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/raid1/www/Hosts/bankrupt/TCRLA_Public/011115.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 Thursday, November 15, 2001, Vol. 2, Issue 224 Headlines A N T I G U A & B A R B U D A LIAT: Gets Capital Boost From Two Caribbean Governments A R G E N T I N A AMERICA TV: Investment Fund Eyes Partnership CEPA: Court Acknowledges 94M Of 116M Pesos In Total Debt GRUPO GALICIA: Slid Further Tuesday Over Debt Plan Impasse B O L I V I A LAB: VASP Concludes Sale Of Controlling Stake B R A Z I L BANCO ECONOMICO: Owner Initiates Steps To Save Bank EMBRAER: 3Q Earnings Seen As Strong But Likely Dipping In 4Q ENRON CORPORATION: Elektro's Sale Apparent In Dynegy Takeover CONTACT: Mark Palmer of Enron Corp., +1-713-853-4738 TRANSBRASIL: Pledges 2 Months Unpaid Wages By End Of November VARIG: Struggles To Reduce Costs Without Sacking Workers VESPER: Qualcomm's Decision Creates Breathing Room AUTO INDUSTRY: Slumping Industry Wary Over Latest VW Strike C H I L E WACKENHUT CHILE: Obtains Favorable Bank Agreement On Loans M E X I C O AEROMEXICO: Plans New Code-Share Service to Prague CINTRA: Recent Airbus Crash Exacerbates Losses P E R U DOE RUN: Expects Higher Lead Prices To Stave Off Money Crunch FERREYROS: In The Red Due To Lower Sales U R U G U A Y BANCO HIPOTECARIO: Records $155.3M Loss From January-June - - - - - - - - - - - - =============================== A N T I G U A & B A R B U D A =============================== LIAT: Gets Capital Boost From Two Caribbean Governments ------------------------------------------------------- Gary Cullen, chief executive officer of LIAT, announced that the government of Antigua & Barbuda and St. Vincent & the Grenadines have increased their share capital in the ailing regional airline, The Antigua Sun reported. "The governments of Antigua & Barbuda and St. Vincent & the Grenadines have increased their investment in the airline. The government of Antigua & Barbuda has in fact doubled its investment to about $4 million, while the government of St. Vincent & the Grenadines still has to make a decision on the amount," Cullen said. Meanwhile, the report also revealed that all of the nine Caribbean governments, to which LIAT owed money, have agreed to the airline's offer to accept shares in lieu of debt. Cullen also unveiled plans for the launching of a Unit Trust bond issue in Barbados and Trinidad, which should be completed by the end of November. The new bond issue is expected to inject some $25 million into the airline, which at present is undergoing a major restructuring process. ================= A R G E N T I N A ================= AMERICA TV: Investment Fund Eyes Partnership -------------------------------------------- The investment fund Condor Ventures aims to become a partner in the television channel America TV, which recently called in the receivers, La Nacion said in a report. According to the latest news, Condor wants to accomplish its goal by acquiring a percentage of the 80 percent of the shares owned by Carlos Avila. In return, the group would invest funds to be used to cancel part of the TV channel's US$47 million of debt, and to cover its operative deficit of about US$1 million monthly. Avila currently controls the artistic and commercial management of the TV channel, while his partner Eduardo Eurnekian has the other 20 percent of the shares. America TV sought protection from creditors last month due to mounting debts and declining advertising revenues. The Argentinean television network reportedly amassed a P$45-million ($45.2 million) debt load. CEPA: Court Acknowledges 94M Of 116M Pesos In Total Debt -------------------------------------------------------- The commercial court handling the debt restructuring of Cia Elaboradora de Productos Alimenticios S.A. has acknowledged 94.2 million pesos of its total 116.6 million pesos in liabilities. A report by AFX-Asia Tuesday said that the court did not recognize the balance of the liabilities because creditors did not include them in their petitions. The company has until next month to obtain approval for a refinancing plan from a majority of its creditors or cause the liquidation of its 124 million pesos in assets. Cia Elaboradora is the beef packer unit of agribusiness conglomerate Garovaglio & Zorraquin S.A. The subsidiary filed for protection in November of last year. Estevez Musante and Rapp y Asociados are the accounting firms handling the creditors' petitions. GRUPO GALICIA: Slid Further Tuesday Over Debt Plan Impasse ---------------------------------------------------------- Financially