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       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, June 15, 2001, Vol. 2, Issue 117

                           Headlines



A R G E N T I N A

AEROLINEAS ARGENTINAS: Bastos To Madrid Trying To Resolve Crisis
AEROLINEAS ARGENTINAS: Cancels Last European Route
ENTEL: Liquidator Testifies On Alsogaray's Fraudulent Activities
LAPA: Eurnekian Negotiates To Acquire Control Of Airline


B R A Z I L

IDEIASNET: Shares Down 95% Since Last Year's IPO
INDUSTRIAS KLABIN: Preferred Stock Price Drops In June
PORTOBELLO: Debts Spur Apprehension Among Market Analysts
VARIG: Announces Hike On International And Domestic Airfares


C H I L E

STARMEDIA: Contradicts Rumors Concerning Esmas Buyout
TELEFONICA CTC: Former Employees Hurl Insults At President


C O L O M B I A

AVIANCA: Avianca, Aces Threaten Bankruptcy If No Merger Approval
AVIANCA: Continues Search For Partners If Aces Merger Fails


M E X I C O

AHMSA: Total Production This Year Slightly Below Annual Capacity
BANCRECER: Slim's Inbursa Seen Likely To Participate In Bidding
BANCRECER: UBS Warburg Says Sale Could Fetch Up To $645M
GRUPO SIMEC: Partial Repurchase of 10 1/2% Third Priority Notes
GRUPO TELEVISA: Likely To Conclude Univision Negotiation In July
STEWART ENTERPRISES: Fitch Assigns New Ratings, Outlook Stable
VIDEOVISA: Target Of Blockbuster's Acquisition Plans


     - - - - - - - - - -


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A R G E N T I N A
=================

AEROLINEAS ARGENTINAS: Bastos To Madrid Trying To Resolve Crisis
----------------------------------------------------------------
Infrastructure Minister Carlos Bastos left for Madrid in an
attempt to revive negotiations over the conflict at Sociedad
Espanola de Participaciones Industriales (SEPI) unit Aerolineas
Argentinas SA, AFX-Asia reported Wednesday. Bastos is expected to
meet with Spanish Foreign Minister Jose Pique and SEPI officials.
No details on which airline Mr. Bastos chose for the flight.

Although Bastos' sudden visit to Spain gives a glimmer of hope
for the ailing airline, the Argentine government seems to have
outlined a plan ready for confirmation of the airline's
bankruptcy - to grant the routes in a license to one single
operator who should be Argentine. The company will probably be
forced to cease operating in the next few days. At that point it
should pay about $13 million (13.7m euros or Pta2.276bn) that it
owes to other airlines for flying its passengers over the last
few weeks.

The airline is now on the brink of bankruptcy as a group of
workers still refuses to approve draconian cost-cutting measures
that SEPI says are necessary to save the company. SEPI owns 92
percent of Aerolineas, the Argentine government holds 5.4
percent, and workers have the remaining 2.6 percent ownership
stake.


AEROLINEAS ARGENTINAS: Cancels Last European Route
--------------------------------------------------
Financially-strapped Argentine airline Aerolineas Argentinas on
Tuesday suspended flights from Buenos Aires to Madrid and Rome
after the government ordered it to resume flight operations on
seven international routes within 72 hours. The governement says
the company did not ask for authorization to suspend the flights,
Agence France Presse reported Tuesday.

The suspension took place immediately, with the airline canceling
a flight scheduled to depart late Tuesday to Madrid. Aerolineas
officials revealed that the flights had to be canceled due to a
lack of fuel. The flight to Madrid and then to Rome was the
airline's last European route.

Last week Aerolineas suspended flights to Miami, New York and Los
Angeles, as well as Auckland, Sydney, Sao Paulo and Rio de
Janeiro.


ENTEL: Liquidator Testifies On Alsogaray's Fraudulent Activities
----------------------------------------------------------------
Liquidator of the bankrupt telephone company ENTel, Enrique
Ipina, testified that Argentina's most prominent woman
politician, Maria Julia Alsogaray, led the company at a time when
a "series of criminal" activities took place, Agence France
Presse reported Tuesday. According to Ipina, he arrived to wind
up ENTel only to find it in a "state of total impunity."

