/raid1/www/Hosts/bankrupt/TCRLA_Public/060303.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
Friday, March 3, 2006, Vol. 7, Issue 45
Headlines
A R G E N T I N A
BODEGAS Y VINEDOS: Trustee Begins Verification Phase of Claims
BRANDO HERMANOS: Wants to Reorganize After Missing on Payments
BUENOS AIRES SEA: Creditors Must Present Claims by May 24
DILEN S.A.: Claims Verification Begins, Ends June 21
FIDEICOMISOS FINANCIEROS: Presents Particulars for Debt Issues
INGENIOS S.R.L.: Files for Bankruptcy After Payment Defaults
INSTITUTO CAIP: Creditors Must Submit Proofs of Claim by Apr. 20
MEDICAL EXPRESS: Trustee Verifies Creditors Claims Until Apr. 17
MORGAN: US$458,250 Debt Due 2011 Is Rated D
PROGETTO S.A.: Verification of Creditors' Claims Ends on April 3
SERVICIO INTEGRAL: Validation of Claims Ends on March 24
SOCIEDAD ALEMANA: Debt Payments Halted, Moves to Reorganize
TELECOM ARGENTINA: Inks Memorandum of Understanding with Gov't
VIO COM: Creditors' Claims Verification Begins, Ends May 9
* ARGENTINA: IDB Approves US$500 Million Loan
* ARGENTINA: Suffers Declining Levels of Inflows in 2005
B A H A M A S
PRESIDENT CASINO: Sells Capital Stock to Pinnacle for $31.5 Mil.
ULTRAPETROL: S&P assigns B Rating with Negative Outlook
B E R M U D A
DIGICEL: Names Honey Adams as Corporate Sales Manager
FOSTER WHEELER: Balance Sheet Upside Down by $341,796,000
INTELSAT LTD: Standard & Poor's Assigns BB- Rating
SEA CONTAINERS: S&P Assigns B+ Rating with Negative Outlook
B R A Z I L
BANCO CITIBANK: S&P Raises Currency Credit Rating to BB from BB-
BANCO DO BRASIL: S&P Ups Currency Credit Rating to BB from BB-
BANCO DO ESTADO: S&P Lifts Currency Credit Rating to BB from BB-
BANCO DO NORDESTE: S&P Ups Currency Credit Rating to BB from BB-
BANCO INDUSTRIAL: S&P Affirms BB-/B Counterparty Credit Rating
BANCO ITAU: S&P Upgrades Currency Credit Rating to BB from BB-
BANCO SAFRA: S&P Raises Foreign Currency Credit Rating to BB
BANCO SANTANDER BRASIL: S&P Shifts Foreign Currency Rating to BB
BANCO SANTANDER MERIDIONAL: S&P Ups Currency Rating to BB
BANCO VOTORANTIM: S&P Assigns BB Foreign Currency Credit Rating
BNDES: S&P Ups Foreign Currency Credit Rating to BB
HSBC BANK: S&P Upgrades Foreign Currency Credit Rating to BB
PETROLEO BRASILEIRO: Says Company Output Will be Maintained
UNIBANCO: S&P Raises Foreign Currency Credit Rating to BB
C A Y M A N I S L A N D S
BAILEY COATES: Sets Mar. 14 Deadline for Claims Filing
BIBBY INTERNATIONAL: Sets Mar. 6 Deadline for Claims Submission
BNC INTERNATIONAL: Sets Mar. 30 Deadline for Claims Filing
NARASFUND LIMITED: Sets Mar. 6 for Shareholders' Final Meeting
NHT LIMITED: Shareholders' Final Meeting Set for March 6
NICOS SHOPPING: Shareholders' Final Meeting Set for Monday
NM HOLDING: Final Meeting of the Shareholders Set for March 23
OSI OFFSHORE: Final Meeting with the Shareholders on March 7
PELEKAS INVESTMENTS: Shareholders Final Meeting Set for March 6
PHILOSOPHY VENTURES: Shareholders Final Meeting Set for March 7
C H I L E
GENERAL MOTORS: Fitch Lowers IDR to B, Remains on Watch Negative
C O L O M B I A
* COLOMBIA: Records Highest Rate of FDI Growth in 2005, Says S&P
D O M I N I C A N R E P U B L I C
CARIBE INFORMATION: Moody's Rates Corporate Family at B2
E C U A D O R
* ECUADOR: Petroecuador Delays Oil Shipments for Agip, Citizens
E L S A L V A D O R
* EL SALVADOR: Social Organizations Balk at CAFTA-DR
J A M A I C A
AIR JAMAICA: Congress Orders Formal Probe on Losses
M E X I C O
EMPRESAS ICA: Asks Review of SCT's Queretaro-Irapuato Ruling
VITRO S.A.: S&P Assigns B Rating with Negative Outlook
TFM S.A.: S&P Assigns 'BB-' Ratings
P U E R T O R I C O
DORAL FINANCIAL: Completes Financial Restatements for 2000-2004
MUSICLAND HOLDING: Panel Balks at Investment, Deposit Guidelines
V E N E Z U E L A
CITGO PETROLEUM: Conn. AG Says Discounted Oil Program Is Legal
- - - - - - - -
=================
A R G E N T I N A
=================
BODEGAS Y VINEDOS: Trustee Begins Verification Phase of Claims
--------------------------------------------------------------
Ms. Margarita Elisa Piastrellini de Pafumi -- the trustee
appointed by a San Rafael court for the reorganization of
Bodegas y Vinedos Garbin S.A. -- has begun the verification of
creditors' claims. Creditors are given until April 10, 2006, to
submit their claims to the trustee.
Infobae relates that Ms. de Pafumi will prepare individual
reports out of the validated claims and submit them in court on
July 28, 2006. The trustee will also present a general report
on the case on Sep. 28, 2006.
An informative assembly is scheduled on May 24, 2007. During
the assembly, the company will present a settlement proposal to
its creditors.
Ms. Margarita Elisa Piastrellini de Pafumi, the trustee, can be
reached at:
Francia 76
San Rafael
Mendoza, Argentina
BRANDO HERMANOS: Wants to Reorganize After Missing on Payments
--------------------------------------------------------------
Brando Hermanos S.A., a company operating in Buenos Aires, has
requested for reorganization after failing to pay its
liabilities since Feb. 27, 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. 24. Clerk No. 47 assists
on this case.
Brando Hermanos S.A. can be reached at:
Mario Bravo 58
Buenos Aires, Argentina
BUENOS AIRES SEA: Creditors Must Present Claims by May 24
---------------------------------------------------------
Buenos Aires Sea Food S.A.'s creditors are required to present
their claims against the company to Mr. Manuel Alberdi, the
company's trustee, on May 24, 2006.
Argentine daily La Nacion relates that Buenos Aires' Court No.
16 declared the company's bankruptcy in favor of the company's
creditor Mr. Rolando Mundin for nonpayment of debt.
Clerk No. 32 assists the court with the proceedings.
Buenos Aires Sea Food S.A. can be reached at:
Maipu 872
Buenos Aires, Argentina
Mr. Manuel Alberdi, the trustee, can be reached at:
R. Pena 189
Buenos Aires, Argentina
DILEN S.A.: Claims Verification Begins, Ends June 21
----------------------------------------------------
Ms. Beatriz Stachesky, court-appointed trustee, has started
verifying claims against plastic industry Dilen S.A., La Nacion
reports. Claims verification will end on June 21, 2006.
La Nacion relates that Buenos Aires' Court No. 3 declared the
company bankrupt in favor of Union Obreros y Empleados
Plasticos, who has claims worth $3,228.91.
Clerk No. 5 assists the court in this case.
Dilen S.A. can be reached at:
Arenales 3727
Buenos Aires
Ms. Beatriz Stachesky, the trustee, can be reached at:
Av. Cordoba 817
Buenos Aires
FIDEICOMISOS FINANCIEROS: Presents Particulars for Debt Issues
--------------------------------------------------------------
Fideicomisos Financieros Fideiagro 2009 debt issues and their
ratings:
-- Valores de deudad Fiduciaria Clase A for US$770,000
* Last due: March 1, 2010
* Rated date: Feb. 17, 2006
* Rate: A
-- Valores de Deuda Fiduciaria Clase B for US$3,210,000
* Last due: March 1, 2010
* Rated date: Feb. 17, 2006
* Rate: BBB
-- Certificado de Participaci¢n for US$20,000
* Last due: March 1, 2010
* Rated date: Feb. 17, 2006
* Rate: C
INGENIOS S.R.L.: Files for Bankruptcy After Payment Defaults
------------------------------------------------------------
Buenos Aires' Court No. 6 is currently reviewing the merits of
the reorganization petition filed by Ingenios S.R.L. Argentine
daily La Nacion reports that the company filed bankruptcy after
defaulting on its debt payments since Jan. 15, 2004.
Clerk No. 11 assists the court on this case.
Ingenios S.R.L. can be reached at:
Lavalle 1537
Buenos Aires, Argentina
INSTITUTO CAIP: Creditors Must Submit Proofs of Claim by Apr. 20
----------------------------------------------------------------
Creditors against Instituto Caip S.R.L. are required to submit
proofs of claim by April 20, 2006. Infobae relates that the
claims will undergo a verification phase. Claims that are
verified will then be submitted in court as individual reports
on June 6, 2006.
A general report, which will contain the company's audited
business records as well as a summary of events pertaining to
the liquidation, will be presented in court on Aug. 3, 2006.
Instituto Caip S.R.L. was declared bankrupt by a Buenos Aires
court. Ms. Maria Elena Mercante was appointed as trustee.
Ms. Maria Elena Mercante, the trustee, can be reached at:
Uruguay 772
Buenos Aires, Argentina
MEDICAL EXPRESS: Trustee Verifies Creditors Claims Until Apr. 17
----------------------------------------------------------------
Creditors' claims against Medical Express S.R.L. will be
verified until April 17, 2006, Infobae reports. Court-appointed
trustee Omar Sergio Luis Vazquez is tasked with the
verification.
A Buenos Aires court handles the Medical Express S.R.L.
bankruptcy case.
Mr. Omar Sergio Luis Vazquez, the trustee, can be reached at:
Bartolome Mitre 1970
Buenos Aires, Argentina
MORGAN: US$458,250 Debt Due 2011 Is Rated D
-------------------------------------------
Morgan S.A.'s Obligaciones negociables for US$458,250:
* Last due: April 1, 2011
* Rated date: Feb. 23, 2006
* Rate: D
* Date of balance: Sept. 30, 2005
PROGETTO S.A.: Verification of Creditors' Claims Ends on April 3
----------------------------------------------------------------
The verification phase for the claims submitted by creditors
against bankrupt company Progetto S.A. has started, Argentine
daily La Nacion reports. The verification will end on April 3,
2006.
Verified claims will be presented in court as individual reports
on May 18, 2006.
A general report will be submitted on July 3, 2006.
Progetto S.A. was declared bankrupt by a Buenos Aires' court.
Ms. Marina Fernanda Tynik, the trustee, can be reached at:
Avda. Rivadavia 10444
Buenos Aires, Argentina
SERVICIO INTEGRAL: Validation of Claims Ends on March 24
--------------------------------------------------------
Claims against bankrupt company Servicio Integral Telefonico
S.A. will be validated by court-appointed trustee Mr. Juan
Castronuovo until March 24, 2006, Argentine daily La Nacion
reports.
Servicio Integral Telefonico S.A. was declared bankrupt after
Buenos Aires' Court No. 17 endorsed the petition of Obra Social
de Empleados de Comercio for the company's liquidation.
The city's Clerk No. 33 assists the court in resolving this
case.
Servicio Integral Telefonico S.A. can be reached at:
Av. Belgrano 2068
Buenos Aires, Argentina
Mr. Juan Castronuovo, the trustee, can be reached at:
Av. Corrientes 2621
Buenos Aires, Argentina
SOCIEDAD ALEMANA: Debt Payments Halted, Moves to Reorganize
-----------------------------------------------------------
Buenos Aires Court No. 6 is studying the request for
reorganization submitted by local company Sociedad Alemana de
Socorro a Enfermos (Deutscher Krankenverein) Asociacion Mutual,
says La Nacion.
The report adds that that the company filed a reorganization
petition following cessation of debt payments on Feb. 15, 2006.
The city's Clerk No. 11 assists the court on this case.
Sociedad Alemana de Socorro a Enfermos (Deutscher Krankenverein)
Asociacion Mutual can be reached at:
Beruti 2526
Buenos Aires, Argentina
TELECOM ARGENTINA: Inks Memorandum of Understanding with Gov't
--------------------------------------------------------------
Telecom Argentina S.A. is about to sign an agreement with the
Argentine govenment relating to its US$2.834 million claim that
resulted from the 2002 government's decision to convert rates
into devalued pesos and froze them.