distressed Grupo Financiero Galicia shares slid to 0.485 Tuesday as investors continued to await the outcome of the national government's tax revenue sharing proposal. According to a report by AFX News, the anemic trading was further weighed by the resignation of Social Security Minister Patricia Bullrich. The national government's proposal is key to its debt- restructuring plan involving $155 billion of provincial and federal public debt. There are now only 6 provinces governed by the opposition Justicialista (Peronist) Party opposed to this plan out of the 10 that originally rejected it. The restructuring plan is expected to weigh heavily on the banking sector which owns the largest percentage of the government's debts. Banco Galicia owns about $4.9 billion of these debts, the most held by any bank except state-owned Banco de la Nacion. This heavy exposure recently prompted Fitch to issue the bank the following ratings: (i) Short-term "C"; (ii) Long-term downgraded to "CC" Rating Watch Negative, from `CCC-', Rating Outlook Negative. Analysts project Galicia will lose 15 percent in annual revenues should the debt restructuring plan go through. ============= B O L I V I A ============= LAB: VASP Concludes Sale Of Controlling Stake --------------------------------------------- Brazilian airline Vasp completed last Friday the sale of its 50.3 percent controlling stake in its Bolivian counterpart, Lloyd Aereo Boliviano (LAB), to Ernesto Asbun, owner of a Bolivian TV network and breweries, O Globo revealed in a report. The value of the transaction was not disclosed. According to the report, the transaction, which was announced two months ago, was accelerated by complaints of fraud involving the company's management. Allegationgs are currently being investigated by the Bolivian authorities. However, Vasp denied any irregularities in the management of LAB, which has a fleet of 12 aircraft and recorded a turnover of R$200 million last year. According to the airline, the accusations stem from a political dispute leading up to next year's presidential elections in Bolivia. =========== B R A Z I L =========== BANCO ECONOMICO: Owner Initiates Steps To Save Bank --------------------------------------------------- Banco Economico owner Angelo Calmon de Sa took the first step in a bid to save the Brazilian bank that was intervened by the Central Bank since its collapse, Jornal do Brasil reported. Calmon de SA presented a proposal to end the liquidation of Economico, decreed in 1996, with an intent to use a Treasury bill worth R$8.9 billion to cover part of the R$12.5 billion that Economico owes to the government and other creditors. The Treasury has been spending R$4 million a day, or R$1.5 billion annually, in the bank's liquidation process. EMBRAER: 3Q Earnings Seen As Strong But Likely Dipping In 4Q ------------------------------------------------------------ Brazilian aircraft manufacturer Embraer is expected to report strong third-quarter earnings compared to last year's same period although net profit and operating results won't be as inspiring as its record earnings in the second quarter this year, Reuters reported Tuesday. According to an average of five analysts' forecasts, Embraer, which is Brazil's largest exporter, should announce a net profit of about 282 million reais ($110 million). The results would be 50 percent higher than in the same period last year. Embraer probably benefited from a 13 percent in the decline of the real during the quarter, which boosted its revenue denominated in the Brazilian currency, said Roberto Freitas, an analyst at brokerage Sudameris Corretora SA in Sao Paulo. "We have a very strong depreciation in the third quarter and Embraer, as an exporter, wins with that," said Reis. Although most of the company's revenues and costs are in dollars, it is able to increase its profits in reais by the exchange rate differences at which it buys parts and then sells them, since the real has steadily depreciated all year. "Despite the strong balance and a good operational performance, Embraer will have to shrink as the market does too," said Pascoal Paione, an analyst at Fator Doria-Atherino. "But the reductions should start to come more in the fourth quarter." For 2002, Embraer slashed its expectation to 135 planes from 205, prompting an expected revenue loss of $1.2 billion. Analysts said Embraer should post net revenue of 1.8 billion reais for the third quarter, above the 1.4 billion it posted a year ago but below the 2 billion it hit in the second quarter of this year. Earnings before