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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

            Monday, August 6, 2001, Vol. 2, Issue 152

                           Headlines


A R G E N T I N A

AEROLINEAS ARGENTINAS: Marsans Formally Submits Offer To SEPI


B R A Z I L

CVRD: To Discuss Project With Phelps At The End Of The Month
CVRD: Kicks Off Construction Of Third Pier
EMBRATEL: Promotes Meeting To Clarify The Record, Give Guidance
GRUPO ECONOMICO: Likely To Generate US$241M From Acominas Sale
INDUSTRIAS KLABIN: 1H01 Loss Amounts To R$64.5M


C H I L E

GENER SA: S&P Lowers AES Gener Rating to `BBB-'; Off CreditWatch
GENER SA: Proposes To Pay Final Dividend To Shareholders
TELEFONICA CTC: Unbundling To Comply With Network Regulations


C O L O M B I A

AVIANCA: Welcomes New Chairman
FABRICONDOR: To Start Operating Under Law 550


M E X I C O

INTERACCIONES/QUADRUM/BANSI: IPAB Monitors Financial Health


P A R A G U A Y

CORPOSANA: Government Delays Privatization Until Next March



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A R G E N T I N A
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AEROLINEAS ARGENTINAS: Marsans Formally Submits Offer To SEPI
-------------------------------------------------------------
Spanish tour operator Viajes Marsans has formally submitted its
offer to Spanish state holding company SEPI to acquire its ailing
Argentine unit Aerolineas Argentinas, AFX-Europe informed
Thursday. The terms of the offer reportedly include retention of
all the employees for two years, assumption of Aerolineas'
US$950-million debt and its entire fleet.

Out of the US$950-million, US$300 million could be renegotiated
with SEPI. Marsans is seeking to roll over debt payments. With
regard to Aerolineas' 7,000 staff, Marsans considers that the
total wage bill, estimated at US$11 million per month, is not
excessive, compared with the carrier's debt servicing, if
Aerolineas' sales can reach between US$60 million - US$70 million
in normal circumstances. However, Marsans will put forward
general wages agreements, tied to productivity targets.

Marsans reportedly submitted its offer through its local venture
Air Plus in the second half of July and signed a confidentiality
agreement with SEPI on July 20.



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B R A Z I L
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CVRD: To Discuss Project With Phelps At The End Of The Month
------------------------------------------------------------
Steven Whisler, chairman, president and CEO of U.S. copper giant
Phelps Dodge announced that the company will meet with Brazilian
iron ore giant CVRD near the end of this month to discuss their
Sossego copper project in northern Brazil's Para state, Business
News Americas reported Thursday.

The meeting comes at a time when there are hints of a
disagreement between the partners about the project, which they
equally own. Last month, CVRD made a public announcement that the
pair was talking about a construction start on the project, with
CEO Roger Agnelli saying it is "speeding up the process" on all
of its copper projects.

"From my prospective it is unfortunate that our partner chose to
discuss it in public," Whisler said this week, adding that Phelps
would maintain its side of the agreement and not publicly discuss
Sossego further until taking a "hard look at everything
associated with it." The meeting would be a full review of all
aspects and issues after delivery of the feasibility study to the
partners.

When asked if Phelps would abandon Sossego, Whisler said: "I will
be frank with you. Our focus is not so much on growth, but on
getting through a very difficult period in the copper market. We
are determined to get our costs profile to where we want it to
be."


CVRD: Kicks Off Construction Of Third Pier
------------------------------------------
Brazilian mining company Companhia Vale do Rio Doce (CVRD)
announced it would begin building a third pier at the Ponta do
Madeira maritime terminal in Maranhao state, Business News
Americas reported Thursday. The new 21m pier, which according to
estimates will cost US$29 million, will allow the port to handle
up to 50 ships per month, with a maximum capacity of 200,000t.
CVRD expects to increase iron and manganese ore exports from 56
million to 72 million tons per year, as well as meeting fresh
demand for iron pellet exports.


EMBRATEL: Promotes Meeting To Clarify The Record, Give Guidance
---------------------------------------------------------------
Telecommunications company Embratel promoted a meeting among
Brazilian investors and specialists of the sector to clarify
misunderstandings and to present its prospects for 2001, South
American Business Information reported Thursday. Embratel has
been accused for lack of transparency. The company has been
posting losses for two quarters prompting Worldcom, the company
which acquired it in 1998, to exclude it from its consolidated
balance sheets.




GRUPO ECONOMICO: Likely To Generate US$241M From Acominas Sale
--------------------------------------------------------------
Brazil's Grupo Economico, which is currently being liquidated by
the Brazilian central bank, expects to raise some US$241 million
(R$600 million) from a public auction of its 17.7 percent stake
in Minas Gerais-based steel maker Acominas, Business News
Americas reported early last week. According to the group's
former president Angelo Calmon de Sa, although the stake's market
value is closer to US$160 million according to recent prices,
companies will be prepared to pay a premium for the position as
it could give the buyer a controlling stake.