Telecom has committeed to make investments for approximately
US$300 million. This will be used for land and mobile lines.
Under the agreement, the company will be able to charge in
dollars the incoming international calls, which were converted
to peso; with this, it will be able to triple its income.
Though increases on the rates have not been planned yet, the
company will reduce the amount of hours goiven to reduced rates.
The formal announcement will be done either this or next week.
Headquartered in Buenos Aires, Telecom Argentina S.A. --
http://www.telecom.com.ar/index-flash.html-- is the fixed-line
operator for local and long-distance services in northern and
southern Argentina. It also provides cellular and PCS phone
services in Argentina, as well as in Paraguay through a 68%
stake in Nocleo. France Telecom formerly controlled the company
through its Nortel Inversora venture with Telecom Italia.
France Telecom sold most of its stake in 2003 to the Werthein
Group, an Argentine agricultural concern owned in part by vice
chairman Gerardo Werthein. Nortel continues to be Telecom
Argentina's largest shareholder with a 55% stake. Nortel is
owned by Sofora, a consortium owned by Telecom Italia (50%), the
Werthein Group (48%), and France Telecom (2%).
* * *
Telecom Argentina's $64,128,000 and $54,124,000 notes due Oct.
15, 2014, carry Standard & Poor's and Fitch's B- ratings.
VIO COM: Creditors' Claims Verification Begins, Ends May 9
----------------------------------------------------------
The verification phase for the claims submitted by Vio Com
Reciclados S.R.L.'s creditors has started, Argentine daily La
Nacion reports. The verification will end on May 9, 2006.
Creditors who are unable to submit claims after the said date
will be excluded from receiving any distribution or payment that
the company will make.
Buenos Aires' Court No. 1 approved the reorganization petition
of Vio Com Reciclados S.R.L. with the assistance of Clerk No. 2.
Vio Com Reciclados S.R.L. can be reached at:
Corrientes 2294
Buenos Aires, Argentina
Mr. Gonzalo Cueva, the trustee, can be reached at:
Terrero 1752
Buenos Aires, Argentina
* ARGENTINA: IDB Approves US$500 Million Loan
---------------------------------------------
The Inter-American Development Bank approved Wednesday a $500
million loan to Argentina to support a sector program to
increase effectiveness, efficiency and transparency of public
financial management.
The economy ministry will be in charge of the program to improve
investment planning, budget and public debt management, covering
four policy areas:
-- macroeconomic environment;
-- strengthening of public investment; and
-- financial management and public debt systems.
This project follows the IDB's 2004-2008 strategy with the
country to support its efforts to achieve a sustainable and more
equitable growth by strengthening institutions for improved
governance and fiscal sustainability, a prerequisite for a
modern, effective and efficient financial management.
"The principal benefit of this program is to strengthen national
financial management in the public sector in the aftermath of
the deep crisis of 2002," said IDB Project Team Leader Francisco
Mejia. "It will ensure that decisions on spending are aligned
with public investment decisions, integrating information on
project execution with budget performance."
"The main results of this project will be the achievement of
greater transparency and effectiveness and efficiency in
managing the national budget," he added. "Results-based
management and public disclosure of indicators and benchmarks
for the 2008-2010 national budget will add transparency to the
budget process."
The program will be executed over a 18-month period. The loan
is for a 20-year term, with a five-year grace period at a
variable interest rate, to be disbursed in two tranches of $150
million and $350 million respectively. Conditions for
disbursement consist of a matrix of agreed upon requirements
based on maintenance of a stable macroeconomic environment and
reform measures in each of the areas covered by the program.
* ARGENTINA: Suffers Declining Levels of Inflows in 2005
--------------------------------------------------------
Standard & Poor's Ratings Services stated that the Republic of
Argentina suffered declining levels of inflows in 2005. S&P
assigned a 'BB-' rating on the country.
According to S&P, foreign direct investment growth rate to
emerging market economies slowed in 2005, but there is still
plenty to go around.
The lowest growth in FDI inflows in 2005 was reported in Latin
America. Growth of just 4.5% in 2005 pales in comparison to the
43.5% increase realized in 2004. The US$72 billion Latin
American FDI in 2005 was significantly below the peak of
US$108.6 billion seen in 1999.
Overall, however, Latin American FDI grew in both 2004 and 2005
after declining for four consecutive years over 2000-2003.
Moreover, three Latin American countries -- Mexico, Brazil, and
Chile -- were among the 10 largest EME recipients of FDI for
both 2004 and 2005.
=============
B A H A M A S
=============
PRESIDENT CASINO: Sells Capital Stock to Pinnacle for $31.5 Mil.
----------------------------------------------------------------
Pinnacle Entertainment (NYSE: PNK) entered into an agreement
with President Casinos, Inc. to purchase all of the outstanding
capital stock of President Riverboat Casino-Missouri, Inc., dba
President Casino St. Louis Riverfront, for approximately $31.5
million. This purchase agreement will be submitted to the U.S.
Bankruptcy Court for the Eastern District of Missouri and is
subject to a potential overbid by third-parties, as well as
approval by the Missouri Gaming Commission. The agreement calls
for a bankruptcy auction to occur by May 16, 2006.
About Pinnacle Entertainment
Pinnacle Entertainment owns and operates casinos in Nevada,
Louisiana, Indiana and Argentina, owns a hotel in Missouri,
receives lease income from two card club casinos in the Los
Angeles metropolitan area, has been licensed to operate a small
casino in the Bahamas, and owns a casino site and has
significant insurance claims related to a hurricane-damaged
casino previously operated in Biloxi, Mississippi. Pinnacle
opened a major casino resort in Lake Charles, Louisiana in May
2005 and a new replacement casino in Neuquen, Argentina in July
2005. Pinnacle also has two casino development projects in the
St. Louis, Missouri area. The development projects are
dependent upon final approval by the Missouri Gaming Commission.
About President Casinos Inc.
Headquartered in St. Louis, Missouri, President Casinos Inc. --
http://www.presidentcasino.com/-- currently owns and operates a
dockside gaming casino in St. Louis, Missouri through its wholly
owned subsidiary, President Missouri. The Debtor filed for
chapter 11 protection on June 20, 2002 (Bankr. S.D. Miss. Case
No. 02-53055). On July 11, 2002, substantially all of Debtor's
other operating subsidiaries filed for chapter 11 protection in
the same Court. The Honorable Judge Edward Gaines ordered the
transfer of President Casino's chapter 11 cases from Mississippi
to Missouri. The case was reopened on Nov. 5, 2002 (Bankr. E.D.
Mo. Case No. 02-53005). Brian Wade Hockett, Esq., at Hockett
Thompson Coburn LLP, represents the Debtors in their
restructuring efforts. David A. Warfield, Esq., at Blackwell
Sanders Peper Martin LLP, represents the Official Committee of
Unsecured Creditors. The Company's balance sheet at Nov. 30,
2005 showed assets totaling $66,292,000 and debts totaling
$75,531,000.
ULTRAPETROL: S&P assigns B Rating with Negative Outlook
-------------------------------------------------------
Standard & Poor's Ratings Services assigned a 'B' rating on
Argentine transportation company Ultrapetrol (Bahamas) Ltd. The
outlook is negative.
A total of 636 entities appeared at risk globally of potential
downgrades as of Feb. 22, 2006, compared with 620 in mid-
January. Almost 87% of those at risk of downgrades were located
either in the US or Europe.
=============
B E R M U D A
=============
DIGICEL: Names Honey Adams as Corporate Sales Manager
-----------------------------------------------------
The Royal Gazette announces the appointment of Honey Adams
Digicel Limited's new Corporate Sales Manager who will oversee
the company's corporate division.
"Honey brings a wealth of sales experience to Digicel, which
will help the company expand its corporate base while
reinforcing Digicel's commitment to superior customer service
and a wide variety of products and services," Digicel general
manager Cheryl Packwood was quoted by the Gazette as saying.
Ms. Adams is a former advertising executive and was a consultant
to the Bermuda Government.
Digicel Limited is the largest provider of wireless
telecommunications in the Caribbean with over 1.7 million
subscribers and LTM revenues of $477 million.
Digicel's $300 million 9-1/4% senior notes due Sept. 1, 2012, is
rated B3 by Moody's and B by Fitch.
FOSTER WHEELER: Balance Sheet Upside Down by $341,796,000
---------------------------------------------------------
Foster Wheeler Ltd. (Nasdaq: FWLT) announced full-year and
fourth-quarter results for the year ended December 30, 2005.
For the full-year 2005, net earnings were $63.7 million,
excluding an after-tax charge of $113.7 million relating to the
revaluation of the Company's 15-year asbestos liability and
insurance asset estimates, and a primarily non-cash after-tax
accounting charge of $59.7 million recorded in conjunction with
the successful Trust Preferred Securities and Senior Notes
exchanges and the common stock purchase warrant offers. The net
loss for the full-year 2005, including these charges, was $109.7
million. Basic earnings per common share, excluding the
charges, were $1.34. Basic loss per common share, including the
charges, was $2.36.
For the fourth-quarter 2005, net earnings were $9.8 million,
excluding the $113.7 asbestos-related charge and a primarily
non-cash accounting charge of $18.2 million related to the
successful Senior Notes exchange and the common stock purchase
warrant offers. The net loss for the fourth quarter of 2005,
including the charges, was $122.1 million. Basic earnings per
common share for the fourth quarter of 2005, excluding the
charges, were $0.18. Basic loss per common share, including the
charges, was $2.27.
EBITDA (earnings before income taxes, interest expense,
depreciation and amortization), for the full-year 2005,
excluding the charges, was $182.1 million. Full-year 2005
EBITDA, including the charges, was $8.7 million. Fourth-quarter
2005 EBITDA, excluding the charges, was $26.9 million. Fourth-
quarter 2005 EBITDA, including the charges, was a negative
$105.0 million.
"At the beginning of 2005, recognizing the enabling effect of
our very successful equity-for-debt exchange in September 2004,
and believing that the initiatives we had adopted from 2002
through 2004 would provide a quality backlog and very good
operating practices, we knew we had to deliver solid financial
results," said Raymond J. Milchovich, chairman, president and
chief executive officer. "Therefore, we stated that our
priority would be to book new business, build quality backlog,
and deliver 'best in class' products and services which
consistently met or exceeded our clients' expectations. During
2005, we did exactly what we said we needed to do. Compared to
2004, new orders in 2005 were up by over 70 percent to $4.2
billion and backlog increased by over 80 percent to $3.7
billion. The excellent operational performance of our Global
Engineering and Construction operations in Continental Europe
and the United Kingdom, the much-improved performance of our
Global Power operations in Europe and the solid performance of
all of our other operations contributed to the significant
increase in EBITDA in these two segments in 2005.
"We also said that we would continue to strengthen our capital
structure in 2005," added Mr. Milchovich. "We completed two
successful equity-for-debt exchanges in 2005, which reduced our
debt by an additional $220.5 million. At year-end 2005, our
debt was $315.4 million, its lowest level in over fifteen years.
In addition, in January 2006, we successfully completed common
stock purchase warrant offers and plan to use the $75 million
cash proceeds from these offers in our debt reduction program in
2006. All three of these debt reduction initiatives will be
accretive to expected 2006 diluted earnings per share, excluding
one-time accounting adjustments.
"In addition to a very strong business-winning and operational
performance, most of the markets we serve are already in, or are
entering, an investment phase. I believe we have the right
products, skills and expertise to capitalize on these
opportunities."
Asbestos
During 2005, the Company continued quarterly monitoring of its
actual experience regarding its domestic asbestos liability and
compared it with its 15-year forecast made at year-end 2004. At
year-end 2005, the Company and its consultants determined that
it was appropriate to revise its 15-year estimate of domestic
asbestos indemnity and defense costs as well as its related
estimate of insurance assets. The Company subsequently
increased its 15-year estimate of domestic asbestos indemnity
and defense costs to $516 million and revised its related
estimate of insurance assets to $320 million, of which $115
million is contested in ongoing coverage litigation. As a
result of the revision of its estimates, the Company recorded a
charge to earnings of $113.7 million in the fourth quarter of
2005.
While the pending asbestos insurance coverage litigation has
been ongoing, the Company has entered into a number of
settlement agreements with various insurers. The Company has
engaged in settlement discussions with various remaining
unsettled insurers in 2005 and intends to continue to negotiate
additional settlements where achievable on a reasonable basis
while the litigation proceeds. An adverse outcome in the
insurance litigation could significantly limit the Company's
insurance assets. However, a favorable outcome in all or part
of the litigation could significantly increase available
insurance assets above its current estimate.
The Company has included in its cash-flow and liquidity
forecasts the potential funding from its own cash of a portion
of its asbestos liabilities in 2006. These forecasts also
assume no additional settlements with insurance companies in
2006.
