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/raid1/www/Hosts/bankrupt/TCRLA_Public/011009.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 Tuesday, October 9, 2001, Vol. 2, Issue 197 Headlines A N T I G U A & B A R B U D A LIAT LTD.: Seeks Voluntary Retrenchment For Employees A R G E N T I N A AEROLINEAS ARGENTINAS: SEPI Chairman Confident In New Ownership AEROLINEAS ARGENTINAS: SEPI Authorized To Settle Worker Benefits EL SITIO: Denies Office Closure Reports, Explains Changes B R A Z I L CVRD: Analysts See Rio Bidding For Caemi's Canadian Assets CVRD: To Post R$1.1B Profit In 3Q01 With Cenibra Sale EMBRAER: Preferred Shares Up 1.2% After New Figures Presented MOULINEX: Court To Issue Ruling On Offers Oct. 16 SAMSUNG ELECTRO-MECHANICS: May Pull Operations Out Of Brazil VARIG: Bondholders Expected To Press For Early Debt Repayment VASP: Sells LAB Shares In The Wake Of Increasing Allegations VASP: Registers Net Loss Of 114.6M Reais For 1H01 VASP: Wins $1Billion Lawsuit Against Government, Appeal Expected J A M A I C A AIR JAMAICA: Graduated Pay Cuts For Employees From Top To Bottom M E X I C O GRUPO DINA: Mothballs Tepeapulco Assembly Plants XEROX: Names PricewaterhouseCoopers As New Accountants P A N A M A PSINET: Cable & Wireless Considers Buying Panamanian Assets P E R U AEROCONTINENTE: Founder To Be Tried Oct. 22 For Drug Trafficking SPCC: Time Running Out To Utilize US$400M Credit T R I N I D A D & T O B A G O BWIA: Imposing Surcharge To Cover Soaring Insurance Premiums - - - - - - - - - - - ================================= A N T I G U A & B A R B U D A ================================= LIAT LTD.: Seeks Voluntary Retrenchment For Employees ----------------------------------------------------- Regional airline LIAT's financial problems continue as the company seeks further reductions of 100-150 from its staff across the region. But, according to a report in The Antigua Sun, the company wants workers to accept a voluntary retrenchment program. LIAT CEO Gary Gullen reportedly convened a meeting of pilots last week informing them of the gloomy financial outlook. Some 22 LIAT pilots are expected to be job hunting soon. The company's Board of Directors is expected to meet soon with unions and organizations representing its employees. The British consultancy firm Speedwing has recommended the retrenchment of 200 workers. Additionally, the airline's fleet of aircraft is to be reduced by seven. ================= A R G E N T I N A ================= AEROLINEAS ARGENTINAS: SEPI Chairman Confident In New Ownership --------------------------------------------------------------- Ignacio Ruiz Jarabo, the chairman of Spain's state holding company SEPI, wished the new owners of Aerolineas Argentinas luck on their venture, EFE News Service related Thursday. Ruiz Jarabo believes that Aerolineas' new owners, the Air Comet consortium, in which the Spanish hotel and tour operator Marsans is the principal partner, will allow it consolidate eventually, even to expand its operations. Mr. Jarabo also hoped employees would join the new management's efforts to relaunch the company. He downplayed speculation that the sale might lead to a resurgence of the labor unrest that originally led SEPI to wash its hands of the company after two of the seven unions representing employees refused to go along with its restructuring plan. Meanwhile, the adjudication of Aerolineas was welcomed by the chairman of Iberia Airlines, Xabier de Irala, as "good news for everyone." He said he felt that the decision to take over the carrier was justified "given the relations between Spain and Latin America" but couldn't have come at a more inopportune time, just after the Gulf War and in the midst of an industry-wide slowdown. AEROLINEAS ARGENTINAS: SEPI Authorized To Settle Worker Benefits ---------------------------------------------------------------- The Spanish government on Friday authorized the state-owned holding company SEPI to defray the cost of employee benefits at Aerolineas Argentinas, EFE said in a report. The Spanish government's move allows SEPI to modify its 2001 financial plan and grant up to $50 million in loans to its subsidiary, Interinvest S.A., for that purpose. Aerolineas Argentinas, which is in debt to the tune of $800 million, was privatized in 1990 by the administration of Carlos Menem, but earned a profit only in 1997. EL SITIO: Denies Office Closure Reports, Explains Changes --------------------------------------------------------- A spokesperson from El Sitio's current controller Claxson contradicted reports that the Miami-based horizontal portal is closing down its offices in Mexico, Brazil and Uruguay, Business News Americas reported Thursday. According to the spokesperson, El Sitio's Mexico office is not closing, rather it is changing to a Claxson office, as is the case in other markets where El Sitio operates. At the same time, the spokesperson also denied reports that El Sitio would close its Venezuelan operations, explaining that the company has never had offices