Alsogaray, who is facing charges of fraud and embezzlement of
public funds, is due to appear Thursday to make a statement
before investigating Judge Jorge Urso. Alsogaray was an
environment minister in the previous government headed by then-
president Carlos Menem. She was reviled by the media as a symbol
of the corruption allegedly rampant under that administration. It
was also Alsogaray, administrator of the company from 1989, who
was placed in charge of its privatization a year later.

Earlier this year, Ipina testified before Urso that Alsogaray had
paid $400 million in cash to suppliers when she was due to have
paid them half that amount, $200 million, in bonds. Documents
relating to the payment were kept in a safe at Banco Nacion,
which two of Alsogaray's staff had access to, according to Ipina.
One of them continued to have access to the safe until 1995 when
he was no longer a public official.

"We are evidently in the presence of a series of criminal facts,"
Ipina said. "The safe was very large and not only Maria Julia
must be implicated, but also those who served as a protective
blanket around her management."


LAPA: Eurnekian Negotiates To Acquire Control Of Airline
--------------------------------------------------------
Eduardo Eurnekian, President of Aeropuertos Argentina 2000, is
negotiating to acquire the control of Lineas Aereas Privadas
(LAPA), South American Business Information reported Wednesday.
LAPA is the second-largest airline holding company in Argentina
carrying 30 percent of the country's domestic market,. The
company, which recently filed for legal relief through
bankruptcy, saw an increase in its market share, from 30 percent
to 40 percent due to ongoing crisis at Aerolineas Argentinas.

Eurnekian heads a group of investors who already agreed to the
acquisition of LAPA with Gustavo Deutsch, founder and majority
shareholder LAPA. LAPA has 1,400 employees and has debts of over
US$130 million. Its creditors are the leasing companies General
Electric Capital Aereal Services, ILFC and Boeing Capital and
certain oil companies. The company also owes US$17 million to a
group of banks and US$5 million to Aeropuertos Argentina 2000.
LAPA recently filed for protection from creditors to ensure
continued operations and the preservation of jobs amid increasing
fuel costs, excessive taxes and the current recession plaguing
the region.



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B R A Z I L
===========

IDEIASNET: Shares Down 95% Since Last Year's IPO
-----------------------------------------------
Shares of IdeiasNet are down 95 percent since its initial public
offering last year, compared with a 6.1 percent decline in the
benchmark Bovespa index, according to a report Wednesday in
Bloomberg. Brazil's only publicly traded Internet holding company
has shut down three of its online projects, sold a fourth and
fired half of its original 260 workers since its IPO on June 8 of
last year.

"I think some of their criteria to invest in the Web sites
weren't very good," said Carlos Levorin, a partner of ClickInvest
Gestao de Ativos Ltda., which bought IdeiasNet shares at the IPO.
"They were too filled with enthusiasm over the Internet."

IdeiasNet had holdings in 17 businesses at the time of its IPO,
from an online used car sales company to a real estate Web site.
As marketing costs and employee expenses soared, the company
began to rethink its strategy.

"We made huge cuts in investments we (had) expected to make,"
said George Ellis, IdeiasNet president and chief executive, in an
interview. "We changed the focus of our companies. Before the
focus was to grow and expand at any price, now it's to achieve
profitability at all costs."

Barely five months after its initial stock sale, IdeiasNet fired
its president, and a few weeks later it shut down an online
auctioneer to cut down losses. By the end of the year, the
company also closed a Web a site offering content for students
and an online insurance sales company. Ellis said the company may
close two or three more units this year in order to become
profitable. As the company slashed investments, investors such as
Levorin began dumping IdeiasNet shares. ClickInvest bought 2
million reais worth of the Internet company's shares at the
initial offering, Levorin said, and lost between 10 percent to 15
percent of its outlay before it sold the holdings, about a month
after it had purchased them.

