based on realistic and
sustainable competition among players willing to invest in
future technological strength.
"Our National Telco businesses have become more aggressive when
dealing with competition. Cooperation and communication have
also improved, so that these businesses can benefit from each
other's experiences of the rapidly liberalising telecom
landscape. We are successfully capitalising on our controlling
stake in Monaco Telecom and will take opportunities to expand
our footprint into new geographies as appropriate.
"The exit from the US and disposal of our Japanese business kept
our cash intact which allowed us in November 2004 to launch a
GBP250 million share buyback. As at March 2005, we had bought
back 60.5 million shares, at an average price of 124.4 pence.
"Our markets continue to suffer from excess capacity and severe
price competition. Performance
improvement will come from efficiencies and cost cutting, and a
shift in our sales mix towards broadband, IP and mobile. We are
in a unique position to help our customers embrace these new
technologies and I look forward with confidence to the year
ahead."
Chief Executive, Francesco Caio, said:
"Our results show we have produced a solid set of numbers, in a
challenging market. This year we have made solid progress in
strengthening Cable & Wireless' competitive position by focusing
on markets where we can be the number one or number two
operator, further reducing our cost base and accelerating our
investment in growth services. Specifically, we have:
- Completed the US exit and sold our domestic business in Japan;
- Acquired Bulldog and completed the first phase of its
development to gain 30 percent coverage of the UK broadband
market;
- Committed to invest GBP190 million over three years to build a
UK Next Generation Network;
- Reshaped our UK business around four key customer segments;
- Refocused Europe on Carrier Services, reducing headcount and
exiting non-core businesses;
- Streamlined central functions, including relocating Group
headquarters;
- Initiated a programme to reduce headcount by more than 1,000
in the UK, corporate and Europe;
- Invested in mobile and broadband in National Telcos; and
- Established pan-regional initiatives including procurement and
marketing plans for National Telcos.
"Our strategy is to establish a sustainable position as an
infrastructure-based competitor operating with its own access
network, building a strong customer franchise, both with
consumers and businesses, investing in IP, broadband and mobile
to pursue profitable growth in new services.
"Through our investments in UK Local Loop Unbundling ('LLU') and
Next Generation Network we have a unique opportunity to lead the
telecom industry in its transition from traditional services to
IP and redefine the competitive scenario to our advantage.
National Telcos
"Each of the 34 national markets in which our National Telcos
operate is at a different stage of liberalisation, with its own
customer profile but the competitive challenges are similar, our
priorities are clear and we must:
- Drive change and performance, especially in our sales and
marketing response to competition;
- Shift the revenue mix to new services through further
investment in broadband, IP and mobile; and
- Lower costs to protect margins in legacy services.
"We aim to be market leaders in mobile and have actively worked
to reclaim business. Our bmobile brand has increased market
share in the Caribbean and in Bahrain a pro-active response
enabled Batelco to retain customer share against competition
from new entrants. We are leaders in most of our National Telco
markets for broadband and IP and are working to maximise market
penetration. Many of the countries in which we operate still
have relatively low take-up levels, and we are well positioned
to offer services that assist customers in the transition. We
have started to invest in IP backbones in countries where
traffic volumes justify the expenditure, including in the
Caribbean where hurricane damage has driven infrastructure
replacement. Network upgrades are also underway in Monaco,
Macau, the Cayman Islands and Grenada.
"The need for continuing cost reduction remains high on our
agenda and we have initiated a number of programmes, including
outsourcing the Caribbean mobile supply chain, leveraging our
strengths in Groupwide procurement, consolidating data centres
and rationalising our property portfolio. These are showing
positive initial results but our cost reduction needs to
intensify in the coming year.
Next Generation Network ('NGN')
"A migration of our UK network to NGN will be a further element
of our strategy. We intend to invest GBP190 million over three
years to transform our core network into a single integrated IP
platform. A large proportion of the anticipated capital
expenditure will replace expenditure that would otherwise have
been needed to maintain our legacy systems, so that incremental
UK investment is only GBP35 million over the three years. The
benefit of this investment is a less complex, highly scalable
network capable of accommodating significant growth in traffic
at a lower capital cost and permanently lower operating and
maintenance costs. Most importantly, our Next Generation Network
will support customer demand, providing greater functionality
and customised solutions at an attractive price.
Ofcom Strategic Telecoms Review
"The regulatory framework remains fundamental to our business
and investment decisions. In particular, Ofcom's Strategic
Telecoms Review provides an opportunity to create a more
transparent and effective regulatory regime in the UK. We are
encouraged by the review's emphasis on infrastructure-based
competition and the principle of equivalence. It is vital,
however, the review delivers an effective and enforceable
regulatory settlement. Fair competition must be at the heart of
the UK telecoms market if customers are to benefit from the
variety of services that new technologies can offer.
Bulldog
"The acquisition in May 2004 of Bulldog Communications, the
broadband operator, was an important step in advancing our UK
access strategy, giving us control of the valuable 'last mile'
and an expanding customer base. We now have coverage of 30
percent of the UK broadband market, reaching our initial target
of 400 unbundled exchanges by end of May 2005, seven months
ahead of the original timetable.
"Based on the customer response we have seen to date we are
today announcing an extension to our rollout plan and additional
new services.
"We now intend to unbundle an additional 200 exchanges by the
end of March 2006, giving total unbundled exchanges of 600 and a
further 200 exchanges in the first half of 2006/7 bringing the
total to 800 exchanges.
This will increase our investment losses in 2005/6 but we see it
as vital in capturing the real and increasing UK customer demand
for broadband.
"We are also announcing the launch in June of a new SoHo
offering, that provides up to 8 VoIP lines, data and fast
internet access all through a single pipe.
"We have reorganised the remaining UK business around customer
segments and through our work this year we now have visibility
of the economics of each of our UK segments - Enterprise,
Business and Carrier Services. This has assisted us in
identifying priorities and targeting cost reductions.
Retail: Enterprise and Business
"During the year we successfully increased the percentage of IP
spend with existing Enterprise customers. The development of the
NGN and an access network positions Cable & Wireless as a
reliable, innovative, scale partner for our Enterprise
customers' migration to IP, offering lower prices and more
sophisticated services. In Business, we are focusing on product
differentiation and customer service.
Carrier Services
"Our intercontinental network is a major international carrier
across 200 countries, the world's sixth largest for
international voice and fifth largest for data. Carrier Services
operates in a highly competitive market that continues to suffer
from over-capacity and pricing pressure. Nonetheless it provides
a useful means to improve our network economics so we have
worked hard to improve market share and our innovative customer
solutions have won some notable contracts. We launched our
global Carrier Multi Packet Labelling System ('MPLS') service,
which can transmit any type of traffic in internet protocol
('IP') format, and have already signed up 8 significant
carriers. During the year revenues were impacted by the
regulatory change in fixed to mobile termination rates. In the
future we will increase our focus on driving cash margins from
this
profitable segment.
