/raid1/www/Hosts/bankrupt/TCRLA

/raid1/www/Hosts/bankrupt/TCRLA_Public/050831.mbx T R O U B L E D C O M P A N Y R E P O R T E R L A T I N A M E R I C A Wednesday, August 31, 2005, Vol. 6, Issue 172 Headlines A R G E N T I N A ALIMENTOS FARGO: Evaluadora Maintains `D' Rating on $120M Bonds CLUB ATLETICO: Court Converts Bankruptcy to Reorganization CONARTE CONSTRUCCIONES: Individual Reports Due for Submission CONSORCIO OLIVARERO: Verification Phase Ends DELTAGRAF S.A.: Individual Creditors' Claims Due Sept. 1 HUMBERTO NICOLAS: Deadline for General Report Approaches LUMICOLOR S.A.: Court Declares Company Bankrupt PETROBRAS ENERGIA: More Info on "Settlement Agreement" PLASTICOS STOLL: Proceeds With Liquidation PROTELIA S.A.: Judge Approves Bankruptcy SUROIL S.A.: Declared Bankrupt by Court WALCAR S.R.L.: Trustee to Present General Report in Court B E R M U D A INTELSAT: To Merge With PanAmSat INTELSAT: S&P Places `BB-' Rating on CreditWAtch Negative B R A Z I L VARIG: Local Court Blocks VarigLog Sale to U.S. Equity Firm C H I L E MANQUEHUE NET: Unites With DirecTV to Offer Triconexion C O L O M B I A TERMOEMCALI FUNDING: Soliciting Consents on Chapter 11 Prepack D O M I N I C A N R E P U B L I C * DOMINICAN REPUBLIC: 2006 Fiscal Policy Framework to be Defined E C U A D O R BANCO DEL PICHINCHA: Ratings Remain Unchanged Despite Turmoil PRODUBANCO: Fitch Affirms Ratings Despite Political Turmoil * ECUADOR: Fitch Revises Outlook on Political, Fiscal Concerns J A M A I C A AIR JAMAICA: Losses Outweigh Possible High Load Factor Profits M E X I C O ASARCO: Wants to Enter Into Bank One Credit Card Pact ASARCO: Wants Approval of Reclamation Claim Procedures ASARCO: Utilities Want Court Order Vacated P A N A M A BANISTMO: Solid Operating Performance Prompts 'BB+/B' Rating PANAMSAT: Ratings Put on Watch Negative on Merger Announcement U R U G U A Y NBC: Advent Seen Likely to Acquire Bank - - - - - - - - ================= A R G E N T I N A ================= ALIMENTOS FARGO: Evaluadora Maintains `D' Rating on $120M Bonds --------------------------------------------------------------- Ratings agency Evaluadora Latinoamericana S.A. Calificadora de Riesgo maintained its `D' rating on US$120 million worth of bonds issued by Compania de Alimentos Fargo SA, the country's leading maker of packaged bread. The bonds, according to securities regulator, the CNV, carry the description "Obligaciones negociables Simples for US$ 120.000.000" and are classified under "Simple Issue." The bonds will mature on July 24, 2008. The Company's financial situation as of June 30, 2005 determined the action rating. CLUB ATLETICO: Court Converts Bankruptcy to Reorganization ---------------------------------------------------------- Club Atletico, Biblioteca y Mutual San Martin, which was declared "Quiebra" earlier, entered reorganization on orders from Court No. 1 of Marcos Juarez's civil and commercial tribunal, according to Infobae. The court assigned Mercedes Catalina Barovero as the Company's receiver. The credit verification process will be done "por via incidental", says the report, adding that the court ordered the receiver to submit the general report on Sep. 19, 2005. An informative assembly is scheduled for March 23 next year. CONTACT: Club Atletico, Biblioteca y Mutual San Martin Alem y Santa Fe Marcos Juarez (Cordoba) Ms. Mercedes Catalina Barovero, Trustee Pellegrini 1059 Marcos Juarez (Cordoba) CONARTE CONSTRUCCIONES: Individual Reports Due for Submission ------------------------------------------------------------- The individual reports on the claims of the creditors against Buenos Aires-based Conarte Construcciones S.R.L. will be submitted tomorrow, Sep. 1, 2005. The claims underwent verification phase until July 7, 2005. A general report containing a summary of the Company's financial status as well as relevant events pertaining to the bankruptcy will be submitted on Oct. 13, 2005. Conarte Construcciones S.R.L. was declared bankrupt by the city's Court No. 16 that the company is bankrupt. The ruling placed the company under the supervision of court-appointed trustee Nora Cristina Roger. The bankruptcy process will end with the disposal of Company assets in favor of its creditors. CONTACT: Conarte Construcciones S.R.L. Avda Rivadavia 5474 Buenos Aires Ms. Nora Cristina Roger, Trustee Hipolito Yrigoyen 1349 Buenos Aires CONSORCIO OLIVARERO: Verification Phase Ends -------------------------------------------- The verification of claims submitted by creditors of Consorcio Olivarero Argentino S.A., a company operating in Buenos Aires, will end tomorrow, Sep. 1, 2005. The claims will be presented in court as individual reports by court-appointed trustee Norberto Jorge Volpe on Oct. 14, 2005. An audit of the Company's accounting and business records is expected on Nov. 25, 2005. They will constitute the general report. Creditors will also vote to ratify the Company's completed settlement plan during the informative assembly on April 8 next year. Consorcio Olivarero Argentino S.A. began reorganization proceedings after the city's Court No. 22, with assistance from Clerk No. 44, granted its petition for "concurso preventivo". CONTACT: Mr. Norberto Jorge Volpe, Trustee Maipu 859 Buenos Aires DELTAGRAF S.A.: Individual Creditors' Claims Due Sept. 1 -------------------------------------------------------- The creditors' individual claims against bankrupt company Deltagraf S.A. will be submitted tomorrow, Sep. 1, 2005. The said claims were authenticated by court appointed trustee Elisa Esther Tomattis until June 27, 2005. After the submission of the claims to court, a general report on the Company's bankruptcy will be expected on Oct. 20, 2005. Court No. 9 of Buenos Aires' civil and commercial tribunal ordered the liquidation of Deltagraf S.A. after the Company defaulted on its debt obligations. The city's Clerk No. 17 assists the court on this case. CONTACT: Ms. Elisa Esther Tomattis, Trustee Rodriguez Pena 110 Buenos Aires HUMBERTO NICOLAS: Deadline for General Report Approaches -------------------------------------------------------- The deadline for the general report on the insolvency case of Humberto Nicolas Fontana S.A.C. will be tomorrow, Sep. 1, 2005. Mr. Fernando Jose Marziale, the trustee selected by the court, stopped accepting creditors' claims on May 23, 2005 and prepared individual reports out of those claims. The said reports were submitted on June 6, 2005. The Company began reorganization following the approval of its petition by Court No. 3 of Buenos Aires' civil and commercial tribunal. 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 June 13, 2006. Clerk No. 6 assists the court on this case. CONTACT: Mr. Fernando Jose Marziale, Trustee Avda Callao 930 Buenos Aires LUMICOLOR S.A.: Court Declares Company Bankrupt ----------------------------------------------- Court No. 15 of Buenos Aires' civil and commercial tribunal declared local company Lumicolor S.A. "Quiebra", relates La Nacion. The court approved the bankruptcy petition filed by Mr. Hector Mendez. The Company will undergo the bankruptcy process with Ms. Graciela Caccavallo as trustee. Creditors are required to present proofs of claim to Ms. Caccavallo for verification before Nov. 8, 2005. Creditors who fail to submit the required documents by the said date will not qualify for any post- liquidation distributions. Clerk No. 30 assists the court on the case. CONTACT: Lumicolor S.A. Apolinario Figueroa 527 Buenos Aires Ms. Graciela Caccavallo, Trustee Estados Unidos 2552 Buenos Aires PETROBRAS ENERGIA: More Info on "Settlement Agreement" ------------------------------------------------------ Petrobras Energia Participaciones S.A. (Buenos Aires: PBE, NYSE: PZE), controlling company of Petrobras Energia S.A. (Buenos Aires: PESA), announced that pursuant to the Master Settlement and Mutual Release Agreement (the "Settlement Agreement") entered into by and between Petrobras Energia S.A. (together with certain affiliates) and certain affiliates of Enron Corp (collectively, "Enron") in April 2004, (i) Petrobras Energia S.A. and the controlling company of the latter, Petrobras Hispano Argentina S.A., transferred in favor of certain affiliates of Enron 58,410,452 Class B Shares issued by Transportadora de Gas del Sur S.A. (TGS), representing approximately 7.35% of TGS's share capital and (ii) simultaneously Enron transferred approximately 40% of the share capital of Compa¤ia de Inversiones de Energia S.A. (CIESA) - controlling company of TGS -, to a trust, whose