in that country. Spanish- and Portuguese-language content provider Claxson was recently formed through a merger of El Sitio (www.elsitio.com) and Ibero-American Media Partners II Ltd. CONTACT: Press & Media, Alfredo Richard of Claxson Interactive Group Inc., +1-305-894-3588; or Jennifer Gery, gery@braincomm.com, of Brainerd Communicators Inc., for Claxson Interactive Group Inc., +1-212-986-6667; or Investors, Jeff Majtyka, majtyka@braincomm.com, or Lenny Santiago, santiago@braincomm.com, or +1-212-986-6667, both of Brainerd Communicators Inc., for Claxson Interactive Group Inc. =========== B R A Z I L =========== CVRD: Analysts See Rio Bidding For Caemi's Canadian Assets ---------------------------------------------------------- Analysts predict that Rio Tinto Group, the No. 3 brazilian mining company, is likely to bid for Caemi Mineracao & Metalurgica SA's Canadian iron unit, as some of Caemi's assets are being sold to gain approval for a buyout by Cia. Vale do Rio Doce (CVRD), Bloomberg revealed Friday. CVRD, the largest iron ore exporter, agreed to pay $280 million for half of Caemi to give it an equal share with Mitsui & Co. of Japan. The concern of the European Union that CVRD would gain too much control over supply to Europe's steelmakers is expected to force the sale of mines and processing plants, such as iron ore pellet maker Quebec Cartier Mining Co., analysts said. "Rio would buy it off their hands," said Glyn Lawcock, a resources analyst at UBS Warburg in Sydney. Caemi, the fourth-largest iron ore exporter in Brazil, owns 50 percent of Quebec Cartier, with Hamilton, Ontario-based Dofasco Inc., Canada's biggest steelmaker by sales, owning the other half. Dofasco, which saw second-half profit fall 66 percent, may also sell its stake, analysts said. The European Commission, the EU's regulatory arm, is due to complete its review of CVRD and Mitsui's bid by Nov. 8, though may rule at a weekly meeting on Oct. 31. The commission said in July there are "serious concerns" of potential domination of iron ore shipments to Europe by CVRD. The regulator can block or impose constraints on mergers between companies with combined global sales of 5 billion euros ($4.2 billion), even if they aren't based in Europe. CONTACT: Roberto Castello Branco: castello@cvrd.com.br +55-21-3814-4540 Andreia Reis: andreis@cvrd.com.br +55-21-3814-4643 Barbara Geluda: geluda@cvrd.com.br +55-21-3814-4557 Daniela Tinoco: daniela@cvrd.com.br +55-21-3814-4946 CVRD: To Post R$1.1B Profit In 3Q01 With Cenibra Sale ----------------------------------------------------- CVRD is expected to register a profit of R$1.1 billion in the third quarter of this year, Jornal do Comercio reported Thursday. Such performance includes the sale of Cenibra to JBP (Japan Paper and Pulp Resources), a transaction valued at US$670 million. Additionally, company CEO Roger Agnelli informed that CVRD is to create new management committees in the midst of a restructuring strategy, which is being developed by the consulting company McKinsey. EMBRAER: Preferred Shares Up 1.2% After New Figures Presented ------------------------------------------------------------- Empresa Brasileira de Aeronautica SA (Embraer) preferred stock rose 1.2 percent Thursday, to 8.8 reais, according to a report in Bloomberg. "Now that the company has presented its figures, we believe that the market will go over its calculations again and realize that Embraer's stock suffered an exaggerated discount based on the speculations and uncertainties of an outlook no longer expected to materialize," Uniao de Bancos Brasileiros SA (Unibanco) said in a report. "Unless a new catastrophe comes about, there is no reason for its shares to slip down further," the report said. Shares at the world's No. 4 aircraft maker have fallen 45 percent in the past 30 days. MOULINEX: Court To Issue Ruling On Offers Oct. 16 ------------------------------------------------- The central works council of the French-Italian appliances company Moulinex-Brandt will rule on the various takeover bids for the beleaguered group on Oct. 15, Le Figaro said in a report. On the other hand, the Nanterre commercial court will issue its own ruling regarding these offers on the following day, according to the CFE-CGC union. However, this claim has yet to be confirmed by the French company's receiver. In any case, the CFE-CGC also alleges that the October 15 session will be preceded by a meeting on either Monday or Tuesday of this week at which the potential buyers Fidei and Euroland will unveil details of their financing plans. SAMSUNG ELECTRO-MECHANICS: May Pull Operations Out Of Brazil ------------------------------------------------------------ As part of a plan to shut down unprofitable businesses abroad, Korea's biggest maker of electronics components, Samsung Electro- Mechanics Co., is likely to withdraw its operations from Brazil, Bloomberg said Monday. The company's Brazilian operations faced difficulties recently due to the strengthening of the Brazilian currency against the