"In summary, I am pleased with progress over the year. We have
delivered on the first two phases of our plan, reconstructing a
competitive position for the company, through our more focused
footprint and streamlined organisation. We have increased
investment in broadband and IP and we have defined and are
building a clear path to the future across all our markets. In
particular, I am confident that our decision to invest in Next
Generation Network for the UK will reinforce our position as one
of the only national infrastructure player with the scale,
access and resources to provide a competitive offering to
businesses and consumers."
Outlook
We expect that operating profit margins within our established
businesses will remain broadly stable in 2005/6 before the
impact of the following:
At the Group level we estimate:
- Operating cost reductions amounting to GBP35 million in
2005/6, as a result of our reorganisation of the UK, corporate
and Europe;
- Outpayments and network UK cost savings of GBP50 million in
2005/6, which will mitigate the impact of continued pricing
pressure;
- A 2005/6 Group depreciation charge of approximately GBP240
million (including NGN and Bulldog);
- Group capital expenditure of between GBP435 million and GBP455
million. This includes UK capital expenditure of approximately
GBP225 million (including NGN). It also includes capital
expenditure relating to the Bulldog exchange rollout of
approximately GBP70 million; and
- A Group effective tax rate of approximately 15 percent for the
next three years.
Bulldog:
We have announced today the extension of the Bulldog exchange
rollout. We now plan to unbundle 600 exchanges in total by end
of March 2006 and 800 exchanges in total by end of June 2006. We
expect Bulldog's performance to be:
- Estimated 2005/6 EBITDA losses of GBP75 million, due to a lag
in prior year, customer provisioning, increased marketing and
advertising spend and losses associated with the additional 200
exchanges;
- Estimated 2005/6 depreciation of GBP15 million;
- Estimated 2005/6 cash capital expenditure of GBP70 million
reflecting the cash underspend in 2004/5 of GBP14 million and
the rollout of the additional 200 exchanges.
Operating losses in 2006/7 are expected to halve compared to
2005/6, beyond which we anticipate minimal losses.
EXECUTIVE SUMMARY
Trading overview
Revenue from continuing operations for the year to 31 March 2005
was GBP3,023 million, a stable performance at constant currency
compared to the prior year and a 3 percent decline at reported
rates.
This result reflects strong performances in Panama where revenue
increased by 6 percent at constant currency and the Rest of the
World2 where revenue increased by 11 percent at constant
currency, together with the contribution of revenue from Monaco
Telecom, which was acquired in June 2004. Offsetting these
strong performances, revenue in Europe declined by 27 percent at
constant currency, revenue in the UK declined by 4 percent and
revenue in the Caribbean declined by 3 percent at constant
currency.
Operating profit from continuing operations before exceptional
items for the year to 31 March 2005 was GBP277 million, an
improvement of GBP46 million over the prior year, reflecting a
33 percent improvement at constant currency. The main drivers of
this improvement were the stronger UK performance and the
ongoing focus on cost reduction across the Group, together with
the contribution from Monaco Telecom. Profit before tax and
exceptional items from continuing operations was GBP361 million
for the year to 31 March 2005 compared to GBP319 million in the
prior year.
Acquisitions and Disposals
On 28 May 2004, Cable & Wireless acquired Bulldog Communications
('Bulldog') for a consideration of GBP18.6 million. Bulldog
contributed revenue of GBP11 million and an operating loss
before exceptionals and amortisation of GBP30 million for the
period from acquisition to 31 March 2005.
On 18 June 2004, Cable & Wireless acquired a 55 percent economic
interest in Monaco Telecom S.A.M. ('Monaco Telecom') for a total
consideration of ?162 million (GBP108 million). Monaco Telecom
contributed revenue of GBP100 million and an operating profit
before exceptionals and amortisation of GBP21 million for the
period from acquisition to 31 March 2005.
On 26 October 2004, Cable & Wireless announced the sale of its
stake in Cable & Wireless IDC, Inc. ('IDC'), its Japanese
subsidiary, to SOFTBANK Corp ('Softbank'). The sale was
completed on 17 February 2005 and Cable & Wireless received a
consideration of GBP71.7 million, comprising GBP62.3 million of
cash and Softbank's assumption of GBP9.4 million of debt. The
consolidated Group financial statements for the year ended 31
March 2005 recognise a profit on disposal of GBP42 million
relating to this transaction. Cable & Wireless retains a sales
office and two network nodes in Japan to maintain services
specifically for its international Enterprise and Carrier
Services customers.
On 28 January 2005, Cable & Wireless sold its 3.4 percent stake
in Intelsat (the satellite communications company). The stake
was held both directly by Cable and Wireless plc and through
various Group subsidiaries and associates. Total cash proceeds
from the disposal of this investment were US$104.8 million
(GBP56 million). Cable & Wireless has now disposed of all of its
satellite shareholdings.
Regulatory
The UK regulator, Ofcom, is due to consult on the final decision
of its Strategic Telecoms Review in summer 2005. Ofcom's stated
objective is that it would seek to promote competition at the
deepest level of infrastructure where it is effective and
sustainable to do so. Ofcom believes the optimum way to achieve
this is through the concept of equality of access, which it
believes will lead to the creation of a more effectively
competitive market in the UK. Implementing the concept of
equality of access will ensure all players have fair and
reasonable access to critical local infrastructure assets by
neutralising BT's historic ability to leverage its unique
position as both a monopoly local infrastructure owner and
competitive retailer.
Ofcom has made Local Loop Unbundling ('LLU') a central theme in
achieving deep level infrastructure competition and the creation
of an LLU adjudicator in 2004 has resulted in more focused
efforts to remove many of the barriers to wider scale rollout of
LLU. However the critical elements of revaluing BT's local
copper network, the review of the regulated cost of capital to
be applied to BT's existing and future investments, charges for
wholesale line rental and fully unbundled local loops remain
outstanding and the detail of the decisions reached in the next
few months will be vital in creating a sustainable competitive
market in the UK.
Discontinued operations
Discontinued operations in the year to 31 March 2005 comprise
IDC and credits relating to transactions associated with the
exit of the US domestic business in the prior year. Other items
relate to the release of previously accrued costs no longer
required. Discontinued operations in the year to 31 March 2004
also relate to TeleYemen.
Exceptional items
In the year to 31 March 2005 the Group recognised a net
exceptional charge before tax of GBP14 million, comprising an
exceptional charge in continuing operations of GBP159 million
and an exceptional credit in discontinued operations of GBP145
million.