trustee is ABN AMRO BANK N.V., Argentine Branch, (the Trustee), that will administer them and place them at the disposal of whom CIESA may designate. Said transfers, as provided for in the Settlement Agreement, will provide for the flexibility necessary to progress with the restructuring of CIESA's financial debt with a view to designing a capital structure in line with the strategy of business development, with the subsequent creation of value in PESA's equity interest in CIESA. Under the terms and conditions of the Settlement Agreement, should refinancing of CIESA's financial debt be agreed upon with creditors, in a second stage Enron will transfer the remaining 10% of its shareholding in CIESA to said creditors, the Trustee or to an alternative entity, as provided in the pertinent CIESA's debt restructuring agreement, subject to the simultaneous transfer to Enron of TGS's Class B common shares currently held by CIESA and representing approximately 4.3% of TGS's share capital . CONTACT: Petrobras Energia Participaciones S.A. Edificio Perez Companc Maipu 1 Buenos Aires, C 1084 ABA Argentina Phone: 54-11-4344-6000 Website: http://www.petrobrasenergia.com PLASTICOS STOLL: Proceeds With Liquidation ------------------------------------------ Union Obreros y Empleados Plasticos successfully sought for the bankruptcy of Plasticos Stoll S.R.L. after Court No. 14 of Buenos Aires' civil and commercial tribunal declared the Company "Quiebra," reports La Nacion. As such, Plasticos Stoll S.R.L. will now start the process with Ms. Marcela Vainberg as trustee. Creditors must submit proofs of claim to the trustee by Nov. 8 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 creditor sought for the Company's liquidation after the latter failed to pay debts amounting to $3,061.20. The city's Clerk No. 28 assists the court on the case that will close with the sale of all of its assets. CONTACT: Plasticos Stoll S.R.L. Av. Santa Fe 4922 Buenos Aires Ms. Marcela Vainberg, Trustee Lavalle 2024 Buenos Aires PROTELIA S.A.: Judge Approves Bankruptcy ---------------------------------------- Construction company Protelia S.A. was declared bankrupt after Court No. 14 of Buenos Aires' civil and commercial tribunal endorsed the petition of Neumasur S.A. for the Company's liquidation. Argentine daily La Nacion reports that Neumasur S.A. has claims totaling $11,443.17 against Protelia S.A. The court assigned Carlos Perez to supervise the liquidation process as trustee. Mr. Perez will validate creditors' proofs of claim until Oct. 31, 2005. The city's Clerk No. 27 assists the court in resolving this case. CONTACT: Protelia S.A. San Martin 793 Buenos Aires Mr. Carlos Perez, Trustee Larrea 785 Buenos Aires SUROIL S.A.: Declared Bankrupt by Court --------------------------------------- Court No. 17 of Buenos Aires' civil and commercial tribunal declared Suroil S.A. bankrupt, says La Nacion. The ruling grants a petition filed by the Company's creditor, Mr. Pablo Puzino, for nonpayment of $109,782 in debt. Trustee Angel Vello Vazquez will review titles, balances and excuses for absence until Nov. 22, 2005. Clerk No. 33 assists the court on the case, which will conclude with the liquidation of the Company's assets. CONTACT: Suroil S.A. Osvaldo Cruz 1936 Buenos Aires Ms. Angel Vello Vazquez, Trustee Parana 275 Buenos Aires WALCAR S.R.L.: Trustee to Present General Report in Court --------------------------------------------------------- Court-appointed trustee Marcela Ingrid Vainberg will present the general report on the Walcar S.R.L. bankruptcy tomorrow, Sep. 1, 2005. On July 5, 2005, Ms. Vainberg submitted the individual reports on the claims of the Company's creditors. The claims were verified until May 23, 2005. Walcar S.R.L. was declared "Quiebra" by Buenos Aires' civi and commercial Court No. 14. Clerk No. 27 assists the court on this case that will end with the sale of the Company's assets. CONTACT: Mr. Marcela Ingrid Vainberg, Trustee Mahatma Gandhi 419 Buenos Aires ============= B E R M U D A ============= INTELSAT: To Merge With PanAmSat -------------------------------- Intelsat, Ltd. and PanAmSat Holding Corporation (NYSE: PA) announced Monday that the two companies have signed a definitive merger agreement under which Intelsat will acquire PanAmSat for $25 per share in cash, or $3.2 billion. The transaction will create a premier satellite company that will be a leader in the digital delivery of video content, the transmission of corporate data and the provisioning of government communications solutions. The new company will offer its customers expanded coverage with additional back-up satellites, supporting fiber networks and enhanced operational capabilities for the provision of an unparalleled level of services. With an increased focus on developing advanced communications technologies, the company will meet the needs of cable TV programmers, broadcasters, businesses, governments and consumers worldwide. Using a combined fleet of 53 satellites, the company will serve customers in more than 220 countries and territories. Driven by the core strengths of the two companies and their employees' commitment to quality in operations and customer service, Intelsat will have a portfolio of customers not only in the developed world, but also in emerging nations and remote areas where satellites are critical to providing communications infrastructure for economic development. "The combination of Intelsat and PanAmSat creates an industry leader with the ability to provide competitive communications and video services to consumers and businesses," said David McGlade, Chief Executive Officer of Intelsat. "The two companies are complementary in customer, geographic and product focus. Together, we will continue providing the highest level of service to existing customers while growing new business in rapidly expanding communications markets." Mr. McGlade will continue to serve as Chief Executive Officer and a Director of the company upon closing. Joseph Wright, currently Chief Executive Officer of PanAmSat, is expected to become Chairman of the Board upon completion of the transaction. "Today [August 29], PanAmSat offers its video, data and government customers a highly reliable level of service that only a technically advanced and financially strong satellite operator can provide," said Mr. Wright. "Now, we will combine the best from both companies and bring a professional business approach to the new enterprise to benefit our customers, employees and shareholders. This is a 'win-win' for both companies, and a terrific outcome for all of PanAmSat's shareholders, who will receive $25 per share in cash -- a significant premium over the recent stock price and nearly a 40% premium over the IPO price of about six months ago. In addition, our shareholders will continue to receive dividends, at the current annual rate or higher, until we close the transaction." PanAmSat brings a strong, video-centric customer base, including leading providers of cable TV programming, while Intelsat's historical strength has been in providing core telephony and advanced data services to developing and underserved regions around the world. Over the long term, the company will consolidate best practices from the two respective organizations. "We will leverage our combined intellectual, material and people assets to continue the high-quality service Intelsat and PanAmSat customers have come to expect," said David McGlade. Following the transaction, the company will have enhanced financial strength and revenue and free cash flow growth opportunities. The company is expected to have pro forma annual revenues of more than $1.9 billion and to maintain significant free cash flow from operations, providing significant resources for capital expenditures and debt service. Under the agreement, which was approved unanimously by the Boards of Directors of both companies, Intelsat will acquire all outstanding common shares of PanAmSat, and additionally Intelsat will either refinance or assume approximately $3.2 billion in debt of PanAmSat Holding Corporation and its subsidiaries. Shareholders owning approximately 58% of PanAmSat's shares have agreed to vote in favor of the combination. Intelsat has received financing commitments for the full amount of the purchase price from a group of financial institutions led by Deutsche Bank Securities Inc., Citigroup Global Markets Inc., Credit Suisse First Boston LLC and Lehman Brothers Inc. A substantial portion of the financing for