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/raid1/www/Hosts/bankrupt/TCRLA_Public/021107.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 7, 2002, Vol. 3, Issue 221 Headlines A N T I G U A & B A R B U D A LIAT: November 15 Deadline Looms for Critical Financing Plan LIAT: Shareholder Governments Seek Headquarters Move A R G E N T I N A COEUR D' ALENE: Reports Exploration Success At Argentinean Mine * Argentina Signs $400M Infrastructure Accord With IDB B E R M U D A MUTUAL RISK: Official Board Changes Announced TYCO INTERNATIONAL: Appeals Court Denies Trocar Products Motion B O L I V I A * Bolivia Reassured Of $1B IDB Loan Over Three Years B R A Z I L ACESITA: Restructuring Improves 3Q02 Financial Results BBA-CREDITANSTALT: Parent Sells Stake As Part Of LatAm Pullout BRASIL TELECOM: Issuing $112.3M In 2-Yr. Bonds CELG: Goias Calls Off Proposed Stake Sale EMBRATEL: Hires CSN Ex-Chairman To Assist Debt-Renegotiation KLABIN S.A.: Ratings Lowered to 'SD'; Off Watch C H I L E AES GENER: Awaits Conama's Permission To Transfer Plant M E X I C O AHMSA: Bank Creditors Schedule Separate Assembly On Nov. 7 BANRURAL: Fox's Plan Remains Before Congress CORPORACION DURANGO: Fitch Affirms Ratings; Outlook Goes Stable DESC: Bear Stearns Downgrades Stock Outlook GRUPO MEXICO: Asarco Struggles To Renegotiate Cleanup Schedules GRUPO MEXICO: San Luis Plant Closes Over Labor Dispute IUSACELL: S&P Cuts Ratings On Financing Concerns T R I N I D A D & T O B A G O BWIA: Barbados May Help BWIA Recover - - - - - - - - - - ================================= A N T I G U A & B A R B U D A ================================= LIAT: November 15 Deadline Looms for Critical Financing Plan ------------------------------------------------------------ A meeting between LIAT senior executives and the region's leaders resulted in the decision giving LIAT until Nov. 15 to secure the US$9 million (EC11 million) needed for it to stay airborne, reports the Barbados Advocate. In additions, LIAT is required to submit financial proposals on its continued operations after the deadline. The region's governments have agreed to guarantee the necessary amount. Trinidad and Tobago will guarantee 44 percent while the government of Barbados 22 percent. Antigua and Barbuda, where LIAT is based will guarantee 19 percent. The move was designed to help LIAT survive the slump plaguing the airline industry and to resolve the issue of alleged predatory pricing practices in the routes LIAT shares with newcomer Caribbean Star Airline. Minister of Tourism and International Transport Noel Lynch, who also attended the meeting, said that a committee to resolve the issue has been created. The committee, headed by Trinidad and Tobago, with Barbados, Guyana, St. Vincent, Antigua and the CARICOM Secretariat as members, will have its first meeting on Nov. 12 in Trinidad. The group seeks to create an atmosphere of fair competition with the region's airlines. Minister Lynch added that the region's governments have a social responsibility to help LIAT because the airline has been operating in the region for over 40 years, significantly contributing to the region's economic and social growth. The meeting was headed by St. Vincent Prime Minister Dr. Ralph Gonsalves. In attendance were Lynch, Prime Minister Patrick Manning of Trinidad and Tobago, President of Guyana Bharat Jagdeo and Prime Minister Owen Arthur. CONTACT: LIAT Corporate Headquarters V.C. Bird International Airport, P.O. Box 819, St. John's, Antigua West Indies Tel. 1 (268) 480-5600/1/2/3/4/5/6 Fax: 1 (268) 480-5625 Homepage: http://www.liatairline.com/ Contacts: Garry Cullen, Chief Executive Officer David Stuart, Vice President of Marketing LIAT: Shareholder Governments Seek Headquarters Move ---------------------------------------------------- LIAT's shareholder governments are suggesting moving the airline's headquarters to St. Kitts. The idea stems from claims that the cost of doing business in its Antigua base is one of the factors driving the airline out of business. However, Antigua and Barbuda Prime Minister Lester Bird said that he will not take part in the decision making on LIAT's headquarters relocation. Prime Minister Bird also revealed that St. Lucia and the Grenadines are jostling for the carrier's engineering department. "Antigua & Barbuda cannot support this. There is no basis. I hope that it is not a revival of insularity," he said. He also pointed out that Antigua and Barbuda will be guaranteeing EC2.1 million out of the EC11 million capital injection LIAT needs. He added that the country had injected some EC30 million into the airline. The board of directors of LIAT has scheduled a press conference for Tuesday at its headquarters at the V.C. Bird International Airport. ================= A R G E N T I N A ================= COEUR D' ALENE: Reports Exploration Success At Argentinean Mine --------------------------------------------------------------- 24% Increase in Total Silver Resources to 4.0 Million Ounces Numerous High-Grade Intercepts Coeur d'Alene Mines Corporation (NYSE:CDE) announced Tuesday continued exploration success at its 100%-owned Martha silver mine located in the Santa Cruz Province of southern Argentina. Since commencing a reverse circulation drill program in August, Coeur has drilled a total of 52 holes totaling approximately 3,500 meters (11,550 feet). Based on these results, Coeur has increased the total estimated resource at Martha by 24% to 4.0 million silver equivalent ounces with an average grade of 3,800 grams per tonne (110 ounces per ton) of silver equivalent. These new resources are located immediately adjacent to and below the current underground workings and are expected to extend Martha's mine life. Drilling is also delineating additional high grade mineralization in the eastern part of the Martha