"Like the investors, we're not happy about how the shares have
performed either, but we're in the same boat as Priceline.com or
Amazon.com, whose share prices have also declined a lot," Ellis
said. "The market for new economy companies is very difficult,
and we're no exception."


INDUSTRIAS KLABIN: Preferred Stock Price Drops In June
------------------------------------------------------
Industrias Klabin de Papel e Celulose SA, Latin America's largest
pulp and paper company, in June, saw the price of its preferred
shares decline by 42.22 percent, to R$1.82, compared to the same
period last year, South American Business Information reported
Wednesday. Mr. Ronaldo Seckelman, an officer of the company,
attributed the decline to investors' doubts concerning Klabin's
operations during energy power rationing program and to its
dollar-denominated debts. Klabin predicts exports to reach US$875
million this year.

Klabin, in a previous TCR-LA report, blamed the servicing of its  
US$800 million debt (almost R$2.8 billion) for its financial
difficulties in the first three months of 2001. The figure
represents 64 percent of the company's overall indebtedness. The
company posted losses of R$79.7 million in the first quarter due
to the increase in the value of the US dollar. By March, its
total assets reached US$2.046 billion and its net worth was
roughly US$661 million. The company's operating income increased
from US$233 million to US$248 million in March 2001. Klabin
posted an operating profit of US$57 million and a negative net
profit of US$37 million.


PORTOBELLO: Debts Spur Apprehension Among Market Analysts
---------------------------------------------------------
Brazilian market analysts are apprehensive about Portobello's
debts, which have now reached a total of R$138.13 million, South
American Business Information reported Wednesday. The company
posted losses of R$8.53 million in the first quarter of this
year, and predicts a gross turnover of R$308 million in the
current year and R$345 million next year. In March 2001, the
company recorded assets of US$129.134 million, and a net worth of
US$25.713 million against the US$49.305 million reported in equal
period of 2000. Portobello's net operating income was of
US$23.156 million and its operating profit was of US$2.430
million against the US$1.059 million. The net losses continued to
swell from US$1.760 million to US$3.947 million.


VARIG: Announces Hike On International And Domestic Airfares
------------------------------------------------------------
Leading Brazilian airline Varig, which reported losses of R$196
million in the first quarter of 2001, on Monday announced an
increase on its average airfare. Tickets will go up by 22-percent
on international routes and 21 percent on domestic flights,
according to a Brazil Financial Wire report. The airfare hike
comes amid widespread complaints by local airlines, which say
heavy taxation and foreign exchange pressure have made operating
costs skyrocket.

Just recently, Varig informed to the Brazilian securities and
exchange commission CVM that it is searching for a partner in
order to balance its financial situation. The airline, controlled
by the FRB-Par foundation (Fundacao Ruben Berta Participacoes),
aims to reduce debts estimated at R$1.3 billion. Varig has not
yet hired any institution to advise the search for a partner. The
company denied reports that it would sell off a 37-percent stake.
FRB-Par, which presently holds an 87-percent interest, will
maintain Varig's control.



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C H I L E
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STARMEDIA: Contradicts Rumors Concerning Esmas Buyout
-----------------------------------------------------
Starmedia Mexico manager Fausto Zapata disproved recent market
rumors that the Latin American-focused Internet company is
considering a buyout of Mexican horizontal portal Esmas, Business
News Americas reported Wednesday. However, Zapata admitted that
acquiring the portal would be a good move considering that Esmas
has growing traffic and a considerable e-commerce clientele, an
area where Starmedia is looking to boost its revenues.

Starmedia earns the majority of its income from online
advertising and expects to reach breakeven both in Mexico and
company-wide by 4Q01, Zapata said. The Internet company received
a US$36-million cash injection last month from a group of
investors led by US-based telco Bellsouth. The capital is
earmarked to implement Starmedia's mobile Internet program, in
which Bellsouth is the strategic partner.