Worldwide Cash and Domestic Liquidity
Total cash and short-term investments at year-end 2005 were
$372.7 million, compared to $342.1 million at the end of the
third quarter of 2005, and $390.2 million at year-end 2004. Of
the $372.7 million at year-end 2005, $319.8 million was held by
non-U.S. subsidiaries. The Company's rolling 12-month liquidity
forecast continues to indicate that it will not need to utilize
its $75 million domestic revolving credit line.
Segment EBITDA
For the full-year 2005, Global E&C Group EBITDA increased to
$165.6 million, up 22 percent compared with $135.6 million in
2004. For the same period, Global Power Group EBITDA increased
to $107.3 million, up almost 33 percent compared with $80.8
million in 2004.
Revenues, bookings and backlog
The Company's bookings in 2005 were very strong. For the full-
year 2005, the Company's new orders were up by 70 percent to
$4.2 billion, compared to $2.4 billion in 2004. For the same
period, the Global E&C Group's new orders increased by 76
percent from $1.7 billion to $3.1 billion. The Global Power
Group's new orders increased by 56 percent to $1.1 billion, up
from $691.3 million in 2004.
The Company's operating revenues for the full year 2005 were
$2.2 billion, compared to $2.7 billion in 2004. Operating
revenues for the Global E&C Group over the same period were $1.5
billion, down from $1.7 billion in 2004, and the Global Power
Group's operating revenues were $728.0 million, down from $988.6
million in 2004. The lower revenues in 2005 versus 2004 were
primarily due to a reduction in reimbursable flow-through costs,
on which the Company earns no mark-up, in the Global E&C Group,
and the completion in 2004 of several large lump-sum turnkey
contracts in the Global Power Group.
The Company has significantly increased its backlog from $2.0
billion at year-end 2004 to $3.7 billion at year-end 2005. The
Global E&C Group backlog almost doubled over the same period, up
from $1.4 billion to $2.7 billion. The Global Power Group
backlog at year-end 2005 increased by almost 50 percent to
$961.6 million, compared with $644.6 million at year-end 2004.
Form 10-K Filing
The Company plans to file its annual report on Form 10-K
containing its complete audited financial statements no later
than March 6, 2006. The results announced today remain subject
to adjustment for events occurring prior to the filing.
Calculation of EBITDA
Management uses several financial metrics to measure the
performance of the Company's business segments. EBITDA is a
supplemental, non-generally accepted accounting principle
financial measure. The Company presents EBITDA because it
believes it is an important supplemental measure of operating
performance. A reconciliation of EBITDA, a non-GAAP financial
measure, to net loss, a GAAP measure, is attached with the
Company's financial data.
The Company believes that the line item on its consolidated
statement of operations entitled "net loss" is the most directly
comparable GAAP measure to EBITDA. Since EBITDA is not a
measure of performance calculated in accordance with GAAP, it
should not be considered in isolation of, or as a substitute
for, net loss as an indicator of operating performance.
EBITDA, as the Company calculates it, may not be comparable to
similarly titled measures employed by other companies. In
addition, this measure does not necessarily represent funds
available for discretionary use, and is not necessarily a
measure of the Company's ability to fund its cash needs. As
EBITDA excludes certain financial information compared with net
loss, the most directly comparable GAAP financial measure, users
of this financial information should consider the type of events
and transactions which are excluded.
The Company's non-GAAP performance measure, EBITDA, has certain
material limitations as follows:
-- It does not include interest expense. Because the Company
has borrowed substantial amounts of money to finance some
of its operations, interest is a necessary and ongoing
part of its costs and has assisted it in generating
revenue. Therefore, any measure that excludes interest
expense has material limitations;
-- It does not include taxes. Because the payment of taxes
is a necessary and ongoing part of the Company's
operations, any measure that excludes taxes has material
limitations;
-- It does not include depreciation. Because the Company
must utilize substantial property, plant and equipment in
order to generate revenues in its operations, depreciation
is a necessary and ongoing part of its costs. Therefore
any measure that excludes depreciation has material
limitations.
Foster Wheeler Ltd. and Subsidiaries
------------------------------------
Consolidated Balance Sheet
--------------------------
(In Thousands of Dollars)
-------------------------
December 30, December 31,
ASSETS 2005 2004
--------------------------
Current Assets:
Cash and cash equivalents $350,669 $291,567
Short-term investments 0 25,775
Accounts and notes receivable, net
Trade 263,782 304,217
Other 56,818 118,296
Contracts in process 139,328 241,140
Prepaid, deferred and refundable income
taxes 20,999 26,144
Other current assets 19,927 32,319
--------------------------
Total current assets 851,523 1,039,458
--------------------------
Land, buildings and equipment, net 258,672 280,305
Restricted cash 21,994 72,844
Notes and accounts receivable - long-term 5,076 7,053
Investment and advances 168,193 158,324
Goodwill, net 50,982 51,812
Other intangible assets, net 64,066 69,690
Asbestos-related insurance recovery
receivable 321,008 332,894
Other assets 98,621 114,605
Deferred income taxes 54,571 50,714
--------------------------
TOTAL ASSETS $1,894,706 $2,177,699
--------------------------
LIABILITIES AND SHAREHOLDERS' DEFICIT
Current Liabilities:
Current installments on long-term debt $21,459 $35,214
Accounts payable 233,815 288,899
Accrued expenses 300,457 314,529
Billings in excess of costs and estimated
earnings on uncompleted contracts 410,676 559,881
Income taxes 31,157 53,058
--------------------------
Total current liabilities 997,564 1,251,581
--------------------------
Long-term debt 293,953 534,859
Deferred income taxes 37,406 7,948
Pension, postretirement and other employee
benefits 269,147 271,851
Asbestos-related liability 466,163 447,400
Other long-term liabilities 141,107 139,113
Deferred accrued interest on subordinated
deferrable interest debentures 2,697 23,460
Minority Interest 27,827 27,052
Commitments and contingencies
--------------------------
TOTAL LIABILITIES 2,235,864 2,703,264
--------------------------
Shareholders' Deficit:
Preferred shares 0 1
Common shares 575 405
Paid-in capital 1,187,518 883,167
Accumulated deficit (1,206,097) (1,096,348)
Accumulated other comprehensive loss (314,796) (296,743)
Unearned compensation (8,358) (16,047)
--------------------------
TOTAL SHAREHOLDERS' DEFICIT (341,158) (525,565)
--------------------------
TOTAL LIABILITIES AND SHAREHOLDERS'
DEFICIT $1,894,706 $2,177,699
--------------------------
Foster Wheeler Ltd. -- http://www.fwc.com/-- is a global
company offering, through its subsidiaries, a broad range of
engineering, procurement, construction, manufacturing, project
development and management, research and plant operation
services. Foster Wheeler serves the refining, upstream oil and
gas, LNG and gas-to-liquids, petrochemical, chemicals, power,
pharmaceuticals, biotechnology and healthcare industries. The
corporation is based in Hamilton, Bermuda, and its operational
headquarters are in Clinton, New Jersey, USA.
At Dec. 31, 2005, Foster Wheeler's balance sheet showed a
$341,796,000 equity deficit compared to a $525,565 equity
deficit on Dec. 31, 2004.
* * *
On Feb. 7, 2006, Standard & Poor's Ratings Services revised its
outlook on Foster Wheeler Ltd. to stable from negative. At the
same time, Standard & Poor's affirmed its 'B-' corporate credit
rating and 'CCC+' senior secured debt rating on the Clinton, New
Jersey-based engineering and construction company. Standard &
Poor's estimates that as of 2005 year-end, Foster Wheeler had
approximately $315 million of total debt outstanding.
INTELSAT LTD: Standard & Poor's Assigns BB- Rating
--------------------------------------------------
Standard & Poor's Ratings Services assigned a 'BB-' rating on
Bermuda's telecommunications company Intelsat Ltd. The outlook
is placed at negative.
A total of 636 entities appeared at risk globally of potential
downgrades as of Feb. 22, 2006, compared with 620 in mid-
January. Almost 87% of those at risk of downgrades were located
either in the US or Europe.
SEA CONTAINERS: S&P Assigns B+ Rating with Negative Outlook
-----------------------------------------------------------
Standard & Poor's Ratings Services assigned a 'B+' rating on a
Bermuda's transportation company, Sea Containers Ltd. The
outlook is placed at negative.
A total of 636 entities appeared at risk globally of potential
downgrades as of Feb. 22, 2006, compared with 620 in mid-
January. Almost 87% of those at risk of downgrades were located
either in the US or Europe.
===========
B R A Z I L
===========
BANCO CITIBANK: S&P Raises Currency Credit Rating to BB from BB-
----------------------------------------------------------------
Standard & Poor's Ratings Services raised its foreign currency
counterparty credit ratings on Banco Citibank S.A. to 'BB' from
'BB-'. The foreign and local currency ratings of this bank are
now equalized at 'BB'. The outlook is stable.
Earlier this week, Standard & Poor's raised its foreign-currency
rating assigned to Brazil to 'BB' from 'BB-' and its local-
currency rating to 'BB+' from 'BB'. The outlook on the
sovereign ratings is stable.
"All changes in foreign currency and national scale credit
ratings reflect the raising of the foreign-currency sovereign
rating on Brazil," said Standard & Poor's credit analyst Laura
Feinland Katz.
BANCO DO BRASIL: S&P Ups Currency Credit Rating to BB from BB-
--------------------------------------------------------------
Standard & Poor's Ratings Services raised its foreign currency
counterparty credit ratings on Banco do Brasil S.A. to 'BB' from
'BB-'. The foreign and local currency ratings of this bank are
now equalized at 'BB'. The outlook is stable.
Earlier this week, Standard & Poor's raised its foreign-currency
rating assigned to Brazil to 'BB' from 'BB-' and its local-
currency rating to 'BB+' from 'BB'. The outlook on the
sovereign ratings is stable.
"All changes in foreign currency and national scale credit
ratings reflect the raising of the foreign-currency sovereign
rating on Brazil," said Standard & Poor's credit analyst Laura
Feinland Katz.
Banco do Brasil S.A is categorized as a commercial bank, and the
ratings on it reflect the bank's intrinsic credit issues in the
context of proven commitment and support demonstrated by its
owner, the Federative Republic of Brazil.
BANCO DO ESTADO: S&P Lifts Currency Credit Rating to BB from BB-
----------------------------------------------------------------
Standard & Poor's Ratings Services raised its foreign currency
counterparty credit ratings on Banco do Estado de Sao Paulo S.A.
to 'BB' from 'BB-'. The foreign and local currency ratings of
this bank are now equalized at 'BB'. The outlook is stable.
Earlier this week, Standard & Poor's raised its foreign-currency
rating assigned to Brazil to 'BB' from 'BB-' and its local-
currency rating to 'BB+' from 'BB'. The outlook on the
sovereign ratings is stable.
"All changes in foreign currency and national scale credit
ratings reflect the raising of the foreign-currency sovereign
rating on Brazil," said Standard & Poor's credit analyst Laura
Feinland Katz.
BANCO DO NORDESTE: S&P Ups Currency Credit Rating to BB from BB-
----------------------------------------------------------------
Standard & Poor's Ratings Services raised its foreign currency
counterparty credit ratings on Banco do Nordeste do Brasil S.A.
to 'BB' from 'BB-'. The foreign and local currency ratings of
this bank are now equalized at 'BB'. Additionally, the National
Scale rating on Banco do Nordeste do Brasil moved to 'brAA+'
from 'brAA'. The outlook is stable.
The foreign and local currency ratings on government-supported
banks were raised to 'BB' and 'BB+', respectively, moving in
tandem with the sovereign credit rating on Brazil (Federative
Republic of).
Earlier this week, Standard & Poor's raised its foreign-currency
rating assigned to Brazil to 'BB' from 'BB-' and its local-
currency rating to 'BB+' from 'BB'. The outlook on the
sovereign ratings is stable.
"All changes in foreign currency and national scale credit
ratings reflect the raising of the foreign-currency sovereign
rating on Brazil," said Standard & Poor's credit analyst Laura
Feinland Katz.
BANCO INDUSTRIAL: S&P Affirms BB-/B Counterparty Credit Rating
--------------------------------------------------------------
Standard & Poor's Ratings Services said Wednesday that it
affirmed its 'BB-/B' counterparty credit rating on Banco
Industrial S.A. following the announcement that Banco Industrial
and Banco de Occidente have entered into an agreement that will
likely result in the sale of Banco de Occidente to Banco
Industrial.
"The affirmation reflects our expectations that the acquisition
will be funded with a prudent amount of equity or equity-like
capital so as to maintain capitalization levels adequate for the
rating category," said S&P's credit analyst Leonardo Bravo.
On Feb. 20, 2006, Banco Industrial requested authorization from
Guatemalan authorities to acquire a majority stake in Banco de
Occidente.
