/raid1/www/Hosts/bankrupt/TCRLA

/raid1/www/Hosts/bankrupt/TCRLA_Public/050630.mbx T R O U B L E D C O M P A N Y R E P O R T E R L A T I N A M E R I C A Thursday, June 30, 2005, Vol. 6, Issue 128 Headlines A R G E N T I N A AEROLINEAS ARGENTINAS: FY 2004 Produced Over $32M in Profits AGROINDUSTRIAS: Reorganization Proceeds To Bankruptcy AGUAS ARGENTINAS: July 7 Board Meeting to Define Suez Future AUTHOGAR S.A.: Files for Bankruptcy BANCO RIO: $107M Capital Increase Awaits Shareholders' OK BOSKOOP S.A.: Enters Bankruptcy on Court Orders CONSTRUCTENO S.A.: Court Declares Company Bankrupt CEREALTAIM S.A.: Court to Oversee Reorganization ENAN S.A.: Court Grants Reorganization Motion FUNDACION COLEGIUM: Seeks Court OK to Reorganize G.F.W. PERSONAL: Declared Quiebra by Court NUEVOS TEJIDOS: Liquidates Assets to Pay Debts PAMPEANO GROUP: Court Appoints Trustee for Reorganization POHBA S.A.: Liquidation Process Initiated POLITER S.R.L.: Judge Approves Bankruptcy Motion SIETE ASES: Reorganization Proceeds To Bankruptcy TGS: S&P Releases Ratings Analysis TK INB: Court Rules Liquidation Required TRANSPORTES: Court Approves Concurso Motion B E R M U D A INTELSAT: Atkins Relinquishes CFO Post, Medlin Takes Over B R A Z I L AES CORP.: Lowers Costs with $650M Credit Facilities Amendment AES TIETE: Holders Sell BRL1.06B Shares in Secondary Offering CEB: Moody's Places Ratings on Review With Uncertain Direction EMBRATEL PARTICIPACOES: To Hold Extraordinary Meeting July 14 LIGHT SERVICOS: Aneel Authorizes Debt Conversion NET SERVICOS: Chairman Reveals June 12 Meeting Agenda SADIA: Fitch Affirms, Withdraws Ratings VARIG: Court Orders Banks to Abstain From Moving Funds VARIG: U.S. Bankruptcy Judge Issues Preliminary Injunction C O L O M B I A ECOPETROL: To Call for Bids on Partnership Contract By Yearend * COLOMBIA: World Bank Approves $30M Loan E C U A D O R * ECUADOR: Financing Gap May Prove Difficult To Close J A M A I C A AIR JAMAICA: Moody's Assigns B1 Rating to $150M Notes M E X I C O EMPRESAS ICA: To Seek Shareholders' Approval on Capital Increase SATMEX: Likely to File for Bankruptcy Under Mexican Laws TV AZTECA: Shareholders Approve Deportivos Merger U R U G U A Y COPACO: Regulator May Favor Plans to Launch Mobile Service V E N E Z U E L A ALENTUY: Seniat Orders Closure, Inspecting Company Accounts - - - - - - - - - - ================= A R G E N T I N A ================= AEROLINEAS ARGENTINAS: FY 2004 Produced Over $32M in Profits ------------------------------------------------------------ The Meeting of Shareholders of Aerolineas Argentinas held on June 23, 2005, with the attendance of 98.66% of the representatives of the outstanding capital, approved the Company's financial statements as of December 31, 2004. The favorable vote was cast by all the shareholders present- 98.66% of the Company's stock holding- without any vote against. Members of the General Inspectorate of Companies attended the meeting; they did not express any reservations about the development and outcome of the meeting. The Fiscal Year produced profits of 94,615,622 pesos - (USD$32,626,076 at the current exchange rate). It should be noted that the Fiscal Year ended on December 31, 2004, is the third consecutive one to produce positive results, thus exceeding the trend observed in the Balance Sheets from more than a decade ago. As a consequence of the analysis of the financial statements, the Meeting of Shareholders approved the amortization of accrued losses from previous fiscal years as of the one ended on December 31, 2002, for a total of 2,423,932,204. - Argentine pesos. This amortization is one of the most significant recorded in Argentine companies of different productive sectors in the last few years, and it shows the effort done by all Aerolineas Argentinas's shareholders, who are strongly committed to the future of the Company. Thus a reorganization of the economic-financial structure of the company is produced, particularly significant for its medium- and long-term development and also to access the capital market through the Buenos Aires Stock Exchange. Finally, it should be noted that, despite the significant amortization of losses accrued by former and adverse administrations of the Company, the Capital Stock of Aerolineas Argentinas was set in more than 900,000,000. - Argentine pesos, amount equal to its net worth, thus positioning the company among one of the most important in Argentina and indicating the current soundness of the Company. CONTACT: AEROLINEAS ARGENTINAS Torre Bouchard 547, 1106 Buenos Aires, ARGENTINA Phone: (54-11) 4310-3000 Fax: (54-11) 4310-3585 E-mail: volar@aerolineas.com.ar Home Page: www.aerolineas.com.ar Officer: Patricio Zabalia Lagos, President AGROINDUSTRIAS: Reorganization Proceeds To Bankruptcy ----------------------------------------------------- The reorganization of Agroindustrias del Valle S.A. has deteriorated into bankruptcy. Argentine news source Infobae relates that Mendoza's civil and commercial Court No. 1 ruled that the Company is "Quiebra Decretada". The report adds that the court assigned Silvia Nelida Nunez as trustee, tasked to verify creditors' proofs of claim. The court also ordered the trustee to prepare individual reports after the verification process is completed. A general report on the bankruptcy process is expected on Aug. 8, 2005. CONTACT: Ms. Silvia Nelida Nunez, Trustee Mitre 565 Mendoza AGUAS ARGENTINAS: July 7 Board Meeting to Define Suez Future ------------------------------------------------------------ French water giant Suez will define its participation in Buenos Aires water utility Aguas Argentinas on July 7, when its board of directors is scheduled to meet, says Business News Americas. Crucial to Suez's decision is the outcome of the ongoing negotiations between it and Argentina's government. The French company believes that in order to have an agreement in place by year-end, there will have to be signs of a workable solution. Suez has been negotiating with Argentina's government for the last several months regarding a new contract. Earlier this month, the government offered two rate increases worth 38% in 2006 and a plan to set up a fund for future investments of some ARS250 million (US$87mn). The government ditched Aguas Argentinas' petition for a US$300- million soft loan to refinance part of its debt, which is estimated at US$600 million. Aguas Argentinas is the sole provider of potable water and sewerage services in the City of Buenos Aires and 17 surrounding districts. AUTHOGAR S.A.: Files for Bankruptcy ----------------------------------- Court No. 5 of Buenos Aires' civil and commercial tribunal is studying the bankruptcy petition submitted by local company Authogar S.A., says La Nacion. The report adds that that the Company filed for bankruptcy, following cessation of debt payments on Oct. 15, 2003. The city's Clerk No. 10 assists the court on this case. CONTACT: Authogar S.A. Carlos Pellegrini 27 Buenos Aires BANCO RIO: $107M Capital Increase Awaits Shareholders' OK --------------------------------------------------------- Banco Rio de la Plata, a unit of Spanish banking group Grupo Santander, plans to embark on a capital increase of up to ARS310 million (US$107 million) as part of its strategy to continue to fortify its balance sheet. Business News Americas reports that the bank will ask shareholders to approve the proposal on July 29. The bank saw its losses widen in the first quarter to ARS307 million compared to a ARS26.7-million loss in 1Q04 due to liability payments done to solidify operations stemming from Argentina's economic and financial crisis in 2002. Earlier this year, Rio paid corporate bond obligations worth US$458 million ahead of schedule. It also paid its full ARS380- million debt with the central bank. CONTACT: BANCO RIO DE LA PLATA S.A. Bartolome Mitre 480 1036 Buenos Aires, Argentina Phone: +54-14-341-1081-1580 Fax: +54-14-341-1074-1084 Web site: http://www.bancorio.com.ar BOSKOOP S.A.: Enters Bankruptcy on Court Orders ----------------------------------------------- Boskoop S.A. enters bankruptcy protection after Court No. 10 of Buenos Aires' civil and commercial tribunal, with the assistance of Clerk No. 20, 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 Carlos Daniel Ayuso as trustee. Mr. Ayuso will be verifying creditors' proofs of claim until the end of the verification phase on Sep. 5, 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 Oct. 18, 2005 followed by the general report, which is due on Nov. 29, 2005. CONTACT: Mr. Carlos Daniel Ayuso, Trustee Tucuman 1455 Buenos Aires CONSTRUCTENO S.A.: Court Declares Company Bankrupt -------------------------------------------------- Court No. 12 of Buenos Aires civil and commercial tribunal declared local company Constructeno S.A. "Quiebra", relates La Nacion. The court approved the bankruptcy petition filed by Obra Social de los Empleados de Comercio y Afines, to whom the Company owes debts amounting to $7,426.54. The Company will undergo the bankruptcy process with Vila Perbeils