/raid1/www/Hosts/bankrupt/TCRLA

/raid1/www/Hosts/bankrupt/TCRLA_Public/020419.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, April 19, 2002, Vol. 3, Issue 77 Headlines A R G E N T I N A BANCO GENERAL: S&P Lowers Credit Grade to "D" Due to Suspension EDENOR: Government's Current Policy Could Mean Huge Losses Ahead B E R M U D A FLAG TELECOM: Tyco May Write Down US$100 million On Bankruptcy FLAG TELECOM: Affiliates Filing Separate Bankruptcy Petitions FLAG TELECOM: Largest Unsecured Creditors Listed in Filings FLAG TELECOM: General Counsel Kees van Ophem Explains Condition FLAG TELECOM: Moves Court To Commence Bermuda Proceedings B R A Z I L BCP: US Parent to Upgrade Service Only After Resolving Default EMBRAER: To Sign Joint Manufacturing Deal with Chinese Partner C H I L E WACKENHUT CORPORATION: To Absorb Huge Loss Due to Unit's Failure C O L O M B I A PAZ DEL RIO: Chief Says Japanese Solution Still Two Years Away M E X I C O GRUPO MEXICO: Regulator to Veto Ferromex-Ferrosur Merger GRUPO MEXICO: Finally Resolves Salary Disputes, Ends Strike ICONSA: Follows Parent Bufete Industrial to Bankruptcy Court P E R U EDELNOR: Privatization Body to Sell Remaining State Shares in May V E N E Z U E L A BANCO INDUSTRIAL: Governent Stops Hemorrhage With VEB125 Billion - - - - - - - - - - ================= A R G E N T I N A ================= BANCO GENERAL: S&P Lowers Credit Grade to "D" Due to Suspension --------------------------------------------------------------- Banco General de Negocios is now rated "D" by Standard & Poor's after seeking a 120-day suspension of operations from the Argentine Central Bank. According to Business News Americas, the new rating applies to the bank's local and foreign currency long-term and short-term counterparty credit grade. They were previously rated "SD." The report says the bank sought the suspension in order to restructure its business amidst the turmoil in the Argentine economy. The request was granted on April 12. The ratings agency placed the bank on selective default a few months ago after the government imposed deposit restrictions and capital controls on Argentine banks in December last year, the paper says. Meanwhile, the bank is also facing a probe on allegations that it acted as a conduit to funneling funds out of the country. Managers of the bank are reportedly under scrutiny right now for their role in the alleged transaction. EDENOR: Government's Current Policy Could Mean Huge Losses Ahead ---------------------------------------------------------------- Power distributor Edenor has asked the Argentine commission in charge of renegotiating contracts to redefine the new tariffs and regulations currently being imposed by the government under its economic emergency framework. According to El Cronista, the company has complained that, since the devaluation of the peso, it has absorbed some ARS1 billion worth of losses. The Electricite de France-controlled firm estimates annual losses of ARS400 million and cash deficit of ARS1 billion should the condition in the country and the tariff levels remain unchanged. ============= B E R M U D A ============= FLAG TELECOM: Tyco May Write Down US$100 million On Bankruptcy -------------------------------------------------------------- Tyco International, the third-largest shareholder of bankrupt Flag Telecom, is expected to write-down at least US$100 million in investments, analysts told Dow Jones Newswires. In an interview with the news conduit, Hedge-fund manager Doug Kass said he expects Tyco to lose US$100 million worth of investments due to the collapse of the network services provider. Salomon Smith Barney analyst Jeffrey Sprague, however, says he expects Tyco to actually write-off only US$10 million from its balance sheet as it had continually marked down the asset as Flag's share price declined in the market. But he estimates total loss to be US$110 million. Mr. Sprague says "the failure of another subsea player further calls into question the carrying value of Tycom on Tyco's books." He said Tyco may partially write down the carrying