U.S. dollar. Samsung Electro-Mechanics doesn't expect a big loss from pulling out of Brazil because it used production facilities relocated from Korea. Samsung Electro-Mechanics saw its first quarterly operating loss in the April-June period as sales to computer companies slumped. Its second-quarter operating income loss totaled 5.6 billion won ($4.3 million), compared with 15.1 billion won profit in the first three months of the year. Operating profit for the first half fell to 9.5 billion won from 144 billion won a year earlier. VARIG: Bondholders Expected To Press For Early Debt Repayment ------------------------------------------------------------- Viacao Aerea Rio-Grandense SA (Varig), Brazil's biggest airline, may be forced to pay back $50 million to bondholders this month if investors demand early repayment on fears that the airline will suffer from the worst global airline slump in a decade, Bloomberg reported Friday. Varig is already in default on the terms of $100 million in 7- year notes that mature in 2005. A 29-percent drop in the value of Brazil's currency this year has meant the company hasn't been able to keep to a condition governing its coverage of interest payments on its debt. In a report, Standard & Poor's said that investors, concerned about the airline's ability to sell enough air tickets after the Sept. 11 terrorist attacks in the U.S., are not likely to extend a waiver on the default beyond Oct. 15. That could force the company to pay out $50 million and seek more financing at a time when concerns about the U.S. attacks and a possible debt default by Argentina are raising financing costs for Brazilian companies. Additionally, the ratings agency revealed that Varig informed analysts that occupancy rates for flights to the U.S. and Japan haven't suffered much since Sept. 11, declining to 70 percent from 74 percent. According to Gerson Becker, Varig's investor relations manager, the airline is planning to raise 156 million reais from the sale of one- and five-year notes as it seeks to stretch out maturities for its short-term debt. The company still hasn't made a final decision on plans announced in July to raise $100 million by selling bonds backed by ticket sales in Brazil, said Becker. Company officials said at the time Varig was preparing to pay $300 million in debt coming due this year. Varig has 600 million reais in debt maturing in one year or less, he said. Varig has debt totaling some $1.3 billion, 85 percent of which is denominated in foreign currency. CONTACT: VARIG Brazilian Airlines, Miami Jeff Kriendler, 305/866-2115 VASP: Sells LAB Shares In The Wake Of Increasing Allegations ------------------------------------------------------------ Battered with mounting allegations of poor management, Brazilian aviation company VASP announced Friday that it would sell its shares in Lloyd Aereo Boliviano (LAB), EFE revealed in a report. A LAB spokesperson informed that the Sao Paulo-based company has decided to cut off all ties with the Bolivian company with which it has been involved since December 1995 through an original investment of $47 million. VASP holds 50 percent of LAB shares. In a letter, VASP President Wagner Canhedo informed Bolivian President Jorge Quiroga of the decision to sell 50 percent of the company's shares "at a reasonable price." Canhedo said that the company was a victim of "an onslaught of allegations and charges," which were causing the company "large and irreversible" financial problems. Over the last few weeks, ruling party and opposition deputies, the Foreign Trade Ministry, and two industry regulation superintendents began an investigation into all the allegations made against VASP's management while controlling LAB. The allegations range from alleged dismantling of aircraft, of which four are currently out of service, to the poor financial dealings and the illegal sale of shares in the International Society of Aeronautical Telecommunications (SITA), with headquarters in Belgium. The LAB Worker's Federation also revealed the existence of a $7 million debt with Ecuatoriana de Aviacion company for the repair of their planes in the city of Cochabomba, incurred while VASP was the majority stock holder. VASP: Registers Net Loss Of 114.6M Reais For 1H01 ------------------------------------------------- Due to a deep slide in the real currency, Brazil's No. 3 airline Vasp registered a net loss of 114.6 million reais ($41.2 million) in the first half of this year, against a net profit of 11.8 million reais in the year-earlier period, Reuters reported Friday. Cost-cutting and restructuring efforts pulled Vasp out of the red last year, but economic turbulence from neighboring Argentina eroded the real in the first half of this year, throwing Brazilian airlines back into trouble. Threats of a global recession after the Sept. 11 attacks on the United States are further eating away at the real in the second half of the year. Still, Vasp said its earnings could improve before the end of the year after the CVM securities and exchange