As reported earlier in the TCR-LA, Starmedia believes it is
adequately funded through the end of 2001 and probably the next
four quarters even if the target of EBITDA breakeven proves
elusive. The company expects to end the year with US$39 million
in cash. However, analysts still believe that bankruptcy may
still be a possibility in the near term.


TELEFONICA CTC: Former Employees Hurl Insults At President
-----------------------------------------------------------
A group of former employees of Telefonica CTC Chile, who were
demonstrating against the massive layoffs outside the company's
offices, yelled insults at company president Bruno Philippi on
Wednesday, according to an EFE report. The incident happened when
Philippi stepped out of the corporate building to see Education
Minister Mariana Aylwin off after an awards ceremony for a course
in educational uses of the Internet. The ex-employees took
advantage of the situation and seized the minister's arm, at
which she attempted to free herself. Philippi intervened, and the
crowd rushed at him shouting insults and calling him a butcher
and a thief.

Telefonica CTC, Chile's biggest telephone utility, opted to slash
its workforce to return to profitability after losing roughly
$300 million since mid-1999. The company's top officials
attributed the losses to government-imposed cuts in rates for
local phone calls, the company's biggest business. Since 1999,
Telefonica CTC has eliminated 2,000 jobs.



===============
C O L O M B I A
===============

AVIANCA: Avianca, Aces Threaten Bankruptcy If No Merger Approval
----------------------------------------------------------------
After the trade and industry regulators on Monday rejected a
planned merger by Aerovias Nacionales de Colombia SA (Avianca)
and Aerolineas Centrales de Colombia (Aces), the two airlines
threatened to file for bankruptcy, Bloomberg reported Wednesday.
With the advent of the Open Skies agreement, which will remove
restrictions on domestic and international routes, Aces and
Avianca see the merger as a defense against the anticipated
competition. The Open Skies is due to come into effect in 2003.

"This is one of the only ways we can get ready for the Open Skies
agreement," said Mario Gomez Estrada, a spokesman for the
National Federation of Colombian Coffee Growers, which owns 80
percent of Aces.

On the other hand, Alfonso Avila, president of Aerorepublica,
which has 17 percent of the local market and competes with Aces
and Avianca, said the merger would give the larger carriers 70
percent of the market. He dismissed the airlines' threat of
bankruptcy as posturing.

"These are just words to pressure the government," Avila said.
"Aces and Avianca can't compete in the international market. They
want to create a monopoly in the local market to subsidize their
losses in the international market."

According to Gomez Estrada, the two companies would resubmit a
proposal to merge before the deadline of June 19. He refused to
provide further information about how the new proposal would
differ from the one, which regulators previously rejected saying
it would concentrate too much of the market into a single company
and could lead to unjustified price increases.

Regulators said they would consider a new proposal for a merger.

"Like all administrative decisions, if (the companies) present
new arguments that make them think the decision was incorrect,
the question will be studied again," said Emilio Archila, a
regulator for trade and industry.

Trade Minister Martha Ramirez also gave her support for the
merger and criticized the regulator's decision, saying that
monopolies are now a part of today's reality. Ramirez added that
alliances have become the only way for companies to compete.


AVIANCA: Continues Search For Partners If Aces Merger Fails
-----------------------------------------------------------
Avianca, which posted losses of 414 billion pesos (US$192
million) last year, compared with losses of 124 billion pesos the
previous year, would be hurt the most if its planned merger with
Aces does not go through, analysts said in a Bloomberg report
Wednesday. Avianca has debts of more than 315 billion pesos, and
according to officials, if the merger isn't approved they will
continue to look for partners.

"Everyone knows we've always said that we will look for other
airlines to join with," said Camilo Vargas, director of finance
for Avianca. Vargas declined to say which airlines the carrier
had in mind.

Avianca, the world's second oldest airline, flies to Miami,
London and Madrid. The company suspended its flights to Frankfurt
earlier this year because of the high cost of fuel.

The merged company would have a fleet of 64 planes and would
carry more than 6 million passengers a year.