value of its Tycom Ltd. unit, which stood at US$2.7 billion at the end of the first quarter. But even if Tyco writes down 100% of the carrying value, Tyco's balance sheet would remain well within the cap covenants of its bank lines, he said. Plagued by nearly US$2.6 billion in debt, Flag collapsed Friday before the U.S. Bankruptcy Court for the Southern District of New York. The Company sought protection from creditors under Chapter 11 of the U.S. Bankruptcy Code. Based in Bermuda, Flag had US$3.3 billion of assets as of March 31, 2002. Contact: FLAG Telecom Holdings Limited 41 Cedar Ave. Hamilton HM 12, Bermuda Telephone (441) 296-0909 http://www.flagtelecom.com FLAG TELECOM: Affiliates Filing Separate Bankruptcy Petitions ------------------------------------------------------------- -------- ------------- Case No. Debtor Entity -------- ------------- 02-11732 FLAG Telecom Holdings Limited 02-11733 FLAG Atlantic Limited 02-11734 FLAG Atlantic Holdings Limited 02-11735 FLAG Limited 02-11736 FLAG Pacific USA Limited Petition Date: April 12, 2002 U.S. Bankruptcy Court: United States Bankruptcy Court Southern District of New York Alexander Hamilton Custom House One Bowling Green, 5th Floor New York, New York 10004-1408 Telephone (212) 668-2870 Bankruptcy Judge: The Honorable Allan L. Gropper Debtors' U.S. Bankruptcy Counsel: Conor D. Reilly, Esq. Janet M. Weiss, Esq. M. Natasha Labovitz, Esq. Craig A. Bruens, Esq. Paul H. Guillotte, Esq. Sarah K. Larcombe, Esq. Joseph Furst, Esq. GIBSON, DUNN & CRUTCHER LLP 200 Park Avenue New York, NY 10166 Telephone (212) 351-4000 Fax (212) 351-4035 Debtors' Bermudian Insolvency Counsel: APPLEBY, SPURLING & KEMPE Cedar House 41 Cedar Avenue P.O. Box HM 1179 Hamilton HM EX, Bermuda Telephone (441) 295-2244 Members of the Prepetition FTHL 11-5/8% Noteholders' Committee: Varde Partners, Inc. Elliot Associates Cerberus Capital Partners Salomon Smith Barney York Capital Redwood Capital Management, LLC Counsel to the Prepetition FTHL 11-5/8% Noteholders' Committee: Kasowitz, Benson, Torres & Friedman Members of the Prepetition FLAG Limited 8-1/4% Noteholders' Committee: Goldman Sachs Pacific Life Eaton Vance Greenwich Capital Hartford Financial Services Group, Inc. Offitbank Pimco PPM America, Inc. Putnam Investments Saloman Brothers Trust Company of the West Wellington Management Counsel to the Prepetition FLAG Limited 8-1/4% Noteholders' Committee: Akin, Gump & Strauss, Hauer & Feld L.L.P. Financial Advisor to the Prepetition FLAG Limited 8-1/4% Noteholders' Committee: Chanin Capital Partners U.S. Trustee: Carolyn S. Schwartz United States Trustee for Region 2 33 Whitehall Street, Suite 2100 New York, NY 10004 Telephone (212) 510-0500 FLAG TELECOM: Largest Unsecured Creditors Listed in Filings ----------------------------------------------------------- The following informationg is gathered from Flag Telecom's document filings with the Bankruptcy Court: FLAG Telecom Holdings Limited Bankruptcy Case No. 02-11732 ----------------------------- A. Bondholders Creditor Nature of Claim Claim Amount -------- --------------- ------------ The Bank of New York Indenture Trustee $564,000,000 101 Barclay Street for 11.625% Floor 21 West Senior Dollar and New York, NY 10286 Senior Euro Notes Attn: Corporate Trust due 2010 Administration - Global Finance Unit York Capital Management 11-5/8% Senior $48,132,000 350 Park Avenue, 4th Floor Notes due New York, NY 10022 March 2010 Cybill Yee Tel: 212-651-0500 Fax: 212-651-0501 Colonial Management 11-5/8% Senior $40,000,000 Associates, Inc. Notes due Equity Department March 2010 1 Financial Center, 13th Floor Boston, MA Carl Ericson Tel: 617-426-3750 Fax: 617-772-3995 Varde Investment Partners LP 11-5/8% Senior $18,600,000 3600 West 80th Street, Suite 425 Notes due Minneapolis, MN 55419 March 2010 Tel: 952-893-1554 Fax: 952-893-9613 Smith Barney 11-5/8% Senior $7,540,000 Smith Barney Mutual Funds Notes due 333 West 34th Street, 3rd Floor March 2010 John Bianchi Tel: 800-451-2010 Brinson Advisors, Inc. 11-5/8% Senior $5,500,000 Mitchell Hutchins Funds Notes due 1285 