After the proposed acquisition, Banco Industrial's market share
will increase to 26% from 20% and will strengthen its leadership
in Guatemala.
The acquisition size is relatively large as it represents more
than 25% of assets and equity of Banco Industrial. Integration
and execution risks are considered low as Banco de Occidente has
a small branch network and its loan portfolio is composed mainly
of corporate loans. Excluding integration costs, impact on
profitability is not expected to be material.
The acquisition may benefit the bank in the medium term but it
could have a negative effect on the bank's adjusted
capitalization due to goodwill arising from the transaction. In
our opinion, management has concrete plans to soften the impact
on capitalization and maintain adjusted capital at current
levels.
S&P will continue to review the conditions of the acquisition
and tangible effects of the transaction once the necessary
regulatory approvals have been confirmed and the acquisition has
been completed.
The stable outlook reflects our opinion that Banco Industrial's
financial profile and strong market presence will be maintained,
and an adequate level of equity capital will be used to fund the
acquisition. The bank has the challenge to maintain capital and
asset quality levels similar to the ones reported historically.
Should asset quality, profitability, or adjusted capitalization
ratios deteriorate or there are unexpected integration issues,
ratings could be revised negatively. Upward rating movement is
limited, given that it is unlikely that the bank would be rated
above the Guatemalan foreign currency sovereign credit rating
(BB-/stable/--).
BANCO ITAU: S&P Upgrades Currency Credit Rating to BB from BB-
--------------------------------------------------------------
Standard & Poor's Ratings Services raised its foreign currency
counterparty credit ratings on Banco Itau S.A. to 'BB' from 'BB-
'. The foreign and local currency ratings of this bank are now
equalized at 'BB'. The outlook is stable.
Earlier this week, Standard & Poor's raised its foreign-currency
rating assigned to Brazil to 'BB' from 'BB-' and its local-
currency rating to 'BB+' from 'BB'. The outlook on the
sovereign ratings is stable.
"All changes in foreign currency and national scale credit
ratings reflect the raising of the foreign-currency sovereign
rating on Brazil," said Standard & Poor's credit analyst Laura
Feinland Katz.
BANCO SAFRA: S&P Raises Foreign Currency Credit Rating to BB
------------------------------------------------------------
Standard & Poor's Ratings Services raised Banco Safra S.A.'s
foreign currency counterparty credit rating to 'BB/Stable/B'
from 'BB-/Positive/B', while the company's local currency
remains at 'BB/Stable/B'.
Earlier on Tuesday, S&P raised its foreign-currency rating
assigned to Brazil to 'BB' from 'BB-' and its local-currency
rating to 'BB+' from 'BB'. The outlook on the sovereign ratings
is stable.
"All changes in foreign currency and national scale credit
ratings reflect the raising of the foreign-currency sovereign
rating on Brazil," said S&P's credit analyst Laura Feinland
Katz.
BANCO SANTANDER BRASIL: S&P Shifts Foreign Currency Rating to BB
----------------------------------------------------------------
Standard & Poor's Ratings Services said Tuesday that it raised
its foreign currency counterparty credit rating on Banco
Santander Brasil S.A. to 'BB/Stable/B' from 'BB-/Positive/B'.
The company's local currency remains at BB/Stable/B.
Earlier, S&P raised its foreign-currency rating assigned to
Brazil to 'BB' from 'BB-' and its local-currency rating to 'BB+'
from 'BB'. The outlook on the sovereign ratings is stable.
"All changes in foreign currency and national scale credit
ratings reflect the raising of the foreign-currency sovereign
rating on Brazil," said S&P's credit analyst Laura Feinland
Katz.
BANCO SANTANDER MERIDIONAL: S&P Ups Currency Rating to BB
---------------------------------------------------------
Standard & Poor's Ratings Services raised to 'BB/Stable/B' its
foreign currency counterparty credit rating on Banco Santander
Meridional S.A. The Outlook was changed to Stable from
Positive. The company's foreign currency was formerly rated
'BB-Positive/B' with a positive outlook. The company's local
currency remains at 'BB/Stable/B'.
S&P said that it raised its foreign currency counterparty credit
ratings on 10 banks to 'BB' from 'BB-'. The foreign and local
currency ratings of these banks are now equalized at 'BB'.
Earlier, S&P raised its foreign-currency rating assigned to
Brazil to 'BB' from 'BB-' and its local-currency rating to 'BB+'
from 'BB'. The outlook on the sovereign ratings is stable.
"All changes in foreign currency and national scale credit
ratings reflect the raising of the foreign-currency sovereign
rating on Brazil," said S&P's credit analyst Laura Feinland
Katz.
BANCO VOTORANTIM: S&P Assigns BB Foreign Currency Credit Rating
---------------------------------------------------------------
Standard & Poor's Ratings Services raised to 'BB/Stable/B it
foreign currency counterparty credit rating on Banco Votorantim
S.A. The company was formerly rated at 'BB-/Positive/B'. The
company's local currency rating remains at 'BB/Stable/B'.
Earlier, S&P raised its foreign-currency rating assigned to
Brazil to 'BB' from 'BB-' and its local-currency rating to 'BB+'
from 'BB'. The outlook on the sovereign ratings is stable.
"All changes in foreign currency and national scale credit
ratings reflect the raising of the foreign-currency sovereign
rating on Brazil," said S&P's credit analyst Laura Feinland
Katz.
BNDES: S&P Ups Foreign Currency Credit Rating to BB
---------------------------------------------------
Standard & Poor's Ratings Services raised its foreign currency
counterparty credit rating on Banco Nacional de Desenvolvimento
Economico e Social S.A. aka BNDES to 'BB' with a stable outlook
from 'BB-' with a positive outlook. The company's local
currency credit rating was also shifted to 'BB+' with a stable
outlook from 'BB' with a positive outlook.
The action moved in tandem with the sovereign credit rating on
the Federative Republic of Brazil.
Earlier on Tuesday, S&P raised its foreign-currency rating
assigned to Brazil to 'BB' from 'BB-' and its local-currency
rating to 'BB+' from 'BB'. The outlook on the sovereign ratings
is stable.
Positive ratings actions were taken by S&P on several Brazilian
banks, which included BNDES.
S&P said it raised its foreign currency counterparty credit
ratings on 10 banks to 'BB' from 'BB-'. The foreign and local
currency ratings of these banks are now equalized at 'BB'.
"All changes in foreign currency and national scale credit
ratings reflect the raising of the foreign-currency sovereign
rating on Brazil," said S&P's credit analyst Laura Feinland
Katz.
HSBC BANK: S&P Upgrades Foreign Currency Credit Rating to BB
------------------------------------------------------------
Standard & Poor's Ratings Services said Tuesday that it took
positive ratings actions on 10 Brazilian banks, among them was
HSBC Bank Brasil S.A. S&P raised its foreign currency
counterparty credit rating on the company to 'BB/Stable/B' from
' BB-/Positive/B'. The company's local currency counterparty
credit rating remains at 'BB/Stable/B'.
S&P said the foreign and local currency ratings of the banks are
now equalized at 'BB'.
Earlier, S&P raised its foreign-currency rating assigned to
Brazil to 'BB' from 'BB-' and its local-currency rating to 'BB+'
from 'BB'. The outlook on the sovereign ratings is stable.
"All changes in foreign currency and national scale credit
ratings reflect the raising of the foreign-currency sovereign
rating on Brazil," said S&P's credit analyst Laura Feinland
Katz.
S&P gave these ratings to HSBC Bank Brasil S.A.:
Certificate of deposit
Local currency: BB/B
Certificate of deposit
Foreign currency: BB-/B
Senior unsecured
Foreign currency BB-
Subordinated
Foreign currency BB-
PETROLEO BRASILEIRO: Says Company Output Will be Maintained
-----------------------------------------------------------
Brazilian oil company Petroleo Brasileiro S.A.'s executive
manager of investor relations, Raul Campos, was quoted by Dow
Jones Newswire as saying that the company's overall output won't
be affected by a migration to new operation contracts in
Venezuela.
Private oil companies signed preliminary agreements last year to
migrate all 32 existing operating agreements in the country to
new joint ventures controlled by PDVSA, which will have an
average 60% stake in all new joint venture contracts. The 32
fields previously under operating agreements are now under a
transition scheme controlled by special "transitional technical
committees" to guarantee their normal operations and transition
to the new contract model.
Dow Jones relates that Venezuela in return agreed to extend
Petrobras' existing operation contracts for 25 years and now is
in talks with the Brazilian company about a series of other
joint projects, such as the Mariscal Sucre natural gas project,
where US$2.2 billion in investments is needed, and an extra
heavy oil project in the Carabobo oil field in Venezuela's
Orinoco region.
"We expect to produce the same volume we were expecting to
produce before renegotiating the old contracts," Mr. Campos said
at a conference call on fourth- quarter earnings. "The old
contracts had only eight years remaining."
In January, Petrobras lowered its reserves in Venezuela, but
said that was due to fields becoming more mature, and not the
upcoming contract migration. Petrobras produced an average of
41,638 barrels of oil a day in Venezuela in January.
* * *
Petroleo Brasileiro SA's long-term corporate family rating is
rated Ba3 by Moody's and its foreign currency long-term debt is
rated BB- by Fitch.
UNIBANCO: S&P Raises Foreign Currency Credit Rating to BB
---------------------------------------------------------
Standard & Poor's Ratings Services said Tuesday it raised its
foreign currency counterparty credit rating on Unibanco -- Uniao
de Bancos Brasileiros, S.A. -- to 'BB/Stable/B' from 'BB-
/Positive/B'. The company's local currency counterparty credit
rating remains at 'BB/Stable/B'.
According to S&P, positive ratings actions were taken on several
Brazilian banks, including Unibanco. S&P said it raised its
foreign currency counterparty credit ratings on 10 banks to 'BB'
from 'BB-'. The foreign and local currency ratings of these
banks are now equalized at 'BB'.
Earlier on Tuesday, S&P raised its foreign-currency rating
assigned to Brazil to 'BB' from 'BB-' and its local-currency
rating to 'BB+' from 'BB'. The outlook on the sovereign ratings
is stable.
"All changes in foreign currency and national scale credit
ratings reflect the raising of the foreign-currency sovereign
rating on Brazil," said S&P's credit analyst Laura Feinland
Katz.
===========================
C A Y M A N I S L A N D S
===========================
BAILEY COATES: Sets Mar. 14 Deadline for Claims Filing
------------------------------------------------------
Creditors of Bailey Coates Ltd. are given until March 14, 2006,
to submit claims to the appointed company liquidators -- Mr.
Korie Drummond and Mr. Gordon I. Macrae.
Creditors must send full particulars of their debts or claims by
the said date or be excluded from the benefit of any
distribution that the company will make.
Bailey Coates started liquidating assets on January 24, 2006.
Mr. Korie Drummond and Mr. Gordon I. Macrae can be reached at:
Kroll (Cayman) Limited, 4th Floor
Bermuda House, Dr. Roy's Drive
Grand Cayman, Cayman Islands
Telephone: (345) 946-0081
Fax: (345) 946-0082
BIBBY INTERNATIONAL: Sets Mar. 6 Deadline for Claims Submission
---------------------------------------------------------------
Creditors of Bibby International Services are given until March
6, 2006, to submit claims to the company's appointed liquidator
-- Mr. Martyn Howard. Creditors must send full particulars of
their debts or claims by the said date or be excluded from the
benefit of any distribution that the company will make.
Bibby International Services started liquidating assets on
February 6, 2006.
Mr. Martyn Howard, the voluntary liquidator, can be reached at:
10 Mountain View
Ballaugh, Isle of Man, IM7 5EW
BNC INTERNATIONAL: Sets Mar. 30 Deadline for Claims Filing
----------------------------------------------------------
Creditors of BNC International Limited are required to submit
particulars of their debts or claims on or before March 30,
2006, to the company's appointed liquidators -- Mr. Lawrence
Edwards and Mr. Richard Mottershead. Failure to do so will
exclude them from receiving the benefit of any distribution that
the company will make.
BNC International Limited started liquidating assets on January
18, 2006.
Mr. Lawrence Edwards and Mr. Richard Mottershead can be reached
at:
P.O. Box 219, George Town
Grand Cayman, Cayman Islands
Telephone: (345) 914 8656
Facsimile: (345) 949 4590
NARASFUND LIMITED: Sets Mar. 6 for Shareholders' Final Meeting
--------------------------------------------------------------
Shareholders of Narasfund Limited will convene to hold an
extraordinary final general meeting at the registered offices of
Cititrust (Cayman) Limited, CIBC Financial Centre, George Town,
Grand Cayman on March 6, 2006.
Accounts on the company's liquidation process will be presented
during the meeting. The shareholders will also authorize the
liquidators to retain the records of the company for a period of
five years, starting from the dissolution of the company.