Porto Alegre-based long-products steel company Gerdau is rumored
to be the favorite buyer as it already owns a 36.6 percent stake
in Acominas. According to an unnamed Gerdau source, a larger
stake in Acominas would allow it to cut costs and feed its North
American plants where prices are better than the domestic market.


INDUSTRIAS KLABIN: 1H01 Loss Amounts To R$64.5M
-----------------------------------------------
Industrias Klabin de Papel e Celulose SA, Latin America's largest
pulp and paper company, ended the first half of 2001 with a
R$64.585-million net loss, according to a report Wednesday in O
Globo-Brazil. Net turnover totalled R$1.169 billion while net
assets stood at R$1.425 billion.



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C H I L E
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GENER SA: S&P Lowers AES Gener Rating to `BBB-'; Off CreditWatch
----------------------------------------------------------------
Standard & Poor's on Thursday lowered its issuer credit rating
and senior unsecured debt rating on AES Gener S.A. (Gener), a
Chilean generation company, to triple-'B'-minus from triple-'B'.
At the same time, Standard & Poor's affirmed its triple-'B'-minus
issuer credit rating and senior secured debt rating on Empresa
Electrica Guacolda S.A., a single-asset thermal generator that is
50% owned by Gener. Both companies' ratings have been removed
from CreditWatch with negative implications where they were
placed on Dec. 28, 2000. The outlooks for both are stable.

The ratings had been on CreditWatch as a result of AES Corp.'s
(double-'B'/Positive/--) acquisition of 98.5% of Gener.
Guacolda's rating was affected since it has historically
benefited from its affiliation with Gener.

AES' and Gener's corporate credit ratings are separated by two
notches. In most circumstances, Standard & Poor's will not rate
the debt of a wholly owned subsidiary higher than the debt of the
parent. However, exceptions will be made on the basis of the
cumulative value provided by enhancements, such as structural
protections, covenants, and an independent shareholder or
director. The enhancements put in place for Gener, together with
certain natural legal insulation provided by Chilean bankruptcy
law, provide Standard & Poor's with sufficient comfort to allow
the two-notch separation.

AES acquired 98.5% of Gener (5.59 billion shares) through two
wholly owned subsidiaries. Certain voting rights related to
changes in Gener's bylaws will shortly be assigned to an
independent director at Gener and to an independent director at
the holding company above Gener.

Standard & Poor's believes that Gener's creditors benefit from
the following mechanisms, which insulate them from the lower-
rated parent:

-- Financial covenant restricting cash distributions -- Gener's
bylaws contain a covenant that prevents Gener from paying
dividends, making capital reductions, or making other cash
distributions (in excess of 30% of profits as required by Chilean
law) unless it satisfies an interest coverage test (2.4 times
(x)) or, prior to such dividend distribution, Gener has
confirmation that it will not be subject to a downgrade of its
issuer credit rating to below triple-'B'-minus by Standard &
Poor's.

-- Clawback mechanism for dividend distributions -- According to
Chilean law, public Chilean corporations, such as Gener, must
distribute a minimum of 30% of net profits as dividends to their
shareholders. If Gener has not met the above covenant test, but
is profitable, it must distribute the minimum amount of dividends
to shareholders. If this occurs, the bylaws of the holding
company above Gener require that it inject as equity, debt or
otherwise, the dividends it receives from Gener unless it
satisfies an interest coverage test or, prior to such dividend
distribution, Gener has received confirmation that it will not be
subject to a downgrade of its issuer credit rating to below
triple-'B'-minus by Standard & Poor's.

-- An independent director will shortly be given the right to
vote roughly two-thirds of outstanding shares of Gener in
connection with any changes to Gener's bylaws regarding the
financial covenants or reorganizations. Any change to the bylaws
regarding the financial covenants or reorganization of Gener
would require an affirmative vote of two-thirds of the shares
issued with voting rights.

-- Per Chilean law, Standard & Poor's believes that the assets of
a distinct Chilean company, such as Gener, would not be
consolidated with that of a U.S. parent in the event of the
parent's bankruptcy.

-- Public notification requirements of changes to bylaws under
Chilean law -- Under Chilean law, public companies are required
to publish notices in local newspapers two weeks in advance of
any changes to bylaws.

-- Personal liability of Gener officers -- Per Chilean corporate
law the board of directors of Gener have a fiduciary obligation
to act in the interest of shareholders (including minority
shareholders).

-- Merger, consolidation, or division of Gener requires approval
of 99% of the shares with voting rights.

The summoning of any shareholders meeting convened for purposes
related to discussion of changes to the bylaws related to changes
in covenants, or merger, consolidation or division of Gener will
require prior notice to Standard & Poor's.

