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/raid1/www/Hosts/bankrupt/TCRLA_Public/011102.mbx T R O U B L E D C O M P A N Y R E P O R T E R L A T I N A M E R I C A Friday, November 2, 2001, Vol. 2, Issue 215 Headlines A R G E N T I N A ALTO PALERMO: S&P Downs Sr. Debt, Credit Ratings; Outlook Neg. B R A Z I L CVRD: Clarifies EU Commission's Approval of CAEMI Acquisition CVRD: Plans $2B Worth Of Energy Generation Investments EMBRATEL: Yet To Decide On Local Telephony Service VARIG: Crisis Deepens With GE Capital's Demand For Debt Payment C O L O M B I A AVIANCA: Predicts Profitability After Merger With Aces VALORES BAVARIA: Gets Cash Injection From Bavaria VALORES BAVARIA: Analysts Skeptical About Restructuring Plans M E X I C O AEROMEXICO/MEXICANA: Government Aid Would Cover Insurance Costs AEROMEXICO: To Lose $160M In 4Q Due To Drop In Passenger Demand BANCA QUADRUM: Has Until Mid December To Decide Its Fate BANCO ATLANTICO: IPAB Board To Review Bital-Atlantico Deal GRUPO DINA: Severence Pay May Never Come, Employees Fear ICA: Selling Assets To Reduce Debts By $160 Million P A R A G U A Y ANTELCO: Privatization Draws One More Bidder T R I N I D A D & T O B A G O YORK RESEARCH: Company Profile - - - - - - - - - ================= A R G E N T I N A ================= ALTO PALERMO: S&P Downs Sr. Debt, Credit Ratings; Outlook Neg. -------------------------------------------------------------- Standard & Poor's lowered its senior unsecured debt and corporate credit ratings on Alto Palermo S.A. (APSA) to triple-'C'-plus from single-'B'. The ratings were removed from CreditWatch, where they placed Oct. 23, 2001. The outlook is negative. The downgrade follows the recent collapse in shopping mall retail sales, reflecting poor prospects for the industry in the medium term. This might further deteriorate APSA's financial profile and not allow the company to reduce its high exposure to short-term debt while the credit environment in Argentina continues to worsen. APSA is a real estate company that owns, leases, operates, develops, and acquires shopping centers in Argentina. Additionally, APSA has developed a credit card operation, Tarshop, started in late 1998. The ratings on APSA reflect the inherent volatility of the Argentine real estate sector and the lack of geographic diversification in APSA's operations. In addition, given the recession that Argentina has been facing since 1999, the company's ability to collect has been deteriorating and might further deteriorate given the further weakening of retail sales in the last two months. Although more than 80% of APSA's total debt with third parties matures in 2005, the remaining share of the debt, characterized by its very short maturities, poses increasing refinancing risks given current credit market conditions. These negative factors are partially offset by the company's strong market position, the strategic locations of its shopping centers, and the growth potential for this sector in Argentina in the longer term. Despite the recession that has been facing the Argentine economy, various financial measures have slightly improved although not enough to offset increasing industry risk. Capital structure is relatively weak given current economic conditions with debt to capitalization of 40.2% for fiscal 2001 compared to 38.7% in 2000 and 46.5% in 1999. During January 2001, the company placed a four-year $120 million bond used mainly to refinance short-term maturities, somewhat improving the financial profile and lengthening the maturity schedule. However, this debt bears variable interest rates linked to highly volatile local reference rates, exposing APSA to breach of covenants if EBITDA growth does not offset the growth of interest rates. EBITDA margins improved to 60.1% in fiscal 2001 from 53.2% in fiscal 2000, but are still lower than in 1999. The poor performance of the industry might lead APSA to strongly increase marketing expenses to maintain attendance to the malls, further affecting EBITDA. For 2001, EBITDA interest coverage was 2.1x compared to 2.0x in 2000 and 2.9x in fiscal 1999 mainly due to the strong increase in interest expenses. Funds from operations to total debt have improved slightly to 20.5% in 2001 compared to 18.2% in 1999. OUTLOOK: NEGATIVE The outlook on Alto Palermo mirrors the outlook on the ratings of the Republic of Argentina, which indicates that those ratings could be lowered again if political and social tensions frustrate the government's efforts to keep the fiscal situation under control. Further capital outflows could cause additional strain and continue to undermine prospects for growth, as they severely impair domestic credit. The outlook also reflects the effects that low consumer confidence, the severe local credit crunch, and the global economic slowdown, may continue to have on GDP growth and the fact that the economy shows no signs of stabilizing. Analyst: Pablo Lutereau, Buenos Aires (54) 114-891-2125 =========== B R A Z I L =========== CVRD: Clarifies EU Commission's Approval of CAEMI Acquisition ------------------------------------------------------------- Regarding news released by the press concerning statements attributed to Companhia Vale do Rio Doce's (NYSE: RIOpr) CEO Roger Agnelli about the course of action that will follow the approval given by the European Commission for the acquisition of Caemi Mineracao e Metalurgia S.A. (Caemi), CVRD would like to inform that: CVRD and Mitsui & Co. Ltd. (Mitsui) will acquire Caemi, and will jointly control it. Each will own 50% of Caemi's common shares. Once the transaction is concluded, the percentage of Caemi preferred shares owned by CVRD and Mitsui might be equalized at 50% for each through the acquisition by CVRD of Caemi shares owned by Mitsui. Caemi's delisting was not considered. Therefore, there is no decision about this issue or about the acquisition of Caemi preferred shares from minority shareholders. First of all, CVRD and Mitsui will conclude the acquisition of the Caemi common shares from its current controlling shareholders. 