the transaction is expected to be raised at Intelsat (Bermuda), Ltd., with additional financing expected to be raised at PanAmSat Holding Corporation, PanAmSat Corporation, and Intelsat Subsidiary Holding Company, Ltd. Prior to this financing and the closing of the transaction, Intelsat (Bermuda), Ltd. is expected to transfer substantially all of its assets and liabilities (including its 9-1/4% Senior Discount Notes due 2015) to a newly-formed wholly-owned subsidiary. Upon completion of the transaction, both PanAmSat Holding Corporation and Intelsat Subsidiary Holding Company, Ltd will be direct or indirect wholly-owned subsidiaries of Intelsat (Bermuda), Ltd., and PanAmSat Holding Corporation and its subsidiaries will continue as separate corporate entities. The transaction is expected to result in a Change of Control, as defined in the indenture governing PanAmSat Holding Corporation's outstanding bonds and certain of the indentures governing PanAmSat Corporation's outstanding bonds. The transaction is conditioned upon PanAmSat Holding Corporation shareholder approval, customary closing conditions and clearances from relevant regulatory agencies, including the appropriate U.S. government antitrust authorities and the Federal Communications Commission. The companies anticipate that the transaction could close in approximately six to 12 months. Credit Suisse First Boston LLC is serving as Intelsat's financial advisor, and Wachtell, Lipton, Rosen & Katz, Paul, Weiss, Rifkind, Wharton & Garrison LLP, and Milbank, Tweed, Hadley & McCloy LLP are serving as Intelsat's legal advisors. Morgan Stanley is serving as PanAmSat's financial advisor, and Simpson Thacher & Bartlett LLP is serving as PanAmSat's legal advisor. 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. Through its owned and operated fleet of 25 satellites, PanAmSat (NYSE: PA) is a leading global provider of video, broadcasting and network distribution and delivery services. It transmits 1,991 television channels worldwide and, as such, is the leading carrier of standard and high-definition signals. In total, the Company's in-orbit fleet is capable of reaching over 98 percent of the world's population through cable television systems, broadcast affiliates, direct-to-home operators, Internet service providers and telecommunications companies. In addition, PanAmSat supports satellite-based business networks in the U.S., as well as specialized communications services in remote areas throughout the world. More information can be obtained at www.panamsat.com. CONTACT: Intelsat E-mail: media.relations@intelsat.com Phone: 1 202-944-7500 INTELSAT: S&P Places `BB-' Rating on CreditWAtch Negative --------------------------------------------------------- Standard & Poor's Ratings Services placed Intelsat Ltd.'s 'BB-' corporate credit rating, the third highest junk level, on CreditWatch with negative implications. The action follows the announcement of a definitive merger agreement between Intelsat and PanAmSat Holding Corp., the parent of PanAmSat Corp. An aggregate of nearly US$8 billion in debt is affected. Under terms of the agreement, Intelsat will acquire PanAmSat Holding's equity for $3.2 billion cash and will assume or refinance $3.2 billion in existing debt. "The CreditWatch listing is based on the elevated financial risk of the combined entity, which has an estimated (consolidated) debt-to-EBITDA ratio in the mid-7x area, based on annualized results for the first six months of 2005 (and assuming an all- debt financing of the acquisition)," explained Standard & Poor's credit analyst Eric Geil. "We expect to resolve the CreditWatch listing after reviewing the transaction financing plans and business prospects for the combined company." The merged company will have a combined fleet of 53 satellites, making it the largest fixed satellite services operator. The resulting entity will benefit from PanAmSat's strong presence in the North American video distribution market, in which expanding high-definition TV services are bolstering transponder demand, and Intelsat's good global presence. The large fleet should improve the combined company's satellite backup capabilities and facilitate more efficient satellite capital expenditures. Nevertheless, industry growth prospects are mature, contract lengths are shortening, and newer managed services businesses important to growth are less profitable than traditional transponder leasing. A meaningful portion of Intelsat's business is from point-to-point carrier services, which are being supplanted by fiber optic networks. Primary Credit Analyst: Eric Geil, New York (1) 212-438-7833; eric_geil@standardandpoors.com =========== B R A Z I L =========== VARIG: Local Court Blocks VarigLog Sale to U.S. Equity Firm ----------------------------------------------------------- A Rio de Janeiro court barred debt-ridden airline Varig from selling its cargo unit to U.S. private equity firm Matlin Patterson Global Advisers LLC, Dow Jones Newswires reports, citing a spokesman. Federal Labor Judge Giselle Bondim Lopes Ribeiro's ruling came at the behest of the national federation of civil aviation workers (Fentac), which claims the sale of VarigLog was fraudulent and harmful to workers. "I accept (Fentac's) allegations and rule that the company shouldn't be sold," the judge said. According to the court, VarigLog's value is estimated at US$300 million, which is three times higher than the US$100 million valuation agreed by Varig and Matlin Patterson. The deal with Matlin, which includes the VarigLog sale, would generate a total of about US$103 million in cash to cover overdue debts, which threaten to shut down its operations. Meanwhile, a New York bankruptcy court is scheduled to hear on Aug. 31 requests from a number of creditors, primarily aircraft and engine leasing firms, to freeze Varig's airplanes for defaulting on payments. ========= C H I L E ========= MANQUEHUE NET: Unites With DirecTV to Offer Triconexion ------------------------------------------------------- Manquehue Net has agreed to team up with regional pay-TV provider DirecTV to offer a triple play solution called Triconexion, offering broadband, satellite TV and telephony, Business News Americas reports, citing Manquehue Net general manager Jorge Troncoso. Through the agreement, Manquehue Net will provide its clients in Chile's metropolitan region, which encompasses capital Santiago, the option to access satellite TV services from DirecTV. Troncoso declined to provide sales forecasts for Triconexion, although he said: "This is not a fight to steal clients from [Chilean triple play provider] VTR, but a bid to open a new option for clients." Local telecoms holding company Grupo GTD expects to assume control of Manquehue Net on August 31 in an operation worth a total of US$27 million. GTD will acquire 49% of Manquehue's shares and in a separate contract plans to acquire 100% of the telco's debt. Even after the operation is completed, GTD and Manquehue Net will continue to operate as independent companies, mostly because of Manquehue's strength in the residential segment, according to previous reports. GTD will continue to be a corporate orientated brand, while Manquehue plans to fortify its presence with greater penetration in the broadband market, specifically in the higher income segments. =============== C O L O M B I A =============== TERMOEMCALI FUNDING: Soliciting Consents on Chapter 11 Prepack -------------------------------------------------------------- TermoEmcali Funding Corp. launched an offer to exchange all outstanding 10.125% Senior Secured Notes Due 2014 for Senior Secured Notes Due 2019, a consent solicitation and solicitation of acceptances of a prepackaged plan of reorganization, on Aug. 11, 2005. The out-of-court restructuring will consist of an offer to exchange each $1,000 of outstanding principal amount of 10-1/8% Senior Secured Notes Due 2014 for $968.58 in principal amount of new Restructured Senior Secured Notes Due 2019. The Restructured Notes will bear interest rates escalating from 6% per annum effective as of the first day of the month in which the exchange offer is effective to 10-1/8% per annum effective from July 1, 2009, plus $31.42 in Cash. The payment recognizes that if $1,000 principal amount of Existing Senior Secured Notes had been exchanged for $1,000 principal amount of Restructured Senior Secured Notes on June 16, 2004, an additional $31.42 in principal would have been amortized since that exchange is based on the