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M E X I C O
===========

AHMSA: Total Production This Year Slightly Below Annual Capacity
--------------------------------------------------------------
The CEO of Mexican steelmaker Altos Hornos de Mexico (AHMSA),
Alonso Ancira, expects a total production volume of only 3.3
million metric tons this year, very close to the company's yearly
production capacity of 3.8 million metric tons,
Reforma/Infolatina reported Wednesday.

"We are not very vulnerable to changes in the price of natural
gas and electric power. We rely on coal. That has allowed us to
work at this (85-percent) capacity. We have another 15 percent of
capacity that we could be using, but it doesn't suit us to use it
now because of dumping practices that are impacting our markets.
The prices we'd get if we chose to produce this extra volume
would not cover the costs that we'd be looking to recover,"
Ancira said.


BANCRECER: Slim's Inbursa Seen Likely To Participate In Bidding
---------------------------------------------------------------
Mexico's Grupo Financiero Inbursa is widely believed to be
considering a bid for government-intervened Mexican bank
Bancrecer when Mexican bank bailout agency IPAB puts it on the
auction block later this year, Reforma/Infolatina reported
Wednesday. Inbursa is part of the business empire of Telefonos de
Mexico Chairman Carlos Slim.

Despite recent denial from Slim and Inbursa senior executives
about the continued speculations, U.S.-based Citigroup's May 17
announcement that it will acquire Grupo Financiero Banamex
Accival has reportedly prompted Inbursa to consider competing for
the bank with likely bidders Grupo Financiero Banorte and
Canadian-owned Scotiabank Inverlat. Adding more fuel to the
widespread beliefs are reports that several senior officials in
the administration of President Vicente Fox would like to see
Inbursa acquire the government-rescued bank.


BANCRECER: UBS Warburg Says Sale Could Fetch Up To $645M
--------------------------------------------------------
According to UBS Warburg, the upcoming sale of government-
intervened Mexican bank Bancrecer could fetch a price of between
$484 million and $645 million, El Economista/Infolatina reported
Wednesday. Laurence Madsen, an analyst at UBS revealed that the
estimate was based on the sale price of government-intervened
Banca Serfin, which the local subsidiary of Spain's Banco
Santander Central Hispano (BSCH) acquired from Mexican bank
bailout agency IPAB last May for $1.4 billion, about 1.6 times
its book value.


GRUPO SIMEC: Partial Repurchase of 10 1/2% Third Priority Notes
---------------------------------------------------------------
Grupo Simec, S.A. de C.V. (AMEX: SIM) announced the repurchase on
June 8, 2001, by its wholly-owned subsidiary, Compania
Siderurgica de Guadalajara, S.A. de C.V. (CSG), of U.S.
$14,505,664.06 aggregate principal amount of CSG's 10 1/2% Third
Priority Notes due November 15, 2007 at par, plus accrued
interest thereon, pursuant to CSG's offer to purchase all
outstanding notes, commencing April 9, 2001. As a result of the
repurchase and an amortization payment made on May 2001, the
remaining outstanding aggregate principal amount of 10 1/2% Third
Priority Notes due November 15, 2001 is U.S. $37,838,023.44.


GRUPO TELEVISA: Likely To Conclude Univision Negotiation In July
----------------------------------------------------------------
Whitney Johnson, an analyst at Merrill Lynch, expects that
Mexican media giant Grupo Televisa could successfully conclude
ongoing negotiations with U.S. Hispanic TV Network Univision in
early July, according to a report in El Universal/Infolatina
Wednesday. Both firms have been in talks for the past several
months, with Televisa looking to boost the quantity of content it
supplies Univision in return for a larger stake in the company
and higher program royalties. Johnson revealed that current
negotiations had been affected by the fact that Televisa in 1992
signed a 25-year contract to provide Univision with U.S. first-
refusal rights over Televisa content.

Previously, in a TCR-LA report, Merrill Lynch cut its rating on
Televisa to `accumulate' from `buy' on concerns over stalled
negotiations between it and Univision.