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: Plans $2B Worth Of Energy Generation Investments ------------------------------------------------------ Roger Agnelli, Companhia Vale do Rio Doce (CVRD) chairman, announced that the Brazilian mining group is planning to invest $2 billion in electricity generation projects over the next six months, O Globo reported. According to the executive, CVRD will continue to analyze every good business opportunity that arises and that the group will bid for at least four concessions to build and operate hydroelectric power plants in the country. EMBRATEL: Yet To Decide On Local Telephony Service -------------------------------------------------- Purificacion Carpinteyro, Embratel regulatory affairs vice president, disclosed that Embratel is still undecided about whether to offer local telephony service next year, Business News Americas reported Wednesday. However, the company will make a final decision after concluding local loop unbundling negotiations with local operators and after regulator Anatel has published the final rules governing new entrants and the provision of new services by incumbents in the 2002 market. Fixed line operators that meet this year government mandated coverage goals set for 2003 will be allowed to compete in new operating areas and provide new services, such as long distance. Intelig and Embratel on the other hand, are eager to provide local service to their business clients. Embratel would need to sign unbundling agreements with fixed line operators in order to offer local service. The possibility of building its own infrastructure is "out of the question," according to Carpinteyro, adding that it would cost far more than leasing capacity from fixed line operators. "The war on unbundling is not over. We are waiting for something to happen," Carpinteyro said. Embratel began unbundling negotiations with the country's three incumbent fixed line operators Telemar, Telefonica and Brasil Telecom in May of 2000, with a view to offer value-added services such as broadband Internet over DSL to end users. However, the discussions were never finalized and Anatel did not intervene to establish firm rules, she said. To see company's financial statements: http://www.bankrupt.com/misc/Embratel.pdf VARIG: Crisis Deepens With GE Capital's Demand For Debt Payment --------------------------------------------------------------- The financial crunch at Brazilian flagship airline Varig gets even worse as it faces pressure from GE Capital to pay its $200 million debt, BBC News said in a report Wednesday. The debts are on account of aircraft leases by Varig. "The outlook was already bleak and the terrorist attacks only made it worse," Varig President Ozires Silva said last week concerning the financial situation of his company, which is $1.25 billion in debt. The airline, which has only made a profit once in the last 10 years, was already struggling before the US attacks because the Brazilian real's slide against the dollar had pushed up the cost of jet fuel and aircraft leasing. Results for the first half of this year show Varig lost $204 million, a record loss due largely to the higher cost of servicing its balooning debt. After the US attacks, Varig laid off 1,700 employees, or roughly 10 percent of its workforce, reduced its fleet by 8 percent and dropped expansion plans for more flights to the US. CONTACT: VARIG Brazil Media Relations 21-3814-5480 =============== C O L O M B I A =============== AVIANCA: Predicts Profitability After Merger With Aces ------------------------------------------------------- Roberto Junguito Jr., Valores Bavaria's vice-president for investment, is optimistic that the company's subsidiary, Avianca, will become profitable, particularly if regulators approve the company's plan to merge with Aerolineas Centrales de Colombia SA (Aces), Colombia's second biggest airline, Bloomberg reported Wednesday. Junguito said though he believed Avianca was capable of becoming profitable on its own, "a turnaround with ACES will be much shorter." However, according to Junguito, the airline still needs an additional cash injection of between $50 million and $80 million some time this year, in large part to help cope with a worldwide decline in air traffic after the Sept. 11 terrorist attacks in the U.S. Some analysts say Valores has little option but to try to turn Avianca around. Declining traffic and rising losses in the airline industry worldwide makes it difficult to sell the