interest, taxes, depreciation and amortization (EBITDA), a measure of its operating performance, should come in at 557 million reais. However, despite the bleak outlook, analysts are largely bullish on the company's stock. "We believe the stock suffered a lot and is very cheap," said Rodrigo Pereira, an analyst at Pactual brokerage. To see company's latest financial statements: http://www.bankrupt.com/misc/Embraer.pdf CONTACT: Anna Cecilia Bettencourt +55 12 345 1106 acecilia@embraer.com.br Milene Petrelluzzi +55 12 345 3054 milene.petrelluzzi@embraer.com.br ENRON CORPORATION: Elektro's Sale Apparent In Dynegy Takeover ------------------------------------------------------------- Market analysts believe the Dynegy's acquisition of Enron Corporation could hasten its exit from Brazil as the merger may have likely radically changed its business plan. According to a South American Business Information report, many industry observers are in the opinion Dynegy will unload Enron's assets in Brazil to focus more on its core markets in the U.S. and Europe. If that happens, they believe Elektro Eletricidade e Servi㎜s S.A. will be among the first assets to be disposed. The power generation company is the sixth largest in Brazil. Elektro is currently burdened by a R$1.06 billion ($427 million) debt that has analysts thinking it will make it one of the first pieces Dynegy would dump. CONTACT: Mark Palmer of Enron Corp., +1-713-853-4738 TRANSBRASIL: Pledges 2 Months Unpaid Wages By End Of November -------------------------------------------------------------- A total of 2,000 workers of Transbrasil will be getting the amount due to them after Transbrasil promised to pay two months unpaid wages by the end of the month, O Globo said in a report. Wages for September were scheduled to be paid November 14, and October's wages will be paid in November 23, as disclosed by Graziella Baggio, head of the Brazilian airline workers' union. According to Baggio, Transbrasil has accepted the paid leave system for cabin staff. As a result, the 200 or so employees who are on paid leave, which ends next Thursday, will have their leave extended by 90 days. VARIG: Struggles To Reduce Costs Without Sacking Workers -------------------------------------------------------- Viacao Aerea Rio-Grandense SA (Varig), Brazil's largest airline, announced a plan to cut expenditures by $160 million in the next 12 months. The reductions are designed to keep the company flying and avoid firings in the midst of a depressing condition in the aviation sector, reported Reuters. According to Varig President Ozires Silva, the company is renegotiating plane leasing contracts, which may help to avoid a 10 percent cut in the workforce. The airline, based in Porto Alegre, Brazil, announced the measure two months ago in order to cut costs because of a slump in travel following terrorist attacks in the U.S. "The cost of firings in Brazil is very high. We are studying the best possible system jointly with the employees," Silva disclosed. Silva said the options being considered included voluntary redundancy and pension programs, as well as unpaid leaves. He said Varig had already managed to save $72 million through a renegotiation of leasing terms, and it planned to return all its six older Boeing 767 planes. Varig spends $300 million annually leasing its planes. CONTACT: VARIG Brazil Media Relations 21-3814-5480 VESPER: Qualcomm's Decision Creates Breathing Room -------------------------------------------------- Struggling Brazilian telecommunications operator Vesper gets a breather after Qualcomm decided to inject US$266 million into the company, according to industry analysts in an ft.com report. Last week, the US wireless technology group announced it would raise its stake in Vesper from 16 to 86 percent. Vesper won two licenses in Sao Paulo and in the Brazilian northeast in 1999 to compete with recently privatized companies. But its initial US$1.6-million investment to build up infrastructure has so far failed to pay off. The company's debt with equipment suppliers amounts to about US$1.2 billion. Ericsson, Nortel Networks and Lucent Technologies are among the creditors that may benefit from Qualcomm's move to help restructure Vesper. "They have the potential to turn round the company," said Daniel Torras, Latin American director of Pyramid Research, a Massachusetts-based telecoms institute. AUTO INDUSTRY: Slumping Industry Wary Over Latest VW Strike ----------------------------------------------------------- The debilitating strike at the Volkswagen plant in Brazil could prove fatal for the other