actual interest payments exceeding the interest that would have been paid at the applicable restructured interest rates to the holders of the Existing Senior Secured Notes since June 16, 2004. The Restructured Senior Secured Notes are expected to have the opportunity for principal prepayments, monthly installment payments, and certain security that would not be available to the Existing Senior Secured Notes. The financial restructuring will also consist of a consent solicitation for the New Indenture, the New Common Agreement and to amend, waive or terminate certain agreements or provisions thereof, including, but not limited to, the Existing Indenture and the Existing Common Agreement applicable to the Existing Senior Secured Notes. By validly tendering the Existing Senior Secured Notes, noteholders will automatically be deemed to have: (a) given consent to the proposed amendments, waivers and terminations with respect to all of the Existing Senior Secured Notes tendered; (b) agreed to the exchange; (c) authorized and directed the Existing Indenture Trustee to execute the proposed amendments, waivers and terminations and to take such further necessary action to effectuate the exchange, including directing the Collateral Agent to execute the amendments, waivers and terminations and to take such further action necessary on its part to effectuate the exchange; (d) accepted the Prepackaged Plan and (e) accepted the releases. The proposed amendments, waivers and terminations will become operative only if the Exchange Offer closes. Obtaining the requisite consent of the holders of at least 94.5% of the aggregate outstanding principal balance of the Existing Senior Secured Notes is one of the conditions to the closing of the Exchange Offer. Existing vs. Restructured Senior Secured Notes If the Exchange Offer is completed, there will be a number of differences between the Existing Senior Secured Notes that are not tendered in the Exchange Offer and the Restructured Senior Secured Notes that will be issued through the Exchange Offer, including: Non-Tendering Existing Restructured Sr. Characteristic Sr. Secured Notes Secured Notes -------------- --------------------- ---------------- Payment Frequency Quarterly Monthly Interest Rate 10-1/8% Escalating from 6% at per annum closing of the Exchange Offer or the effectiveness of the Prepackaged Plan to 10-1/8% commencing July 1, 2009 Maturity 2014 2019, subject to potential shortening of maturity through mandatory prepayments Principal prepayment at No Yes closing Opportunity for mandatory principal No Yes prepayments after closing Additional security No Yes through equity pledge Guarantee of Yes, but the right Yes underlying cash to the proceeds of flow by Emcali any draw will fall below those of the holders of Restructured Senior Secured Notes Rated No Yes, expected from Fitch and/or Standard & Poor's Luxembourg No, such a listing Yes, such a listing Listing is not to be is expected to be retained for obtained for the the Existing Restructured Senior Senior Secured Secured Notes Notes Benefits of continuing affirmative and negative covenants No Yes Redemption Yes No premium Holder receives No, except through Yes releases on the Prepackaged Plan exchange As of Aug. 11, 2005, there is a total of $144,080,024 in aggregate principal amount of Existing Senior Secured Notes outstanding. Delivery of the Restructured Senior Secured Notes and payment to tendering holders will be made promptly following the expiration date and the satisfaction or waiver of all conditions to the Exchange Offer. The Prepackaged Plan The Claims held by holders of its Existing Senior Secured Notes constitute the only impaired class under the Prepackaged Plan. In the event that less than 94.5% of the aggregate outstanding principal balance of the Existing Senior Secured Notes are tendered in connection with the Exchange Offer, but if the Prepackaged Plan is accepted by holders of at least 66% of the aggregate principal amount of the Existing Senior Secured Notes who vote and who represent at least 50% of the total number of beneficial holders of the Existing Senior Secured Notes who vote, the Company may commence a voluntary case under Chapter 11 of the Bankruptcy Code for purposes of effectuating the restructuring through the Prepackaged Plan. The exchange offer and consent solicitation will expire at 5:00 p.m. on Sept. 9, 2005. Deutsche Bank Trust Company Americas serves as the Indenture Trustee for the Restructured Senior Secured Notes. The Company and Emcali are parties to a 20-year power purchase agreement pursuant to which the Company sold electric generating capacity and energy to Emcali. The Power Purchase Agreement has been suspended pending the effectiveness of the exchange offer and the issuance of notes payable by Emcali to TermoEmcali. At such time, the PPA is to be terminated. Full-text copies of the Company's Offering Memorandum and Disclosure Statement and related documents are available at no charge at its exchange agent's website at http://www.bondcom.com/termoemcalior at these addresses: Bondholder Communications Group -- New York Attn: Trina Caliveri 30 Broad Street, 46th Floor New York, NY 10004 Telephone: (212) 809-2663 Fax: (212) 437-8727 E-mail: tcaliveri@bondcom.com Bondholder Communications Group -- London Attn: Trina Caliveri 3rd Floor, Prince Rupert House 64 Queen Street London, EC4R 1AD Telephone: +44 20 7236 0788 Fax: +44 20 7236 0779 E-mail: tcaliveri@bondcom.com TermoEmcali Funding Corp. was formed to develop, construct, own and operate a natural gas-fired electric power generation facility, which is located near Cali, Colombia. The Company is owned by Leaseco, Cauca Valley Holdings Ltd., TermoEmcali Holdings Ltd., Emcali E.I.C.E. E.S.P., and Inversiones Inca S.A. Leaseco, a Cayman Islands company, is owned and controlled by Cauca Valley and Holdings, both of which are Cayman Islands companies. * * * As reported in the Troubled Company Reporter-Latin America on July 28, 2005, Standard & Poor's 'D' rating on TermoEmcali Funding Corp.'s US$165 million senior secured notes due 2014 reflects the Colombian company's failure to make its September 2004 debt-service payment. Since then, the project-financed entity also failed to make its debt-service payments through June 2005. TermoEmcali operates a 234 MW combined-cycle, natural-gas-fired power generation facility, and sells capacity and energy to Empresas Municipales de Cali (Emcali), a Colombian municipal utility that provides diversified services to two million residents in and around Santiago de Cali. TermoEmcali entered a 20-year purchased-power agreement (PPA) with Emcali to provide capacity and energy, and eventually transfer the facility to Emcali at no cost. However, after Emcali defaulted on March 6, 2003, the PPA has not been honored. As of June 2005, Emcali continues to fail to meet its financial obligations due under the PPA for more than $85 million. In November 2003, TermoEmcali and Emcali, the project's offtaker, signed a memorandum of understanding (MOU) while pursuing an orderly restructuring of the obligations under the PPA. The MOU expired on June 2004, and although the parties discussed extending it, Emcali indicated it would not continue payments under the MOU until an energy-purchase agreement (EPA), replacing the former PPA, is signed. Despite the expiration of the MOU and Emcali's failure to perform its obligations under the PPA, Emcali and TermoEmcali continued to negotiate a restructuring of the PPA. On June 2005, TermoEmcali reached agreement to restructure Emcali's obligations to the project and settle certain disputes with Emcali. The deadline to achieve the restructuring is May 17, 2006. In parallel with those negotiations, TermoEmcali and a committee of restricted bondholders and other lenders have held discussions about restructuring the financing documents on a basis consistent with cash flows anticipated under a restructured PPA. After the restructuring of the financing documents is finalized Standard & Poor's Ratings Services will reassess the transaction's credit rating.