Cash and funding
At 31 March 2005, the Group's cash and short-term investments
were GBP2,166 million. Total borrowings were GBP824 million, of
which long-term debt was GBP801 million. The net cash balance at
31 March 2005 was GBP1,342 million. Cash and short-term
investments include GBP14 million of treasury investments and
GBP80 million of Credit Linked Notes referenced to the Group's
2012 GBP200 million bond (which have a similar economic effect
to repurchasing the bonds for the period of the investment) and
GBP42 million ring-fenced in relation to performance guarantees.
During the year ended 31 March 2005 the Group bought back GBP20
million of its 8.625 percent 2019 bonds and GBP16 million of its
8.75 percent 2012 bonds for an aggregate consideration of GBP36
million.
Dividend
The Board reinstated the dividend in June 2004 and, in August
2004, a full year dividend of 3.15 pence was paid in respect of
the year ended 31 March 2004. The full year dividend comprised a
notional interim dividend of 1.05 pence and a final dividend of
2.1 pence.
The Board has recommended a full year dividend for the year
ended 31 March 2005 of 3.80 pence,
comprising 1.16 pence per share for the interim and 2.64 pence
per share for the final dividend. The recommended dividend is
subject to approval of the shareholders at the Annual General
Meeting to be held on 22 July 2005. If approved, the final
dividend will be paid on 11 August 2005 to ordinary shareholders
on the register as at 8 July 2005 and to American Depositary
Receipt holders on 18 August 2005 on the register as at 8 July
2005.
The scrip dividend scheme will be offered in respect of the
final dividend. Those shareholders who have already elected to
join the scheme need do nothing since the final dividend will be
automatically applied to the scheme.
Shareholders wishing to join the scheme for the final dividend
(and all future dividends should return a completed mandate form
to Lloyds TSB Registrars, The Causeway, Worthing, West Sussex,
BN99 2DZ by Thursday 14 July 2005. Copies of the mandate form,
and the scrip dividend brochure, can be obtained from Lloyds TSB
Registrars (UK callers: 0870 600 3975, overseas callers: +44
1903 502 541) or from the Company's website (www.cw.com).
Return of capital
On 10 November 2004, Cable & Wireless announced a GBP250 million
share repurchase programme, reflecting the Board's view that a
return of capital was possible as a result of the progress made
in dealing with legacy issues such as the US exit, the sale of
IDC and the sale of Intelsat.
At 31 March 2005, 60.5 million shares had been repurchased at a
total cost of GBP75.3 million, equating to an average price per
share of 124.4 pence. Shares repurchased are held as treasury
shares. We expect the share repurchase programme will be
completed by 31 March 2006.
===========
M E X I C O
===========
CEMEX: Moody's Ups Ba1 Ratings Outlook To Positive From Stable
--------------------------------------------------------------
Approximately $110 million in long-term debt securities affected
Moody's Investors Service has revised the ratings outlook on
Cemex S.A. de C.V.'s Ba1 ratings to positive from stable.
Ratings affected include the company's Ba1 ratings on
approximately $110 million in senior unsecured Euro notes and
its senior implied rating.
The positive outlook reflects Moody's recognition that Cemex's
management has begun to mitigate the significant near-term
refinancing risk associated with RMC Group acquisition debt.
Recently, the company extended the median debt maturity profile
from 2.8 years, following the RMC acquisition, to an average
life of around 4 years. Moody's believes continued progress in
both lengthening the average debt maturity profile to a minimum
of 5 years and diversifying the company's funding sources, which
have been heavily dependent on bank financing, will reduce the
company's financial risk profile and are necessary for achieving
an upgrade in the company's ratings to investment grade.
The positive outlook also reflects Moody's belief that strong
growth in consolidated revenue and free cash flow, which will
continue to be primarily allocated towards absolute debt
reduction of at least $1.2 billion in 2005 and additional
incremental debt reduction over the intermediate term, will
result in credit metrics that are consistent with a Baa3 rating.
Specifically, over the next 12 months, Moody's could upgrade
Cemex S.A. de C.V.'s Ba1 rating to Baa3 if, in addition to the
lengthening of the average debt maturity to at least 5 years and
the diversification of funding sources, it becomes evident the
consolidated company will achieve lease adjusted debt-to-EBITDAR
of under 3.0x, 20% retained cash flow to total debt, 15% free
cash flow to total debt and 4.0x EBIT interest coverage. Moody's
noted, however, that increased transparency with regard to the
operating performance of the recently-acquired RMC Group assets
will be required before an upgrade is achieved, given that the
company has not filed public financial statements in almost a
year. Moody's believes that increased transparency regarding the
combined company's financial results will provide greater
confidence that the company is successfully integrating the new
assets while reducing the absolute level of debt outstanding and
mitigating financial risk.
Historically, the two stand-alone ratings at Cemex S.A. de C.V.
and Cemex Espana differed because of dissimilar credit profiles,
separate guarantor groups that did not provide upstream nor
downstream guarantees, and restrictions on the movement of cash
between the two companies. Now, however, Moody's believes it is
appropriate to analyze the company as a consolidated entity,
with equalized ratings, given strong operating performance in
Mexico has improved the credit profile of Cemex S.A. de C.V. and
there are no longer any limitations on the movement of cash
between the two companies.
Cemex's ratings are supported by the company's globally-
diversified operations as a cement company with a leading
vertical position in ready-mix concrete and aggregates
production. The ratings also recognize Cemex's strong operating
performance as evidenced by modest revenue growth, expanding
operating margins and increasing free cash flow. Moody's
anticipates there are significant potential cost reduction and
working capital efficiencies at RMC, whose operations are
largely in investment grade countries.
Over the near-term, Moody's believes that Cemex's legacy markets
should continue to experience moderate operating performance
improvement with increasing amounts of free cash flow,
particularly due to the company's dominant market share in
Mexico , where the company has above industry average margins,
high return on capital invested and significant barriers to
entry. Nevertheless, the ratings also recognize the business
risks associated with the RMC acquisition, including a higher
concentration in lower operating margin regions, the lower
barrier to entry ready-mix concrete business, and high financial
leverage. As well, while operations have benefited from improved
economic conditions over the last year or so, the company
remains exposed to economic cycles in many developed countries
where revenue growth tends to track GDP growth.
Cemex, headquartered in Monterrey, Mexico, is a growing global
building solutions company that provides building products to
customers in more than 60 countries throughout the world.
MERIDIAN AUTOMOTIVE: Extends Interim Access to DIP Financing
------------------------------------------------------------
Meridian Automotive Systems, Inc. announced Thursday that it has
received approval from the U.S. Bankruptcy Court for the
District of Delaware to extend interim access to $30 million of
its debtor-in-possession (DIP) financing through June 30, 2005.
As previously announced, interim access to the DIP financing was
originally approved at a hearing held on April 27, 2005.