Destruction of the records may then be allowed after such
period.
Any person who is entitled to attend and vote at this meeting
may appoint a proxy to attend and vote in his stead. A proxy
need not be a member or a creditor.
The company's voluntary liquidator can be reached at:
Buchanan Limited
P.O. Box 1170, George Town
Grand Cayman, Cayman Islands
NHT LIMITED: Shareholders' Final Meeting Set for March 6
--------------------------------------------------------
Shareholders of NHT Limited will convene to hold a final meeting
at the registered offices of BNP Paribas Private Bank & Trust
Cayman Limited, 3rd Floor Royal Bank House, Shedden Road, George
Town, Grand Cayman on March 6, 2006, at 10:00 AM.
Accounts on the company's liquidation process will be presented
during the meeting. The shareholders will also authorize the
liquidators to retain the records of the company for a period of
five years, starting from the dissolution of the company.
Destruction of the records may then be allowed after such
period.
Any person who is entitled to attend and vote at this meeting
may appoint a proxy to attend and vote in his stead. A proxy
need not be a member or a creditor.
Interested parties may contact the liquidator at:
Ellen J. Christian
Piccadilly Cayman Limited
3rd Floor Royal Bank House, Shedden Road
George Town, Grand Cayman
Telephone: 345 945 9208
Fax: 345 945 9210
NICOS SHOPPING: Shareholders' Final Meeting Set for Monday
----------------------------------------------------------
Shareholders of Nicos Shopping Credit Receivables Corp. III will
convene to hold the Final Meeting at the offices of BNP Paribas
Private Bank & Trust Cayman Limited, 3rd Floor Royal Bank House,
Shedden Road, George Town, Grand Cayman, on March 6, 2006 at
10:00 A.M.
Accounts on the company's liquidation process will be presented
during the meeting. The shareholders will also authorize the
liquidators to retain the records of the company for a period of
five years, starting from the dissolution of the company.
Destruction of the records may then be allowed after such
period.
Any person who is entitled to attend and vote at this meeting
may appoint a proxy to attend and vote in his stead. A proxy
need not be a member or a creditor.
Interested parties may contact the liquidator at:
Ellen J. Christian
Piccadilly Cayman Limited
3rd Floor Royal Bank House, Shedden Road
George Town, Grand Cayman
Telephone: 345 945 9208
Fax: 345 945 9210
NM HOLDING: Final Meeting of the Shareholders Set for March 23
--------------------------------------------------------------
The shareholders of NM Holding, Inc. will convene to hold a
final general meeting at the registered offices of Maples
Finance Limited, Queensgate House, George Town, Grand Cayman,
Cayman Islands, on March 23, 2006.
Accounts on the company's liquidation process will be presented
during the meeting. The shareholders will also authorize the
liquidators to retain the records of the company for a period of
five years, starting from the dissolution of the company.
Destruction of the records may then be allowed after such
period.
Any person who is entitled to attend and vote at this meeting
may appoint a proxy to attend and vote in his stead. A proxy
need not be a member or a creditor.
Interested parties may contact the liquidator at:
Ms. Emile Small
Maples Finance Limited
P.O. Box 1093 George Town
Grand Cayman, Cayman Islands
OSI OFFSHORE: Final Meeting with the Shareholders on March 7
------------------------------------------------------------
The sole shareholder of OSI Offshore Invest Inc. will hold an
extraordinary final meeting at the registered office of the
Company on March 7, 2006.
Accounts on the company's liquidation process will be presented
during the meeting. The shareholders will also authorize the
liquidators to retain the records of the company for a period of
five years, starting from the dissolution of the company.
Destruction of the records may then be allowed after such
period.
Any person who is entitled to attend and vote at this meeting
may appoint a proxy to attend and vote in his stead. A proxy
need not be a member or a creditor.
Interested parties may contact the liquidator at:
Commerce Corporate Services Limited
P.O. Box 694 George Town
Grand Cayman, Cayman Islands
Telephone: 949 8666
Facsimile: 949 7904
PELEKAS INVESTMENTS: Shareholders Final Meeting Set for March 6
---------------------------------------------------------------
Shareholders of Pelekas Investments Limited will convene to hold
an extraordinary final general meeting at the registered offices
of Cititrust (Cayman) Limited, CIBC Financial Centre, George
Town, Grand Cayman on March 6, 2006.
Accounts on the company's liquidation process will be presented
during the meeting. The shareholders will also authorize the
liquidators to retain the records of the company for a period of
five years, starting from the dissolution of the company.
Destruction of the records may then be allowed after such
period.
Interested parties may contact the liquidator at:
Buchanan Limited
P.O. Box 1170, George Town
Grand Cayman, Cayman Islands
PHILOSOPHY VENTURES: Shareholders Final Meeting Set for March 7
---------------------------------------------------------------
The sole Shareholders of Philosophy Ventures Inc. will convene
to hold an extraordinary final meeting at the registered offices
of the company on March 7, 2006.
Accounts on the company's liquidation process will be presented
during the meeting. The shareholders will also authorize the
liquidators to retain the records of the company for a period of
five years, starting from the dissolution of the company.
Destruction of the records may then be allowed after that
period.
Interested parties may contact the liquidator at:
Commerce Corporate Services Limited
P.O. Box 694 George Town
Grand Cayman, Cayman Islands
Telephone: 949 8666
Facsimile: 949 7904
=========
C H I L E
=========
GENERAL MOTORS: Fitch Lowers IDR to B, Remains on Watch Negative
----------------------------------------------------------------
Fitch Ratings has downgraded the I ssuer Default Rating of
General Motors to 'B' from 'B+'. Fitch has also assigned an
'RR4' Recovery Rating to GM's senior unsecured debt, indicating
average recovery prospects (30-50%) for this class of creditors
in the event of a bankruptcy filing. GMAC's 'BB' rating remains
on Rating Watch Evolving by Fitch pending further developments
in GM's intent to sell a controlling interest in GMAC.
The downgrade of GM reflects lack of substantive progress on
reducing GM's cash operating costs, which Fitch believes will
result in negative cash flows persisting through 2007. It is
becoming increasingly apparent that the UAW contract may not be
re-opened until the official September 2007 date, limiting GM's
ability to realize substantive cost reduction targets on a
timely basis. When combined with revenue pressures,
restructuring costs, a stressed supplier base, and projected
financial support to resolve the Delphi situation, liquidity
will continue to deteriorate from current healthy levels.
Fitch's expectation of continued operating losses, declining
liquidity, and a financially stressed supplier base raises the
risk that suppliers could begin to restrict trade credit to GM.
Trade credit represents a critical component of GM's current
liability structure. Fitch has not seen evidence of this to
date. In addition, event risk associated with a potential labor
strike at Delphi remains high, and a disruption in Delphi's
supply of parts to GM would quickly shut down production at GM
and drain liquidity. Risks associated with the restructuring of
the U.S. auto supplier industry (which could result in supply
disruptions or require financial support from GM) will continue
for the intermediate term. Suppliers are also facing more
limited access to capital. The inability to reduce costs
rapidly in the supply chain highlights the need for GM to
achieve fundamental reductions in other structural cost areas,
cost factors that remain highly inflexible.
Fitch's analysis of a potential restructuring scenario provides
a recovery value of approximately 40% for general senior
unsecured creditors in the event of a bankruptcy.
Recovery values were derived from an analysis and valuation of a
restructured GM North American automotive operation,
supplemented by asset values associated with GM's Asian
operations, various shareholdings, and a retained 49% interest
in GMAC. Fitch assumes that any cash, asset or equity values
associated with GM's European and Latin American operations
would be applied to service operating requirements and
liabilities in those locations, providing no incremental
recovery value for GM debtholders. In the event of a filing,
Fitch projects that the vast majority of claims would be on a
senior unsecured basis, encompassing existing debt, drawdowns
under the company's existing credit facilities and substantial
claims from trade creditors and other general liabilities.
Fitch also projects that in a bankruptcy, GM would retain its
pension plans due to high asset levels and concessions that the
UAW would make to ensure the plans are not absorbed by the PBGC.
Recovery values in a bankruptcy would ultimately depend on the
terms of a new labor contract between GM and the UAW, providing
a high degree of uncertainty. In addition, the size and
potential complexity of a bankruptcy would be complicated by the
uncertainties surrounding the new, untested bankruptcy law.
Fitch's recovery analysis can be found in a Special Report on
General Motors Corp. found on the Fitch Ratings web site at
http://www.fitchratings.com/
GM remains on Rating Watch Negative, with a primary focus on
resolution of the Delphi situation. In order to avoid any
supply disruption that could force wide production shutdowns at
GM, further financial support from GM is regarded as a
certainty. The extended nature of the negotiations speaks to
the difficulty of the three-party discussions, and it is
difficult to ascertain the level of progress. In any scenario,
Fitch expects that GM will experience higher costs and a
continuation of its competitive disadvantage in supplier costs,
thereby hindering GM's ability to reverse margin erosion and
stabilize cash flows.
The Rating Watch Negative status on GM also incorporates the
risks that he sale of a controlling interest in GMAC is not
completed on a timely basis. Fitch maintains its expectation
that solid progress on the sale will occur through the end of
the first quarter. Ratings on GM and GMAC would be reviewed at
any time Fitch believed that the sale was not solidly on track.
GM has healthy liquidity of $20.5 billion in cash and s/t VEBA
as of December 31, 2005, which is expected to be supplemented by
proceeds of a controlling interest in GMAC. In addition, GM has
approximately $15 billion in L/T VEBA, which is expected to be
drawn down to finance permitted expenses. Fitch projects that
liquidity requirements in a bankruptcy would be high, which
could accelerate the timing of any bankruptcy filing if rapid
stabilization of operating performance is not achieved.
Fitch has downgraded these ratings:
General Motors Corp.
General Motors of Canada Ltd.
-- Senior debt to 'B' from 'B+';
-- Issuer Default Rating to 'B' from 'B+'.
These ratings remain on Rating Watch Evolving:
General Motors Acceptance Corp.
GMAC International Finance B.V.
GMAC Bank GmbH
General Motors Acceptance Corp. of Australia
General Motors Acceptance Corp. of Canada Ltd.
General Motors Acceptance Corp. (N.Z.) Ltd.
-- Issuer Default Rating 'BB';
-- Senior debt 'BB';
-- Short-term 'B'.
Residential Capital Corp.
-- Issuer Default Rating 'BBB-';
-- Senior debt 'BBB-';
-- Short-term 'F3'.
GMAC Bank
-- Long-term deposits 'BBB';
-- Issuer Default Rating 'BBB-';
-- Senior debt 'BBB-';
-- Short-term deposits 'F3'.
===============
C O L O M B I A
===============
* COLOMBIA: Records Highest Rate of FDI Growth in 2005, Says S&P
----------------------------------------------------------------
Standard & Poor's Ratings Services said that the Republic of
Colombia recorded the highest rate of FDI growth in 2005, at
40%. S&P rated Colombia at 'BB'.
Foreign direct investment growth rate to emerging market
economies slowed in 2005, but there is still plenty to go
around, according to S&P.
The lowest growth in FDI inflows in 2005 was reported in Latin
America. Growth of just 4.5% in 2005 pales in comparison to the
43.5% increase realized in 2004. The US$72 billion Latin
American FDI in 2005 was significantly below the peak of
US$108.6 billion seen in 1999.
Latin American FDI grew in both 2004 and 2005 after declining
for four consecutive years over 2000-2003. Moreover, three
Latin American countries -- Mexico, Brazil, and Chile -- were
among the 10 largest EME recipients of FDI for both 2004 and
2005.
===================================
D O M I N I C A N R E P U B L I C
===================================
CARIBE INFORMATION: Moody's Rates Corporate Family at B2
--------------------------------------------------------
Moody's Investors Service assigned a B2 corporate family rating
to Caribe Information Investment Incorporated's aka Caribe based
on its small size, limited growth prospects and high leverage
with debt to adjusted EBITDA of over 7 times after the leverage
buyout transaction. The ratings are supported, however, by
Moody's expectations of stable revenues and EBITDA due to
Caribe's subsidiaries dominant market share in Puerto Rico and
Dominican Republic as well as Moody's estimates of an adjusted
EBITDA to interest of approximately 1.5 times for 2006.
A B1 rating was assigned to the proposed US$165 million in loan
facilities based on the assignment of contractual right to the
publishing rights, equivalent to 35% of the advertising revenues
related to yellow pages directories published by Verizon
Information Services Puerto Rico. The sponsor financial support
from Welsh, Carson, Anderson & Stowe in the form of a
subordinated loan and equity also sustain the rating. Moody's
adjusted ratios do not consider the cash flows from the
Dominican Republic operating company. This is the first time
Moody's rates Caribe. The rating outlook is stable.