(Troubled Company Reporter, Tuesday, August 30, 2005, Vol. 9, No. 205) =================================== D O M I N I C A N R E P U B L I C =================================== * DOMINICAN REPUBLIC: 2006 Fiscal Policy Framework to be Defined ---------------------------------------------------------------- The International Monetary Fund announced Monday that the fiscal policy framework for 2006 is expected to be defined in the coming days. On Monday in Washington, D.C., International Monetary Fund's (IMF) mission chief for the Dominican Republic Mr. Guy Meredith stated: "The IMF mission, which visited Santo Domingo during August 17- 26, 2005, made important progress towards completing, at the staff level, the first and second reviews of the Dominican Republic's program supported by a Stand-By Arrangement from the IMF. "Developments under the program remain favorable, and preliminary information suggests that the end-March and end-June 2005 quantitative performance criteria have been met with comfortable margins. The continued implementation of cautious fiscal and monetary policies has contributed to strengthening confidence, reducing inflation and lowering interest rates, while economic activity continues to improve. Progress has been made in the area of structural reforms, including in drafting legislation to enhance fiscal management and strengthen the structure of monetary and financial institutions. "The authorities are expected to define in the coming days the fiscal policy framework for 2006, consistent with program objectives. Once this is in place, the authorities' Letter of Intent describing the government's policies will be reviewed by Fund staff and Management," Mr. Meredith said. CONTACT: IMF - International Monetary Fund External Relations Department Public Affairs Phone: 202-623-7300 Fax: 202-623-6278 Media Relations Phone: 202-623-7100 Fax: 202-623-6772 ============= E C U A D O R ============= BANCO DEL PICHINCHA: Ratings Remain Unchanged Despite Turmoil ------------------------------------------------------------- Fitch Ratings affirmed Ecuadorian bank Banco del Pichincha y Subsidiarias' ratings below and revised the outlook on the long- term foreign currency rating to Negative: --Long-term foreign currency 'B-' --Short-term foreign currency 'B'; --Support '5'. This change follows a similar action taken on Ecuador's sovereign ratings and reflects increased sovereign credit risk due to greater political instability and added fiscal rigidities. Despite the recent political turmoil, the performance of the banking sector has remained stable and banks have reported steady deposit growth and high liquidity levels. CONTACT: Linda Hammel +1-212-908-0303, New York Peter Shaw +1-212-908-0553, New York Patricio Baus +5932 222-2323, Quito MEDIA RELATIONS: Kenneth Reed +1-212-908-0540, New York PRODUBANCO: Fitch Affirms Ratings Despite Political Turmoil ----------------------------------------------------------- Fitch Ratings affirmed Ecuadorian bank Produbanco's ratings below and revised the outlook on the long-term foreign currency rating to Negative: --Long-term foreign currency 'B-'; --Short-term foreign currency 'B'; --Support '5'. This change follows a similar action taken on Ecuador's sovereign ratings and reflects increased sovereign credit risk due to greater political instability and added fiscal rigidities. Despite the recent political turmoil, the performance of the banking sector has remained stable and banks have reported steady deposit growth and high liquidity levels. CONTACT: Linda Hammel +1-212-908-0303, New York Peter Shaw +1-212-908-0553, New York Patricio Baus +5932 222-2323, Quito MEDIA RELATIONS: Kenneth Reed +1-212-908-0540, New York * ECUADOR: Fitch Revises Outlook on Political, Fiscal Concerns -------------------------------------------------------------- Fitch Ratings, the international credit rating agency, has revised the Outlook on Ecuador's sovereign ratings to Negative from Stable. The long-term foreign currency rating is affirmed at 'B-' and the country ceiling is affirmed at 'B-'. The short- term foreign currency rating is likewise affirmed at 'B'. Sovereign credit risk has increased recently on greater political instability and concerns about related fiscal pressures. Changes to laws governing the FEIREP oil stabilization fund and the 'Fondo de Reservas' social security program have effectively reduced the pool of local financing available to the government. The oil production interruption that began in mid-August has left public finances more vulnerable to a decline in oil prices and to spending increases. According to Fitch Senior Director and lead Ecuador Sovereign analyst, Morgan Harting, 'there is a plausible 'muddle through' scenario in which Ecuador will be able cover its roughly US$3 billion in financing needs through end-2006, but this will require reasonable fiscal performance underpinned by oil revenues, the availability of financing from multilateral lenders and other governments, and relative stability in the financial system and capital account.' Risks to the credit over this period include potential spending pressures related to next year's election and higher scheduled bond debt service in 2006. Harting stated that 'these risks will all be more difficult to mitigate in light of the current uncertainty about Ecuadoran politics.' The issuer rating could be downgraded in the event that oil production is not fully restored quickly, that fiscal performance suffers, that the 2006 budget threatens debt service, or that actual disbursements from official creditors are below estimates. The rating could stabilize if the oil production interruption proves transitory, if adequate financing is secured from bilateral and multilateral sources, and if appears feasible that government balances will be held in check. CONTACT: Morgan C. Harting, CFA, New York +1-212-908-0820 Roger M. Scher, New York +1-212-908-0240 MEDIA RELATIONS: Kenneth Reed +1-212-908-0540, New York ============= J A M A I C A ============= AIR JAMAICA: Losses Outweigh Possible High Load Factor Profits -------------------------------------------------------------- National carrier Air Jamaica reached in July this year its highest load factor for any single month in five months, having filled 80% of its seat capacity, but lost around US$1 million, says Observer Business Reporter. Air Jamaica flew 150,000 passengers in July 2005, about 70,000 or 30% less than the 220,000 in 2004 that brought US$3 million profit. This means that the airline has cut its capacity by 40%. The airline operated 35% less flights, but achieved 12% boost in its yield or earning per flight to reach its highest yield ever. July's performance indicates clearly that cutting loss making routes and consolidating marginal ones is a good strategy, Executive Chairman Dr. Vincent Lawrence said. The airline did not make clear what revenues were reaped for July. However, even with Air Jamaica's proclamation of a highest passenger load factor in five years, the airline continues to lose money. The airline is expected to record a US$160 million loss by the end of the year, having already lost US$72 million for the first six months. With increased competition, escalating jet fuel costs, pilots leaving to join the more lucrative airlines of the Middle East, Far East and India, and a yet to be declared business model, prospects look far from encouraging. Also, tourism arrivals are currently down and the September- October period is fallow. July and August may be the best months for the national carrier but by the end of September, Air Jamaica is expected to lose further US$30 million. An Air Jamaica spokesperson said, "There are these figures being thrown about which we don't know for a fact are true or will ever be made true. What we do know is that we are now trying to restructure the airline in order to return it to profitability. Now that will take time. Let's not lose sight of the fact that Air Jamaica changed both ownership and management less than a year ago." =========== M E X I C O =========== ASARCO: Wants to Enter Into Bank One Credit Card Pact ----------------------------------------------------- ASARCO LLC seeks authority from the U.S. Bankruptcy Court for the Southern District of Texas pursuant to Section 364(c)(2) of the Bankruptcy Code to enter into a corporate credit card agreement with Bank One and grant a lien on a newly created segregated cash account to secure obligations arising under the credit card program. The American Express Program Before the Petition Date, ASARCO had a company credit card program sponsored by American Express Company, which provided business credit cards to certain key employees of the Debtor for their business-related expenses and for purchasing necessary goods and services. Upon learning of the Chapter 11 filing, American Express cancelled ASARCO's credit card program, freezing all cards under