Avenue of the Americas March 2010 New York, NY 10019 Marianne Rossi Tel: 212-713-2000 Aragon Investments, Ltd 11-5/8% Senior $4,005,000 Chicago, IL 60606-3405 Sutter Real Estate 11-5/8% Senior $4,000,000 San Francisco, CA 94111 Notes due March 2010 Bank of Montreal 11-5/8% Senior $3,250,000 100 Kings Street West, 3rd Floor Notes due First Canadian Place March 2010 Toronto Ontario M5X 1H3 Lemuel Seabrook Redwood Capital Mgmt 11-5/8% Senior $3,000,000 Englewood Cliffs, NJ 07632 Notes due March 2010 Wells Fargo Capital Markets 11-5/8% Senior $3,000,000 550 California St, FL 14 Notes due San Francisco, CA 94104 March 2010 Louise Chen Atlantic Asset Management 11-5/8% Senior $2,500,000 New York, NY 10006 Notes due 1111-5/8% Senior March 2010 HSBC Bank Plc Global 11-5/8% Senior $2,250,000 Investment Services Notes due England March 2010 Satellite Credit 11-5/8% Senior $2,000,000 Opportunities Fund, Ltd Notes due Boston, MA 02110-1727 March 2010 Trust Company of the West (TCW) 11-5/8% Senior $2,000,000 865 S Figueroa Notes due Los Angeles, CA 90071 March 2010 Enterprise Capital Management 11-5/8% Senior $1,450,000 Atlanta, GA 30326 Notes due March 2010 First Allmerica Financial 11-5/8% Senior $1,250,000 Life Insurance Notes due New York, NY 10066 March 2010 American Express Financial Corp. 11-5/8% Senior $1,000,000 55440-0534 Notes due March 2010 Deutsche Banc Securities 11-5/8% Senior $745,000 Notes due March 2010 USB Warburg LLC 11-5/8% Senior $300,000 677 Washington Blvd 9N Notes due Stanford, CT 06901 March 2010 Carlos Lede Tel: 203-719-7644 Fax: 203-719-0795 Afliac Market Value Fund 11-5/8% Senior $250,000 New York, NY 10006 Notes due 1111-5/8% Senior March 2010 B. Trade Creditors Latham & Watkins Professional $48,642 99 Bishopsgate, LONDON Services professional services Arthur Andersen-UK Trade Debt $22,171 P O Box 125, Nottingham NG1 2AH, UK American Stock Transfer & Trust Trade Debt $4,000 40 Wall Street New York, NY 10005 Tel: 212 936 5100 Appleby, Spurling & Kempe Professional $3,001 Cedar House Services 41 Cedar Avenue Hamilton, HM12 Bermuda Tel: 00 1 441 295 2244 Financial Times Trade Debt $2,774 1 Southwark Bridge London SE1 9HL Tel: 020 7873 3000 FLAG Atlantic Limited Bankruptcy Case No. 02-11733 ---------------------------- Creditor Nature of Claim Claim Amount -------- --------------- ------------ Tycom Trade Debt $1,737,288 Building A 60 Columbia Turnpike Morristown, NJ 07960 Dresdner Bank Bank Debt $247,402 75 Wall Street New York NY 10005-2889 Skadden, Arps, Slate, Professional $6,473 Meagher & Flom Services 919 Third Avenue New York, NY 10022-3897 Hobbs Group L.L.C. Trade Debt $6,000 P.O. Box 13535 Accounts Receivable Dept Newark, NJ 07188-0535 Tel: 203-351-5600 Appleby, Spurling & Kempe Professional $5,710 Cedar House Services 41 Cedar Avenue Hamilton, HM12 Bermuda Tel: 00 1 441 295 2244 Simmons & Simmons Professional $283 21 Wilson Street Services London EC2M 2TX UK Barclays Bank plc Bank Debt Unliquidated 222 Broadway New York NY FLAG Atlantic Holdings Limited Bankruptcy Case No. 02-11734 ------------------------------ Creditor Nature of Claim Claim Amount -------- --------------- ------------ Slaughter & May Professional $789 35 Basinghall Street London EC2V 5DB UK Tel: 020 7600 1200 FLAG Limited Bankruptcy Case No. 02-11735 ---------------------------- A. Bondholders Creditor Nature of Claim Claim Amount -------- --------------- ------------ IBJ Schroder Bank & Trust Company Indenture Trustee $430,000,000 One State Street for 8-1/4% New York, NY 10004 Senior Notes Attn: Corporate Trust due 2008 Administration Vanguard Group 8-1/4% Senior $56,630,000 Fixed Income Notes due 100 Vanguard Blvd January 2008 Karen Hogan Tel: 610-669-1000 Fax: 610-407-2807 Jackson National Life 8-1/4% Senior $41,200,000 Jackson Natl Life Ins Co of NY Notes due 1 Corporate Way January 2008 Robert Fritts Tel: 517-381-5500 PPM America, Inc. 8-1/4% Senior $32,800,000 Equity Investments Notes due 225 West Wacker Drive-1200 January 2008 Marvin Lutz Tel: 312-634-2553 Fax: 312-634-0055 JoAnne Bianco Tel: 312-634-2500 Fax:312-634-0906 