OUTLOOK:STABLE

Gener's stable outlook reflects expectations of strengthening
financial ratios. Funds from operations (FFO) interest coverage
and FFO to debt are expected to exceed 2.5x and 11%,
respectively, over the next several years. Guacolda's stable
outlook reflects a high level of contract cover and technical and
operational support from Gener. Financial ratios are expected to
remain stable, despite pressure on profit margins as maturing
contracts are renegotiated, as a result of debt amortization. FFO
interest coverage and FFO to debt are expected to exceed 2.5x and
14%, respectively, over the next five years, Standard & Poor's
said.


GENER SA: Proposes To Pay Final Dividend To Shareholders
--------------------------------------------------------
Gener SA announced it is offering to pay shareholders a final
dividend of 19.6 pesos a share, equivalent to a payout of 111.186
billion pesos, AFX-Europe reported Wednesday. The company sent a
statement to the stock exchange notifying that the dividend
proposal would be put to shareholders at an EGM schedule for
August 29, with payment set for September 13. In addition, Gener
said it has also given a US$320-million loan to parent
Inversiones Cachagua Ltda at 30-day Libor plus 2.5 percentage
points.


TELEFONICA CTC: Unbundling To Comply With Network Regulations
-------------------------------------------------------------
Chile's largest telco Telefonica CTC Chile published unbundling
conditions on its website following a call from the regulatory
authority to open its network to competitors, a company
spokesperson confirmed in a Business News Americas report
released Thursday.

On Tuesday, CTC general manager Claudio Munoz invited competitors
to use the company's network to provide ADSL service.

"ADSL is important to this company. In that sense we are opening
our network to every company in this country to use our
infrastructure to make money," he said.

Regulator Subtel ordered the incumbent to unbundle its network as
part of a controversial tariff decree approved in August 1999,
which reduced local call rates and access fees CTC charges
competitors. However, until now the company has dragged its heals
on the unbundling issue.



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

AVIANCA: Welcomes New Chairman
------------------------------
Colombian national carrier Avianca now has a newly-appointed
chairman in the person of Vytis Didziulis, South American
Business Information reported Friday. Consequently, Diziulis, a
former director at Distral (now in liquidation), will take charge
of Avianca's projected merger with fellow Colombian airline Aces
if and when authorities approve such a move.

Ernesto Vasquez Rocha had been holding the reins of Avianca,
which in March 2001 posted a negative equity of 387 billion
pesos, and in 2000, registered losses of 414 billion pesos. Just
recently, the airline's leading shareholder Valores Bavaria
delayed injecting a US$68.5-million capitalization into the
airline until it sees an improvement in the conditions
surrounding the operation.


FABRICONDOR: To Start Operating Under Law 550
---------------------------------------------
As soon as Fabricato and Tejicondor, two Colombian companies from
the textile sector, complete the merger process, a company to be
officially known as Textiles Fabricato Tejicondor SA will emerge,
according to a report Thursday in South American Business
Information. However, shareholders, who recently approved the
process, have already started calling the future firm
Fabricondor. Completion of the merger process now awaits
regulatory approval from Supervalores, the stock market
Superintendencia in Colombia. Fabricondor will control 48 percent
of the national market but will begin operating under the Ley 550
for economic intervention aimed at securing debt-restructuring
deals. Fabricondor will be controlled by Suramericana and
Compania Nacional de Chocolates, from Fabricato, and Argos, from
Tejicondor, as well as partner-to-both Corfinsura. The new firm
will have 14 subsidiaries and will produce 90 million meters of
cloth annually. Fabricato's premises will be used for production,
while Tejicondor's will be used for an educational project.



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M E X I C O
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INTERACCIONES/QUADRUM/BANSI: IPAB Monitors Financial Health
------------------------------------------------------------
Julio Cesar Mendez, executive secretary at Mexican Bank Savings
Protection Agency (IPAB), revealed that the agency is ready to
take steps to help banks it sees at risk of serious financial
crisis, Business News Americas reported Tuesday. Mendez revealed
that IPAB is now closely monitoring the health of three banks.
The short list includes Interacciones and Quadrom, which,
according to the National Banking and Investment Commission
(CNBV), are showing signs of financial weakness, and Bansi, which
will have to reclassify its capital.

IPAB is prepared to extend loans for up to six months, with the
possibility of extending the loans another six months if
required, Mendez said. If loans are insufficient to resolve the
banks' financial problems, "we would have to go further and apply
a permanent support scheme, through an administration, like what
happened with Bancrecer," he said. Another possibility would be
to liquidate the institutions in order to pay depositors, said
Mendez.



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P A R A G U A Y
===============

CORPOSANA: Government Delays Privatization Until Next March
-----------------------------------------------------------
The Paraguayan government decided to delay the privatization
auction of the water supply company Corposana from December of
this year to March 2002, Diario ABC said in a July 27 report. The
government attributed the postponement to the indemnities that
will be paid to workers, as well as the choice of an investment
bank to advise on the sale. In order to reduce labor liabilities
to zero before the privatization, Corposana will have to spend
US$8.4 million.




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
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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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