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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

            Wednesday, September 12, 2001, Vol. 2, Issue 178

                           Headlines

* A R G E N T I N A *

AEROLINEAS ARGENTINAS: Sepi to Define Future This Week
CURTIDORA DEL OESTE: Goes Bankrupt
MULTICANAL: Loses Transmission Rights

* B R A Z I L *

EPTE: Shares Fall to Lowest Price on Less-Than-Expected Offer
MOULINEX-BRANDT: Administrators Must Find Buyer Within Six Months
TELESYSTEM INTERNATIONAL: Successful in Private Exchange Offer

* C H I L E *

EDELNOR: AES Extends Expiration Date for Offer to Purchase
LANCHILE: Pilots Likely to Strike Nov. 29
LANCHILE: Impacted by Pilot Disruptions, Softening Cargo Demand
TELEFONICA CTC: To Sell 60% Sonda Ownership
TELEFONICA CTC: Call Rates Proposal Now Under Subtel's Scrutiny

* C O L O M B I A *

AVIANCA/ACES: Merger Case Greets Third Arbiter

* E C U A D O R *

FILANBANCO: Ecuador to Proceed With Auction

* H O N D U R A S *

GEOMAQUE EXPLORATIONS: In Process of Restructuring Loan

* M E X I C O *

BANCRECER: Banorte Only Participant in Auction
UNEFON: TV Azteca Shareholders Prepare to Back Company
UNEFON: Iuscell's Most Likely Target for Major Investment
AEROCONTINENTE: Flies Again


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

AEROLINEAS ARGENTINAS: Sepi to Define Future This Week
------------------------------------------------------
Bidders for the embattled Argentine airline Aerolineas Argentinas
and the Argentine press predicted that the Spanish state
industrial holding company Sepi is likely to reach a definitive
decision this week regarding the Argentine airline's future,
Gaceta de los Negocios reported Monday. All the bidders agree
that the value of the company will fall each day that the Spanish
government delays its decision. The airline is accumulating
additional losses from operating in restricted conditions and the
market share it has lost to competitors in this period.

Sepi, which holds 92.1 per cent of Aerolineas Argentinas, earlier
revealed that the sale would be made on the basis of the economic
viability plans presented by the four bidders.


CURTIDORA DEL OESTE: Goes Bankrupt
----------------------------------
Curtidora del Oeste Santafecino, a tannery of Santa Fe province,
which specializes in processing leather for soles and upholstery,
went bankrupt with US$45 million in debt, according to a report
Thursday in South American Business Information. Sector sources
revealed that an Italian tannery group, which administrates a
vegetable tanning plant in Corrientes province, is interested in
continuing the tannery's industrial activity but with a radical
change in the systems used by the bankrupt firm.

Curtidora del Oeste Santafesino was created in 1963.


MULTICANAL: Loses Transmission Rights
-------------------------------------
After months of legal battle, Multicanal, along with Cablevisi¢n,
finally succumbed to government pressure to strip them of their
exclusive rights to transmit matches Argentina's national teams
play against regional rivals, to qualify for next year's World
Cup, according to an article in Multichannel News International
released Friday.

The decision came just days after a federal judge threatened to
block transmission of last week's match against rival Brazil
unless the MSOs agreed with the government to comply with a
Congressional law that requires the games be made accessible free
of charge. The MSO's argued they should be exempt from the law
because they acquired the rights to televise the games prior to
its passage last October.

However, the court ruled that the public's interest came ahead of
the legitimate contractual claims of the MSOs. The two MSOs
jointly paid $54 million to sports-media outfit Torneos y
Competencias (TyC). TyC, which acquired the rights to the World
Cup eliminatory games for $14 million from FIFA, the soccer
federation. However, DirecTV Latin America holds the rights to
World Cup events in 2002 and 2006 in many Latino territories,
including Argentina.

It is not known if the MSOs received any compensation for the
lost games.


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

EPTE: Shares Fall to Lowest Price on Less-Than-Expected Offer
-------------------------------------------------------------
Shares in power transmission company Empresa Paulista de
Transmissao de Energia Eletrica SA (EPTE) took its steepest one-
day dive ever following a less-than-expected offer from another
Brazilian utility to take over the company, Bloomberg revealed
Monday. EPTE shares plunged 26 percent to 11.8 reais in the
afternoon trading at the Sao Paulo stock exchange after Cia. de
Transmissao de Energia Eletrica Paulista SA (Cteep) offered to
acquire the former for 1.89 Cteep shares for each share in
Empresa Paulista.