Pimco Advisors 8-1/4% Senior $17,991,000 PIMCO Funds Notes due P.O. Box 6430 January 2008 840 Newport Center Drive Benjamin Trotsly Tel: 800-426-0107 New York Life Insurance Equity 8-1/4% Senior $16,400,000 51 Madison Avenue-203 Notes due Karen Beyer January 2008 Tel: 212-576-6194 Fax: 212-448-1711 Putnam Advisory Global 8-1/4% Senior $15,695,000 Fundamental Research Notes due 1 Post Office Square January 2008 John Boselli Tel: 617-760-8461 Fax: 617-760-1375 UBS Warburg LLC 8-1/4% Senior $15,000,000 100 Liverpool Street Notes due John Campbell January 2008 Tel: 0207 567 2939 Fax: 0207 567 2064 Appaloosa Investment L.P. 8-1/4% Senior $12,405,000 Notes due January 2008 Lincoln National Life 8-1/4% Senior $12,000,000 915 South Clinton Street Notes due Mail Stop 8A-02 January 2008 Jon Boscia Tel: 219-455-2000 Fax: 219-455-1729 Palomino Fund Ltd 8-1/4% Senior $10,870,000 Notes due January 2008 Eaton Vance Management Inc 8-1/4% Senior $10,650,000 Equity Research & Investments 255 State Street Michael Weilheimer Tel: 617-482-8260 Fax: 617-542-7410 American Home Assurance 8-1/4% Senior $10,000,000 AIG Tower 1-2-4 Notes due Kinshi-Cho January 2008 Yasuo Goto Tel: 3-5619-3084 Fax: 3-5619-3153 Unumprovident Corporation 8-1/4% Senior $10,000,000 Notes due January 2008 Perry Capital 8-1/4% Senior $9,949,000 599 Lexington Avenue, 36th Floor Notes due New York, NY January 2008 Nat Klipper Tel: 212-583-4000 Fax: 212-583-4099 Trust Company of the West (TCW) 8-1/4% Senior $9,000,000 400 South Hope Street, 3rd Floor Notes due Richard Pool January 2008 Tel: 212-553-9865 Fax: 212-553-9880 Offit 8-1/4% Senior $8,000,000 520 Madison Avenue, 27th Floor Notes due New York, NY January 2008 William Charlton Tel: 212-350-3776 Fax: 212-371-7687 Provident Life 8-1/4% Senior $8,000,000 1 Fountain Square Notes due Vicki Corbett January 2008 Tel: 423-755-1373 Deutsche Banc Securities 8-1/4% Senior $6,705,000 Notes due January 2008 Marathon Asset Management LLC 8-1/4% Senior $6,200,000 230 Park Avenue, 7th Floor Notes due Andrew Rabinowitz January 2008 Tel: 212-499-1350 Fax: 212-499-1385 AIG Life 8-1/4% Senior $6,000,000 AIG Life Insurance Co. Notes due Post Office Box 667 January 2008 John Oehmke Tel: 302-594-2000 A. Trade Creditors Freshfields Bruckhaus Deringer Professional $82,070 65 Fleet Street Services London EC4Y 1HS UK Tel: 0207 936 4000 Arthur Andersen & Co. (Bda) Professional $61,130 Victoria Hall Services Accounts Receivable Dept 11 Victoria Street Hamilton HM 11 Bermuda Arthur Andersen (Malaysia) Professional $57,996 P.O. Box 11040 Services Accounts Receivable Dept Kuala Lumpur 50734 MALAYSIA Tel: 03-255-7000 Agilent Technologies UK Ltd Trade Debt $43,547 Eskdale Road Winnersh Triangle Wokingham Berkshire RG41 5DZ UK Tel: 020 7868 9208 Hobbs Group Trade Debt $12,587 P.O. Box 13535 Accounts Receivable Dept Newark, NJ 07188-0535 Tel: 203-351-5600 FLAG TELECOM: General Counsel Kees van Ophem Explains Condition --------------------------------------------------------------- FLAG's Troubles & Woes Kees van Ophem, FLAG's Secretary and General Counsel since October 2001, relates how the Company finds itself at the steps of the Bankruptcy Court: FLAG's troubles stem from a dramatic change in the economic climate generally, and an even more dramatic shift in the environment for telecommunications companies. This shift has imposed severe financial challenges on the telecommunications industry in general and, in particular, FLAG's competitors, customers and potential customers, and, due to dramatically lower capital expenditure budgets, FLAG itself. Overcapacity for bandwidth in some regions and lower than anticipated demand have led to dramatic declines in bandwidth prices, the unavailability of new capital, and chapter 11 filings by companies in virtually every sector of the telecommunications industry. The Turnaround Plan In light of the current economic climate, FLAG Telecom has focused its business strategy on preserving capital and reducing costs by: serving the core backbone needs of large telecom and Internet companies, focusing on regions where