as trustee. Creditors are required to present proofs of claim to Ms. Perbeils for verification before Aug. 26, 2005. Creditors who fail to submit the required documents by the said date will not qualify for any post-liquidation distributions. Clerk No. 23 assists the court on the case. CONTACT: Constructeno S.A. Viamonte 657 Buenos Aires Ms. Vila Perbeils, Trustee Vidal 2670 Buenos Aires CEREALTAIM S.A.: Court to Oversee Reorganization ------------------------------------------------ Cerealtaim S.A. will begin reorganization following the approval of its petition by Court No. 10 of Buenos Aires' civil and commercial tribunal. The opening of the reorganization will allow the Company to negotiate a settlement with its creditors in order to avoid a straight liquidation. Ricardo Norberto Belli will administer the reorganization proceedings as the court-appointed trustee. He will verify creditors' claims until Oct. 3, 2005. The validated claims will be presented in court as individual reports on Nov. 14, 2005. Mr. Belli is also required by the court to submit a general report essentially auditing the Company's accounting and business records as well as summarizing important events pertaining to the reorganization. The report will be presented in court on Dec. 27, 2005. An Informative Assembly, the final stage of a reorganization where the settlement proposal is presented to the Company's creditors for approval, is scheduled on Aug. 21, 2006. Clerk No. 19 assists the court on this case. CONTACT: Cerealtaim S.A. Carlos Tejedor 546 Carlos Tejedor Mr. Ricardo Norberto Belli, Trustee Avda Santa Fe 960 Buenos Aires ENAN S.A.: Court Grants Reorganization Motion --------------------------------------------- Enan S.A. successfully petitioned for reorganization after Court No. 21 of Buenos Aires' civil and commercial tribunal issued a resolution opening the Company's insolvency proceedings. Under insolvency protection, the Company will continue to manage its assets subject to certain conditions imposed by Argentine law and the oversight of a court-appointed trustee. Infobae relates that Ana Maria Calzada Percivale will serve as trustee during the course of the reorganization. The trustee will be accepting creditors' proofs of claim for verification until Sep. 6, 2005. After verifications, the trustee will prepare the individual reports and submit it in court on Oct. 19, 2005. She will also present a general report for court review on Nov. 30, 2005. The Company will endorse the settlement proposal, drafted from the submitted claims, for approval by the creditors during the informative assembly scheduled on May 31, 2006. CONTACT: Ms Ana Maria Calzada Percivale, Trustee Sarmiento 2437 Buenos Aires FUNDACION COLEGIUM: Seeks Court OK to Reorganize ------------------------------------------------ Fundacion Colegium, a company operating in Buenos Aires, has requested for reorganization after failing to pay its liabilities since July 8, 2004. The reorganization petition, once approved by the court, will allow the Company to negotiate a settlement with its creditors in order to avoid a straight liquidation. The case is pending before Court No. 20. Clerk No. 39 assists on this case. CONTACT: Fundacion Colegium Lavalle 1464 Buenos Aires G.F.W. PERSONAL: Declared Quiebra by Court ------------------------------------------ Buenos Aires' civil and commercial Court No. 1 decreed the bankruptcy of G.F.W. Personal Eventual S.A., reports Infobae. The Company will kick off the process with Mr. Luis Pedro Pereyra as receiver, who will verify creditors' claims until Aug. 26, 2005. The Company's case will conclude with the liquidation of its assets to repay creditors. Clerk No. 1 assists the court in handling the proceedings. CONTACT: Mr. Luis Pedro Pereyra, Trustee Roque Saenz Pena 651 Buenos Aires NUEVOS TEJIDOS: Liquidates Assets to Pay Debts ---------------------------------------------- Buenos Aires-based Nuevos Tejidos S.A. will begin liquidating its assets following the pronouncement of the city's civil and commercial Court No. 21 that the Company is bankrupt, reports Infobae. The bankruptcy ruling places the Company under the supervision of court-appointed trustee, Ana Maria Calzada Percivale. The trustee will verify creditors' proofs of claim until Aug. 31, 2005. The validated claims will be presented in court as individual reports on Oct. 13, 2005. Ms. Percivale will also submit a general report, containing a summary of the Company's financial status as well as relevant events pertaining to the bankruptcy, on Nov. 24, 2005. The bankruptcy process will end with the disposal of the Company's assets in favor of its creditors. Clerk No. 41 assists the court on the Company's case. CONTACT: Nuevos Tejidos S.A. Azcuenaga 568 Buenos Aires Ms. Ana Maria Calzada Percivale, Trustee Sarmiento 2437 Buenos Aires PAMPEANO GROUP: Court Appoints Trustee for Reorganization --------------------------------------------------------- Pampeano Group S.A., a company operating in Buenos Aires, is ready to start its reorganization after Court No. 20 appointed Maria Angelica Adornetto to supervise the proceedings as trustee. Clerk No. 39 assists the court on this case. An Infobae report states that Ms. Adornetto will verify creditors' claims until Sep. 7, 2005. Afterwards, she will present these claims as individual reports for final review by the court on Oct. 19, 2005. Ms. Adornetto will also provide the court with a general report pertaining to the Company's reorganization on Nov. 30, 2005. The court has scheduled the informative assembly on May 31, 2006. CONTACT: Ms. Maria Angelica Adornetto, Trustee Suipacha 670 Buenos Aires POHBA S.A.: Liquidation Process Initiated ----------------------------------------- Pohba S.A. was declared "Quiebra" by Court No. 18 of Buenos Aires' civil and commercial tribunal, reports La Nacion. As such, Pohba S.A. will now start the process with Mr. Amaldo Manuel as trustee. Creditors must submit proofs of their claim to the trustee by Sep. 5, 2005 for authentication. Failure to comply with this requirement will mean a disqualification from the payments that will be made after the Company's assets are liquidated. The city's Clerk No. 35 assists the court on the case that will close with the sale of Pohba's assets. CONTACT: Pohba S.A. Gallo 1182 Buenos Aires Mr. Amaldo Manuel, Trustee Parana 224 Buenos Aires POLITER S.R.L.: Judge Approves Bankruptcy Motion ------------------------------------------------ Politer S.R.L. was declared bankrupt after Court No. 9 of Buenos Aires' civil and commercial tribunal endorsed the petition of Union de Obreros y Empleados Plasticos for the Company's liquidation. Argentine daily La Nacion reports that Union de Obreros y Empleados Plasticos has claims totaling $17,874.85 against Politer S.R.L. The court assigned Faure Ruben Hugo to supervise the liquidation process as trustee. Mr. Hugo will validate creditors' proofs of claim until Sep. 12, 2005. The city's Clerk No. 18 assists the court in resolving this case. CONTACT: Politer S.R.L. Superi 3155 Buenos Aires Mr. Faure Ruben Hugo, Trustee Avenida Rivadavia 1227 Buenos Aires SIETE ASES: Reorganization Proceeds To Bankruptcy ------------------------------------------------- Siete Ases S.A., a Buenos Aires-based company that was undergoing reorganization, was declared bankrupt. Argentine news source Infobae relates that the city's civil and commercial Court No. 19 ruled that the Company is "Quiebra Decretada". The report adds that the court assigned Raquel Steinhaus as receiver, who will verify creditors' proofs of claim until Aug. 18, 2005. The court also ordered the receiver to prepare individual reports after the verification process is completed, and have them ready by Sep. 29, 2005. The court also expects a general report on the bankruptcy process to be filed on Nov. 11, 2005. CONTACT: Siete Ases S.A. Jeronimo Salguero 1575 Buenos Aires Ms. Raquel Steinhaus, Trustee Paraguay 577 Buenos Aires TGS: S&P Releases Ratings Analysis ---------------------------------- Rationale The ratings on Transportadora de Gas del Sur S.A. (TGS) reflect the following risks: - High regulatory risk in Argentina and future cash flow generation uncertainties, as regulated tariffs have remained frozen in Argentine peso terms since January 2002; - The timing and final outcome of concession contract renegotiations remain uncertain; - Still-high leverage after restructuring; - Partial currency mismatches between revenues (partly in Argentine pesos) and debt service (in U.S. dollars); - Exposure to the swings in international prices of liquids coming from natural gas processing; and - Limited financial flexibility. The above-mentioned risks are partially offset by TGS's unregulated activity having benefited from the devaluation of the Argentine peso and by a favorable debt maturity schedule after debt restructuring. TGS is Argentina's largest natural gas transportation company and had approximately US$910 million in debt outstanding at March 31, 2005. The ratings do still