Marcos Severine, a power utility analyst at Banco Sudameris SA's
brokerage in Sao Paulo disclosed that the ratio was below
investor estimates of up to 3 shares for each share of EPTE.

"Probably investors didn't think the exchange rate for the shares
was very good," said Pedro Batista, an analyst at Banco Pactual
SA in Rio de Janeiro. "This operation had been expected for a
very long time."

Shares in Empresa Paulista are falling to adjust to the new
ratio, which values the stock at 11.8 reais, according to
Severine.

In February, the two companies said their board members approved
a plan under which Cteep will acquire EPTE. The Sao Paulo state
government, which last year said it wanted to merge both
utilities to increase efficiency, controls both companies.


MOULINEX-BRANDT: Administrators Must Find Buyer Within Six Months
-----------------------------------------------------------------
Court-appointed administrators Didier Segard and Francisque Gay
have been given six months to find a buyer for Moulinex Brandt,
the Franco-Italian electrical appliance manufacturer, which filed
for bankruptcy protection on Friday, the Financial Times revealed
Monday.

Following the decision by the Nanterre commercial court, Prime
Minister Lionel Jospin and a number of ministers in his
Socialist-led government vowed to help fend-off the liquidation
of Moulinex and encouraged competitors to make takeover offers
soon.

"In this situation, we must do the utmost to find an industrial
buyer," said Finance Minister Laurent Fabius.

This weekend, reports cited Whirlpool and Electrolux as potential
takeover candidates. Seb, a French rival of Moulinex, is also
interested, although the government is unlikely to favor a
domestic deal that could produce large job cuts.

The administrators said they had asked Patrick Puy to remain as
chief executive even though he had indicated that he expected to
step down.


TELESYSTEM INTERNATIONAL: Successful in Private Exchange Offer
--------------------------------------------------------------
Telesystem International Wireless Inc. (TIW) (Nasdaq:TIWI)
(TSE:TIW.) is pleased to announce that holders of its Senior
Discount Notes due 2007 have tendered almost all (approximately
99.9%) of the outstanding notes in exchange for a combination of
cash and new 14% Senior Guaranteed Notes due December 30, 2003
pursuant to an exchange offer that expired September 7, 2001 at
5:00 p.m.

The total principal amount of new Senior Guaranteed Notes that
will be issued to tendering holders on or about September 12,
2001, will be approximately US$195 million. The total amount of
cash to be paid in the exchange offer, including the fee payable
in the related consent solicitation, is US$50 million.

The new Senior Guaranteed Notes and the US$50 million cash
consideration were offered in exchange for the currently
outstanding 13 1/4% Senior Discount Notes due 2007 and 10 1/2%
Senior Discount Notes due 2007 having a total nominal value of
US$547 million. As at June 30, 2001, the total accreted value of
the two series of Senior Discount Notes was US$480 million.

TIW has also obtained consents from the holders of its Senior
Discount Notes to amend the existing indentures governing those
notes in order to delete substantially all of the covenants in
such indentures.

The new Senior Guaranteed Notes will not be registered under the
U.S. Securities Act of 1933 or offered by prospectus under
Canadian securities laws. The exchange offer was made pursuant to
a private placement exemption under the Securities Act.

About TIW

TIW is a global mobile communications operator with over 4.4
million subscribers worldwide. The Company's shares are listed on
the Toronto Stock Exchange ("TIW") and NASDAQ ("TIWI").

TIW is also the strategic partner in two leading cellular
operators in Brazil. In Central and Eastern Europe, TIW is a
cellular market leader in Romania and launched services in the
Czech Republic in March 2000.

To see company's latest financial statements:
http://www.bankrupt.com/misc/Telesystem.pdf

For further information, contact:

     Telesystem International Wireless Inc.
     BENOIT FORCIER
     Tel: 514/673-8468
     E-mail: bforcier@tiw.ca

     OR

     Telesystem International Wireless Inc.
     MARK BOUTET
     Tel: 514/673-8406
     e-mail: mboutet@tiw.ca

     OR

     Telesystem International Wireless Inc.
     ANDRE GAUTHIER
     Tel: 514/673-8493
     Email: agauthier@tiw.ca
     Website: www.tiw.ca


=========
C H I L E

=========

EDELNOR: AES Extends Expiration Date for Offer to Purchase
---------------------------------------------------------
The AES Corporation (NYSE:AES) has announced that it is extending
the expiration date for its tender offer (the "Offer") for cash
by Luna III, Ltd., a Cayman Islands limited liability exempted
company ("Luna") and wholly owned indirect subsidiary of The AES
Corporation to purchase all of the outstanding (i) 10-1/2% Senior
Loan Participation Certificates due 2005 (the "2005
Certificates") and (ii) 7-3/4% Senior Loan Participation
Certificates due 2006 (the "2006 Certificates" and, together with
the 2005 Certificates, the "Certificates") of Empresa Electrica
del Norte Grande S.A., a Chilean corporation ("Edelnor").