FLAG has a competitive advantage, and increasing the revenue generating capacity of the FLAG Telecom global network by expanding the number and scope of bundled services available to its customers. With this business plan in hand, the Debtors began negotiations with their principal creditors to restructure their bank, bond and trade debt. The Chapter 11 Scenario In connection with these negotiations, Mr. van Ophem relates, the Debtors concluded that the commencement of these chapter 11 cases was in the best interests of all stakeholders because it would be difficult, outside of reorganization proceedings for the Debtors, to effect the contemplated restructuring. The Debtors continue to believe that FLAG Telecom's core businesses, taken as a whole, are viable, and believe that continued operation of activated networks, completion and lighting of additional near term revenue producing segments, and continued development of FLAG Telecom's servicing abilities are each capable of producing significant future revenue streams. Meanwhile, the Debtors believe that the current unsettled telecommunications market is not a favorable environment for liquidation. Consequently, the Debtors believe that reorganization of their core businesses will generate substantially more value than other business options. Why FLAG Filed Now On April 11, 2002, the Company was informed that the Bank Group was accelerating the debt owed under the Credit Agreement dated as of October 8, 1999 (as amended by the First Amendment to Credit Agreement and Equity Contribution Agreements dated as of December 14, 1999; the Second Amendment to Credit Agreement dated as of November 16, 2000; and the Third Amendment to the Credit Agreement and Forbearance Agreement, dated as of March 25, 2002) among Flag Atlantic Limited, the banks and other financial institutions party thereto -- the Lending Consortium is comprised of: Barclays Bank plc, Dresdner Bank AG, New York and Grand Cayman Branches, Westdeutsche Landesbank, Girozentrale, New York Branch, Australia and New Zealand Banking Group Ltd., Bank of Scotland, City National Bank, Credit Lyonnais, DG Bank Erste Bank Der Oesterriechischen Sparkassen AG, Gulf International Bank B.S.C., Bayerische Hypo-Und Vereinsbank, AG, New York Branch, IKB Deutsche Industriebank AG, Luxembourg Branch, Kbc Finance Ireland, Landesbank Hessan-Thuringen Girozentrale, Landesbank Sachen Girozentrale, Mitsubishi Trust & Banking Corp., NIB Capital Bank, Rabobank International, Raiffeisen Zentralbank, Osterreich Aktiengesellschaft, Societe Generale, Sumitomo Bank Limited, and The Royal Bank of Scotland plc. as of March 25, 2002 -- Barclays Bank Plc, as the administrative agent for the Lenders, Dresdner Bank AG, New York Branch, as the documentation agent, Westdeutsche Landesbank Girozentrale, New York Branch, as the syndication agent, and Barclays Capital, as the lead arranger was accelerated. Mr. van Ophem explains that the acceleration arguably caused cross-defaults of the Debtors' institutional bond debt. Although FTHL is not a borrower or a guarantor under the FLAG Atlantic Limited facility, Barclays Bank plc froze FTHL's funds on deposit at Barclays. Further, FTHL held significant funds at a financial institution that was a lender under the FLAG Atlantic Limited facility. In response to the acceleration and fear that other financial institutions party to the FLAG Atlantic Limited bank facility would similarly freeze funds, FTHL moved approximately $210,000,000 out of such accounts. The funds were ultimately moved to FLAG Pacific Holdings Limited -- a non-Debtor and non- filing entity. FLAG TELECOM: Moves Court To Commence Bermuda Proceedings --------------------------------------------------------- Certain debtors that are organized in Bermuda -- FLAG Telecom Holdings Limited, FLAG Limited, FLAG Pacific USA Limited, FLAG Atlantic Holdings Limited and FLAG Atlantic Limited -- ask the Court for authority to commence proceedings in the Supreme Court of Bermuda, and to apply for the appointment of Joint Provisional Liquidators in a two-fold