The proceeds of the transaction will be used to pay for the
acquisition of 60% of Verizon Information Services Puerto Rico
and 100% of Verizon Servicios de Informacion Dominican Republic,
both of which are yellow pages directory publishing companies.
The assigned ratings assume there will be no material variations
to the draft legal documentation reviewed by Moody's and assume
that these agreements are legally valid, binding and
enforceable.
Moody's assigned these ratings:
-- Corporate Family Rating B2
-- US$10 Million Revolving
Credit Facility due 2012 B1
-- US$155 million Term Loan
Facility due 2013 B1
The rating outlook is stable.
The 'B2' corporate family rating reflects Caribe's small size of
revenues -- from publishing rights and dividends received from
operating subsidiaries -- of approximately US$25 million and its
high leverage as per total debt to EBITDA ratio projected to be
over 7 times by the end of 2006.
The ratings are restrained by limited revenue growth, in Moody's
opinion, given the small size and mature markets in which the
Caribe's subsidiaries operate as well as their respective
dominant market positions.
The credit facilities were notched up to 'B1' from the corporate
family 'B2' rating because of the fact that these will be
secured by the assignment of the contractual right to Puerto
Rico publishing rights royalties received from
Telecomunicaciones de Puerto Rico, Inc., which amounted to over
US$19 million in 2005, net of bad debt charges, as well as
because of the support in distress provided by the subordinated
debt and equity put in by the sponsors. This offsets the fact
that the security package includes neither the shares nor direct
access to the cash flows or assets of the larger Puerto Rican
operating company, although it does include a full guarantee
package from the smaller Dominican Republic operating company.
The ratings are sustained by predictable cash flows to service
debt as per historical and projected stable revenue generation.
The risk of other media channels, such as the Internet,
threatening the yellow pages directories business is mitigated
by the sponsor's strategy to grow Internet-based product
offerings and to seek additional distribution channels and other
new media opportunities.
Also supporting the ratings is Caribe's reasonable interest
coverage, which Moody's projects will be 1.5 times Adjusted
EBITDA/interest in 2006, which factors in some increase in
interest rates; in addition, Moody's considered the fact that
Caribe will most probably generate excess cash, which the
company will use to decrease debt, reducing leverage to over six
times EBITDA by the end of 2008 from over seven times in
December 2006, as per Moody's estimates.
At closing, Welsh, Carson, Anderson and Stowe aka WCAS, one of
the largest private equity investments firms in the US, will
acquire 100% of Caribe which, in turn, will be levered up to
provide for the funding for the acquisition of the operating
companies. WCAS will lend US$45 million to Caribe in the form
of 10% subordinated notes, which will mature one year after the
US$165 million proposed credit facilities mature. WCAS will
also inject US$72.5 million in equity in Caribe. The Puerto
Rican operating company is expected to remain debt free while
the Dominican Republic operating company is likely to keep a
moderate level of debt.
The main assets of Caribe are Verizon Information Services
Puerto Rico and Verizon Servicios de Informacion Dominican
Republic; the former is the incumbent directory publisher in
Puerto Rico with a 99% market share and exclusive rights to
publish under the Telecomunicaciones Puerto Rico brand; the
latter is the incumbent and only directory publisher in
Dominican Republic. Both operating subsidiaries enjoy
predictable and stable EBITDA margins, although below industry
averages.
The stable outlook is supported by the long-term publishing
rights agreement with Telecomunicaciones de Puerto Rico, to
expire in 2019 -- with 15 automatic renewal terms of 5 years
each -- and reflects the commitment from Welsh, Carson, Anderson
and Stowe's to not use the operating subsidiaries' balance sheet
to increase consolidated indebtedness.
A dramatic reduction in consolidated leverage at Caribe to
levels below 5 times debt/Adjusted EBITDA could trigger an
upgrade momentum. Conversely, a material revenue or margin
deterioration in the operating subsidiaries driven by increase
in operating costs and/or termination of any significant
publishing agreement would negatively impact the ratings.
Caribe Information Investment Inc., based in Puerto Rico, is a
holding company with two Caribbean directory publishing
operating subsidiaries, Verizon Information Services-Puerto
Rico, 60% owned, and Verizon Information Services-Dominican
Republic, 100% owned. Moody's notes that the remaining 40%
ownership in Verizon Information Services-Puerto Rico belongs to
World Directories, which has 50% of the Board of Directors.
=============
E C U A D O R
=============
* ECUADOR: Petroecuador Delays Oil Shipments for Agip, Citizens
---------------------------------------------------------------
Ecuador's state-owned oil firm Petroecuador (PCD.YY) has delayed
two crude oil shipments that were originally scheduled to leave
the port of Balao on Feb. 27 and Feb. 28, a top Petroecuador
executive told Dow Jones Newswires.
"We were forced to delay by two days shipments for Agip and
Citizens, each for 360,000 barrels of oriente crude," said the
executive, who asked not to be named.
Agip SpA (AGI.YY) is an Italian oil firm while Citizens Energy
is a Boston, Massachusetts-based oil trading firm.
The shipments, the unnamed source told Dow Jones, will leave the
Balao port between Mar. 2 and 4.
During this month, Petroecuador is also scheduled to ship
360,000 barrels each for U.K's Arcadia Petroleum, Brazil's
Petrobras, U.K.'s Perenco, as well as another shipment for
Citizens, Dow Jones relates.
As previously reported, the oil company's operations in Napo
province was halted on Feb. 20 when striking workers took over
two pipelines. The takeover prompted the nation's president to
declare a state-of-emergency in the province.
The protesters calmed down when the government conceded to
provide millions of dollars for infrastructure in the depressed
region.
Petroecuador estimates the cost of the damage carried out by the
protesters at about US$11 million.
* * *
Fitch Ratings assigns these ratings on Ecuador:
Rating Rating Date
------ -----------
Country Ceiling B- Aug. 29, 2005
Long Term IDR B- Dec. 14, 2005
Short Term IDR B Dec. 14, 2005
=====================
E L S A L V A D O R
=====================
* EL SALVADOR: Social Organizations Balk at CAFTA-DR
----------------------------------------------------
Social organizations in El Salvador aired out protests against
the Free Trade Area for Central America with the US and
Dominican Republic aka CAFTA-DR, Prensa Latina reports.
According to Prensa Latina, the protesters claim that the
different domestic sectors were not consulted about the
agreement.
Prensa Latina relates that protesters raised other problems.
They say that the CAFTA-DR will widen the gap between El
Salvador and the US, ruin the national economy, escalate
unemployment, underemployment and emigration, and set salaries
below the minimum.
Economics experts, states Prensa Latina, foresee severe
consequences for Central American finances in the CAFTA-DR,
since US products will flood the local markets preventing fair
competition.
The government, according to Prensa Latina, accuses the
protesting groups of particular interests and even common
crimes, although the groups represent the majority of the
people.
President Antonio Saca and US counterpart -- George W. Bush --
officially announced that CAFTA-DR would take effect on March 1.
* * *
Fitch Ratings assigns these ratings on El Salvador:
Rating Rating Date
------ -----------
Country Ceiling BB+ Jun. 18, 2004
Long Term IDR BB+ Dec. 14, 2005
Short Term IDR B Dec. 14, 2005
Local Currency
Long Term Issuer
Default Rating BB+ Dec. 14, 2005
=============
J A M A I C A
=============
AIR JAMAICA: Congress Orders Formal Probe on Losses
---------------------------------------------------
Jamaica's House of Representatives agreed to form a panel that
will examine the financial and operational state of Air Jamaica,
Jamaica Observer reports.
The Observer relates that the Jamaica Labour Party had been
pushing for a parliamentary probe into the airline since last
year without any support from the government majority. However,
a motion from Opposition Leader Bruce Golding, which was tabled
in May last year, was finally accepted by the House.
An excerpt from Representative Golding's motion:
"Whereas the government in December 2004 reassumed full
ownership of Air Jamaica, which had accumulated losses in excess
of US$600 million;
"And Whereas Air Jamaica had previously accumulated significant
losses while under government ownership prior to its divestment
in November 1994;
"And Whereas Air Jamaica continues to incur substantial losses
which will ultimately have to be borne by the budget;
"And Whereas the interest of the Jamaican taxpayers require that
a detailed analysis be conducted as to the immediate and long-
term prospects of Air Jamaica before accumulating further losses
and before further financial commitments are made:
"Be it resolved that a select committee be appointed to examine,
as a matter of urgency, the financial and operational state of
Air Jamaica, its future prospects and the plans being pursued by
the airline's management and make recommendations appropriate to
the country's economic interests as well as those of the
taxpaying public.
The House of Representatives' leader, Dr. Peter Phillips, said
that both sides had agreed on the appointment of the committee,
the Observer reports.
The committee is comprised of:
* Dr. Omar Davies, chairman;
* Dr. Wykeham McNeill;
* Dr. Fenton Ferguson;
* Dr. Morais Guy;
* Audley Shaw;
* Mike Henry; and
* Clive Mullings.
The committee will investigate Air Jamaica's losses of US$136
million since the government resumed control of the airline in
December 2004. Air Jamaica lost US$99 million (J$6.25 billion)
in 2004.
* * *
Air Jamaica's $200 million 9-3/8% notes due July 18, 2015,
carries Moody's B1 rating and Standard & Poor's B rating.
===========
M E X I C O
===========
EMPRESAS ICA: Asks Review of SCT's Queretaro-Irapuato Ruling
------------------------------------------------------------
Empresas ICA, S.A. de C.V., announced Wednesday that it has
filed a demand for review -- recurso de revision -- with the
Ministry of Communications and Transport aka SCT with respect to
the latter's ruling on Feb. 8, 2006. SCT declared void all the
bids for the Queretaro-Irapuato highway under the PPP -- public-
private partnership -- mechanism.
ICA seeks the suspension of the second call for bids for the
Queretaro-Irapuato highway, the partial revocation of the Feb.
8, 2006, ruling, and to be awarded the project.
ICA believes that its demand for review is supported by the
facts that the bid made by ICA is solvent and transparent, does
not fail to comply with any requirements established in the
bidding documents, and does not violate any legal requirements.
Empresas ICA -- http://www.ica.com.mx/-- the largest
engineering, construction, and procurement company in Mexico,
was founded in 1947. ICA has completed construction and
engineering projects in 21 countries. ICA's principal business
units include civil construction and industrial construction.
Through its subsidiaries, ICA also develops housing, manages
airports, and operates tunnels, highways, and municipal services
under government concession contracts and/or partial sale of
long-term contract rights.
* * *
As reported in the Troubled Company Reporter on Nov. 14, 2005,
the ratings (B/Stable/) assigned to ICA took into consideration
the company's position as the largest engineering, construction,
and procurement concern in Mexico.
VITRO S.A.: S&P Assigns B Rating with Negative Outlook
------------------------------------------------------
Standard & Poor's Ratings Services assigned a 'B' rating with a
negative outlook on Mexico's Vitro S.A. de C.V. Vitro
commercializes forest products and building materials.
A total of 636 entities appeared at risk globally of potential
downgrades as of Feb. 22, 2006, compared with 620 in mid-
January. Almost 87% of those at risk of downgrades were located
either in the US or Europe.
TFM S.A.: S&P Assigns 'BB-' Ratings
-----------------------------------
Standard & Poor's Ratings Services assigned a 'BB-' rating on
Mexican TFM S.A. de C.V. (Kansas City Southern). The outlook is
negative.
A total of 636 entities appeared at risk globally of potential
downgrades as of Feb. 22, 2006, compared with 620 in mid-
January. Almost 87% of those at risk of downgrades were located
either in the US or Europe.
=====================
P U E R T O R I C O
=====================
DORAL FINANCIAL: Completes Financial Restatements for 2000-2004
---------------------------------------------------------------
Doral Financial Corporation (NYSE: DRL), a diversified financial
services company, today announced the restated results of its
previously issued consolidated financial statements for the
years 2000 through 2004 and the filing of its amended annual
report on Form 10-K for the year ended December 31, 2004. "With
the filing of our amended 2004 annual report on Form 10-K, the
Company has completed a major step towards returning to timely
financial reporting," stated John A. Ward III, the Company's
Chairman and Chief Executive Officer.
Restatement Highlights
-- The cumulative effect of the restatement through December
31, 2004, was a decrease to Doral Financial's retained
earnings of $694.4 million, which includes a total
decrease of $508.1 million for 2002, 2003 and 2004 and
$186.3 million related to periods prior to 2002.
-- On a pre-tax basis, the cumulative effect of the
restatement through December 31, 2004, was a decrease in
income of $920.8 million, which includes a total decrease
of $680.5 million for 2004, 2003 and 2002 and $240.3
million related to periods prior to 2002.
-- As a result of the restatement, there was a decrease in
Doral Financial's stockholders' equity of $688.2 million
and a decrease in Tier 1 capital of $591.7 million, or 35%
in each case, as of December 31, 2004, compared to
previously reported results.