it. James R. Prince, Esq., at Baker Botts L.L.P., in Dallas, Texas, states that even before the Petition Date the Debtor was unsatisfied with the credit card program offered by American Express. According to Mr. Prince, ASARCO had contacted other providers, prepetition, including Bank One, one of ASARCO's main banking and financial institutions, about the possibility of migrating ASARCO's credit card program to another provider. Due to American Express' cancellation of the existing credit card program, the Debtor found it necessary to expedite its negotiations for a replacement credit card program. Migration to Bank One ASARCO has selected Bank One's $250,000 Commercial Card Classic program, which will provide key employees with up to 100 business charge cards to replace the cancelled American Express program. Annual fees for the credit cards vary depending on annual usage, but in no event are the fees greater than $35 per card. The finance charge rate, which applies only to past-due accounts, is equal to the prime rate plus 2%. As a condition to entering into the credit card agreement, Bank One is requiring ASARCO to: (a) set aside $250,000 in a segregated savings account at Bank One; and (b) grant Bank One a lien against the segregated savings account to secure ASARCO's obligations arising under the credit card program. ASARCO will fund the account with unencumbered cash, not cash collateral. The segregated savings account will remain in ASARCO's name and control. Bank One Credit Card Program Is Necessary ASARCO believes that the credit agreement with Bank One is necessary for the operation of its business and is in the best interest of the estate. Mr. Prince explains that the Debtor needs to provide certain of its key employees with a business charge card to be used: (1) for the purchase of supplies used in the daily operations of the business; (2) for business-related travel expenses; and (3) other business-related needs. Section 364 authorizes a debtor who is unable to obtain unsecured credit to obtain credit, after notice and a hearing, secured by a lien on property of the estate that is not otherwise subject to a lien. Mr. Prince notes that ASARCO has otherwise been unable to obtain the type of credit that Bank One is offering on an unsecured basis. In fact, even American Express sought similar protections in order to continue to service ASARCO's procurement card program postpetition. Mr. Prince further informs the Court that, unless the Debtor is authorized to enter into the credit arrangement with Bank One and grant a lien on a $250,000 segregated cash account, ASARCO's business operations will be disrupted by the loss of its corporate credit card program. Texas Commission Objects The Texas Commission on Environmental Quality contests ASARCO's request to migrate its Credit Card Program to Bank One on the grounds that the Commission's counsel did not receive notice of the emergency hearing on the Motion until August 18, 2005, at 5:33 p.m., after close of business, when he received an e-mail from an employee of the Debtor's counsel. ASARCO has sought expedited consideration of the request. A hearing on the Motion was scheduled for August 19, 2005. The Texas Commission asserts that it is inappropriate for its counsel to receive less than one business day's notice of a hearing without a true emergency. The Commission's counsel is extremely concerned that the expedited consideration of the Debtor's request is a window into what creditors can expect in the case. "The Debtor should not be permitted to abuse the Court's graciousness with respect to the setting of emergency hearings," Hal F. Morris, Esq., Assistant Attorneys General, Bankruptcy & Collections Division, in Austin, Texas, argues, "unless they can demonstrate a true emergency which would require immediate court action and justify the denial of due process to other parties in interest." The Texas Commission also asserts that the Debtor's Motion lacks sufficient detail about the nature of the alleged emergency, stating that the Motion itself does not contain substance creating a problem with regard to the employees' inability to avail of Credit Card Services. Mr. Morris points out that one of the key facts the Debtor should disclose is the date and time it received notice that its account was being frozen by American Express. The Texas Commission requests that any order entered by the Court on less than one day's notice to parties-in-interest, be an interim order. This would allow all parties-in-interest an opportunity to review the Debtor's pleading and consider the Debtor's request. The Texas Commission also asks the Court to establish a procedure for the setting of emergency hearings in the bankruptcy proceedings, stating that not all requests by the Debtor are true emergencies and that the due process rights of parties-in-interest must be balanced against the Debtor's desire for expeditious resolution of its motions. The Texas Commission suggests a procedure for the Court's consideration: (1) Any order entered on an emergency motion be interim; (2) Parties-in-interest have 20 days to challenge the entry of the interim order; (3) If an objection is filed, the matter be requested by the Debtor be set for hearing within 20 days of the date the objection was filed; and (4) If there are no objections filed, the order becomes final in 25 days of the entry of the interim order. Notice James R. Prince, Esq., at Baker Botts L.L.P., in Dallas, Texas, advises parties-in-interest that the hearing to consider the Debtor's request, originally scheduled for Aug. 19, 2005, has been adjourned to a later date still to be set. Headquartered in Tucson, Arizona, ASARCO LLC -- http://www.asarco.com/-- is an integrated copper mining, smelting and refining company. Grupo Mexico S.A. de C.V. is ASARCO's ultimate parent. The Company filed for chapter 11 protection on Aug. 9, 2005 (Bankr. S.D. Tex. Case No. 05-21207). James R. Prince, Esq., Jack L. Kinzie, Esq., and Eric A. Soderlund, Esq., at Baker Botts L.L.P., and Nathaniel Peter Holzer, Esq., Shelby A. Jordan, Esq., and Harlin C. Womble, Esq., at Jordan, Hyden, Womble & Culbreth, P.C., represent the Debtor in its restructuring efforts. When the Debtor filed for protection from its creditors, it listed $600 million in total assets and $1 billion in total debts. The Debtor has five affiliates that filed for chapter 11 protection on April 11, 2005 (Bankr. S.D. Tex. Case Nos. 05- 20521 thru 05-20525). They are Lac d'Amiante Du Quebec Ltee, CAPCO Pipe Company, Inc., Cement Asbestos Products Company, Lake Asbestos Of Quebec, Ltd., and LAQ Canada, Ltd. Details about their asbestos-driven chapter 11 filings have appeared in the Troubled Company Reporter since Apr. 18, 2005. ASARCO has asked that the five subsidiary cases be jointly administered with its chapter 11 case. (ASARCO Bankruptcy News, Issue No. 3; Bankruptcy Creditors' Service, Inc., 215/945-7000) ASARCO: Wants Approval of Reclamation Claim Procedures ------------------------------------------------------ Since filing for bankruptcy, ASARCO LLC has received reclamation demands from various suppliers and other creditors. ASARCO expects to receive more of these demands. Pursuant to Section 546(c) of the Bankruptcy Code, the Debtors ask the Court to establish these guidelines and procedures for the treatment of timely asserted reclamation claims: (a) Any supplier or other creditor asserting a reclamation claim must do so in compliance with the requirements of Section 546(c) and applicable state law; (b) Notwithstanding any reclamation demand that would require ASARCO to segregate the assets subject to the reclamation demand, ASARCO would be authorized to use the goods, products, and raw materials provided by suppliers and other trade creditors that may be subject to reclamation claims; (c) In lieu of physical reclamation, if ASARCO determines that a particular supplier or other trade creditor has a valid reclamation claim and ASARCO desires to pay the creditor on account of the goods, then ASARCO will provide written notice of its intent, along with the supporting invoices, to: (i) the official committee of unsecured creditors appointed in ASARCO's case; (ii) the official committee of unsecured creditors appointed in the Subsidiary Cases; and (iii) the United States Trustee. Unless a written objection is filed and served on ASARCO within five business days from the date of delivery of the notice, the creditor will be deemed to hold an administrative