carrier. "I think Avianca has been on their sell list for quite some time -- if they could find a buyer," said Rue Swabey, an analyst with Santander Central Hispano Investment. VALORES BAVARIA: Gets Cash Injection From Bavaria ------------------------------------------------- Struggling Colombian conglomerate Valores Bavaria obtained a crucial cash injection from related brewer Bavaria on Wednesday, Reuters reported. Accordingly, profitable brewer Bavaria injected $350 million into the company by generously buying Valores Bavaria stock. The deal was approved on Tuesday by shareholders from Valores Bavaria and owners of Bavaria stock -- with the only dissenting vote from the brewer's workers' union. According to Leonor Montoya Alvarez, Valores Bavaria president, the funds would help Valores Bavaria's debt profile However, according to the company, there's still a need for it to shed smaller firms and merge its indebted airline Avianca to cut costs. Montoya disclosed executives were reevaluating the holding company's investment portfolio of some 100 firms. "We have made a very important, serious, very conscientious analysis of our investment portfolio," Montoya said. "We will be concentrating on those companies we believe can generate more value for shareholders. We are thinking about getting out of others." Montoya said Valores Bavaria was interested in selling small firms including food maker Productor Comercializador de Alimentos, security firm Vise Inc., temporary employment firm Serdan, and shedding a minority stake in telecommunications firm Orbitel. VALORES BAVARIA: Analysts Skeptical About Restructuring Plans ------------------------------------------------------------- Analysts expressed uncertainty regarding Valores Bavaria's plans to sell assets and swap debt for equity in order to help it cover losses without borrowing more money, Bloomberg reported Wednesday. After third-quarter losses rose 10-fold to almost 123 billion pesos ($53 million), Valores may need to seek additional funds within 12 months, they say. "At some point, they're going to have to find another source of income to stabilize their finances," said Sandra Hurtado, an analyst with Multivalores SA. "Much of this company is not sustainable." Since the start of the year, the holding company's shares have fallen 66 percent. Losses may mount even more if Valores doesn't press ahead with plans to sell some its holdings, said Carolina Forero, an analyst with Bogota-based Corporacion Financiero Del Valle. "If they get rid of problematic companies, then this could be really good," said Forero. =========== M E X I C O =========== AEROMEXICO/MEXICANA: Government Aid Would Cover Insurance Costs --------------------------------------------------------------- A proposal that would help meet additional insurance costs against risk of war and terrorism being paid by the Mexican airlines Aeromexico and Mexicana is now in the hands of the lower house finance committee, Reuters reported Wednesday. The Mexican government sent the proposal to the Congress on Wednesday in order to provide $107 million to save the countries' airlines, which are struggling in the aftermath of the Sept. 11 aerial attacks in the United States. "The (government and airlines) face two alternatives: cover the difference in cost in insurance fees or stop operating," Mexico's lower Chamber of Deputies said in a statement. Aeromexico and Mexicana together have 80 percent of the Mexican air travel market, with the bulk of flights traveling to U.S. destinations. They are controlled by holding company Cintra , which is majority held by the government. CONTACT: AEROMEXICO Mayte Sera Weitzman of AeroMexico, +1-713-744-8446, or mweitzman@aeromexico.com MEXICANA DE AVIACION Jenny Jenks, Marketing Director, International Division of Mexicana Airlines, +1-210-491-9764, or ennyjenks@mexicana.com AEROMEXICO: To Lose $160M In 4Q Due To Drop In Passenger Demand --------------------------------------------------------------- Due to a slump in passenger demand, Aeromexico is expected to post losses of $160 million in income in the fourth quarter, revealed airline executive Francisco Cervantes in Mexican financial daily El Economista report. According to Cervantes, it will take "at least seven months" for passenger demand to recover to levels seen before the September 11 terrorist attacks, he said, and "while this uncertainty continues, people will not travel, mainly in international traffic to the United States." In September alone, Aeromexico lost out on $40 million, and "October and November don't look very positive. We have planes on the ground, reductions in personnel and costs cuts," said Cervantes, who is also head of the National Chamber of the Air Transport Industry (Canaero). BANCA QUADRUM: Has Until Mid December To Decide Its Fate ------------------------------------------------------- Banca Quadrum has until December 15 to decide whether it has the necessary resources to finance itself, as advised by the Mexican financial regulator the National Banking and Securities Commission (CNBV), Mexico City daily Reforma reported Wednesday. Quadrum needs between $35 and $69 million, according to estimates by analysts. "Currently, Quadrum has all of the information necessary for its shareholders to