reflect some government intervention that could partially affect TGS's unregulated business. Debt relief as a result of the conclusion of the restructuring is significant. Although there was no haircut on principal, maturities have been pushed out significantly and are amortizing in line with cash flow generation capacity. The new debt carries a 5.3% coupon for the six-year series and 7% for the nine-year series, with step-up rates reaching 7.5% in the last year in the case of the six-year series and 10% in the case of the nine-year series. In addition, the nine-year debt bears additional interest rates subject to the company's cash generation. If the current level of capital expenditures is maintained, TGS should be able to face the first six years of resulting interest and amortization with its current generation of about $180 million of EBITDA after capital expenditures. In the longer term, the company will need to increase revenues or obtain other sources of refinancing to meet the requirements of a growing debt- service profile. Nevertheless, assuming a relatively stable evolution of the U.S. dollar exchange rate, TGS should be able to reduce some additional debt in the first years through the cash sweep mechanisms included in the conditions of the restructuring (in June 2005, TGS paid US$28 million of additional amortization due to this cash sweep mechanism). Despite the expected more favorable maturity schedule, as long as TGS does not increase revenues and cash generation, its repayment capacity could be affected, particularly in a potential devaluation scenario of the Argentine peso and a high inflation scenario. Standard & Poor's Ratings Services considers the company's future cash flow generation to be somewhat unclear as long as the renegotiation of the concession contracts is not resolved and until a new tariff adjustment mechanism has been agreed on to reestablish the company's financial and economic balance. We also consider potential mandated increases in capital expenditures to be another form of regulatory risk. Given its current revenue base and capital structure, TGS's future financial performance will also depend on the performance of the international prices of liquids coming from natural gas processing. About 50% of TGS's revenues (50.9% for fiscal 2004) are unregulated and derived from the sale of liquids coming from natural gas processing at the Cerri complex near the city of Bah�a Blanca, in the province of Buenos Aires. Although this U.S. dollar-linked revenue stream became more significant after the devaluation of the peso, TGS's financial profile severely weakened as a result of the government's emergency measures in early 2002. TGS's capital structure significantly improved, due to a reduction of the debt burden (considering the cash payment made as part of the restructuring, equal to 11% of the principal amount) and the positive results reported in the past two years. Consequently, total debt to total capitalization decreased to 53.4% as of March 31, 2005, from 61.2% in year-end 2003. Continuing debt reduction is expected, given the amortization profile of the restructured debt and the limitations to incur additional indebtedness. Nevertheless, the foreign exchange rate will remain critical for TGS because its entire debt is still dollar-denominated. The company will not face interest rate risk because all the new debt after restructuring is at fixed step-up rates. As Argentina's largest natural gas transportation company, TGS delivers approximately 61% of the country's total gas consumption. It has a 35-year license to operate Argentina's southern gas transportation system (regulated activity). TGS also operates a natural gas separation facility near Bah�a Blanca. The company separates natural gas into ethane, butane, propane, and natural gasoline, which are sold to distributors, refineries, and other third parties (unregulated activity). Liquidity TGS's liquidity position is adequate, although limited, for the rating category, having significantly improved after the rescheduling of its debt maturities. As of March 31, 2005, TGS had about $115 million in cash and short-term investments, abundantly exceeding its short-term debt. In addition, the new obligations issued contain certain cash sweep mechanisms and various restrictive covenants, including limitations to issue additional debt, maximum capital expenditures and investments, and restrictions on dividend payments, among others. Nevertheless, these conditions should not jeopardize the company's current liquidity position. In the medium term, TGS's deleveraging should help improve financial flexibility. Outlook The stable outlook reflects expectations of strengthening repayment capacity after the improvement in TGS's debt maturity schedule, a certain stability in the exchange rate, and a certain degree of government intervention in the company's operations. The outlook also reflects our opinion that the debt restructuring concluded in December 2004 provides TGS with an adequate window for renegotiating the concession contract without incurring significant financial pressures. In this context, the ratings on TGS could benefit from future perceived important improvements in the country's institutional environment or a renegotiation of the concession contract favorable for the company's cash flow generation. Nevertheless, the ratings could come under pressure if the renegotiation of the concession contract negatively affects TGS's business or financial profiles or if further government intervention (i.e., as a form of mandatory investments, additional export duties, or significant natural gas restrictions to be processed at Cerri) significantly affects the company's cash generation. Primary Credit Analyst: Luciano Gremone, Buenos Aires (54) 11- 4891-2143; luciano_gremone@standardandpoors.com Secondary Credit Analyst: Pablo Lutereau, Buenos Aires (54) 114- 891-2125; pablo_lutereau@standardandpoors.com TK INB: Court Rules Liquidation Required ---------------------------------------- Buenos Aires' civil and commercial Court No. 22 ordered the liquidation of Tk Inb S.R.L. 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 Maria Elena Cappelletti, the court- appointed trustee. Ms. Cappelletti will verify creditors' proofs of claim until Oct. 31, 2005. The verified claims will serve as basis for the individual reports to be submitted in court on Dec. 13, 2005. The submission of the general report follows on Feb. 23, 2006. Clerk No. 44 assists the court on this case, which will end with the disposal of the Company's assets in favor of its creditors. CONTACT: Ms. Maria Elena Cappelletti, Trustee Pedro Goyena 1674 Buenos Aires TRANSPORTES: Court Approves Concurso Motion ------------------------------------------- Court No. 22 of Buenos Aires' civil and commercial tribunal approved a petition for reorganization filed by Transportes del Tejar S.A., according to a report from Argentine daily La Nacion. Estudio Auzmendi-Palma was appointed as trustee. The trustee will verify claims from the Company's creditors. After verification period, the trustee will submit the individual and general reports to court. Dates for submission of these reports as well as the deadline for the verification are yet to be disclosed. A settlement plan will be proposed by the Company for its creditors during the informative assembly, which will be held after the submission of the reports. Creditors will vote to ratify the completed settlement plan during the said assembly. The city's Clerk No. 43 assists the court on the case. CONTACT: Transportes del Tejar S.A. Doctor Enrique Finochietto 1305 Buenos Aires Estudio Auzmendi-Palma, Trustee Pte. Jose Evaristo Uriburu 1632 Buenos Aires ============= B E R M U D A ============= INTELSAT: Atkins Relinquishes CFO Post, Medlin Takes Over --------------------------------------------------------- Intelsat, Ltd., a global satellite communications leader providing services in over 200 countries and territories, reported on Tuesday that William Atkins has resigned his position as Chief Financial Officer to pursue other interests. The company has named J. Robert Medlin as acting Chief Financial Officer. The change is effective June 30, 2005. Intelsat has commenced a search process for a permanent successor. Mr. Medlin is a senior managing director of FTI Palladium Partners, a division of FTI Consulting, Inc. Intelsat has engaged FTI to provide interim management services, including providing the services of Mr. Medlin and providing assistance in the search for a permanent chief financial officer. Mr. Medlin, a CPA, brings to Intelsat 30 years of corporate finance experience with particular expertise in tax, audit and corporate finance work. "We are looking forward to benefiting from the deep finance expertise that Bob and the FTI organization offer as we transition our financial leadership," said David McGlade, Intelsat's Chief Executive Officer. "William made key contributions at a pivotal time for Intelsat, most notably