players in the slumping automotive industry. Already, previous strikes at the Sao Bernardo do Campo plant have caused serious cashflow problems to related companies like auto- parts makers. Just recently, Mexican auto-parts manufacturer Industria Automotriz SA blamed current industrial actions for its decision to sell assets to pay debts due next year. The Volkswagen operations in Brazil account for more than half of the Mexican firm's MXP400 million ($43.2 million) annual sales. Observers believe the latest strike launched just this Monday will likely force other businesses to follow Industria's path, if folding up is still not the only option. Some 16,000 workers of Volkswagen's Brazilian unit mounted another strike this week after talks bogged down over the weekend regarding the management's plan to cut 3,000 jobs. The workers are objecting to the huge layoff plan saying they should not be made to suffer for falling sales. The Company, however, claims the cut represents redundant workers. Accordingly, this cutback is not yet the end of the layoff plan as these surplus workers could double next year when one production line in Brazil will be closed down completely. ========= C H I L E ========= WACKENHUT CHILE: Obtains Favorable Bank Agreement On Loans ---------------------------------------------------------- Wackenhut Chile S.A., the Chilean affiliate of The Wackenhut Corporation (NYSE: WAK WAKB), announced Tuesday that it has executed a standstill agreement with a consortium of banks regarding substantially all of its unsecured loans (approximately $11 million, including performance bonds issued by the same Chilean lenders). The terms of the standstill agreement ("Prorroga de Obligaciones") with the lending institutions provide Wackenhut Chile with deferral of interest payments for 90 days with all accrued and unpaid interest and principal due in 180 days. Philip L. Maslowe, chairman of the board of Wackenhut Chile, said, "The company's core physical security business is the market leader in Chile. The agreement with the banks will enable Wackenhut Chile's management team to dedicate themselves to customer service and continued growth in the security- related businesses. The deferral of interest and principal, as agreed upon with the lending institutions, will provide Wackenhut Chile with sufficient time to execute its restructuring strategy, which includes the selling of non- core businesses and should generate sufficient proceeds to repay all unsecured debt obligations." Banco Sud Americano, an affiliate of the Bank of Nova Scotia, is the lead bank in the standstill agreement and has been instrumental in structuring the arrangement which involves thirteen lending institutions. An affiliate of Banco Sud Americano, Banco Sud Americano Asesorias Financieras, has been engaged by Wackenhut Chile to assist in the sale of the company's non-core businesses. Wackenhut Chile S.A. is an outsourcing company engaged in physical security, cash-in-transit, contract cleaning, temporary staffing, food service, forestry and postal services in Chile, with headquarters in Santiago. It is an affiliate of The Wackenhut Corporation, and revenues in 2000 for Wackenhut Chile S.A. were approximately US$95 million. CONTACT: Patrick Cannan, Director, Corporate Relations of Wackenhut Corporation, +1-561-691-6643, or pcannan@wackenhut.com =========== M E X I C O =========== AEROMEXICO: Plans New Code-Share Service to Prague -------------------------------------------------- AeroMexico, Mexico's largest airline, announced Monday that it will start code-share flights between Mexico City and Prague with SkyTeam partner Czech Airlines on December 1, 2001. The new service will operate daily via Paris and daily via New York. "These new code-share flights link the hearts of Central Europe and Mexico, further expanding AeroMexico's presence in Europe," said Rolf Hoehn, AeroMexico's Vice President, U.S. Division. "Traffic between Mexico and the Czech Republic grew by 62% between 1999 and 2000. We expect to see further increases in that growth with this more convenient SkyTeam connection between our countries, as travelers gain more options to enjoy the attractions of Mexico and the charms of Central Europe." "This code-share route between Mexico City and Prague represents an excellent opportunity to promote tourism between both countries," said Vera Zemanova, Ambassador of the Czech Republic in Mexico. CONTACT: Mayte Sera Weitzman (281) 372-3446 mweitzman@aeromexico.com or Carole Minor (713) 880-9550 cminor@encorecommunications.com CINTRA: Recent Airbus