The 2005 Certificates and the 2006 Certificates were issued in an
aggregate principal amount of US$90,000,000 and US$250,000,000,
respectively. The Certificates represent pro rata participation
interests in all payments of principal and interest made in
respect of loans of Edelnor.

The Offer will now expire at 5:00 p.m. New York City time, on
September 20, 2001, unless further extended or earlier
terminated. All other terms of the Offer remain unchanged.

As of 5:00 p.m., New York City time, on September 7, 2001, Luna
was advised by the exchange agent that approximately
US$10,674,000 of the total amount of the 2006 Certificates were
tendered and none of the 2005 Certificates were tendered.

Information regarding the tender and delivery procedures and
conditions of the Offer is contained in the Offer to Purchase
dated August 6, 2001 and related documents. Copies of these
documents can be obtained by contacting Mellon Investor Services,
at 917/320-6286. Banc of America Securities LLC is the exclusive
dealer manager for the Offer.

Additional information concerning the terms and conditions of the
Offer may be obtained by contacting Banc of America Securities
LLC at 888/292-0070 (toll free) or 704/388-4807 (collect).

CONTACT:          The AES Corporation
                  Kenneth R. Woodcock, 703/522-1315


LANCHILE: Pilots Likely to Strike Nov. 29
-----------------------------------------
LanChile accused pilots' union of dishonest practices in order to
push through with negotiations by delaying the flights, El
Mercurio reported Thursday. According to the company, the pilots'
attitude is illegal because it is hurting passengers. Between
August 1 and 21, LanChile's punctuality rate on domestic flights
was 70.4 percent; between the August 26 and September 3, 2001,
the rate dropped to 18.9 percent. On international flights the
rate dropped from 70 percent to 20.9 percent.

The union's main complaint, on the other hand, is that LanChile
is using unregistered pilots, such as ex-Ecuadorian de Aviacion
and Landau pilots. Furthermore, LanChile is using Ladeco Cargo
for passenger services.

Pilots are not looking to earn as much as the One World alliance
pilots who earn 400 percent to 500 percent more than Chilean
pilots. LanChile pilots could start a strike on November 29.


LANCHILE: Impacted by Pilot Disruptions, Softening Cargo Demand
----------------------------------------------------------------
Lan Chile S.A., ("Lan Chile" or "the Company") (NYSE: LFL) said
Monday that pilot-induced service disruptions and softening cargo
demand have negatively impacted the Company's financial
performance. Given these developments, th Company believes that
current analyst estimates should be revised.

During the past two weeks, the Company's passenger operations
have been negatively impacted by a pilot-induced slowdown. The
LanChile Pilot Union, which represents approximately 60% of the
Company's total pilots, is currently under a long-term contract,
which is scheduled to expire on November 30, 2001. These pilots
have significantly increased delays in both departure and arrival
times and have further disrupted operations by increasing the
amount of medical leaves requested. While the Company is doing
everything possible to maintain its service standards, the
disruptions are expected to continue until the contract is
resolved.

Additionally, a significant decrease in southbound cargo demand,
specifically to Argentina and Brazil, has resulted in decreased
traffic. While the Company has re-routed its freighters, it has
not been able to compensate for the impact.

Luis Ernesto Videla, LanChile's Chief Operating Officer stated,
"We continue to manage our cargo operations in order to preserve
profitability, and we are working to minimize the effects of the
operational disruption caused by our pilots. We apologize to any
of our customers who have been inconvenienced and will keep the
market informed of any developments."

CONTACT:          In Chile
                  Lan Chile S.A.
                  Alejandro de la Fuente
                  Daniel Jones - djones@lanchile.cl
                  Andres Bianchi - abianchi@lanchile.cl
                  Tel: 562/565-2538 / 6812

                  or

                  In New York
                  i-advize Corporate Communications, Inc.
                  Maria Barona, mbarona@i-advize.com
                  Blanca Hirani, bhirani@i-advize.com
                  Tel: 212/406-3691


TELEFONICA CTC: To Sell 60% Sonda Ownership
-------------------------------------------
Telefonica CTC Chile has entrusted Sonda General Manager Andres
Navarro to sell 60 percent of Sonda, which is owned by Telefonica
CTC, in the next three years, after which Navarro has the
purchase option, according to a report Thursday in El Mercurio.
The decision was deemed bureaucratic since Navarro, who already
has 40 percent of Sonda, is clearly the only one interested in
Sonda.