in preparing the company for the $5.1 billion private equity acquisition of Intelsat that, with associated financings, closed earlier this year. We wish him the best in his future endeavors and thank him for his service to Intelsat." Intelsat is a global communications provider offering flexible and secure services to customers in over 220 countries and territories. Intelsat has maintained a leadership position for over 40 years by distributing video, voice, and data for television and content providers, government and military entities, major corporations, telecommunications carriers, and Internet service providers. Intelsat's reach, power and expanding solutions portfolio deliver information reliably and quickly to every corner of the globe. CONTACT: Intelsat Media Relations E-mail: media.relations@intelsat.com Phone: 1 202-944-7500 =========== B R A Z I L =========== AES CORP.: Lowers Costs with $650M Credit Facilities Amendment -------------------------------------------------------------- The AES Corporation (NYSE:AES) announced Tuesday it has amended its $650 million credit facilities to significantly reduce borrowing costs. The interest rate on the $450 million revolving credit facility has been reduced to the London Interbank Offered Rate (LIBOR) plus 175 basis points. Previously, the rate was LIBOR plus 250 basis points. In addition, the revolving credit facility maturity date was extended from 2007 to 2010. The interest rate on the term loan facility also was reduced to LIBOR plus 175, from LIBOR plus 225, while its maturity in 2011 remains unchanged. At May 31, 2005, there were no borrowings under the $450 million revolving credit facility, but approximately $179 million was utilized for letters of credit supporting general business purposes, while the $200 million term loan was fully drawn. AES retains the right to prepay without penalty under these facilities at any time. "This amendment demonstrates that the financial markets continue to recognize AES's improving credit quality. It reflects the benefits of our deleveraging strategy and our improved financial performance," said AES Executive Vice President and Chief Financial Officer, Barry Sharp. AES is a leading global power company, with 2004 revenues of $9.5 billion. AES operates in 27 countries, generating 44,000 megawatts of electricity through 124 power facilities and delivers electricity through 15 distribution companies. CONTACT: The AES Corporation Media: Robin Pence Phone: 703-682-6552 E-mail: mediaaes.com Investor: Scott Cunningham Phone: 703-682-6336 URL: www.aes.com AES TIETE: Holders Sell BRL1.06B Shares in Secondary Offering ------------------------------------------------------------- Three shareholders of electric power utility AES Tiete sold a total of BRL1.06 billion of shares during a secondary offering, about BRL138 million higher than the initial figure of BRL921.6 million carried out June 15. According to Dow Jones Newswires, Sao Paulo's government-owned bank Nossa Caixa and two local units of Spain's Banco Santander Central Hispano (STD) sold the shares through the Sao Paulo Stock Exchange (Bovespa). Altogether, the banks sold 20.7 million preferred shares priced at BRL40.00 per lot of 1,000 shares, and 6.3 million voting shares priced at BRL36.50 per lot of 1,000 shares. The total shares sold represent 28.38% of AES Tiete's total capital. About 80% of the shares on offer were purchased by overseas institutional investors, while the remaining 20% was split between investors including individuals, investment funds and pension funds. The offer was coordinated by Credit Suisse First Boston and Banco Santander Brasil. Within the offer, CSFB sold 2.7 million shares under a green shoe option to meet the exceptional demand. The shares were sold in Brazil and also to qualified investors in the U.S. under 144A rules. AES Tiete is controlled by the Brasiliana holding company, which is a joint venture between U.S.-based AES Corp. (AES) and Brazil's National Development Bank, or BNDES. CEB: Moody's Places Ratings on Review With Uncertain Direction -------------------------------------------------------------- Approximately BRL 43 million of debt affected Moody's America Latina placed Tuesday under review with uncertain direction the Ba3 global local currency rating and Baa1.br national scale rating of Companhia Energetica de Brasilia's (CEB) debentures due in 2006. The rating action reflects CEB's overall deteriorated credit metrics due to slower than expected recovery of energy sales following the rationing period, the company's relatively high delinquency and energy loss rates, as well as insufficient tariffs adjustments. The review of CEB's ratings will incorporate the ongoing joint- default analysis of Government-Related-Issuers as communicated in our April 28, 2005 press release. CEB is the monopoly electric distribution company for Brazil's Federal District, which includes Brazil's capital city of Brasilia. The Federal District owns 89.3% of CEB's voting shares. EMBRATEL PARTICIPACOES: To Hold Extraordinary Meeting July 14 ------------------------------------------------------------- Vice Chairman of the Board of Directors of Embratel Participacoes S.A. Jose Formoso Martinez released a notice on Tuesday to inform its shareholders that an Extraordinary General Meeting will be held at the Company's headquarters, located at Rua Regente Feijo, n.� 166, room 1687-B, Downtown, City and State of Rio de Janeiro, on July 14th, 2005, at 3.00pm, to deliberate on the following agenda: i) deliberate on the proposal of reform the Company Corporate By-laws with the following purposes: I) provide new wording to article five of the Corporate By-laws in order to reflect the capital increase ratified by the Board of Directors on May 23rd., 2005 as follows: "Art. 5 - The subscribed corporate capital, fully paid in, is R$ 4.096.713.387,00 (four billion, ninety-six million, seven hundred and thirteen thousand, three hundred and eighty-seven reais), represented by 758,306,004,336 (seven hundred and fifty- eight billion, three hundred and six million, four thousand, three hundred and thirty-six) shares, 282,027,681,973 (two hundred and eighty-two billion, twenty-seven million, six hundred and eighty-one thousand, nine hundred and seventy-three) being nominative common shares and 476,278,322,363 (four hundred and seventy-six billion, two hundred and seventy-eight million, three hundred and twenty-two thousand, three hundred and sixty- three) being nominative preferred shares, all with no nominal value."; II) in order that the Fiscal Council act as Company Audit Committee to the purposes disposed at Sarbanes-Oxley Act of 2002: modify the item XV of article 17, inclusion of the sole paragraph of article 30 and article 31, and respective items; modify the third paragraph ( 3) of article 31; modify the caput, paragraphs first and second ( 1 and 2) of article 32; III) in order to assure the Company to hire by contract consultants that may be required by the Fiscal Council, to perform their duties, as well as to approve specific budget destined to this purpose: inclusion of item II of article 17; inclusion of item (v) in the first paragraph ( 1) of article 29; and inclusion of article 43; and (IV) as a consequence of the changes proposed, rearrange the articles, respective items and alter the internal references. ii) approve the consolidation of Company Corporate By-laws; iii) approve the Fiscal Council Internal Ruling ; and iv) readjust the remuneration of the members of the Fiscal Council approved at Annual Ordinary General Meeting held on April 29th, 2005, fixing the monthly individual remuneration in the amount of eight thousand reais (R$ 8.000,00). General Instructions: A) Powers of Attorney should be filed at the Company headquarters within forty-eight hours before the Shareholders Meeting. B) Shareholders participating in Fungible Custody of Nominative Shares of the Stock Exchanges willing to take part at this Meeting shall present a statement, informing their respective shareholding, issued two (02) days before the Meeting thereof. CONTACT: EMT - Embratel Participacoes S.A. Rua Regenta Feijo 166 Sala 1687-B Centro Rio de Janeiro, 20060-060 Brazil Phone: 5521-519-6474 URL: http://www.embratel.net.br LIGHT SERVICOS: Aneel Authorizes Debt Conversion ------------------------------------------------ Electric power utility Light Servicos de Electricidad has secured approval from power regulator Aneel to convert into shares the US$400 million in debt it owes its parent company Electricite de France (EDF). Business News Americas suggests that the approval paves the way for Light to complete a broad financial restructuring of US$760 million in debt with 12 creditor banks. The preliminary agreement with creditors needs to be ratified by June 30 to allow the conclusion of the other part of the capitalization program, which involves a BRL767-million loan from the national development bank BNDES. According to Business News Americas, Light agreed to carry out a