STEWART ENTERPRISES: Fitch Assigns New Ratings, Outlook Stable
--------------------------------------------------------------
Fitch has assigned a rating of `BB+' to Stewart Enterprises,
Inc.'s (Stewart) planned $550 million senior secured bank credit
facility and a rating of `BB-' to the company's upcoming issue of
$300 million in 7-year senior subordinated notes. The new bank
credit facility and subordinated debt issue are components of the
company's refinancing plan. Also, Fitch has assigned a rating of
`BB+' to publicly held senior notes remaining after Stewart's
tender offer is completed. As part of its refinancing plan, the
company announced a tender offer for approximately $200 million
of its $300 million publicly held senior notes. Remaining senior
notes will have a pari passu security position with the new
senior secured bank credit facility. All ratings are contingent
upon successful completion of Stewart's refinancing plan, as is
the change in Rating Outlook from Negative to Stable.

Stewart's ratings reflect its position as one of the leaders in
the death care industry, its diversified operations in the U.S.,
its improving operating cash flow, its comparatively predictable
revenue stream, and its relatively stronger financial position
among major industry participants. The company's leverage though
improving remains high. The Rating Outlook has been revised to
Stable from Negative, recognizing the progress Stewart has made
in reducing its debt, the prospects for further debt reduction,
and the sharp reduction in refinancing risk once the refinancing
plan is completed. The new senior secured bank credit facility is
expected to consist of a $225 million four-year revolving credit
facility, $250 million five-year term loan B, and a $75 million
18 month asset sale term loan. This facility is intended to
replace the current revolving credit facility maturing in April
2002 with a balance of $442 million as of May 31, 2001. In
addition to its tender offer for $200 million of its publicly
held senior notes, the company plans to redeem all of its
privately held senior notes ($65 million outstanding as of May
31, 2001). In the first half of fiscal year 2001, Stewart has
made progress in reducing its financial leverage. Management's
initiatives to improve free cash flow and pay down debt include:
suspending acquisitions, tightening terms of pre-need sales,
limiting spending internally, eliminating the payment of
dividends, and carefully reviewing proposed capital spending.
Management recognizes that debt levels remain high and is
committed to further reducing debt over the next few years. A key
part of debt reduction plans going forward will be the sale of
Stewart's various international operations. Management expects
cash proceeds in the range of $200 million to $250 million
(including tax benefits) if all international operations are
sold. On June 4, 2001, Stewart announced a definitive agreement
to sell its Mexican operations with net proceeds of $70 million
and an estimated closing date in about 60 days. Proceeds from the
sale of Mexican operations will be used to pay down the bulk of
the $75 million asset sale term loan. To write down its
international assets to fair market value, the company will take
a pre-tax charge of $230 to $250 million in third quarter 2001.


VIDEOVISA: Target Of Blockbuster's Acquisition Plans
----------------------------------------------------
Videovisa, which recently initiated bankruptcy proceedings, is
now the target of U.S.-based video-rental franchise Blockbuster
Inc.'s acquisition plans, Reforma/Infolatina related Wednesday.
According to Blockbuster Executive Vice President Nigel Travis,
the company is currently analyzing ways to expand its Mexican
franchise. One of the options being considered is the acquisition
of the outlets owned or licensed by Videovisa, Blockbuster's
Mexican competitior. However, Travis said Blockbuster would not
consider acquiring all of Videovisa's outlets considering the
risk of cannibalizing its own existing franchise system.

Blockbuster Chairman John Antioco also said that Blockbuster, at
present, garners about 45 percent of the Mexican video-rental
market. According to him, the company planned to open 50 new
outlets in Mexico this year, almost half of which will be
franchisees.




S U B S C R I P T I O N   I N F O R M A T I O N

Troubled Company Reporter Latin American is a daily newsletter
co-published by Bankruptcy Creditors' Service, Inc., Trenton, NJ,
and Beard Group, Inc., Washington, DC. John D. Resnick, Edem
Psamathe P. Alfeche and Janice Mendoza, Editors.

Copyright 2001.  All rights reserved.  ISSN 1529-2746.

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