Andres Navarro formed Sonda in 1974. In 1997, he sold 60 percent
to Telefonica for US$126 million. Last year, Telefonica had
$114.223 million losses through Sonda. In case Navarro stays with
the company he will pay for 60 percent of its assets.

Sonda is one of the main computer services companies in Latin
America; it is represented in 11 countries in the region. The
company is involved in the modernization of the Chilean
government and implementation of automatic banking systems.


TELEFONICA CTC: Call Rates Proposal Now Under Subtel's Scrutiny
---------------------------------------------------------------
Subtel (Subsecretaria de Telecomunicaciones) informed it is now
studying Telefonica CTC Chile's proposal to reduce phone call
rates based on volume, under the specifications established by
article 611 of the Comision Resolutiva Antimonopolios, El
Mercurio reported Thursday. Additionally, the government also
said it is analyzing whether they should make public the proposal
of Telefonica as suggested by VTR.


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

AVIANCA/ACES: Merger Case Greets Third Arbiter
----------------------------------------------
The proposed merger of Colombia's two largest airlines, Avianca
and Aces, welcomes its third arbiter following the corporation
regulator's admission that he failed to make a ruling less than
two weeks after he took the job, Bloomberg reported Monday. Jorge
Pinzon, who was given the job after the resignation of the trade
and industry regulator, said that the aviation authority was
better suited to judge the case.

In June, Avianca, Colombia's No. 1 airline, and Aces resubmitted
an application to merge after the trade regulator rejected a
request saying he thought it would lead to a monopoly. The merger
would create a company with over 70 percent of the market,
estimated the regulator.


=============
E C U A D O R
=============

FILANBANCO: Ecuador to Proceed With Auction
-------------------------------------------
Banking Superintendent Miguel Davila announced that Ecuador is
pushing for the auction of state-owned Filanbanco's assets and
liabilities, while it studies whether it can inject the $175
million needed for the process, Reuters said Monday. On Friday,
Ecuador's banking authorities determined that the Finance
Ministry, Filanbanco's only shareholder, would need to inject
another $175 million into the bank to proceed with the planned
auction of its assets and liabilities. Without this controversial
capitalization, the bank would be liquidated.

"A final decision must be made regarding Filanbanco: It will be
opened, or definitively closed," according to Davila, explaining
that the bank's current status is termed a "suspension of
operations."

"The shareholder is told, are you going to sustain the bank from
here forward, or does it pass to the hands of banking authorities
to arrange for its liquidation?" he added.

Several analysts feared that Filanbanco's assets won't be
sufficient to cover its liabilities, which include short-term
deposits over $10,000 per account and mid- and long-term deposits
that have yet to be returned to bank clients.

Davila said while minimum standards for the capital adequacy
ratio can be waived during the liquidation process, assets and
liabilities still must match up.


===============
H O N D U R A S
===============

GEOMAQUE EXPLORATIONS: In Process of Restructuring Loan
-------------------------------------------------------
(Amounts quoted in US dollars)

Geomaque Explorations Ltd. announced Monday that it has reached
agreement with its principal lender Resource Capital Fund II LP
of Denver, Colorado (the "Lender") to provide time for the
renegotiation of its credit and security arrangements with the
Lender under the agreement dated June 9, 2000 (the "Credit
Agreement") by September 28, 2001.

Sinking fund payments required under the Credit Agreement have,
with the agreement of the Lender, been deferred as a result of
lower than projected cash flows due to continuing lower than
planned gold production at the Company's Vueltas del Rio Mine in
Honduras (the "Mine").

Under the Credit Agreement, a payment to the Lender of $825,000
from the sinking fund would have been due September 30, 2001. In
conjunction with its discussions with the Lender, the Company has
prepaid $575,000 of this amount from the sinking fund. As a
result, the payment due September 30, 2001 is now $250,000. With
the Lender's concurrence, the Company is using $300,000 of funds
that would otherwise be deposited in the sinking fund principally
to fund the acceleration of construction of the second leach pad
at the Mine.

The second leach pad is being built to provide more leaching
area. This will allow sufficient time to achieve planned leaching
recoveries before the next layer of ore is placed on the pad.
Treatment of ore using this new pad will commence before the end
of the year resulting in gold production increases being realized
in the first quarter of 2002.