The Company said that its request to extend the interim access
was the result of ongoing discussions with its lending group
regarding revisions to its 2005 operating forecasts. These
revisions were driven by recent reductions in production volumes
by original equipment manufacturers (OEMs). The Company is
working with its pre-petition lending group for an appropriate
DIP financing that takes into account the revised 2005 operating
forecast. Meridian believes that its available post-petition
liquidity will not be reduced as a result of any modifications
to its final DIP facility. Meridian said that it expects that
the $30 million in interim DIP financing along with normal cash
flow is sufficient for its current operating needs. A final
hearing on the Company's DIP financing will be held by the end
of June.
About Meridian Automotive Systems
Meridian Automotive Systems is a leading supplier of
technologically advanced front and rear end modules, lighting,
exterior composites, console modules, instrument panels and
other interior systems to automobile and truck manufacturers.
Meridian operates 22 plants in the United States, Canada and
Mexico, supplying Original Equipment Manufacturers and major
Tier One parts suppliers.
CONTACT: Gavin Anderson & Co.
Doug Morris, 212-515-1964
PEMEX: Seeks to Prepay $994M Notes in June
------------------------------------------
State oil company Petroleos Mexicanos (Pemex) plans to pay off
US$994 million in notes on June 27 via its financing vehicle,
relates Dow Jones Newswires.
Pemex Finance will redeem the notes at par, plus accrued
interest, while also offering up a yet-to-be-determined premium.
The bonds being prepaid are:
- US$194.1 million in 6.55% notes due 2008
- US$400 million in 6.30% notes due 2010
- US $250 million in 7.33% notes due 2012; and
- US $150 million in 7.80% notes due 2013
Following the payment, Pemex Finance will have US$2.44 billion
in notes outstanding with maturities ranging from 2007 to 2018.
As of March 31, Pemex as a whole owed US$46.2 billion.
SATMEX: Noteholders File Involuntary Chapter 11 Petition
--------------------------------------------------------
A group of secured and unsecured noteholders, represented by
Wilmer Cutler Pickering Hale and Dorr LLP and Akin Gump Strauss
Hauer & Feld LLP, respectively, holding in excess of US$379
million of outstanding notes of Satelites Mexicanos, S.A. de
C.V. ("Satmex" or the "Company"), the leading Mexican satellite
operator in the Americas, filed Thursday an involuntary Chapter
11 petition against Satmex in the U.S. Bankruptcy Court for the
Southern District of New York.
The noteholders have reached an agreement on a comprehensive
debt restructuring that is supported by creditors holding more
than two-thirds in amount of the Company's liabilities, and have
requested that the court waive the customary exclusivity period
given to the Company in order to implement the agreed-upon
restructuring plan as quickly as possible. The noteholders
believe that implementing the terms of their debt restructuring
through a formal Chapter 11 plan of reorganization would
substantially improve the Company's capital structure and allow
it to better serve the needs of its customers in Mexico, the
United States, and throughout Latin America.
Satmex currently has a principal amount of approximately
US$523.4 million of debt in default.
Under the restructuring agreement, the petitioning secured and
unsecured noteholders have agreed, subject to certain
conditions, to provide up to US$55 million in debtor-in-
possession (DIP) financing to Satmex, an amount that would be
sufficient to fund the launch of Satmex 6, the Company's new
satellite. Satmex 6 has been stored at the Arianespace launch
facility in French Guiana for the last 18 months because Satmex
has not had sufficient capital to fund its launch. The Company
has two other satellites in orbit.
The noteholders' restructuring agreement contemplates that
allowed claims of trade creditors would be paid in full,
permitting the Company to continue to operate without
interruption. The agreement also provides that current
shareholders -- including Loral Space & Communications Ltd.,
itself in a Chapter 11 proceeding; Principia, S.A. de C.V., led
by Sergio Autrey, the Company's acting chief executive officer;
and the Mexican government -- will maintain majority control of
the reorganized company as of the Effective Date of the Chapter
11 plan. The Company is not a party to the restructuring
agreement.
"This action by the petitioning holders of the Senior Secured
Floating Rate Notes due 2004 and of the 10 1/8% Senior Notes due
2004 was taken in order to preserve the value of the Company's
assets and to provide a comprehensive and timely solution to its
financial difficulties, which have been on-going since prior to
the Company's first major debt payment default in August 2003,"
said Mitchell A. Harwood, Managing Director of Evercore
Partners, financial advisor to the petitioning holders of Senior
Secured Floating Rate Notes.
"The noteholders have concluded that the extended period of
uncertainty is beginning to take its toll on the Company's
customer base," said Harwood. "The noteholders believe that the
Chapter 11 restructuring will provide current and potential
customers with comfort that the Company's telecommunications
services will continue uninterrupted," said Harwood.
"A traditional out-of-court restructuring process to resolve the
Company's balance sheet and funding issues has been on-going for
almost two years, and the creditors do not see that process
resolving matters in the near term," said Skip Victor, Senior
Managing Director of Chanin Capital Partners, financial advisor
to the petitioning holders of the 10 1/8% Senior Notes.
"We therefore believe that a restructuring under Chapter 11 of
the U.S. Bankruptcy Code is now the best alternative to follow,
because it will achieve a fair and equitable restructuring of
the Company's debt and will provide for the critical new funding
needed to launch Satmex 6 in a relatively short time frame,"
said Victor.
"In order for the Company to remain competitive and provide
customers with important services, it is important to resolve
the Company's balance sheet and funding issues promptly, and the
noteholders' action is being taken to achieve that result," said
Victor.
Satmex, headquartered in Mexico, derives over 50% of its
revenues from United States business, and all of the Company's
over US$500 million in debt was issued in the United States and
is governed by New York law. The Company's largest shareholder,
Loral Space & Communications Ltd., is a United States public
company also undergoing a Chapter 11 reorganization in the U.S.
Bankruptcy Court for the Southern District of New York. Under
U.S. bankruptcy law, Satmex has 20 days to respond to the
involuntary petition, during which time the Company is entitled
to operate its business in the ordinary course. In the event
that the Company or another party contests the involuntary
petition, it will be up to the Bankruptcy Court to determine
whether the Chapter 11 reorganization will proceed.
CONTACT: Sitrick And Company, for Evercore Partners
Mike Sitrick, +1-310-788-2850
Tom Vogel, +1-212-573-6100
VISTEON CORP.: Ford Moves to Assist Ailing Unit
-----------------------------------------------
Ford Motor Company announced Wednesday it has signed a
Memorandum of Understanding (MOU) with its largest supplier,
Visteon Corp., that protects the Company's supply of critical
parts and components, creates opportunities for production
material cost savings, and improves its ability to benefit from
competitively-priced and high-quality parts, systems and
technologies.