approach to: (1) prevent the seizure of assets or the commencement of any liquidation proceedings by foreign creditors who do not honor the automatic stay imposed by the United States bankruptcy Court, and (2) facilitate the ultimate restructuring of the Debtors under Bermuda law. Conor D. Reilly, Esq., at Gibson, Dunn & Crutcher LLP, tells the Court that no authorization will be required to commence the Bermuda proceedings. This is because such proceedings and the Chapter 11 cases are to be commenced substantially contemporaneously and because the Bermuda proceedings will, effectively, be ancillary to the Chapter 11 cases. As a result of the accelerated filing of the Chapter 11 cases, the process of filing for commencing the Bermuda proceedings or selecting Joint Provisional Liquidators will now go forward on a post-petition basis. Mr. Reilly says the Debtors have determined, in the exercise of their business judgment, that the commencement of the Bermuda proceedings is in the best interests of their businesses, their creditors and their estates. Mr. Reilly says the Bermuda proceedings foster two significant goals underlying the Bankruptcy Code: the principle of providing a forum for restructuring of all of a debtor's debts rather than allowing self-help remedies by overzealous creditors, and the principle of facilitating restructuring and reorganization. =========== B R A Z I L =========== BCP: US Parent to Upgrade Service Only After Resolving Default -------------------------------------------------------------- American telecom operator Bellsouth says it plans to only change the TDMA network of BCP, its Brazilian subsidiary, to a CDMA platform rather than to GSM, in order to offer 2.5G services. Citing an O Globo report, Business News Americas says the CDMA upgrade will also be done in six other countries where it still operates TDMA networks. Of the company's operations in 11 Latin American countries, only four so far are using the CDMA platform. The American parent, however, clarified that the upgrade will be implemented only after the US$375 million debt default of BCP shall have been resolved. The company says it is currently in talks with Brazilian local bank partner Banco Safra to help find a solution on the matter. BCP operates in the Sao Paulo area plus six states in the northeast region. EMBRAER: To Sign Joint Manufacturing Deal with Chinese Partner -------------------------------------------------------------- Brazilian aircraft maker Empresa Brasileira de Aeronautica SA is reportedly close to a deal with Chinese counterpart Harbin Aircraft Manufacturing Co. over a joint production venture in China. The primary goal of the project is to jointly design and build 40- to 60-seat regional passenger planes in China, says Bloomberg. The idea is in line with China's ambition to start making commercial aircraft with a range of 3,000 km to meet domestic travel demands. "China's rapid urbanization and the growth of its tourism industry means there's a lot of demand here for a smaller, medium-range aircraft," says Liu Haisheng, in an interview with Bloomberg. Mr. Liu, a deputy director of the Economic and Trade Commission of Heilongjiang, says a Chinese delegation will be in Sao Paolo in the first week of May to hold more talks with Embraer. He says Heilongjiang's initial investment to design the jet would be about US$73 million. By Embraer's estimates, demand in China will account for half the 500 regional jetliner sales in Asia during the next decade as the domestic aviation industry expands. Accordingly, China's market clout has given them substantial leverage in forcing suppliers to transfer plane technology to its own aerospace companies. Under this particular deal, the Chinese government apparently pressured Embraer into agreeing to this production-sharing project by making it a precondition to an order for 30 jetliners. Harbin Aircraft Manufacturing Co. is a unit of AVIC II, a Chinese state-run aerospace company. ========= C H I L E ========= WACKENHUT CORPORATION: To Absorb Huge Loss Due to Unit's Failure ---------------------------------------------------------------- Business service-provider Wackenhut Corp. anticipates a pretax write-off of US$14 million to US$17 million in the first quarter arising from the bankruptcy of its affiliated company in Chile. According to Wackenhut, the charge will include the write-off of all remaining cash advances, notes receivables and estimated related expenses. Pretax losses related to the Chilean operations totaled US$29.2 million during fiscal 2001. The bankrupty of the Chilean affiliate was "a significant disappointment," according to President and Chief Executive Richard Wackenhut in a statement. The company had tried to restructure the operations of its Chilean affiliate by attaining majority ownership of the affiliated company and selling certain non-core businesses in Chile. In a press release, Wackenhut said the affiliate is at a condition where they could no longer generate sufficient cash either from ongoing operations or the sale of assets to repay their obligations. During the first quarter of last year, Wackenhut had a loss of 1.5 million, or 10 cents a share before charges, on revenue of US$663.5 million. =============== C O L O M B I A =============== PAZ DEL RIO: Chief Says Japanese Solution Still Two Years Away -------------------------------------------------------------- Paz del Rio President Enrique Tobon says the investment proposals of Japan's Kobe Steel to help resuscitate the bankrupt Colombian steel-maker could take up to two years to be fully implemented. In the meantime, he says, the company will try to jumpstart earlier attempts to share continuous casting facilities with Hornos Nacionales. "The decision could be made to renew technical feasibility tests done with Hornos Nacionales to make best use of their continuous casting capability, which obviously could be used in our casting process," Mr. Tobon told Business News Americas. The Japanese firm plans to pour in new technology in the company, which is the only steel mill in Latin America that do not have ladle and continuous casting systems. Mr. Tobon says pending the completion of the Japanese investment, the company will try to explore alternatives like operating its electric furnace. This, however, will depend on market conditions and the availability of scrap, whose volumes have fallen sharply on the world market. He says until a couple of years ago the US was supplying 12 metric tons a year of scrap metal, but today this figure has dropped to 6 metric tons. The European Union, however, is still placing 30 metric tons a year on the market. But even if scraps were available, the electric furnace still needs repair and a more powerful transformer, he says. The other alternative to using the electric furnace is buying steel slabs. This, however, would require rethinking the Kobe Steel investment plan, Mr. Tobon says. The paper says the Japanese company is already done with the third phase of its review on the company's operations. The recent review dealt with problems related to mining, coking and sintering, as well as blast furnace and rolling processes. Paz del Rio is currently under a form of bankruptcy protection, the paper says. =========== M E X I C O =========== GRUPO MEXICO: Regulator to Veto Ferromex-Ferrosur Merger -------------------------------------------------------- The Mexican antitrust authority CFC has nixed the planned merger of railroad operators Ferromex and Ferrosur, a source told Business News Americas early this week. According to the CFC insider, the authority sees the combination as violating the rules and concession ownership limits set when the industry was privatized in the late 1990s. Current regulations prohibit any of the country's three major railroad operators from owning more than 5% stake in either of the other two, as a means of safeguarding competition. Ferromex, a unit of Grupo Mexico, operates the network that connects the Valley of Mexico with northern destinations including Monterrey, Guadalajara, Torreon, the ports of Manzanillo and Altamira and the Mexico-US border. Ferrosur, owned