private issue of local convertible debt to BNDES in exchange for the loan. CONTACT: LIGHT SERVICOS DE ELETRICIDADE S.A. Avenida Marechal Floriano, 168 20080-002 Rio de Janeiro, Brazil Phone: +55-21-2211-2794 Fax: +55-21-2211-2993 Home Page: http://www.lightrio.com.br Contact: Bo Gosta Kallstrand, Chairman Michel Gaillard, President and CEO Joel Nicolas, Executive Director, Operation Paulo Roberto Ribeiro Pinto, Executive Director, Investor Relations and CFO NET SERVICOS: Chairman Reveals June 12 Meeting Agenda ----------------------------------------------------- Net Servicos de Comunicacao Chairman of the Board of Directors Roberto Irineu Marinho released a notice on June 24, 2005 informing that an Extraordinary Shareholders' Meeting was held on June 12, 2005 at 11:00 p.m., at the Company's headquarters located at Rua Verbo Divino, in the city and state of Sao Paolo. The notice revealed the following agenda: a) Reorganization of CHAPTER V - FISCAL COUNCIL - of the Company's bylaws to make this council a permanent one and to adjust under the scope of the Sarbanes-Oxley Act. b) Placement of the Fiscal Council, sitting and alternate member's election, and definition of their fixed remuneration. c) Change the article 5 of the Company's bylaws to reflect the Company's capital increase confirmed at the Board of Directors' Meeting held on May 10, 2005, from R$2,748,650,800.00 to R$3,387,408,498.71, arising from a private underwriting, within the authorized capital, corresponding to 745,147,153 common shares and 1,079,874,843 preferred shares, all registered, book- entry and nonpar shares, at a price of R$0.35 per common and preferred shares. The minute of the Company's bylaws to be deliberated on the Extraordinary General Meeting now summoned is available to the shareholders as from this date at the Company's headquarters, and was submitted to Bovespa - Sao Paulo Stock Exchange, under the scope of article 135, paragraph 3� and article 124, paragraph 6� of the Law 6.404/76, and amendments. The shareholders participating in the Fungible Custody of Registered Shares of the Stock Exchanges intending to participate in this Meeting shall submit a statement issued forty-eight (48) hours before the Meeting, containing their respective shareholding provided by the custody agency. CONTACT: Net Servicos de Comunicacao URL: http://nettv.globo.com/NETServ/br/home/ SADIA: Fitch Affirms, Withdraws Ratings --------------------------------------- Fitch Ratings has affirmed and withdrawn the ratings of Sadia S.A., including its 'BB-' international scale foreign currency rating, 'BB' international local currency rating, 'BB' IFC trust certificates rating, and 'A(bra)' national scale rating. Fitch has withdrawn the ratings consistent with its policies. Fitch will no longer provide ratings or analytical coverage to this issuer. Sadia is the largest vertically integrated food company in Brazil. The company is the leading producer and processor of poultry (chicken and turkey), pork and processed-packaged food products (mainly hams, hot dogs, sausages, frozen dishes, and margarine) in Brazil, and the country's largest poultry exporter. Sadia operates 11 plants and distributes its product line of more than 600 items through distribution centers located throughout the country. The company exports to more than 92 countries. CONTACT: Giovanna Caccialanza, CFA, +1-212-908-0898, New York Gisele Paolino +55 21 4503-2600, Rio de Janeiro, Brazil MEDIA RELATIONS: Kenneth Reed +1-212-908-0540, New York VARIG: Court Orders Banks to Abstain From Moving Funds ------------------------------------------------------ Varig, S.A., Linhas Aereas S.A. and Nordeste Linhas Aereas S.A. believe that due to their reorganization proceedings, it is necessary to prevent the banks and financial institutions, where the Debtors keep their accounts receivable, from transferring any money they owe to the creditors that are favored by the applicable payment mechanisms. The Debtors relate that certain creditors will be benefited, by receiving their credits in advance, to the detriment of the other creditors and the Debtors themselves. The Debtors state that Law No. 11.101/05 classifies as a crime the disposal or burdening of part of the assets of companies undergoing judicial recovery to favor certain creditors. At the Debtors' request, the Brazilian Court directs 14 banks to abstain from any acts aimed at the transfer or blockage of amounts deposited in current accounts or any other forms of financial application from VARIG, S.A., Rio Sul Linhas Aerea S.A., and Nordeste Linhas Aereas S.A. to their creditors, and that the amounts be used expressly for and by order of the Debtors. The Banks are: * Bank Boston - Banco Multiplo S.A., * GE Varig Engine Services S.A., * Banco Do Estado Do Rio Grande Do Sul S/A - Banrisul, * Empresa Brasileira De Infra-Estrutura Aeroportuaria - Infraero, * Banco Industrial e Comercial S.A., * IATA/BSP Brasil, * Instituto Aerus De Seguridade Social, * Banco do Brasil S.A., * Uniao de Bancos Brasileiro S.A. - Unibanco, * Pentagono S.A. Distribuidora de Titulos e Valores Mobiliarios, * Petrobras Distribuidora S.A., * IBM Brasil - Industria de Maquinas e Servicos Ltda., * Pavarini - Distribuidora de Titulos e Mobiliarios, and * Operadoras de Cartoes de Credito American Express, Rede Card e Visa do Brasil. Vicente Cervo, the foreign representative appointed in Varig, S.A., and its debtor-affiliates' Brazilian bankruptcy proceedings, filed a Sec. 304 petition on June 17, 2005 (Bankr. S.D.N.Y. Case Nos. 05-14400 and 05-14402). Rick B. Antonoff, Esq., at Pillsbury Winthrop Shaw Pittman LLP represents Mr. Cervo in the United States and Sergio Bermudes, Esq., in Brazil. As of March 31, 2005, the Debtors reported BRL2,979,309,000 in total assets and BRL9,474,930,000 in total debts. (Varig Bankruptcy News, Issue No. 03; Bankruptcy Creditors' Service, Inc., 215/945-7000) VARIG: U.S. Bankruptcy Judge Issues Preliminary Injunction ---------------------------------------------------------- A U.S. federal bankruptcy judge issued Monday a preliminary injunction preventing creditors of struggling Brazilian airline Varig from seizing aircraft, says Dow Jones Newswires. In his ruling, Judge Robert Drain said Varig had met the conditions to qualify for a "breathing spell" and that the injunction would "best assure the economical and expeditious administration" of Varig's bankruptcy proceedings in Brazil. Judge Drain said he would hold a hearing Sept. 12 to review the preliminary injunction, which strengthened an existing temporary restraining order issued June 17. If Varig fails to make payments on leased aircraft, or doesn't maintain and insure them, Judge Drain said the leasing company in question can seek special permission from the court before that date to take further action. Varig filed for bankruptcy in a Rio de Janeiro court on June 17 to prevent the aircraft leasing unit of American International Group Inc. (AIG), the ILFC, from seizing 11 Varig jets whose lease payments weren't up to date. Varig followed that up with a request for a temporary restraining order in the U.S. to prevent its aircraft from being seized overseas. CONTACT: VARIG S.A. (Viacao Aerea Rio-Grandense) Avenida Almirante Silvio de Noronha, 365 Rio de Janeiro, RJ 20021-010 Brazil VICENTE CERVO - FOREIGN REPRESENTATIVE OF VARIG Attorneys for the Foreign Representative: PILLSBURY WINTHROP SHAW PITMAN LLP 1540 Broadway New York, New York 10036-4039 (212) 858-1000 (Phone) (212) 858-1500 (Fax) Rick B. Antonoff (RBA-4158) =============== C O L O M B I A =============== ECOPETROL: To Call for Bids on Partnership Contract By Yearend -------------------------------------------------------------- State oil company Empresa Colombiana de Petroleos (Ecopetrol) will open a bidding process by the end of the year to choose a partner in a project to expand its Cartagena refinery, according to Mauricio Salgar, vice president of Ecopetrol's operations. Ecopetrol aims to up Cartagena refinery's capacity from 75,000 barrels a day (b/d) to 140,000b/d in order for Colombia to produce enough diesel to meet its domestic needs. According to Dow Jones Newswires, Colombia is currently importing 5,200 b/d of diesel from Venezuela. The expansion project is worth US$800 million, of which at least US$500 million should come from the international partner. The government hopes to have the refinery ready by the end of 2007. Ecopetrol is engaged in the exploration, production, transportation, refining and marketing of its crude and petroleum derivatives. * COLOMBIA: World Bank Approves $30M Loan ----------------------------------------- The World Bank's Board of Directors approved on Tuesday a $30 million loan to Colombia in order to increase agricultural competitiveness and improve the accessibility of export- potential products to international markets. "This program will support Colombia's efforts of achieving rapid and sustainable growth for all citizens by improving the provision of scientific and technological goods and