The MOU proposes the transfer of 24 Visteon plants and
facilities in the U.S. and Mexico and associated assets to a
new, temporary business entity to be managed by Ford. Over time,
Ford would prepare most of these transferred Visteon operations
for sale to companies with the expertise and capital to supply
Ford with parts, systems and technologies that are competitive
in price and quality. In addition, once the transaction is
closed, the agreement provides Ford with warrants to purchase up
to 25 million shares of Visteon Corp. common stock at $6.90 per
share, and continued annual price reductions from Visteon
through 2008.
"This agreement brings us closer to a true 'arms length'
relationship with our largest supplier," said Don Leclair,
Ford's chief financial officer and executive vice president.
"We've accomplished this while also creating opportunities to
accelerate the improvement of our business results. Over time,
this agreement will allow us to diversify our supply base and
enhance our access to parts, systems and technologies that are
competitive in price and quality. With the United Auto Workers'
continued support, many of these Visteon operations will have
the opportunity to prosper under new ownership."
The MOU with Visteon is subject to customary approvals and
conditions, ratification by Ford-UAW hourly employees that would
be affected by the proposed agreement, and negotiation by Ford
and Visteon of a definitive agreement, which the parties are
working to complete in the third quarter. The transaction is
expected to be closed by September 30.
Business Entity Details
At the transaction's closing, 24 Visteon plants and facilities
in the U.S. and Mexico will transfer to a Ford-managed business
entity. The entity's operations, assets and liabilities will be
reflected in Ford's consolidated financial results and balance
sheet.
In keeping with its temporary status, the new business entity
will not have its own employees. It will lease salaried
employees from Visteon, and all hourly UAW-Ford employees
currently working in Visteon facilities. In addition, Ford is
expected to implement over time buy-outs for about 5,000 Ford-
UAW hourly employees.
Leading the new business entity as chief executive officer will
be Frank E. Macher, a 35-year veteran of the automotive industry
who most recently served as CEO and chairman of Federal-Mogul
Corp., and previously as president and CEO of the former ITT
Automotive, an $8 billion global automotive supplier. He will
report to Greg Smith, Ford's executive vice president and
president, The Americas. Macher's career experience includes 30
years with Ford, including as vice president and general manager
of the Company's Automotive Components Division, the predecessor
to the current Visteon Corp. Also, Al Ver, Ford's current vice
president of Advanced and Manufacturing Engineering, has been
appointed the new business entity's president and chief
operating officer. He will report to Macher. Ver has 37 years of
industry experience, including 33 years with Ford that includes
significant experience with Manufacturing operations, as well as
engineering expertise in automotive components, powertrain and
vehicle assembly.
"Frank's unique leadership experience in our industry from both
the manufacturer and supplier perspectives makes him the right
person to lead this operation," said Smith. "Al will be focused
on driving change in the areas of quality, cost and delivery.
Together, Frank and Al will make a formidable team."
Other MOU Details:
Other significant terms of the MOU that would be part of the
definitive agreement include:
* Forgiveness by Ford of Visteon's remaining Ford-UAW OPEB
obligation and a portion of Visteon's salaried OPEB obligation
for former Ford employees and retirees, totaling about $800
million (of which $600 million was reserved in 2004).
* Payment by Ford to Visteon of up to $550 million to assist
Visteon's restructuring expenses.
* Extension by Ford to Visteon of a $250 million secured loan,
the proceeds of which would be used by Visteon to repay debt
maturing on August 1, 2005. The loan from Ford would be repaid
by Visteon upon closing of the transaction.
* Provision by Visteon of certain services (e.g., information
technology, accounting, etc.) to facilitate the operation of the
new business entity.
* Payment by Ford of $300 million for the inventory included in
the transferred operations.
* Assumption by Ford or the Ford-managed business entity of
certain liabilities associated with the business including
environmental and employee-related accrued liabilities for the
Ford-UAW hourly employees assigned to work at Visteon. Other
than these liabilities and the OPEB obligation mentioned above,
the MOU does not contemplate that Ford or the new entity will
take on other liabilities of the transferred businesses.
However, it is expected that the Ford-managed business entity
would take over the future performance under purchase and supply
contracts associated with the transferred businesses.
* Acceleration of payment terms through 2006 for payments due
from Ford to Visteon for components purchased by Ford for its
U.S. facilities, with a gradual increase over time to normal
payment terms by 2009.
* Funding by Ford of certain capital expenditures associated
with Visteon's Saline, Sheldon Road, Sandusky and Utica Plants
effective with capital expenditures incurred or committed by
Visteon beginning May 1, 2005. This funding is on the same
terms as the funding previously agreed and announced by Ford and
Visteon in March for other Visteon plants and will continue
until closing of the transactions contemplated by the MOU.
Financial Impact:
The agreement is expected to result in special charges ranging
from $450 million to $650 million in 2005. In addition, there
will be an estimated $300 million to $500 million in special
charges in 2005-to-2009 related to the buy-outs for hourly
workers. The new business arrangement also is expected to result
in significant material cost savings in the range of $600
million to $700 million per year by the end of the decade;
however, operating losses of about $125 million in the fourth
quarter of 2005, and annual operating losses of $200 million to
$300 million in 2006 are expected in addition to the special
charges.
=====================
P U E R T O R I C O
=====================
DORAL FINANCIAL: Provides Data, Updates Restatement Process
-----------------------------------------------------------
Doral Financial Corporation (NYSE: DRL) announced Thursday that
the Company has filed a Current Report on Form 8-K providing
certain operational data for the first quarter of 2005 as well
as providing an update on the restatement process and related
matters.
Results of Operations and Financial Condition
The financial information provided below is unaudited and
preliminary. While it represents the Company's best estimate
based on its current knowledge, the information may change for a
variety of reasons, including as a result of the restatements
described in Item 8.01 below.
As of March 31, 2005, the Company had cash and cash equivalents
of $2.8 billion, of which $1.85 billion was unencumbered,
compared to $2.5 billion as of December 31, 2004, of which $1.72
billion was unencumbered. The Company's banking subsidiaries had
aggregate deposits of approximately $3.5 billion as of March 31,
2005, compared to $3.6 billion as of December 31, 2004. The
mortgage loan servicing portfolio increased to $14.6 billion as
of March 31, 2005, compared to $14.3 billion as of December 31,
2004. Loan production remained strong in Puerto Rico during the
first quarter of 2005. The Company's loan production was $2.2
billion for the first quarter of 2005, compared to $1.8 billion
for the first quarter of 2004, of which $1.2 billion was
internally originated in each of the periods.