by telecommunications and retail holding giant Grupo Carso, holds the concession for the key Valley of Mexico- Coatzacoalcos railroad axis. The merger would have created a new company to be named ITM, which will be majority owned by Ferromex, with Grupo Carso retaining 20% interest. The regulator will publish its findings next month. The source says the antitrust office will invoke the antimonopoly law and kill the merger should it receive clearance from the transport ministry. GRUPO MEXICO: Finally Resolves Salary Disputes, Ends Strike ----------------------------------------------------------- Grupo Mexico, the world's third largest copper producer, finally settled the six-week old worker's strike at La Caridad plant in northwestern Sonora state. Workers at La Caridad accepted the same 5.25 percent direct wage increase and 0.5 percent more in benefits that were offered to strikers at other units. Workers at four units of Grupo Mexico walked out March 5, demanding the Company improve its offer of a 5 percent salary increase to between 8 percent and 10 percent. Strikes in Zacatecas, San Luis Potosi and Coahuila had already been settled following agreements in increases in salary and benefits. Grupo Mexico, which also operates in the United States and Peru, said all its units are now working at 100 percent capacity. ICONSA: Follows Parent Bufete Industrial to Bankruptcy Court ------------------------------------------------------------ Mexican engineering and construction concern Grupo Iconsa (Ingenieros Y Contratistas S.A. De C.V.) confirmed it would file for bankruptcy protection to restructure its debts. The company accumulated losses of MXN255 million (US$28 million) over the past two years as infrastructure sales in Mexico decreased severely. In 2001, Iconsa recorded a MXN159.6 million net loss on sales of MXN748.9 million. The company's total liabilities stood at MXN675.9 million. Company officials are planning to meet with creditors as soon as the bankrupty petition was approved. Grupo Iconsa is a subsidiary of Mexican construction Bufete Industrial, which initiated pre-bankruptcy proceedings in late January this year. ======= P E R U ======= EDELNOR: Privatization Body to Sell Remaining State Shares in May ----------------------------------------------------------------- Divestiture of the remaining government stake in Edelnor will continue next month, as Peru's privatization body Copri plans to place 110 million shares on the auction block. Business News Americas says, if the auction goes well, the remaining 208 million shares will be sold as well. Copri capital markets manager Alberto Rojas told the paper that the public sale will happen during the first 10 days of May, depending on regulator approval. Last month, Copri grossed US$24 million for selling 110 million Edelnor shares at 0.76 soles (US$0.22) each, the minimum price per share set by the body. Edelnor is the largest private distributor in Peru and serves almost 4 million people in Lima and the nearby port Callao. Spain's Endesa acquired 60% of Edelnor in 1994 and controls and runs the company. The government still owns 27.1% of the company. ================= V E N E Z U E L A ================= BANCO INDUSTRIAL: Governent Stops Hemorrhage With VEB125 Billion ---------------------------------------------------------------- The Venezuelan government has reportedly taken steps to stop the bleeding at its largest development bank by injecting it with VEB125 billion cash. Business News Americas says Banco Industrial de Venezuela Chairman Jorge Castillo was recently quoted confirming the report. The bank booked losses of VEB53 billion last year and already its loses for the year has amounted to VEB15.6 billion, the paper says. Mr. Castillo hopes his cost-cutting plan will bring the bank back into black with a projected profit of VEB3 billion this year. *********** 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, Edem Psamathe P. Alfeche and Ma. Cristina Canson, Editors. Copyright 2002. 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 * * *