services to rural producers," said Isabel Guerrero, World Bank Country Director for Colombia and Mexico. "The project will contribute to increasing the competitiveness of the agricultural sector in the context of a more open economy." The Agricultural Transition Project will focus on strengthening the Agricultural Science and Technology System to improve competitiveness, as well as improving access to markets by enhancing the National Sanitary and Phytosanitary Measures System. Specifically, the program will support the following activities: Support the provision of technology and innovation through the preparation of participatory and demand driven research and development (R&D) agendas around certain production chains, as well as the implementation and co-financing of these agendas through a Competitive Fund. Strengthen the National Sanitary and Phytosanitary System (SPS) in order to enable it to respond to the sanitary standards of international markets, which will enhance the admissibility of agricultural products to these markets. This will be done by financing the training of professionals, strengthening capacity, and designing and implementing national SPS information network, among others. "Structural and sanitary barriers in world markets for poultry, beef and milk, currently inhibit the possibilities of expansion of Colombia's exports of these products," said Matthew A. McMahon, World Bank task manager for the project. "The project will help agricultural producers to become more competitive and take advantage of their potential for fulfilling the global demand for quality, environment-friendly and safe food products." "Aimed at fostering competitiveness in the rural sector as the country faces the challenges and opportunities of the Free Trade Agreement, this project will significantly contribute to promote sustainable development in rural areas of Colombia most affected by poverty and violence," said Alberto Chueca Mora, World Bank Country Manager for Colombia. The $30 million, fixed spread loan is repayable in 14 years, including a grace period of eight years. CONTACT: The World Bank Gabriela Aguilar Phone:(5255) 5480-4200 E-mail: Gaguilar2@worldbank.org Alejandra Viveros Phone:(202) 473-4306 E-mail: Aviveros@worldbank.org URL: http://www.worldbank.org/ ============= E C U A D O R ============= * ECUADOR: Financing Gap May Prove Difficult To Close ----------------------------------------------------- Standard & Poor's Ratings Services 'CCC+' long-term sovereign credit rating on the Republic of Ecuador reflects various fiscal, economic and political risk. Political and institutional weaknesses underpin Ecuador's rating. Uncertainty stemming from unforeseen political and fiscal developments cannot be discarded. The proximate cause for the June 20, 2005, downgrade of Ecuador's rating from 'B-', CreditWatch with negative implications, however, is uncertainty about the ability of the government to cover its financing needs over the coming year given these weaknesses. Despite high oil prices, Ecuador's financing options have become more precarious amid inconsistent policy signals by President Alfredo Palacio's government and changes to fiscal legislation. Coupled with high expenditure rigidity this, in turn, raises the risk associated with Ecuador's ability to cover its financing needs-a risk consistent with a rating in the 'CCC' category. Fiscal Risk Fiscal risk tends to constrain most sovereigns rated in the speculative-grade category, particularly those in the 'B' or 'CCC' rating categories. Weak institutions and a history of unpredictable policy, including default on its debt obligations, have resulted in high credit risk in Ecuador. Consequently, Ecuador's private sector has demonstrated little interest in holding government paper since the forced restructuring of locally issued debt during the 1999-2000 economic crisis. Only after almost two years in office and amid high oil prices was former President Lucio Gutierrez's government able to entice the private sector, and essentially foreign investors, to buy government paper. The Gutierrez Administration slowly developed a better-than-expected track record of resisting all pressures for increased spending. Like previous governments, however, it was unable to advance structural reform to reduce Ecuador's fiscal rigidities and procyclical dependency on oil revenue. In addition, it presided over a doubling of the central government payroll, further exacerbating fiscal rigidities. Against the backdrop of underlying fiscal fragilities and a short history of macroeconomic stability since 2000, the mixed policy signals by the Palacio government have undermined nascent confidence in policy predictability in Ecuador. Distressing policy developments and/or statements include: - Weakening of the fiscal responsibility law (FRL), with a potentially more expansionary fiscal policy, - Changes to the oil stabilization fund (FEIREP), with less commitment to debt reduction, - Using FEIREP resources to extend credit via poorly managed public sector financial institutions with already large nonperforming loans, - The prospect that reserves of the social security institute (IESS) might be used for investment in the inefficient, poorly managed state owned oil company Petroecuador, - Contradictory statements on the importance of Ecuador's relationship with the multilateral agencies, and - Questioning of the dollarization framework. Despite initial rhetoric to the contrary, Ecuador's tight financing constraints for 2005 have shaped a more realistic assessment of spending plans for the year. Indeed, updated fiscal projections by the Finance Ministry outlined with proposed changes to FRL and FEIREP suggest spending moderation for 2005. However, the loosening of spending limits implied by changes in FRL generates questions about the planned pace of spending in 2006, although this, too, is likely to be constrained by the availability of financing. Implementation of "fiscal responsibility" and the establishment of an effective oil "stabilization fund" are crucial for an economy like Ecuador's. The fact that Ecuador is dollarized implies that policy flexibility rests completely on fiscal policy. This, in turn, requires a fiscal stance that is "extra" prudent: the running of fiscal surpluses, limited budgetary rigidities, and maintaining a low level of debt. Given its dependency on oil, Ecuador's budget is also more susceptible to revenue volatility. Including revenue that has accrued to FEIREP (and, in essence, has been used as budgetary financing), 35% of central government revenue will derive from oil in 2004-2005. Reversing a history of a "boom and bust" associated with oil fortunes entails smoothing and limiting expenditure over the commodity price cycle via the effective use of a stabilization fund. The impending changes to Ecuador's FRL and FEIREP (as proposed by the government and passed by Congress) were not, in and of themselves, the determining rating factor for Standard & Poor's lowering Ecuador's rating to 'CCC+' from 'B-'. Both 'B-' and 'CCC+' ratings incorporate significant fiscal weakness. Furthermore, despite having been enacted into law in 2002, neither FRL nor FEIREP have been effectively implemented. However, the impending changes to these laws, coupled with conflicting policy signals from the government, undermine confidence in Ecuador's nascent fiscal prudence. This, in turn, has materially increased the likelihood of curtailed access to official and private sector financing over the coming year. This more limited access to financing has raised the risk surrounding the "ability" of Ecuador to service its debt in a timely manner. A track record of default on its financial obligations by both the public and private sectors also points to a weakness in the payment culture and questions of "willingness" to pay in Ecuador. The Financing Gap Standard & Poor's estimates a financing gap on the order of US$400 million for Ecuador's central government in 2005. The projected performance of the central government balance differs slightly from official forecasts. However, the projected financing gap arises due to concern about the prospects for, and magnitude of, disbursements from multilateral agencies and the willingness of the private sector to roll over locally issued debt. Standard & Poor's estimates Ecuador's financing needs at about US$2,850 million for 2005. This includes a central government deficit of almost US$550 million (assuming FEIREP funds are accounted for below the line); locally issued short-term debt and amortization of US$1,350 million; and external amortizations of US$950 million. [Note: accounting for US$490 in the FEIREP funding "above the line" as does the Ministry of Finance, Standard & Poor's estimate of Ecuador's deficit is US$58 million, versus the official forecast of US$22 million.] Funds available to cover these financing needs include use of FEIREP funds, project-related and exceptional official lending, and placements of local debt. Standard & Poor's is less optimistic on the prospects for disbursement of exceptional funds by multilaterals than is the government, given setbacks to the still-young fiscal institutions and uncertainty about policy under the Palacio Administration. The government is looking for US$350 million in exceptional financing, while Standard & Poor's assumes US$200 million will be available. Further complicating the financing picture for 2005 is the fact that clarification on the amount of exceptional financing is unlikely to be forthcoming from the multilaterals until the third quarter. The time frame depends first on the International Monetary Fund's evaluation of the final, legislated changes to FRL and FEIREP and the government's budget plan for 2006, followed by funding decisions within the various multilaterals themselves. Of the US$1,350 million in domestically issued debt amortizing in 2005, Standard & Poor's assumes US$1,170 million is rolled over. This US$1,170 million figure is based upon estimated rollover or repayment of almost US$700 million in government paper that came due during January 2005-May 2005 and assumptions on the ability to refinance payments due during June 2005- December 2005, as outlined below. Since the Palacio government came to office in April 2005, anecdotal evidence suggests there has been no rollover of paper with the private sector. Lingering uncertainty about access to official financing and mixed policy signals are expected to limit the government's ability to rollover domestic amortizations. It is important to underscore at the onset that estimates of the share of paper held by the private sector vary, but Standard & Poor's believes that 50% of short-term locally issued paper (CETES) is held by the private sector, with a significant portion held by foreign investors. In projecting CETES rollovers during June 2005-December 2005, however, Standard & Poor's uses a slightly more generous assumption that US$200 million (or 40%) of the almost US$500 million in CETES due during this time period is held by the private sector, and not refinanced. Standard & Poor's projects that US$300 million of CETES will be rolled over during June 2005-December 2005, and that almost US$200 million in other medium-term government paper coming due during this time frame will also be refinanced. These CETES and bonds are believed to be held by state-owned entities; it should be easier for the government to place paper with public sector entities. That said, assuming 100% rollover of debt with state- owned entities such as IESS, local governments, universities, etc., is not without risk. Public pressure has led Congress to discuss a bill that might return 50% to 100% of monies held in the IESS reserve fund (around US$700 million) to workers. This could reduce the IESS funds available for investment in government paper. Closing The Gap While Standard & Poor's estimates a US$400 million financing gap for 2005 and highlights the risk of Ecuador satisfying its financing needs, various alternatives are possible to close the gap this year. The multilaterals could be more forthcoming with funds, should prudent policy signals by the government become consistent. Improved policy signals could also increase private sector willingness to refinance the government of Ecuador's debt. With record-high world oil prices, additional oil revenue to FEIREP could provide additional relief. Finally, the drawing- upon of additional funds from IESS or somehow accessing the operating surpluses at other state-owned entities cannot be ruled out; Standard & Poor's expects that such funding would likely be of limited duration and magnitude. Alternatively, the government could generate a better fiscal outturn and lower its overall financing needs. Tax revenue has been stronger than expected thus far this year, but has also been offset by weak revenue associated with domestic sales of petroleum products. Expenditure rigidity (in terms of a large share of nondiscretionary/earmarked spending) limits scope for a meaningful reduction in expenditure. While spending cuts do not seem in line with the government's rhetoric, the government could decide to execute less capital expenditure as has been done in the past. Ecuador's financing constraints have also been met by running arrears. During 2002, the government accumulated some US$750 million in arrears to public-sector workers, pensioners, suppliers, and official creditors. Arrears are estimated to be around US$250-US$300 million at present. The Palacio government, however, has suggested that any arrears would be directed to the financial sector, and running arrears with workers or pensioners is bound to be problematic given the social environment. With significant domestic debt maturities in October 2005 (US$260 million) and January 2006 (US$200 million), liquidity pressures are likely to increase toward the end of 2005. The financing picture for 2006 is also likely to be tight. The Global 2012s begin to amortize (US$125 million per year) next year. With presidential elections scheduled for October 2006, questions about fiscal prudence during an election year likely will increase, exacerbated by the weakening of spending limits as per pending changes to FRL. Hence, Standard & Poor's also expects limited access to official and private sector financing in 2006. Political Risk Should Not Be Underestimated While the volatile social situation that ousted Mr. Gutierrez has seemingly stabilized, Standard & Poor's maintains that Ecuador has one of the weakest and most unpredictable political and institutional environments among its 107 rated sovereigns. Weakness in Ecuador's political structure and uncertain political dynamics are an ever-present risk for the sovereign. Problems of governability, confrontation with Congress, or renewed outcry by the public -at large cannot be discarded. President Palacio lacks a congressional support base. The longevity of support from the Partido Social Cristiano (PSC) and Izquierda Democratica (ID) is likely to be driven by opportunistic concerns and vested interests and, hence, be somewhat unpredictable. The return of Mr. Gutierrez to Ecuador could also prove unsettling to the current political balance. Public pressure for early presidential and congressional elections (ahead of schedule for October 2006) and changes in composition of the major courts seem to have been mostly assuaged, for now. The government has promised to lead and engage discussion with civil society to evaluate possible changes to the political system. To that end, a national, popular consultation is scheduled for Dec. 11, 2005. The content of the referendum/consultation, however, has yet to be defined. Given widespread dissatisfaction with the political class, an unforeseen trigger could again ignite popular protests and prove destabilizing to economic policy. Primary Credit Analyst: Lisa M Schineller, New York (1) 212-438- 7352; lisa_schineller@standardandpoors.com ============= J A M A I C A ============= AIR JAMAICA: Moody's Assigns B1 Rating to $150M Notes ----------------------------------------------------- Moody's Investors Service assigned a first-time rating of B1 to Air Jamaica Limited's new $150 million of guaranteed senior unsecured notes, due 2015, based solely on the unconditional and irrevocable guarantee of the Government of Jamaica whose rating for foreign currency is B1. Jamaica's country ceiling for foreign currency debt reflects the government's commitment to fiscal discipline and comparatively low external government debt ratios. Although, the rating outlook is currently stable, the credit challenges for Jamaica include a closely managed exchange-rate regime that is subject to severe, recurrent pressures, high vulnerability to domestic and external shocks, such as hurricanes and higher than expected fuel costs, impacting the tourism industry and economy, along with a large public-sector debt burden. Downward pressure on the rating could appear if fiscal results in the current fiscal year are considered insufficient to prevent further deterioration of the primary surplus and the public-sector debt. An aggressive and costly defense of the currency by using international reserves and domestic interest rates may also lead to downward pressures. Moody's has noted that the Government has made efforts to return to a balanced budget position and has a constitutional provision mandating debt-service payments as the first expenditure priority. In the event that Air Jamaica is unable to make timely principal and interest payments, the unsecured notes will then become an obligation of the Government of Jamaica and will be included in its public sector indebtedness which is subject to the provision of payment under the Jamaican Constitution. Due to the turmoil in the airline industry and significant financial losses, the Government of Jamaica assumed total ownership of Air Jamaica Holdings Limited and its subsidiary, Air Jamaica Limited, as of December 23, 2004, and has guaranteed the