-- After giving effect to the restatement, Doral Financial
and its banking subsidiaries remain "well capitalized" for
bank regulatory purposes as of December 31, 2004.
Material Weakness
As part of the restatement process, current management concluded
that the Company's internal control over financial reporting was
not effective as of December 31, 2004, and identified a number
of material weaknesses, including but not limited to an
ineffective control environment. As part of this ineffective
control environment, the Company failed to appropriately design
controls to prevent or detect instances of override or
intervention by certain former members of senior management and
the former director emeritus, and there were also inadequate
mechanisms to identify and respond to such instances.
John A. Ward III said, "We have concluded an exhaustive process
examining Doral Financial's accounting practices and internal
controls from 2000 through 2004. With the restatement of our
2004 financial statements now behind us, we intend to move to
complete as expeditiously as possible our financial statements
and related quarterly and annual filings for 2005. On behalf of
our entire senior management team and Board of Directors, we
thank our employees, our customers and our investors for their
support. In turn, we pledge to assure that the best interests of
the Company and its stakeholders will be upheld as we continue
to implement changes to the Company's strategy and corporate
governance practices."
Summary of Key Results of the Restatement for the Five Years
Ended December 31, 2004:
Diluted Earnings Per Common
Net Income Share
(in thousands) (in dollars)
---------------------------- ----------------------------
As As
Year Ended Previously As Change Previously As Change
December 31, Reported Restated (%) Reported Restated (%)
------------ ---------- --------- ------- ----------- -------- -------
2004 $489,625 $214,794 (56%) $3.95 $1.63 (59%)
2003 321,299 142,138 (56%) 2.70 1.10 (59%)
2002 220,968 166,882 (24%) 1.89 1.40 (26%)
2001 143,851 97,709 (32%) 1.31 0.86 (34%)
2000 84,656 29,428 (65%) 0.82 0.24 (71%)
Tier 1 Capital
(in thousands)
---------------------------------------
As
Year Ended Previously
December 31, Reported As Restated Change(%)
---------------- -------------- -------------- ---------
2004 $1,705,733 $1,113,987 (35%)
2003 1,471,132 1,114,143 (24%)
2002 945,262 744,132 (21%)
2001 765,320 532,791 (30%)
2000 493,139 336,476 (32%)
Stockholders' Equity
(in thousands)
---------------------------------------
As
Year Ended Previously
December 31, Reported As Restated Change(%)
---------------- -------------- -------------- ---------
2004 $1,972,769 $1,284,617 (35%)
2003 1,592,440 1,182,362 (26%)
2002 1,044,971 804,379 (23%)
2001 762,120 577,675 (24%)
2000 505,710 365,679 (28%)
Doral Financial's, Doral Bank PR's and Doral Bank NY's capital
ratios at December 31, 2004, based on existing Federal Reserve,
FDIC and OTS guidelines, after giving effect to the restatement:
Banking Subsidiaries
---------------------------------
Doral Doral Well
Financial Doral Bank PR Bank Capitalized
(As Restated) (As Restated) NY Minimum
------------- ------------- ------- -----------
Total capital ratio
(total capital to
risk weighted assets) 14.8% 20.6% 21.5% 10.0%
Tier 1 capital ratio
(Tier 1 capital to
risk weighted assets) 14.4% 19.9% 21.2% 6.0%
Leverage ratio(1) 6.8% 5.5% 8.5% 5.0%
As of December 31, 2004 and after giving effect to the
restatement, each of Doral Financial, Doral Bank PR and Doral
Bank NY were in compliance with all applicable regulatory
capital requirements and are considered to be "well
capitalized."
Doral Financial's restated total assets reflect a significant
increase in loans as a result of the recharacterization as
secured borrowings of certain mortgage loan transfers to local
financial institutions that did not meet the provisions of SFAS
140 for sale accounting.
Summary of Accounting Adjustments by Category
Doral Financial has classified the accounting practices and
related adjustments that were affected by the restatement into
six categories. This classification involves subjective
judgments by management, and particular accounting errors may
fall within more that one category. The cumulative impact of
the changes to retained earnings through December 31, 2004, is
summarized as:
Cumulative Increase
(Decrease) of Retained
Earnings Through
(In thousands) December 31, 2004
---------------------------------------------- -----------------------
Pre-tax Restatement Adjustments:
Recharacterization of mortgage loans sale
transactions as secured borrowings $ (595,525)
Valuation of IOs (283,082)
Accounting for servicing assets (23,144)
Accounting for derivative instruments and
investment securities (24,381)
Provision for loan and lease losses 7,195
Other accounting adjustments (1,863)
-----------
Total pre-tax restatement adjustments (920,800)
Tax impact of restatement adjustments 226,396
-----------
Total retained earnings and legal surplus
impact $ (694,404)
===========
Restatement Process
1. Recharacterization of Mortgage Loans Sale Transactions as
Secured Borrowings
As part of the restatement process, the Company has
recharacterized as loans payable secured by mortgage loans a
number of loan transfers that had been previously accounted for
as sales. As a result, the Company reversed the gains previously
recorded in connection with such transfers. The recharacterized
transactions include:
-- As previously announced, the recharacterization of all
mortgage loan transfers to FirstBank. The independent
investigation conducted by Latham & Watkins LLP, outside
counsel for the Company's independent directors and the
Audit Committee, found that it is likely that the former
treasurer and the former director emeritus of the Company
inappropriately entered into oral agreements or
understandings with FirstBank, providing recourse beyond
the limited recourse established in the written contracts.
Based on an analysis of these findings and other evidence
reviewed by the Company, the Company concluded that the
mortgage loan sales to FirstBank did not qualify as sales
under SFAS 140, because these sales did not satisfy the
"reasonable assurance" standard of SFAS 140 regarding the
isolation of assets in bankruptcy.
-- As previously announced, the reversal of a number of
mortgage loan sales involving the generally
contemporaneous purchases and sales of mortgage loans from
and to other local financial institutions where the
amounts purchased and sold and other terms were similar.
The Company's Audit Committee determined that there was
insufficient contemporaneous documentation to substantiate
the business purpose for these transactions in light of
the timing and similarity of the purchase and sale amounts
and other terms of the transactions; and
-- The recharacterization of certain transfers of mortgage
loans with full recourse provisions effected prior to
2000.
Except with respect to the generally contemporaneous and pre-
2000 transactions referred, the Company, after a thorough review
of its loan sale contracts, concluded that the mortgage loan
transfers to Banco Popular de Puerto Rico, Banco Santander
Puerto Rico and Westernbank Puerto Rico continue to qualify for
sales treatment under SFAS 140. Although these institutions
have historically accounted for these transactions as sales, on
February 20, 2006, Westernbank publicly announced that it had
determined to reverse the accounting for these transactions
because it received an opinion concluding that these
transactions do not constitute "true sales." Subsequent to this
announcement, the Company reassessed the accounting treatment of
its transactions with Westernbank and, as part of such
reassessment, obtained an independent opinion concurring with a
previously obtained "true sale" opinion with respect to these
transactions. As part of its internal review, Doral Financial
also obtained confirmations from these institutions regarding
the terms of the transactions.
2. Valuation of IOs
As part of the restatement process, Doral Financial concluded
that the previous IO valuation was not in accordance with GAAP.
The Company determined that to properly estimate the value of
its portfolio of floating rate IOs, for financial reporting
purposes, the valuation model used by the Company should be
based on implied LIBOR rates derived from the forward yield
curve at the date of valuation. Under the new model, the
prepayment assumptions and discount rates incorporated into
Doral Financial's valuation model will no longer incorporate
management's assumptions regarding the future, but will be based
on publicly available and independently verifiable market
benchmarks and statistically derived relationships. In this
regard, the independent investigation determined that in certain
instances there was improper conduct by certain former members
of management and a former director emeritus that contributed to
the overvaluation of the IOs.
3. Accounting for Servicing Assets
Historically, the Company incorrectly extrapolated the value
from a third-party valuation received for its conforming loan
portfolio to the non-conforming loan portfolio. As part of the
restatement process, the Company engaged a third party to
perform a valuation of its entire servicing asset portfolio.
The restated value of the Company's servicing asset portfolio
also reflects:
(1) the reclassification of some of the Company's retained
assets between servicing assets and IOs and
(2) the derecognition of certain servicing assets as a
result of the recharacterization of certain mortgage
loan sales as secured borrowings.
4. Accounting for Derivative Instruments and Investment
Securities
As part of the restatement process, the Company reviewed its
accounting for derivatives and concluded that it had not
adequately recognized forward contracts that meet the definition
of a derivative under SFAS 133 "Accounting for Derivative
Instruments and Hedging Activities" for certain mortgage loans
purchases and the simultaneous sale and securitization agreement
entered into with a third party. As a result, Doral Financial
corrected the previous accounting for these particular
transactions to recognize the derivative instrument at execution
and changed the cost basis of the resulting mortgage pools.
5. Other Accounting Adjustments
In addition to the adjustments described above, Doral Financial
also reviewed other areas which resulted in adjustments to the
Company's consolidated financial statements.
Financial and Operational Overview
Net Income
During 2004, Doral Financial's net income amounted to $214.8
million, compared to $142.1 million for 2003, and diluted
earnings per common share were $1.63 for 2004, compared to $1.10
for 2003. The pre-tax income results for 2004, which decreased
to $129.3 million, compared to $166.1 million for 2003, were
adversely affected by the continued impact of rising short-term
interest rates on Doral Financial's net income. During 2004,
Doral Financial obtained a return on average assets of 1.50%,
compared to 1.37% for 2003, and a return on common equity of
30.20%, compared to 19.96% for 2003.
Doral Financial's consolidated net income for the year ended
December 31, 2004, includes an income tax benefit of
approximately $85.5 million resulting from the implementation of
tax planning strategies effected by Doral Financial. Without
the tax benefit noted above and assuming an effective tax rate
of 20%, Doral Financial's net income and diluted earnings per
share as of December 31, 2004, would have been $103.4 million
and $0.63, respectively, and its return on average assets and
average common stockholders' equity for such period would have
been 0.72% and 11.67% respectively.
Interest
During 2004, net interest income was Doral Financial's principal
source of revenues. Net interest income for 2004 was $333.7
million, compared to $234.4 million for 2003, an increase of
42%. The increase in net interest income for the year 2004
compared to 2003 was principally due to an increase in Doral
Financial's average interest-earning assets coupled with a
slight improvement on its interest rate margin. Average
interest-earning assets grew by 38% compared to 2003,
particularly in its loans portfolio, and investment and
mortgage-backed securities, driven by a higher level of
originations and the Company's strategy to increase its tax-
exempt income by investing in U.S. Treasury and agency and
mortgage-backed securities. The Company also experienced a
moderate increase in its net interest spread and margin during
2004. Doral Financial's net interest spread and margin for 2004
were 2.26% and 2.48%, respectively, compared to 2.21% and 2.41%,
respectively, for 2003. Net interest spread and margin improved
during 2004 because rates paid by Doral Financial on its
borrowings declined more in relative terms than the rates earned
by Doral Financial on its loans and securities. The average
rate paid by Doral Financial on its interest-bearing liabilities
decreased by 41 basis points compared to 2003, while the average
yield on its interest-earning assets decreased by 36 basis
points compared to 2003. The decrease in rates on Doral
Financial's interest-bearing liabilities reflects a shift to
shorter-term borrowings, including the issuance in 2004 of $740
million in floating rate notes due 2005 and 2007. The increase
in the volume of interest-earning assets was funded through a
combination of deposits, increased secured borrowings, including
repurchase agreements, and the issuance of floating rate senior
notes.
Net gains from mortgage loan sales and fees. Net gains from
mortgage loan sales and fees, the Company's second most
significant source of revenues during 2004, was adversely
affected by the rise in short-term interest rates and the
flattening of the yield curve. For the year ended December 31,
2004, Doral Financial's net gain on mortgage loan sales and fees
was $83.6 million, compared to $94.7 million for 2003, a
decrease of approximately 12%, notwithstanding a larger volume
of sales. The average gain on loan sales margin decreased to
3.30% for 2004, compared to 4.10% for 2003. The volume of loans
sales and securitizations was $2.5 billion for 2004, compared to
$2.3 billion for 2003.
Net Loss for Securities
Doral Financial's net loss on securities held for trading, which
includes realized and unrealized gains or losses on its
securities held for trading, including IOs, as well as on
options, futures contracts and other derivatives used for
interest rate risk management purposes, resulted in a loss of
$105.0 million for 2004, compared to a loss of $22.4 million for
2003. The net loss on securities held for trading experienced
during 2004 was principally due to realized and unrealized
losses with respect to derivative instruments undertaken for
risk management purposes. In the past, Doral Financial's
interest rate risk management program was designed to protect
the value of the Company's assets and income from substantial
increases in long-term interest rates that cannot be absorbed in
the normal course of business and was not adequately aligned to
the sensitivity of the Company's assets and liabilities to
interest rate changes. As the yield curve flattened during the
latter part of 2004, the Company experienced losses on the value
of its derivatives as part of its trading activities.