Financial Reporting Update
We previously disclosed the need to restate our financial
statements for some or all of the periods from January 1, 2000
to December 31, 2004. On May 10, 2005, we filed a Form 12b-25
with the Securities and Exchange Commission (the "SEC") to
disclose that we would not be able to file on a timely manner
our Form 10-Q for the quarter ended March 31, 2005.
We are working diligently to complete the restatement process
and become current in our SEC filings, but we cannot at this
time provide a date for completing the process because of the
complexity of the task and the early stage of the process.
In our report on Form 8-K/A dated April 21, 2005, we disclosed
that management had identified a material weakness in internal
controls over financial reporting as of December 31, 2004
relating to the lack of effective controls over the valuation of
our floating rate interest only strips ("IOs"). We continue to
re-assess the effectiveness of our internal controls as of such
date in light of the restatement, and we may identify additional
material weaknesses as we complete our assessment. We also
continue to expect that, when we file our amended 2004 annual
report on Form 10-K/A, PricewaterhouseCoopers LLP, our
independent registered public accounting firm, will issue an
adverse report on our internal controls over financial reporting
as of December 31, 2004. We do not expect to provide additional
disclosure on these matters until we file our amended 2004
annual report on Form 10-K/A.
Update on Restatement
As previously disclosed, we have identified items that require
adjustments to our prior period financial statements. As part of
the restatement process, we are also reviewing certain other
matters that may require restatement, including the accounting
for the deferral and recognition of mortgage origination fees
and expenses and for lease payments. As the review process
continues, new information may come to light. Accordingly, any
matters that we identify at this stage, and any assessments of
the nature, scope or amount of restatements, are necessarily
preliminary and subject to change as our investigation and
analysis progress.
The matters that the Company has identified to date as requiring
restatement of financial statements for periods ended on or
prior to December 31, 2004 are as follows:
- We are reviewing the accounting for our portfolio of floating
rate IOs originated from 2000 through 2004. We have determined
that to value our floating rate IOs our valuation model should
use an implied interest rate based on the forward yield curve
rather than using actual contractual or period-end LIBOR rates.
- As previously announced, the change in the valuation model
will result in a substantial reduction in the recorded fair
value of our floating rate IOs. The current estimate is that the
reduction will be approximately $600 million, pre-tax. We have
not yet completed the analysis of how the net impact of this
adjustment will be distributed among the affected periods.
- We have been developing new procedures to improve our control
over the valuation process for our IOs. We are working closely
with First Manhattan Consulting Group to develop a new valuation
model that appropriately incorporates the forward yield curve.
- We are reviewing all the assumptions and processes used to
value our IOs and mortgage servicing rights and to calculate
gains on sale of mortgage loans.
Our audit committee has directed the law firm of Latham &
Watkins LLP to conduct an independent investigation into the
circumstances leading to the restatements.
Consequences of our Financial Reporting Situation under our Debt
Instruments
Many of our financial agreements contain provisions requiring us
to provide financial information to creditors or their
representatives by specified dates. The delay in our financial
reporting process results in potential violations of these
covenants. Under some of our financial agreements, we have also
made representations concerning our financial statements and
compliance with applicable laws for prior periods, and a
restatement could, depending on its nature and materiality,
cause a breach of these representations.
Public debt
We have two indentures governing our public debt securities that
require that we file with the relevant trustee the reports we
are required to file with the SEC. One indenture was executed on
October 10, 1996 (the "1996 Indenture") and other on May 14,
1999 (the "1999 Indenture" and together with the 1996 Indenture,
the "Indentures"). Under the 1996 Indenture, we have one public
debt issue, with a total outstanding principal amount of $75
million. Under the 1999 Indenture, we have four public debt
issues with a total of $937.3 million outstanding as of April
30, 2005.
Since we did not file our quarterly reports for the first
quarter of 2005 by May 25, 2005, we are currently in default
with respect to our reporting obligations under the Indentures.
Since a default under the Indentures has occurred, the trustee
or the holders of at least 25% of the outstanding principal
amount of the securities of any series may provide us with a
notice of default with respect to one or more series. If we fail
to cure the default within 60 days (90 days in the case of the
1999 Indenture) after receipt of that notice of default, then
the trustee or such holders will have the right to accelerate
the maturity of the relevant series of debt securities. This
would trigger the cross-acceleration provisions under the other
series issued under the Indentures and certain of our other debt
arrangements. While we consider such an acceleration to be
unlikely, if it were to occur, we may be unable to meet our
payment obligations. In addition, we cannot assure you that
under such circumstances we would be able to refinance our debt,
whether through the capital markets or otherwise, on
commercially reasonable terms, or at all.
Major credit facilities
We had warehousing, gestation and repurchase agreements lines of
credit, including advances from the FHLB-NY (collectively
"Financing Agreements") totaling $14.7 billion as of March 31,
2005, of which $8.6 billion was outstanding as of such date.
Most of our funding is provided by uncommitted lines pursuant to
which advances are made at the discretion of the lender.
Our failure to provide financial statements to lenders could
result in defaults under some of the Financing Agreements. Under
some of the Financing Agreements, a restatement could also,
depending on its nature and materiality, result in a breach of a
representation. Where appropriate, we intend to request the
lenders under these agreements to grant us temporary waivers of
the reporting and restatement related defaults. In the absence
of waivers, we may be unable to make drawings and the lenders
may be entitled to terminate the agreements. If we do not obtain
these waivers, or if we obtain them but they expire, we believe
that the effects on our financial condition and our operating
flexibility could be material. However, we currently anticipate
that we will continue to have sufficient credit facilities to
meet our liquidity needs.
Our banking subsidiaries have various independent sources of
funding, including core deposits, brokered deposits and advances
from the FHLB-NY. Our banking subsidiaries file Consolidated
Reports of Condition and Income ("Call Reports") with the
Federal Deposit Insurance Corporation (the "FDIC") and Thrift
Financial Reports ("TFRs") with the Office of Thrift Supervision
("OTS") containing detailed financial information regarding such
institutions. The publicly available portions of the Call
Reports and the TFRs can be accessed through the FDIC's website
at www.fdic.gov.
Derivatives
We use derivatives to manage our exposure to interest rate risk.
As of March 31, 2005, we had in place interest rate swap
agreements with a remaining term in excess of one year with a
notional amount equal to $3.9 billion. The agreements governing
these instruments also contain provisions that may be breached
by our delay in reporting or by the restatement. We also intend
to ask for similar waivers from our counterparties under these
derivative agreements. In the absence of waivers, these
counterparties might have the right to terminate the derivative
agreements.