expense claim under Section 503(b), and ASARCO is authorized to pay the creditor without further Court order; (d) In lieu of physical reclamation, if the Court determines, upon request of a particular supplier or other trade creditor, and after notice and a hearing, that a creditor has asserted a valid reclamation claim, then the creditor will be granted an administrative expense claim under Section 503(b) for the amount of the reclamation claim; and (e) In any proceeding commenced to determine the validity or amount of any reclamation claim, the supplier or the trade creditor asserting the claim will bear the initial evidentiary burden of establishing the validity of its reclamation claim under Section 546(c) and applicable state law by a preponderance of the evidence. Jack L. Kinzie, Esq., at Baker Botts LLP, in Dallas, Texas, tells the Court that the procedures for resolving reclamation claims are necessary to prevent supply interruptions and severe and irreparable injury to the Debtors' business operations. The success and ultimate viability of the Debtors' businesses depend on the immediate utilization of the goods, products, and raw materials that may be the subject of reclamation claims. "If suppliers or other trade creditors are allowed to reclaim certain assets or if the Debtors are required to segregate those assets, there could be disastrous interruption in the Debtors' business operations," Mr. Kinzie says. Mr. Kinzie further asserts that the disruption and adverse publicity that would result could impact the Debtors' relationship with other trade creditors and force an effective shut down of their business operations, which could severely impair, or possibly eliminate, any possibility for a successful reorganization. Any payment to be made will be subject to any cash collateral or postpetition financing documents or orders approved or entered in the Debtors' cases. (ASARCO Bankruptcy News, Issue No. 3; Bankruptcy Creditors' Service, Inc., 215/945- 7000) ASARCO: Utilities Want Court Order Vacated ------------------------------------------ ASARCO LLC obtains electricity, water, natural gas, telephone services, and similar services through accounts with numerous utility companies in connection with the normal operation of its business. Under Section 366 of the Bankruptcy Code, utility companies are prohibited from discontinuing, altering, or refusing service to a debtor during the first 20 days of the bankruptcy case. Upon expiration of the Stay Period, however, a Utility Company has the option of terminating its services if a debtor has not furnished adequate assurance of payment. Karen C. Paul, Senior Assistant General Counsel of ASARCO, relates that it is vitally important to the Debtor's business, and thus to the Debtor's successful reorganization, that utility services continue uninterrupted after the expiration of the Stay Period. If utility services were discontinued or altered, even briefly, the Debtor's ongoing operations would be severely disrupted, causing substantial and perhaps irreparable harm, and the Debtor's reorganization efforts would be jeopardized. For this reason, the Debtor wants to prevent Utility Companies from terminating services or requiring additional deposits in connection with their provision of services. The Utility Companies would not be prejudiced by the absence of additional deposits, Ms. Paul says. ASARCO has timely paid most of its undisputed prepetition invoices, and is prepared to pay all undisputed postpetition charges for Utility Services. The timely payment of prepetition invoices and prompt payment of all undisputed postpetition invoices for Utility Services after the Petition Date, together with existing deposits and the statutory administrative priority provisions constitute adequate assurance of payment under the Bankruptcy Code, Ms. Paul asserts. Moreover, if the Utility Companies require additional deposits to secure continued services, the Debtor may face a severe cash shortage. Shelby A. Jordan, Esq., at Jordan, Hyden, Womble & Culbreth, P.C., in Corpus Christi, Texas, points out that courts have held that a debtor's ability to pay postpetition bills promptly is most determinative of adequate assurances for utility companies. In In re George C. Frye Co., 7 B.R. 856 (Bankr. D. Me. 1980), Mr. Jordan says the court found that a utility company's demand that a Chapter 11 debtor post a deposit or suffer termination of service, if permitted, would jeopardize the debtor's reorganization efforts. Additionally, the court noted that the administrative expense priority provisions of Sections 503(b) and 507(a) constituted adequate assurance of payment to the utility. At the Debtor's behest, the U.S. Bankruptcy Court for the Southern District of Texas enjoins and restrains Utility Companies from discontinuing, altering, or otherwise refusing service on account of any unpaid prepetition charges. A Utility Company, however, may request additional assurances of payment in the form of deposits or other security within 30 days after the Court enters a Utility Injunction Order. If the Debtor believes that the Additional Assurance Request is not reasonable, the Debtor may schedule a hearing to determine if additional assurances are necessary. Judge Schmidt holds that a Utility Company will be deemed to have adequate assurance of payment until a further Court order is entered in connection with a Determination Hearing. Utility Companies will be prohibited from applying any prepetition deposit to a postpetition invoice, but instead be required to hold any deposits postpetition as additional adequate assurance. A schedule of the Debtor's utility service accounts is available at no charge at: http://bankrupt.com/misc/Utility_Service_Accounts.pdf Utilities Want Order Vacated (1) Chevron Rhett G. Campbell, Esq., at Thompson & Knight LLP, in Houston, Texas, informs the Court that Chevron Natural Gas, a division of Chevron U.S.A. Inc., is not a utility but rather a forward contract merchant entitled to the protection of Section 556 of the Bankruptcy Code. Before the Petition Date, Chevron and the Debtor had entered into a Base Contract for Sale and Purchase of Natural Gas dated April 1, 2003, by which Chevron agreed to deliver natural gas to the Debtor. Pursuant to the terms of the contract and Tex. Bus. Com. Code section 2.702(a), the Debtor was prepaying for the gas prior to delivery. Section 556 expressly provides that a forward contract may not be "stayed, avoided or otherwise limited by operation of any provision of this title or by order of a court in any proceeding under [the Bankruptcy Code]." The Utility Order seeks to modify Chevron's contractual rights with respect to payment and dispute resolution pursuant to the provision of Section 366, Mr. Campbell points out. That action is expressly forbidden by the provision of Section 556. Accordingly, Chevron asks the Court to modify the Utility Order to delete Chevron from the list of Utility Companies or to provide that the Order does not apply to Chevron. (2) El Paso Philip G. Eisenberg, Esq., at Locke Liddell & Sapp LLP, in Houston, Texas, asserts that El Paso Natural Gas Company is not a utility company subject to the provision of Section 366 of the Bankruptcy Code. Mr. Eisenberg notes that "utility," as used in Section 366, is not defined in the Bankruptcy Code. However, the legislative history of Section 366 contemplates application only to utilities that are "monopolies in the area" and debtors who "cannot easily obtain comparable service." In this regard, Mr. Eisenberg says the Debtor has wholly failed to meet its burden of proving that El Paso is a monopoly, and proving that it has no choice but to enter into gas supply contracts with El Paso because it could not otherwise obtain comparable service. Moreover, the Debtor has disclosed in an exhibit to the Utility Motion that it obtains natural gas from seven suppliers. "El Paso expressly avers that it is not a monopoly in any of the areas where the Debtors operate, and the Debtors could (and did) obtain comparable service from other natural gas suppliers," Mr. Eisenberg tells Judge Schmidt. "If the Debtors, or their affiliates who have actually contracted with El Paso, did not find the terms and condition of the Gas Supply Contracts acceptable, it could have negotiated with another natural gas supplier." Mr. Eisenberg further notes that El Paso's records indicate that its gas supply contract is with ASARCO, Inc., not the Debtor. Mr. Eisenberg also contends that the Gas Supply Contracts are forward contracts subject to termination or liquidation under Section 556. By classifying El Paso as a utility, Mr. Eisenberg says, the Debtor is merely attempting to avoid the possibility of termination or liquidation of the Gas Supply Contracts or its obligations to cure prepetition defaults in the event of assumption of the Gas Supply Contracts, as would be required by Section 365(b)(1)(A). Furthermore, Section 365 does not enjoin the alteration, refusal or discontinuation of service to, or discrimination against, the Debtor, as does the Utility Order relying upon Section 366, Mr. Eisenberg adds. The Debtor should be required on rehearing to substantiate its claim that El Paso should be subject to the Utility Order, Mr. Eisenberg argues. The Utility Order should be vacated to provide El Paso an adequate opportunity to demonstrate that the Order is inapplicable. Absent the Court vacating the Utility Order, El Paso will be subjected to the provisions of Section 366, without the Debtor having first put to the task of demonstrating that it is entitled to any of the protections provided.