Net Gain for Securities
During 2004, net gain on sale of securities classified as
available for sale amounted to $12.0 million, compared to $5.5
million in 2003, an increase mostly related to an increased
volume of sales.
Net Servicing Income
Net servicing loss for 2004 was approximately $2.7 million,
compared to a gain of $21.2 million for 2003. The decrease in
net servicing income was principally due to increased impairment
charges resulting from a decline in the estimated fair value of
Doral Financial's MSRs, driven by a slight decrease in mortgage
rates during 2004. In 2003, as a result of the increase in
interest rates and the associated decrease in anticipated
prepayment rates, Doral Financial recovered $24.0 million from
its MSR valuation allowance. In 2004, as rates remained
constant and prepayment forecasts increased slightly from
December 2003, Doral Financial recorded net impairment charges
of $8.1 million through a higher impairment valuation allowance.
Doral Financial recorded total amortization and impairment
charges of $37.4 million during 2004, compared to $10.7 million
for 2003.
Fee-Based Income
As Doral Financial has continued to develop as a diversified
financial institution, its fee-based income has continued to
increase. Commissions, fees and other income increased by 42% to
$32.3 million for 2004, compared to $22.8 million for 2003.
Commissions and fees earned in the banking and insurance agency
operations were largely responsible for this increase.
Loan production
Loan production, which Doral Financial now defines as internal
originations and loan purchases with the related servicing
rights, experienced a slight increase during 2004. The volume
of loan production by Doral Financial during 2004 and 2003 was
approximately $5.5 billion and $4.9 billion, respectively. In
the past, Doral Financial also included as part of its loan
production conforming mortgage loans purchased on a wholesale
basis from a U.S. financial institution without the related
servicing rights. Such wholesale purchases without the
associated servicing rights, which were discontinued during
2005, amounted to $2.3 billion and $1.6 billion for 2004 and
2003, respectively.
Restatement Background
and Remediation Program
The Company announced the need to restate its financial
statements in April 2005, following the determination by the
Audit Committee and the Board of Directors that it was necessary
to correct the methodology used to calculate the fair value of
Doral Financial's portfolio of floating rate IOs.
In addition to Doral Financial's internal review, Latham,
outside counsel for the Company's independent directors and for
the Audit Committee of the Board of Directors, conducted an
independent investigation into certain matters surrounding the
restatement. As previously disclosed, on August 17, 2005, after
discussing the results of the investigation to date, the Board
of Directors determined that the departures of Salomon Levis,
former chief executive officer and member of the board, Ricardo
Melendez, former chief financial officer, Mario S. Levis, former
treasurer, and David Levis, former director emeritus, from their
positions were in the best interest of the Company.
Accordingly, the Board of Directors asked for and accepted the
resignations of Salomon Levis, Mario S. Levis and David Levis.
In addition, the Board of Directors asked for the resignation of
Ricardo Melendez, former chief financial officer. When that
resignation was not tendered, Mr. Melendez was terminated from
his position at Doral Financial.
Factors Affecting 2005 Results and Future Operations
The Company expects earnings for 2005 to be substantially lower
than for 2004, mainly as a result of these factors:
-- a reduction in mortgage loan sales and related gain on
sales, in particular during the second half of 2005, as a
result of the inability of the Company to use its
traditional sales channels for non-conforming loans to
local financial institutions because of the uncertainty
surrounding the accounting treatment of sale transactions
as well as reduced gain on sale margins resulting from the
interest rate environment during 2005;
-- reduced net interest income as a result of the continued
rise in short-term interest rates and the flattening of
the yield curve;
-- losses incurred on the sale of lower-yielding investment
securities during the fourth quarter of 2005;
-- losses on derivatives during the first half of 2005
resulting primarily from delays in properly aligning the
Company's risk management practices to the interest rate
sensitivity of the Company's financial assets; and
-- legal, accounting and other expenses related to the
restatement.
The Company's operations remain fundamentally sound, as
reflected by the following preliminary and unaudited operational
data:
-- For the year ended December 31, 2005, internal
originations increased to $5.1 billion from $4.9 billion
for 2004, an increase of 4.4%, notwithstanding the
difficult interest rate environment during 2005;
-- The mortgage loan servicing portfolio increased to $15.6
billion as of December 31, 2005, compared to $14.3 billion
as of December 31, 2004, an increase of 9.6%; and
-- Several key business areas also showed growth, including
an increase in the commercial loan portfolio of
approximately 26% and an increase in insurance agency fees
of 5%.
The Company and its banking subsidiaries expect to remain "well
capitalized" for bank regulatory purposes as of December 31,
2005.
The Company has decided to make certain changes to its business
strategy that will also impact its future earnings results.
These changes will be implemented progressively beginning in
2006.
The changes in the Company's strategy are principally designed
to produce revenue and earnings streams that are more stable,
transparent and easier to protect from interest rate risk and to
make the Company's operations more efficient. Among the changes
in business strategies are:
-- retention of more mortgage loans in portfolio to increase
net interest income;
-- continue emphasis on fee income from insurance agency
operations;
-- diversification of loan sale and securitization channels
for mortgage loans and more balanced cash gains and non-
cash gains on mortgage loan sales;
-- diversification of loan product offerings;
-- implementation of a targeted cost reduction program; and,
-- targeted branch expansion.
2005 Financial Reports Filing
The Company also announced that it expects to file its quarterly
reports on Form 10-Q for the first three quarters of 2005 as
soon as practicable. Due to the work required to prepare and
file these quarterly reports, the Company does not expect that
it will be able to file its annual report on Form 10-K for the
year ended December 31, 2005 by its due date of March 16, 2006.
The Company plans to file its 2005 Form 10-K as soon as
practicable after the filing of the quarterly reports.
The Company expects to host a conference call to discuss its
2005 earnings results, as well as respond to questions regarding
the restatement results, shortly after the release of its 2005
financial results.
Doral Financial Corporation -- http://www.doralfinancial.com/--
a financial holding company, is the largest residential mortgage
lender in Puerto Rico, and the parent company of Doral Bank, a
Puerto Rico based commercial bank, Doral Securities, a Puerto
Rico based investment banking and institutional brokerage firm,
Doral Insurance Agency, Inc. and Doral Bank FSB, a federal
savings bank based in New York City.
* * *
As reported in the Troubled Company Reporter on Nov. 1, 2005,
Moody's Investors Service downgraded to Ba3 from Ba1 the senior
debt of Doral Financial Corporation. The ratings have been
downgraded a number of times since Moody's initial review
process began in April 2005. According to Moody's, a number of
negative developments have occurred since the most recent
downgrade, which was on Sept. 6, 2005.
A partial list of ratings that have been downgraded:
* Senior debt to Ba3 from Ba1 and
* Subordinated debt to B1 from Ba2.
MUSICLAND HOLDING: Panel Balks at Investment, Deposit Guidelines
----------------------------------------------------------------
As reported in the Troubled Company Reporter on Jan. 26, 2006,
Judge Stuart M. Bernstein of the U.S. Bankruptcy Court for the
Southern District of New York authorized the Debtors, on an
interim basis, to invest and deposit funds in the Investment
Account, in accordance with their prepetition practices,
although that practice may not strictly comply with the
requirements of Section 345 of the Bankruptcy Code.
Judge Bernstein allows, on an interim basis, all applicable
banks and other financial institutions to accept and hold or
invest funds, at the Debtors' direction, in accordance with the
Debtors' prepetition investment practices.
According to the Debtors' internal investment policies, the
investment account may only invest in these types of securities:
-- overnight repurchase agreements;
-- debt instruments issued by the Federal National Mortgage
Association or the Federal Home Mortgage Corporation with
a rating of P1/A1;
-- asset-backed floating rate securities or corporate
floating rate note with a rating of Aaa/AAA;
-- domestic time deposits/negotiable certificates of deposit
or money market securities;
-- domestic commercial paper with a rating of A1/P1; and
-- money market mutual funds that invest in securities
approved under the Debtors' policy.
Creditors Committee Objects
The Official Committee of Unsecured Creditors tells the Court
that it is necessary for it to review information concerning the
investment guidelines that the Debtors want to continue to
utilize and any alternative guidelines that were considered, in
order to properly respond to the Debtors' request.
According to Mark S. Indelicato, Esq., at Hahn & Hessen LLP, in
New York City, the Committee has requested information about the
guidelines from the Debtors and their financial advisors.
As of January 25, 2006, neither the Committee nor its financial
advisors have received sufficient information to enable the
Committee to evaluate the merits of the Debtors' request.
Accordingly, the Committee asks the Court to adjourn the hearing
until the Committee and the Court can properly review the
Investment and Deposit Guidelines.
Headquartered in New York, New York, Musicland Holding Corp., is
a specialty retailer of music, movies and entertainment-related
products. The Debtor and 14 of its affiliates filed for chapter
11 protection on Jan. 12, 2006 (Bankr. S.D.N.Y. Lead Case No.
06-10064). James H.M. Sprayregen, Esq., at Kirkland & Ellis,
represents the Debtors in their restructuring efforts. Mark T.
Power, Esq., at Hahn & Hessen LLP, represents the Official
Committee of Unsecured Creditors. When the Debtors filed for
protection from their creditors, they estimated more than $100
million in assets and debts. (Musicland Bankruptcy News, Issue
No. 6; Bankruptcy Creditors' Service, Inc., 215/945-7000)
=================
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CITGO PETROLEUM: Conn. AG Says Discounted Oil Program Is Legal
--------------------------------------------------------------
As previously reported, the U.S. House Energy Committee asked
Citgo Petroleum Corp. for documents relating to Venezuela's
program that provides heating oil to poor Americans. U.S.
lawmakers want to determined whether or not the oil deals are
"part of an unfriendly government's increasingly belligerent and
hostile foreign policy" toward the United States.
However, Connecticut Attorney General Richard Blumenthal said
that the sales of discounted oil from Citgo is legal, responding
to M. Jodi Rell, the state governor's request to issue a legal
ruling on this program, the Associated Press reports.
Citgo has delivered discounted heating oil in Massachusetts, New
York, Maine, Rhode Island, Vermont, Connecticut, Delaware and
the Philadelphia area.
According to Mr. Blumenthal, the organizations distributing the
heating oil provided by Citgo, Venezuelan oil giant Pdvsa's
branch in the United States, are private, non-profit
organizations, El Universal relates.
CITGO is owned by PDV America, an indirect, wholly owned
subsidiary of Petroleos de Venezuela S.A., the state-owned oil
company of Venezuela.
PDVSA is Venezuela's state oil company in charge of the
development of the petroleum, petrochemical and coal industry,
as well as planning, coordinating, supervising and controlling
the operational activities of its divisions, both in Venezuela
and abroad.
* * *
As reported on Feb. 16, 2006, Standard and Poor's Ratings
Services assigned a 'BB' rating on CITGO Petroleum Corp.
The ratings on CITGO Petroleum Corp. reflect a satisfactory
business risk profile and an aggressive financial risk profile,
limited by the ratings of the company's parent, Petroleos de
Venezuela S.A. aka PDVSA.
CITGO's credit strength as a stand-alone entity is based on the
scale and complexity of its refining operations, which have net
crude processing capacity of 970,000 barrels per day through
three wholly owned fuel refineries, two asphalt refineries, and,
in a nonoperating position, a 41% interest in the Lyondell-CITGO
Refining L.P. joint venture.
The company's throughput places it among the largest refiners in
the U.S. CITGO gains substantial competitive advantage from its
ability to process large volumes of heavy, sour crude oils,
which trade at sharp discounts to better-quality crude oil, into
high-margin products, and large average unit sizes that
translate into economies of scale.
The refiner's profitability is limited by the concentration of
its operations in the highly competitive Gulf Coast market,
which usually has the lowest margins in the US Geographic
concentration also exposes the company to the risk of regional
disruption, as demonstrated by recent hurricanes. The credit
effect of interrupted operations at the Lake Charles refinery
was offset somewhat by strong refining margins realized at
CITGO's other facilities.
Standard & Poor's 'BB' rating on CITGO is higher than the 'B+'
corporate credit rating on PDVSA, because of the relative
strength of the refiner's financial profile and the asset
protection afforded to CITGO creditors, if CITGO defaults for
PDVSA-specific reasons, for example, a Venezuela sovereign
default. Nevertheless, CITGO could be challenged by events
surrounding PDVSA.
***********
S U B S C R I P T I O N I N F O R M A T I O N
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Copyright 2006. All rights reserved. ISSN 1529-2746.
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