Certain Consequences of our Reporting Situation under the
Federal Securities Laws
Our failure to meet the reporting requirements of the federal
securities laws will affect our ability to access the capital
markets. We will be unable to make any registered offering of
securities until we file our restated financial statements for
the periods up to December 31, 2004 and our unaudited interim
financial statements for the quarter ending March 31, 2005. We
will also be ineligible to file "short-form" registration
statements (registration statements that allows the Company to
incorporate by reference its Form 10-K, Form 10-Q and other SEC
reports into its registration statements) for one year following
the date the Company files all its periodic reports that are
past due, including our amended 2004 annual report on Form 10-
K/A and any quarterly reports that may have been delayed. These
reports must fully comply with the SEC's rules for their
content, including inclusion of a management's assessment of and
the independent registered public accounting firm's report on
management's assessment and on the Company's internal controls
over financial reporting.
Until the Company is current in its reporting, the ability of
holders of restricted securities to resell these securities in
reliance on Rule 144 will also be limited.
In addition, at least until we are current in our reporting, we
will have to suspend the use of the resale shelf registration
statement for our 4.75% Perpetual Cumulative Convertible
Preferred Stock (the "Convertible Preferred Stock"). If we are
unable to permit the use of the registration statement prior to
June 10, 2005, we will be required to pay liquidated damages to
the holders of the Convertible Preferred Stock at an annual rate
equal to 0.50% of the aggregate liquidation preference of the
Convertible Preferred Stock until the earlier of (1) the date
the resale registration statement becomes available again or (2)
September 22, 2005.
On May 25, 2005, the Company issued a press release announcing
that on May 19, 2005 it had received notice from The Nasdaq
Stock Market Listing Qualifications Department that the Company
was not in compliance with the reporting requirements for
continued listing set forth in Nasdaq Marketplace Rule
4310(c)(14) and that as a result Company's 7% Noncumulative
Monthly Income Preferred Stock, Series A, 8.35% Noncumulative
Monthly Income Preferred Stock, Series B and 7.25% Noncumulative
Monthly Income Preferred Stock, Series C (collectively, the
"Preferred Stock") are subject to delisting from The Nasdaq
Stock Market ("Nasdaq") as of May 31, 2005. As previously
announced, the Company failed to timely file its quarterly
report on Form 10-Q for the fiscal quarter ended March 31, 2005.
As a result of this failure, effective May 23, 2005, Nasdaq
changed the trading symbol for the Preferred Stock from "DORLP,"
"DORLO" and "DORLN" to "DRLPE," "DRLOE" and "DRLNE,"
respectively.
The Company made a timely request for a hearing before a Nasdaq
Listing Qualifications Panel pursuant to the procedures set
forth in Nasdaq Marketplace Rule 4800 Series to appeal the
Nasdaq staff's determination. This request will stay the
delisting of the Preferred Stock pending the hearing and the
determination of the Nasdaq Listing Qualifications Panel. There
can be no assurance that the Nasdaq Listing Qualifications Panel
will grant our request for continued listing.
A copy of the press release is filed as Exhibit 99.1 hereto and
is incorporated herein by reference.
The New York Stock Exchange also has broad powers to commence
delisting proceedings for violations of its financial reporting
rules. However, we expect to be current on our reporting before
the New York Stock Exchange takes any such action.
Risks Arising from Delayed Reporting and Restatement
Civil and regulatory actions
Following our announcement of the restatement of our financial
statements for prior periods, the Company and certain of its
officers and directors have been named as defendants in numerous
purported class action lawsuits alleging violations of federal
securities laws. These actions have been filed in the U.S.
District Court for the Southern District of New York and in the
U.S. District Court for the District of Puerto Rico. The
plaintiffs allege primarily that the defendants disseminated
materially false and misleading statements and failed to
disclose material information concerning the value of the
Company's IOs and its internal controls over financial
reporting. The Company is unable to ascertain the ultimate
aggregate amount of monetary liability or financial impact to
the Company of these lawsuits, which are in their very early
stages and seek unspecified damages. In addition, the SEC has
informed the Company that it is conducting an informal inquiry
regarding the restatement and related matters. These civil and
regulatory actions, as well as any other actions to which we may
become subject as a result of the restatement, could result in
us being required to pay damages, fines or other penalties and
have an adverse effect on our business, results of operations,
financial condition and liquidity.
As a bank holding company, we are subject to supervision and
regulation by the Board of Governors of the Federal Reserve
System, including complying with certain risk-based capital
guidelines. As a financial holding company, we are permitted to
engage in a broader spectrum of activities than those permitted
to bank holding companies that are not financial holding
companies. To continue to qualify as a financial holding company
each of our banking subsidiaries must continue to qualify as
"well capitalized" and "well managed." For additional
information regarding regulatory matters, please refer to Item 1
of our 2004 Annual Report on Form 10-K under the subcaption
"Regulation and Supervision." As part of its evaluation of the
Company, the Board of Governors of the Federal Reserve System
will likely take into account the restatement and related
internal-control matters and any improvements to our controls
that we implement as a result of these issues. We cannot predict
whether the Board of Governors of the Federal Reserve System
will take any action with respect to the Company as a result of
the restatement and related matters, or, if any action were
taken, whether it would have a material adverse effect on the
Company.
Lack of public disclosure
Until we have filed our amended 2004 annual report on Form 10-
K/A and any quarterly filings that may be delayed, there will be
limited public information available concerning our results of
operations and financial condition. The absence of more recent
financial statements may have a number of adverse effects on us
and on the market prices of our securities.
Creditor remedies
As discussed above, delays in reporting result in potential
violations of covenants in some of our financial instruments,
and the restatement of previously filed financial statements
could also, depending on its nature and materiality, cause a
breach of representations under some of them. If we are unable
to obtain waivers under our Financing Agreements, we may be
unable to continue to obtain credit under these agreements and
our lenders may elect to terminate the agreements. If we cannot
comply with the reporting covenants under our Indentures, we
will be in default under the indentures with respect to each
series of securities issued thereunder. In addition, unless we
obtain waivers, counterparties to some of our derivative
agreements may elect to terminate these arrangements. The
exercise of remedies under these instruments or agreements could
have a material adverse effect on our financial condition.
Other matters
The delay in reporting and the potential restatement, and the
related uncertainties, may also have other actual or potential
adverse effects in addition to those discussed above, including
the following: adverse effect on the perception of the Company
by existing and potential clients; adverse effect on our ability
to recruit and retain talent; continuing adverse effect on our
credit standing and on investor confidence; increased scrutiny
from the SEC and banking regulators, including in the context of
possible enforcement proceedings; and heightened risks of
shareholder litigation.
We also face substantially increased costs in connection with
financial reporting and Sarbanes-Oxley compliance, and legal
fees in connection with the civil litigation and dealing with
regulatory agencies. Our reduced credit standing and limited
access to the capital markets could also increase our costs of
funding.
Declaration of Dividends
On April 20, 2005, the Board of Directors of the Company
declared a regular quarterly cash dividend on the Company's
common stock, in the amount of $0.18 per share, payable on June
3, 2005 to holders of record as of the close of business on May
16, 2005.