commission said that companies can postpone recognizing losses derived from the real's depreciation for up to four years. VASP: Wins $1Billion Lawsuit Against Government, Appeal Expected ---------------------------------------------------------------- Brazilian airline Vasp won 2.8 billion reais ($1 billion) in a lawsuit against the Brazilian government over ticket price controls during the late 1980s, Bloomberg reported Saturday. The Regional Federal Tribunal in Brasilia voted 4-3 in favor of the airline, agreeing that the company was unfairly harmed when the government barred airlines from raising ticket prices from 1987. Federal government's lawyers said they'll appeal the ruling. ============= J A M A I C A ============= AIR JAMAICA: Graduated Pay Cuts For Employees From Top To Bottom ---------------------------------------------------------------- Senior managers at the National airline Air Jamaica agreed during an emergency management meeting less than two weeks ago to have their salaries cut by 10 percent effective immediately, RJR Radio Jamaica revealed in a report. Air Jamaica's President Chris Zacca and the airline's Vice-Presidents will forego one tenth of their salaries as the carrier struggles to embark on cost cutting measures in the wake of the fall-off in business since the September 11 attacks on Washington and New York. The cuts will continue until December. Meanwhile, the salaries of the airline's managers and senior directors will be reduced by six percent. In addition, the airline's rank and file employees have been asked to voluntarily give up three percent of their salaries in solidarity with senior management. Air Jamaica, which has faced a drastic drop in revenue due to a huge decline in airline travel, lost US$11 million in the days after the attacks as several of its planes were grounded for three days. =========== M E X I C O =========== GRUPO DINA: Mothballs Tepeapulco Assembly Plants ------------------------------------------------ Grupo Dina has mothballed its assembly plants in Tepeapulco, according to a report Friday in waitnews.com. The company has been struggling with financial trouble since 1997. With capacity established at 10,000 units a year, the truck range was upgraded in September 1998, but not with all-new products, which were desperately needed. Western Star of Canada reached agreement with Dina for the supply of 9,000 heavy-duty trucks a year, but the agreement came just as the North American truck sector was runing into its own trouble. The contract was subsequently cancelled and Grupo Dina recently filed a legal case with the Tribunal Arbitral de la Camara de Comercio Internacional (CCI), claiming US$123,161,117 from Western Star. Dina was relying on the benefits of the contract over the coming ten years and since cancellation, has moved very close indeed to going entirely out of business. US financial consultants BDO Seidman LLP arrived at the damage figures claimed in the suit. WST has until January 2002 to challenge the case. The court is expected to make its decision in the second quarter of 2002. XEROX: Names PricewaterhouseCoopers As New Accountants ------------------------------------------------------ Xerox Corporation, under investigation for alleged accounting irregularities stemming from its Mexican operations, announced Friday that PricewaterhouseCoopers LLP has been named the company's independent accountants for the fiscal year ending December 31, 2001, replacing KPMG LLP. "KPMG and Xerox have had a long and important relationship," said Paul A. Allaire, Xerox chairman. "While Xerox appreciates their service on our behalf, the Board and its Audit Committee believe it is appropriate at this time to bring in new accountants. We fully expect a smooth and seamless transition to PricewaterhouseCoopers." KPMG spokesman George Ledwith said the accounting firm was disappointed in the termination of what had been a more than 30- year relationship. "KPMG invested significant talent and resources in the audit of Xerox's financial statements," he said. "We have since worked closely with Xerox to try to further address issues raised by our audit and the investigation and were continuing to do so when we were terminated." In March, KPMG told Xerox it wanted to significantly expand its audit of the company's 2000 financial statements. That review led to a restatement of Xerox's finances. The more in-depth review came as the SEC investigated Xerox's accounting practices after the company acknowledged accounting irregularities at its Mexico unit. Xerox, which fired several executives in Mexico and took a $120 million, after-tax charge last year, has said the problems were limited to domineering managers who sought to drive growth at any cost. Xerox filed Friday a Form 8-K with the Securities and Exchange Commission detailing the change in the company's independent auditor. The Audit Committee and the Board of Directors approved last week the company's decision to change independent accountants. CONTACT: Media Contact: Xerox Corporation Christa Carone, 716/423-5074 christa.carone@usa.xerox.com =========== P A N A M A =========== PSINET: Cable & Wireless Considers Buying Panamanian Assets ----------------------------------------------------------- Britain's Cable & Wireless Plc said on Thursday it may dip into its 6.5 billion pound ($9.6 billion) cash pile to buy parts of bankrupt U.S. Internet services company PSINet in Japan and Panama, Reuters revealed in a report. Chief Executive Graham Wallace said the company was looking at adding some of the U.S. company's assets to its Web site hosting business. But Wallace said he would remain careful with the cash for the next year because he expected further turbulence in the telecoms industry. CONTACT: PSINet Inc., Ashburn Flo Bryan, 703/726-1077 ======= P E R U ======= AEROCONTINENTE: Founder To Be Tried Oct. 22 For Drug Trafficking ---------------------------------------------------------------- A Peruvian court will try Fernando Zevallos, the founder of Peruvian airline Aerocontinente SA, on October 22 on charges of drug-trafficking, Bloomberg said in a report. According to Lupe Zevallos, Aerocontinente's chairman of the board and Fernando Zevallos' sister, her brother is the airline's founder but has no current position in the company. In September, Zevallos testified before a Chilean judge in Santiago about the source of funds Aerocontinente uses to operate its Chilean unit. Meanwhile, Zevallos is also being investigated regarding links to a corruption web involving jailed ex-spy chief Vladimiro Montesinos, who was adviser of former Peruvian President Alberto Fujimori. SPCC: Time Running Out To Utilize US$400M Credit ------------------------------------------------ A spokesperson from Southern Peru Copper Corp. announced that the planned expansion of the company's Ilo smelter may be contained in its third-quarter results, due to be released the week beginning October 22, Business News Americas related Friday. The announcement came after Lima stockbrokerage Wiese Sudameris warned that the country's largest copper producer was running out of time to use a US$400-million credit for the expansion and environmental clean-up at the smelter. Since the brokerage's analysis on the company, SPCC has told the Lima bourse it has asked the country's largest bank, Credito del Peru, to help evaluate alternatives for debt refinancing, including an extension to loan repayment periods. The search would consider all possibilities, forms and opportunities in domestic and international financial markets, and the company would tell the bourse when it had agreed the terms and conditions of a definitive contract with the bank and/or identified the form the financing would take, its statement to the market added. The debt-restructuring search comes at a time when copper is at two-year lows, with its spot price below US$0.65/lb on the London Metal Exchange (LME), and market sentiment generally negative as fears of a world recession grow amid increasing talk of war. ================================= T R I N I D A D & T O B A G O ================================= BWIA: Imposing Surcharge To Cover Soaring Insurance Premiums ------------------------------------------------------------ National airline BWIA began charging passengers a fee on October 2 to cover insurance premiums, which increased because of the threat of war after the Sept. 11 terrorist attacks in the US, The Trinidad Express revealed in a report. "The surcharge of US$10 on international tickets and US$5 on regional and domestic tickets has become necessary as international insurance costs have skyrocketed in response to the global threat of war," a BWIA press release stated. The release quoted BWIA president and CEO Conrad Aleong as saying that the airline's annual cost of war risk insurance leapt from US$40,000 per annum to over US$3.2 million per annum as a result of the action by insurance companies. The airline will remove the surcharge once the underwriters return their premiums to pre- September 11 levels. BWIA has approached the Government for financial aid. Clint Williams, director of corporate communications, said BWIA has apprised Finance Minister Gerald Yetming of its losses and higher insurance costs and is "awaiting a meeting" to determine whether the airline will receive help. 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. This material is copyrighted and any commercial use, resale or publication in any form (including e-mail forwarding, electronic re-mailing and photocopying) is strictly prohibited without prior written permission of the publishers. Information contained herein is obtained from sources believed to be reliable, but is not guaranteed. The TCR Latin America subscription rate is $575 per half-year, delivered via e-mail. Additional e-mail subscriptions for members of the same firm for the term of the initial subscription or balance thereof are $25 each. For subscription information, contact Christopher Beard at 240/629-3300. * * * End of Transmission * * *