notes which will be sold in privately negotiated transactions which, under Rule 144A, do not require registration under the Securities Act of 1933. Air Jamaica is the national airline and is an important part of the transportation infrastructure of Jamaica, a country that is a vacation destination in the Caribbean region. The company indicated that it has over 50% of the passenger market and over 70% of the cargo market. Air Jamaica's all Airbus fleet is currently comprised of 11 A320, 6 A321 and 3 A340 aircraft, and it operates over 300 flights to destinations in the U.S., Canada, United Kingdom and throughout the Caribbean. In December 2004, the company launched a corporate restructuring program to improve operational efficiencies and reduce costs due to higher than expected fuel costs and increased competition. Ratings assigned are: - Senior Unsecured -- B1 - Outlook -- Stable Air Jamaica Limited and its parent company, Air Jamaica Holdings Limited, are headquartered in Kingston, Jamaica. =========== M E X I C O =========== EMPRESAS ICA: To Seek Shareholders' Approval on Capital Increase ---------------------------------------------------------------- Construction company Empresas ICA SA will seek approval on a proposed capital increase at an extraordinary shareholders meeting scheduled for July 14, says Dow Jones Newswires. In a filing with the Mexican Stock Exchange, ICA said shares would be offered on the local market and distributed on foreign markets. The amount of the proposed offering will not be disclosed until the assembly. ICA, the country's largest engineering and construction company, posted first-quarter net profit of MXN68 million on sales of MXN4.01 billion. CONTACT: Empresas ICA Sociedad Controladora S.A. de CV Minera No. 145 Edificio Central Mexico, DF 11800 Phone: 52 55 792 9991 Fax: 52 5 271 2431 URL: http://www.ica.com.mx SATMEX: Likely to File for Bankruptcy Under Mexican Laws -------------------------------------------------------- Speculation is mounting that satellite company Satmex may eventually file for bankruptcy under Mexican legislation, reports Business News Americas. Two weeks ago, Satmex's controlling shareholder Sergio Autrey agreed with its US creditors to extend from June 15 to July 7 the deadline for resolving differences over whether to file for bankruptcy in the US or Mexico. The agreement was made on condition that Satmex would not file for bankruptcy protection under Mexican law, a Concurso Mercantil, before June 28. Earlier speculations have suggested that the Mexican government, which holds a US$188-million note for a loan it made to Firmamento, a holding company controlled by Autrey, will opt for a Concurso Mercantil. The government is concerned that the loan would be treated as shareholder debt rather than Satmex debt if the restructuring takes place under US laws. Speculations about the possibility of Satmex filing for bankruptcy under Mexican laws resurfaced after the government cancelled a meeting with Satmex creditors last week. "The meeting was cancelled because the government refused to speak with us," one creditor said. This meant, Autrey also failed to meet with creditors last week, and there are no meetings planned in the near future. BCP Securities analyst James Harper said there are three possible outcomes to the current scenario: to reach a deal before July 7; to not reach a deal and file a concurso mercantil; or for creditors to ask for a further extension of the July 7 deadline. "I don't think they are going to reach a deal. So I do think it will be a concurso mercantil or a second extension," Mr. Harper told Business News Americas. Mr. Harper believes creditors will definitely react negatively to the former considering the fact that sorting through a bankruptcy deal in Mexico could take years. TV AZTECA: Shareholders Approve Deportivos Merger ------------------------------------------------- TV Azteca, S.A. de C.V. (BMV: TVAZTCA); (NYSE: TZA); (Latibex: XTZA), one of the two largest producers of Spanish-language television programming in the world announced that an Extraordinary Shareholders' Meeting held Monday, June 27, at its corporate offices in Mexico City, unanimously approved by vote of 99.35% of the Company's shareholders, the merger of Servicios Deportivos TV into TV Azteca. Servicios Deportivos TV, a technical advisor of a U.S. developer of satellite transmission solutions, and a subsidiary of Azteca Holdings, owns 90 million CPOs of TV Azteca, equivalent to 3% of the company's outstanding capital stock. The interest held by Servicios Deportivos TV, is valued at a price of Ps.5.56 per CPO, which equals an aggregate amount of approximately Ps.501 million (US$46 million). TV Azteca will retire the CPOs received pursuant to the merger, reducing its stockholders equity by the Ps.501 million (US$46 million), as of June 30, 2005. The outstanding debt of Servicios Deportivos TV is Ps.512 million (US$47 million), which will be integrated into TV Azteca's balance sheet. The company anticipates the incremental debt to be temporary, following its firm commitment to its six- year plan for uses of cash. As previously detailed, the cash usage plan entails allocating a substantial portion of TV Azteca's cash generation to reduce the company's debt by approximately US$250 million, and to make distributions to shareholders of over US$500 million by 2008. The company noted the stockholdings' increase delivers incremental value to all TV Azteca shareholders, while providing the company's strategic business planning with additional distribution alternatives derived from Servicios Deportivos TV's innovative transmission solutions. TV Azteca is one of the two largest producers of Spanish language television programming in the world, operating two national television networks in Mexico, Azteca 13 and Azteca 7, through more than 300 owned and operated stations across the country. TV Azteca affiliates include Azteca America Network, a new broadcast television network focused on the rapidly growing US Hispanic market, and Todito.com, an Internet portal for North American Spanish speakers. CONTACT: TV Azteca, S.A. de C.V. Investor Relations Bruno Rangel Phone: 52-55-1720-9167 E-mail: jrangelk@tvazteca.com.mx or Rolando Villarreal Phone: 52-55-1720-0041 E-mail: rvillarreal@gruposalinas.com.mx or Press Relations Tristan Canales Phone: 52-55-1720-1441 E-mail: tcanales@gruposalinas.com.mx Or Danie McCosh Phone: 52-55-1720-0059 E-mail: dmccosh@tvazteca.com.mx URL: http://www.tvazteca.com.mx/ ============= U R U G U A Y ============= COPACO: Regulator May Favor Plans to Launch Mobile Service ---------------------------------------------------------- Telecoms regulator Conatel plans to grant state fixed-line operator Copaco permission to enter the mobile telephony business, Business News Americas reports, citing Conatel's new president Jorge Pavetti. This would be good news for Copaco, which is understood to be exploring this avenue so that it would be a more attractive purchase should the government attempt to privatize it. In recent weeks, Copaco's plan to launch the service has become unpopular within the sector. Even Paraguay's President Nicanor Duarte has expressed opposition to Copaco's plan. Duarte acknowledges Copaco's right to a mobile license. However, the president and his followers believe the Company must become profitable and put its books in order before it can think about investing the US$12-million earmarked for this project. It would make more sense to use the US$12-million to help pay off Copaco's longstanding interconnection debt with incumbent mobile operators, said congressman Nelson Chavez. ================= V E N E Z U E L A ================= ALENTUY: Seniat Orders Closure, Inspecting Company Accounts ----------------------------------------------------------- Tax authority Seniat ordered aluminum products maker Alentuy, which allegedly failed to meet tax obligations, to close its operations in Lara state until June 30, reports Business News Americas. The order came after Alentuy's security guards physically assaulted authorities investigating the tax issues surrounding the Company. Seniat's investigation will focus on the 2004-2005 value-added tax records that are reportedly packed with serious irregularities. Alentuy, which produces aluminum cans, tubes and slugs, employs 780 people. *********** S U B S C R I P T I O N I N F O R M A T I O N Troubled Company Reporter - Latin America is a daily newsletter co-published by Bankruptcy Creditors' Service, Inc., Fairless Hills, Pennsylvania, USA, and Beard Group, Inc., Frederick, Maryland USA. John D. Resnick, Edem Psamathe P. Alfeche and Sheryl Joy P. Olano, Editors. Copyright 2005. All rights reserved. ISSN 1529-2746. This material is copyrighted and any commercial use, resale or publication in any form (including e-mail forwarding, electronic re-mailing and photocopying) is strictly prohibited without prior written permission of the publishers. 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