Previously, on April 14, 2005, a Committee of the Board of
Directors of the Company declared a quarterly dividend on the
Corporation's 4.75% Perpetual Cumulative Convertible Preferred
Stock, in the amount of $2.96875 per share, payable on June 15,
2005 to holders of record as of the close of business on June 1,
2005.
CONTACT: Doral Financial Corporation
Salomon Levis/Ricardo Melendez, 787-474-1111
R&G FINANCIAL: Investors Sue Over Securities Violations
-------------------------------------------------------
Investors sued R&G Financial Corporation ("R&G" or the
"Company") (NYSE: RGF - News) on Thursday, claiming that the
financial holding company issued false and misleading financial
statements to the investing public.
Berman DeValerio Pease Tabacco Burt & Pucillo filed the class
action in the U.S. District Court for the Southern District of
New York. The lawsuit seeks damages for violations of federal
securities laws on behalf of all investors who purchased R&G
common stock from April 21, 2003 through and including April 25,
2005 (the "Class Period").
The lawsuit claims that the defendants violated Sections 10(b)
and 20(a) of the Securities Exchange Act of 1934 and the rules
and regulations promulgated thereunder, including U.S.
Securities and Exchange Commission ("SEC") Rule 10b-5.
According to the complaint, R&G's financial statements were
materially false and misleading when made because defendants
failed to disclose the following: (1) that the Company's
earnings quality had been significantly weakened by the
Company's use of more aggressive assumptions to generate gain on
sale income, as well as to the value it retained in its interest
only ("IO") residuals in securitization transactions; (2) that
R&G's methodology used to calculate the fair value of its IO
residual interests was incorrect and caused the Company to
overstate its financial results by at least $50 million; (3)
that the Company's financial statements were not prepared in
accordance with Generally Accepted Accounting Principles
("GAAP"); (4) that the Company lacked adequate internal controls
and was therefore unable to ascertain the true financial
condition of the Company; and (5) that as a result, the value of
the Company's net income and financial results were materially
overstated at all relevant times.
On April 25, 2005, after the close of trading, R&G shocked the
investing public when it announced that it would restate its
earnings for 2003 and 2004.
On this news, R&G stock fell $8.14 per share, or 35 percent, to
close at $15.04 on April 26, 2005, a two-year low.
If you purchased R&G common stock from April 21, 2003 through
and including April 25, 2005 you may wish to contact the
following attorneys at Berman DeValerio Pease Tabacco Burt &
Pucillo to discuss your rights and interests.
Leslie R. Stern
One Liberty Square
Boston, MA 02109
(800) 516-9926
C. Oliver Burt, III
222 Lakeview Avenue, Suite 900
West Palm Beach, FL 33401
(561) 835-9400
law@bermanesq.com
If you wish to apply to be lead plaintiff in this action, a
motion on your behalf must be filed with the court no later than
June 27, 2005. You may contact the attorneys at Berman DeValerio
to discuss your rights regarding the appointment of lead
plaintiff and your interest in the class action, or you may
submit information online at
http://www.bermanesq.com/Securities/Signup1.asp?caseid=549.
Please note, you may also retain counsel of your choice and need
not take any action at this time to be a class member.
=============
U R U G U A Y
=============
BANCO COMERCIAL: Government to Sue Three Banks in Uruguay
---------------------------------------------------------
Uruguay's economy minister, Daniel Astori, announced that the
government plans to initiate civil proceedings against JPMorgan
Chase (NYSE: JPM), CSFB (NYSE:CSR) and Dresdner in Uruguay for
their role in the defunct Banco Comercial del Uruguay.
According to Business News Americas, lawyers had recommended the
government sue the banks in Uruguay because of greater chances
of winning the case there and also due to lower costs.
The three international banks were all co-shareholders in Banco
Comercial, which was intervened in 2002 together with several
other banks due to capital problems and a massive run on
deposits. The government is accusing the three banks of not
honoring their obligations to the failed bank.
In January, the International Court of Arbitration of the Paris-
based International Chamber of Commerce ordered the Uruguayan
government to repay the three banks US$120 million for a capital
injection that was undertaken during the financial crisis in
2002.
=================
V E N E Z U E L A
=================
PDVSA: Moody's Confirms B1 Local Currency Issuer Rating
-------------------------------------------------------
Moody's Investors Service confirmed Petroleos de Venezuela 's
(PDVSA) B1 global local currency rating, taking it off review
for upgrade and assigning a developing outlook. It also
confirmed the B1 long-term rating for notes issued by PDVSA
Finance Ltd., a receivables financing vehicle. Both ratings have
been under review for possible upgrade since September 2004,
when they were upgraded in tandem with the upgrade of Venezuela
's country ceiling for foreign currency bonds to B2. PDVSA's B2
foreign currency issuer rating was not under review and is
capped by Venezuela 's foreign currency country ceiling.
Moody's is maintaining a developing outlook on PDVSA's B1 global
local currency rating pending publication and the analysis of
PDVSA's audited financial statements and filings with the SEC
for both 2003 and 2004. PDVSA's timely filing of financial
statements has been delayed in the aftermath of the company
strike that disrupted operations in late 2002 and early 2003.
The company has announced it expects to file audited statements
for 2003 in the near future, and for 2004 some time before year-
end 2005. To maintain ratings coverage and to make any further
standalone assessment of PDVSA's global local currency rating
will also require more updated financial and operating
information from the company for 2005 and beyond.
The rating of the PDVSA Finance notes is linked to the global
local currency and foreign currency ratings of PDVSA, which
generates the receivables that back the repayment of the rated
notes. As a result of this linkage, any further changes in those
ratings may also result in a change in the rating of the PDVSA
Finance notes. Consequently, the B1 note rating has also been
confirmed.
Moody's also notes that confirmation of the PDVSA's global local
currency rating with a developing outlook does not reflect any
potential rating adjustment that could result from application
of the joint-default analysis methodology, as announced in April
2005, to the company as a government-related issuer (GRI). That
analysis will take into consideration PDVSA's fundamental credit
quality without any implied government support, an estimate of
default dependence or correlation between PDVSA and the
government of Venezuela , and the probability of government
support for PDVSA in a distress scenario. A GRI rating
adjustment to PDVSA's global local currency rating, if any, is
expected to take place in the first half of 2005 in tandem with
other GRIs on a region-by-region basis.
PDVSA, the state oil company of Venezuela, is headquartered in
Caracas, Venezuela.
***********
S U B S C R I P T I O N I N F O R M A T I O N
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co-published by Bankruptcy Creditors' Service, Inc., Fairless
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Copyright 2005. All rights reserved. ISSN 1529-2746.
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