Crash Exacerbates Losses ---------------------------------------------- The recent Airbus crash in New York is expected to lead Mexican airline holding company Cintra to finish the year with losses of $120 million, according to airline industry consultant Simon Garcia Rubio. In a report in Mexico City daily Reforma, Rubio stated that the accident would have an immediate effect on flights to tourist destinations, which are "personal decisions," that don't depend on other factors. According to Mexicana spokesperson Fernando Martinez, seat occupancy on flights to and from the United States declined from 67 percent to 60 percent as a result of the September 11 attacks, and that occupancy is now likely to decline further. Mexicana and leading competitor Aeromexico are owned by Cintra. ======= P E R U ======= DOE RUN: Expects Higher Lead Prices To Stave Off Money Crunch ------------------------------------------------------------- Doe Run Resources Corp. is confident that the anticipated modest recovery in the price of lead over the next 12 months is will help avert a financial crunch at the company, Doe Run President Jeff Zelms said in a St. Louis Post-Dispatch report. Already in hot water for lead contamination at its main smelter in Herculaneum, Doe Run is being battered by a decline in the prices for lead and other base metals, such as copper and zinc. At present, the company is in talks with bondholders about restructuring its heavy debt burden. Net debt stood at $377 million at the end of July. Restructuring debt "is clearly the right thing to do," Zelms said. "We have too much debt." According to Zelms' estimates, the company is likely to post a loss of roughly $30 million for the 2001 fiscal year, which ended Oct. 31, compared with a $23 million loss in 2000. The company lost $1.4 million in 1999. Losses have caused analysts to worry about the company, whose corporate credit rating has been downgraded to "CCC" by credit- rating agency Standard & Poor's. "CCC" indicates that the company's debt instruments are vulnerable to default. Zelms is confident, however, that the company won't face problems meeting its financial obligations. And the company doesn't foresee a financial situation that might force it into bankruptcy. "I don't do bankruptcy," Zelms said. Doe Run, owned by privately held Renco Group Inc. of New York, has been struggling with large debt since making an aggressive expansion into Peru. It bought the massive La Oroya smelting and refinery complex, one of the world's largest metal-processing facilities, in October 1997 and the Cobriza copper mine in August 1998. FERREYROS: In The Red Due To Lower Sales ---------------------------------------- Peruvian heavy equipment supplier Ferreyros posted a 1.63- million-sole net loss in nine months this year against a 1.61- million-sole profit in the comparable period last year, reported Business News Americas. The nine-month figures were a 1.11- million-sole loss, compared to a 2.68-million-sole profit. Net gains of 5.89 million soles (third quarter) and 6.57 million soles (nine months) on Peru's statutory inflation set-aside were not enough to reverse the losses. The company told Lima's stock exchange that the loss was a result of lower sales in the country's large-scale mining sector. Ferreyros admitted it had expected the lower sales because most mining companies had planned to buy their heavy equipment in the first half of the year. Peru's three-year recession also contributed to the losses. ============= U R U G U A Y ============= BANCO HIPOTECARIO: Records $155.3M Loss From January-June --------------------------------------------------------- Banco Central del Uruguay revealed recently that Banco Hipotecario suffered the most losses during the first half of the year among state-owned banks. According to the central bank, Hipotecario posted $155.3 million in losses during the six-month stretch, making it the single biggest loser during the period among government and private banks combined. This poor performance virtually confirms the credit ratings assigned recently to the bank by both Fitch and Standard & Poor's. Early this month, Fitch gave Hipotecario the following marks: (1) Short-term currency rating "C"; (2) Long-Term downgraded to "CC" Rating Watch Negative, from "CCC-", Rating Outlook Negative; (3) Individual Rating "D"; (4) Support from "4T"to "5T" In late October, S&P also assigned the bank's counterparty credit ratings a CCC+/C B-/C, while its senior unsecured debt got a CCC+ B-CDs CCC+/C B-/C. 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 * * *