decide for or against the financing of the institution," said CNBV official Pablo Escalante. "They have until more or less December 15 to make a decision and bring in the financing," he said. Deteriorating finances, which resulted in Quadrum's inability to maintain the required levels of financing and preventive reserves, led the CNBV to intervene in the bank at the end of August. BANCO ATLANTICO: IPAB Board To Review Bital-Atlantico Deal ---------------------------------------------------------- Mexico's bank bailout agency IPAB is expected to present to its board of directors the deal for Grupo Financiero Bital's acquisition of Banco del Atlantico, Mexico City daily El Universal reported Wednesday. Subsequently, IPAB will confirm the total cost of Atlantico's reorganization estimated to be 13 billion pesos. Under the agreement, IPAB will pay for 80 percent of the reorganization, and Bital will pay for the remaining 20 percent. According to Bital executives, the company is in talks with GE Capital and ING Baring, while its agent, Credit Suisse, is looking for more alternatives to provide Bital with financing. Banking sources said it was possible that several Mexican institutions, including Banorte, Scotiabank-Inerlat and Santander could provide additional financing. GRUPO DINA: Severence Pay May Never Come, Employees Fear -------------------------------------------------------- Apparently, the 506 employees of Dina Trucks may be just waiting for nothing. According to a report in Mexican financial daily El Economista, neither the company nor the Labor ministry see any resolution to a 3.5 million peso payment Dina owes to the workers as severance pay. So far, the company has offered the union the option of property or money to be paid after production begins at a new industrial park, said union head Juan Carlos Castillo Cruz. But the union shunned the offers on the grounds that the company should be able to pay the debt with a recently-received bank loan. "The position of the union is that when we arrive at a liquidation plan, it must be cash in a one-time payment," said Castillo. ICA: Selling Assets To Reduce Debts By $160 Million --------------------------------------------------- In a bid to cut its total debt to $500 million from nearly $660 million in the fourth quarter, Mexico's biggest construction company Empresas ICA Sociedad Controladora SA de CV (ICA) is going to put assets on the block, Reuters reported Tuesday. "We are increasing our efforts to raise asset sales," said Jose Luis Guerrero, financial director at ICA. At the end of the third quarter, ICA's total debt stood at 6.359 billion pesos, 1.382 billion pesos lower than in the same period of 2000. Some 43 percent of the company's debt has a one-year maturity, which is why the firm is in the process of renegotiating the terms of its debt with its creditors, Guerrero said. =============== P A R A G U A Y =============== ANTELCO: Privatization Draws One More Bidder -------------------------------------------- Brazilian telecommunications group Brasil Telecom is thinking about taking part in the privatization of the Paraguayan fixed telephony operator Antelco, according to a report Tuesday in O Globo. Antelco, which has 297,000 lines, is scheduled for privatization in March 2002. Other potential bidders for the telephony operator are Telecom Argentina, France Telecom, Telefonica and Hutchinson. ================================= T R I N I D A D & T O B A G O ================================= YORK RESEARCH: Company Profile ------------------------------ NAME: York Research Corporation 280 Park Avenue, Suite 2700 West New York, NY 10017 TELEPHONE: (212) 557-6200 FAX: (212) 557-5678 EMPLOYEES (last reported count): 31 TYPE OF BUSINESS: York Research Corporation is a developer, owner and marketer of environmentally friendly projects and products. Through subsidiaries, partnerships, joint ventures and affiliates, the Company is in the business of developing, constructing and operating energy production facilities, including those that utilize natural gas as fuel to produce thermal and electric power (cogeneration), and renewable energy projects that convert wind energy into transmittable electric power (Greenpower). SIC: COGENERATION SERVICES & SMALL POWER PRODUCERS [4991] TRIGGER EVENT: York Research defaulted October 30, 2001 on a $10.3 million portfolio bond payment and replaced its chief executive Robert Beningson, with Robert Paladino, formerly York's executive vice president as it faced the threat of a bankruptcy filing. The collateral for the defaulted portfolio bonds includes York's interest in its Trinidad, Big Spring, Brooklyn Navy Yard, and Warbasse projects. Meanwhile, the creditors of its bankrupt subsidiary, Syracuse, New York-based North American Energy Conservation, were determining whether to file a bankruptcy petition against the company, alleging that claims against York had not been fruitful. CEO: Robert Paladino CFO: Michael Trachtenberg Last TCRLA Headline DATE: Thursday, November 1, 2001, Vol. 2, Issue 214 To see company's latest financial statement: http://www.bankrupt.com/misc/York_Research.pdf CONTACT: Corporate Communications of York Research Corporation, +1-212-557-6200 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 * * *