(ASARCO Bankruptcy News, Issue No. 3; Bankruptcy Creditors' Service, Inc., 215/945-7000) =========== P A N A M A =========== BANISTMO: Solid Operating Performance Prompts 'BB+/B' Rating ------------------------------------------------------------ Standard & Poor's Ratings Services assigned its 'BB+/B' counterparty credit rating to Primer Banco del Istmo S.A. (Banistmo). The outlook is stable. "Ratings reflect Banistmo's solid operating performance and the fact that the bank is the leading financial group in Central America, which in turn results in a good degree of diversification in the region," said Standard & Poor's credit analyst Jaime Carreno. Offsetting these positives is the bank's aggressive expansion strategy based in mergers and acquisitions. Banistmo's strategy toward becoming the leading commercial bank in Central America has proven successful in terms of market penetration and expansion of its business franchise. The strategy followed by the bank is considered aggressive as it implies strong growth in locations that pose operating risks that are relatively higher than those faced in Panama, and by the fact that some acquisitions added temporary pressures on the bank's efficiency levels and asset quality indicators. Nevertheless, the strategy has been successful and its track record after acquisitions shows that the bank has had the ability to turn the acquired entities to the group's efficiency and good asset quality levels in a reasonable time frame. Banistmo's solid operating performance largely reflects its capacity to increase its revenue base through acquisitions that have resulted earnings accretive. Interest margin represents the bulk of revenues. Although results are somewhat sensitive to trends in interest rates, the bank benefits from the fact that it operates within diverse interest rate environments, which in turn adds consistency to margins on a consolidated level. The stable outlook incorporates the expectation that Banistmo will continue with an aggressive expansion strategy to consolidate its leading position in the Central American region. Temporary effects on efficiency, asset quality, and capital indicators are already built into the current rating levels, and are not expected to be material. Organic growth has been somewhat limited, as the bank has directed resources to tune up its recent acquisitions, so it faces the challenge of replicating the group's performance and business model in future acquisitions as track record shows. Successful amalgamation of acquisitions, together with resumed organic growth and stability of profitability, capital, and asset quality ratios will be considered as factors that would support a positive outlook for the ratings. On the other side, lack of capacity to control operating risks derived from acquisitions or the deterioration of the financial profile of the bank will likely result in a negative action over the ratings. The stable outlook also reflects that on the sovereign credit ratings of Panama. We do not believe that the risk of exchange controls being imposed in the country is material, because of the effective "monetary union" that Panama is part of due to its long-standing use of the U.S. dollar. Therefore, there is no specified constraint on the foreign currency ratings on entities domiciled there; however, in our opinion, the economic situation of a country has a direct effect on the performance of the banking system. Primary Credit Analyst: Jaime Carreno, Mexico City (52) 55-5081- 4417; jaime_carreno@standardandpoors.com Secondary Credit Analyst: Michael T DeStefano, New York (1) 212-438-7372; mike_destefano@standardandpoors.com PANAMSAT: Ratings Put on Watch Negative on Merger Announcement -------------------------------------------------------------- Standard & Poor's Ratings Services placed PanAmSat's `BB' corporate credit rating, the second highest junk level, on CreditWatch with negative implications. The action follows the announcement of a definitive merger agreement between Intelsat and PanAmSat Holding Corp., the parent of PanAmSat Corp. An aggregate of nearly $8 billion in debt is affected. Under terms of the agreement, Intelsat will acquire PanAmSat Holding's equity for $3.2 billion cash and will assume or refinance $3.2 billion in existing debt. "The CreditWatch listing is based on the elevated financial risk of the combined entity, which has an estimated (consolidated) debt-to-EBITDA ratio in the mid-7x area, based on annualized results for the first six months of 2005 (and assuming an all- debt financing of the acquisition)," explained Standard & Poor's credit analyst Eric Geil. "We expect to resolve the CreditWatch listing after reviewing the transaction financing plans and business prospects for the combined company." The merged company will have a combined fleet of 53 satellites, making it the largest fixed satellite services operator. The resulting entity will benefit from PanAmSat's strong presence in the North American video distribution market, in which expanding high-definition TV services are bolstering transponder demand, and Intelsat's good global presence. The large fleet should improve the combined company's satellite backup capabilities and facilitate more efficient satellite capital expenditures. Nevertheless, industry growth prospects are mature, contract lengths are shortening, and newer managed services businesses important to growth are less profitable than traditional transponder leasing. A meaningful portion of Intelsat's business is from point-to-point carrier services, which are being supplanted by fiber optic networks. Primary Credit Analyst: Eric Geil, New York (1) 212-438-7833; eric_geil@standardandpoors.com ============= U R U G U A Y ============= NBC: Advent Seen Likely to Acquire Bank --------------------------------------- U.S. investment fund Advent International is likely to beat Chilean financial holding Corp Group in the race for Uruguay's state-owned bank Nuevo Banco Comercial (NBC), Business News Americas suggests in a report. The Uruguayan government is seeking to privatize NBC by the end of the year. Advent and Corp Group, the only two firms vying for NBC, have offered some US$250 million each for the bank, a source close to the negotiations said. But Advent, which is reportedly being advised by the Ficuscapital group on the NBC purchase, plans to improve and expand NBC's operations with the aim of selling it to an international or Brazilian bank in some five years. Advent is a US private investment fund that manages some US$6 billion in assets. Corp Group, on the other hand, runs Corpbanca (NYSE: BCA) in Chile and Venezuela. NBC was created in March 2003 from the assets of local banks Banco Comercial, Banco Montevideo and Banco Caja Obrera. The three banks were intervened and suspended as a result of a run on deposits during the country's financial crisis in 2002. *********** 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. Information contained herein is obtained from sources believed to be reliable, but is not guaranteed. The TCR Latin America subscription rate is $575 per half-year, delivered via e-mail. Additional e-mail subscriptions for members of the same firm for the term of the initial subscription or balance thereof are $25 each. For subscription information, contact Christopher Beard at 240/629-3300. * * * End of Transmission * * *