The Company has engaged Haywood Securities Inc. as its financial
advisor to assist with this restructuring. In order to avoid
possible conflicts of interest during these discussions, Mr.
Bruce Higson-Smith, Vice President of Resource Capital Funds has
resigned from the Board of Directors of the Company.

Geomaque Explorations Ltd. is an international mining company
that is producing gold from its Vueltas del Rio Mine in Honduras
and San Francisco Mine in Mexico, and exploring for precious
metals in the Americas.

For further information, contact: John Paterson, President and
                                  Chief Executive Officer
                                  (416) 956-7470;


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

BANCRECER: Banorte Only Participant in Auction
----------------------------------------------
Monday's auction of the failed Mexican bank BanCrecer SA was left
only with one participant, Grupo Financiero Banorte SA, the
country's fifth-largest bank, after Canada's Bank of Nova Scotia,
which had also been expected to make a bid, withdrew from the
auction, Bloomberg revealed in a report. Banorte submitted Monday
an offer to purchase Bancrecer, and according to the report, the
government agency managing the sale said it would announce on
September 24 whether Banorte's offer is accepted.

Analysts say the purchase would help Banorte compete in Mexico's
consolidating banking industry against rivals such as Citigroup
Inc., which this year purchased Grupo Financiero Banamex SA to
form the country's largest bank.

"It would be a good move to buy BanCrecer," said Jose Angel
Montano, an analyst with Grupo Financiero BBVA-Bancomer SA. "It
would expedite their expansion process."

BanCrecer is currently in the hands of Mexican bank bailout
agency IPAB, the government agency which took control of the bank
after the peso crisis pushed it to the brink of bankruptcy. The
bank, which has some 800 branches in Mexico City and the central
Mexico area, has a 3 percent market share.


UNEFON: TV Azteca Shareholders Prepare to Back Company
------------------------------------------------------
Shareholders of TV Azteca are now preparing to support Unefon in
case the latter fails to meet its payment obligations, Mexico
City daily El Universal reported Friday. Report has it that TV
Azteca shareholders have ratified an agreement for the company
and Moises Saba to contribute as much as US$35 million to
liquidate obligations of Unefon in the event that it cannot
fulfill its payment obligations. TV Azteca and Saba had already
guaranteed up to US$80 million each in credit to Unefon to
provide the mobile-phone company with cash. Shareholders also
passed modifications to the company's statutes according to
changes in the new Securities Markets Law. It was agreed, at a
board meeting last December, to separate Unefon from TV Azteca
subject to certain conditions.


UNEFON: Iuscell's Most Likely Target for Major Investment
---------------------------------------------------------
Iusacell, which is controlled by 37-percent owner Verizon
Communications, needs to expand its footprint, which only covers
Mexico City and the surrounding states, if it wants to gain on
market leader Telcel, an operation of Telmex, subsidiary America
Movil, Wireless Today said in a report Thursday.

"The only way they can do that is by acquiring somebody else
because all the licenses have been distributed," said Enrique
Gaitan, the Mexican operations managing director of New York-
based telecom investment consultancy latinvalley.

Since Mexico's telecom regulators aren't making new wireless
market licenses available, Iusacell may look to Unefon, which
primarily offers wireless-based local phone service throughout
the country.

Unefon was launched in 1999 with the backing of TV Azteca, the
operator of two national television networks in Mexico, and of
members of Mexico's Saba family. But Unefon needs help.

"Unefon is looking for somebody to support them," Gaitan said.
"It's going to be hard for them to survive on their own."


=======
P E R U
=======

AEROCONTINENTE: Flies Again
---------------------------
AeroContinente, Peru's leading airline, began its first full-week
of flights in Chile on Monday after a month-long battle with the
Chilean courts had paralyzed its business, the Financial Times
said in a report. The airline was able to get back to its
activities after a Chilean judge ruled that the airline could
restart its flights. The four AeroContinente Chile executives,
three Chileans and one Peruvian held on suspicion of conspiracy
and money laundering charges, had also been released, the charges
against them having been deemed insubstantial.

The case has meant a moral victory for the Peruvian airline -
with its sights set now on Argentina; an embarrassment for the
independent Chilean probe that brought the charges; renewed calls
for anti-competition authorities to look at Chilean carrier
LanChile's domestic dominance; and a re-awakening of old grudges
between the neighboring Andean countries, analysts say.

                                    *********

       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 and Edem
Psamathe P. Alfeche, Editors.

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

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