mine, which has the potential to further increase the total amount of resources. Presently, there are 2.7 million ounces of proven and probable reserves contained within the 4.0 million ounce total resource at Martha. Additional resources are also being delineated along the main Martha vein at the R-4 prospect located 100 meters east of the Martha mine. Select values from these reverse circulation holes include: -- 1.0 meter (3.3 feet) of 11,008 grams per tonne silver equivalent (322 ounces per ton). -- 11.5 meters (38.0 feet) of 4,165 grams per tonne silver equivalent (122 ounces per ton). Within this intercept, 6.0 meters (20.0 feet) of 7,273 grams per tonne silver equivalent (212 ounces per ton) was intersected. -- 20.5 meters (67.0 feet) of 1,067 grams per tonne silver equivalent (31 ounces per ton). Within this intercept, 3.5 meters (11.5 feet) of 3,947 grams per tonne silver equivalent (115 ounces per ton) was intersected. Coeur's Senior Vice President of Exploration Dieter Krewedl remarked, "Our exploration progress at Martha continues to be very exciting. Our exploration efforts to date indicate that the Martha vein is prospective over a 1,600 meter strike length. Additional drilling is beginning this week on the Martha vein and on the two new veins that have been identified in the area. Over the coming weeks, we are confident that nearly all of the 4.0 million ounces of existing resources will be converted to proven and probable reserves." Coeur acquired the Martha mine and other precious metals exploration properties in southern Argentina from Yamana Resources Inc. in April of this year for $2.5 million in cash. Ore from the Martha mine is being trucked to the Company's Cerro Bayo silver/gold mine located 270 miles away in southern Chile for processing. The Martha mine is located within the highly prospective land package acquired by Coeur that totals nearly 145,000 acres. Coeur d'Alene Mines Corporation is the world's largest primary silver producer, as well as a significant, low-cost producer of gold. The Company has mining interests in Nevada, Idaho, Alaska, Argentina, Chile and Bolivia. Cautionary Note to U.S. Investors -- The United States Securities and Exchange Commission permits mining companies, in their filings with the SEC, to disclose only those mineral deposits that a company can economically and legally extract or produce. We use the term "resources" in this press release which the SEC guidelines strictly prohibit us from including in our filings with the SEC. U.S. investors are urged to consider closely the disclosure in our Form 10-K. You can review and obtain copies of that filing from the SEC website at http://www.sec.gov/edgar.html This document contains numerous forward-looking statements relating to the Company's silver and gold mining business. The United States Private Securities Litigation Reform Act of 1995 provides a "safe harbor" for certain forward-looking statements. Operating, exploration and financial data, and other statements in this document are based on information the company believes reasonable, but involve significant uncertainties as to future gold and silver prices, costs, ore grades, estimation of gold and silver reserves, mining and processing conditions, changes that could result from the Company's future acquisition of new mining properties or businesses, the risks and hazards inherent in the mining business (including environmental hazards, industrial accidents, weather or geologically related conditions), regulatory and permitting matters, and risks inherent in the ownership and operation of, or investment in, mining properties or businesses in foreign countries. Actual results and timetables could vary significantly from the estimates presented. Readers are cautioned not to put undue reliance on forward-looking statements. The Company disclaims any intent or obligation to update publicly these forward-looking statements, whether as a result of new information, future events or otherwise. CONTACT: Coeur d'Alene Mines Corporation Mitchell J. Krebs, 208/769-8155 * Argentina Signs $400M Infrastructure Accord With IDB ------------------------------------------------------ The Inter-American Development Bank agreed to a US$400 infrastructure accord with the government of Argentina Tuesday. The accord was signed by IDB President Enrique Iglesias and Argentine Economy Minister Roberto Lavagna in Buenos Aires, reports Dow Jones. The agreement is aimed at improving Argentina's transport links with its neighbors Chile, Bolivia and Brazil. The plan also commits both sides to spend US$200 million on Argentine border infrastructure projects over the next six years. The Argentine border crossing with Chile are often blocked by snow during winter, as they wound across the Andean mountain range. Roads that connect Argentina to Bolivia are old and run- down by heavy trucking. Iglesias said the move would contribute to Argentina's export sector and boost economic integration within the Mercosur trade bloc - made up of Argentina, Brazil, Uruguay and Paraguay and associate members Bolivia and Chile. Exports to Mercosur countries made up 30 percent of the total in September. This figure is significantly higher than in recent years. Mr. Lavagna expressed his gratitude to the IDB, saying this is additional evidence of the support the organization has given the country over the years. Argentina is hard-pressed for developmental funds as it faces debt payments worth US$800 due to the World Bank, which has extended the deadline to Nov. 14 from Nov. 9. However, the country has made it clear that it would not be using its reserves to pay its debts over concerns of further currency devaluation. The country is still in negotiations with the International Monetary Fund. Earlier, it has refused to impose some measures the IMF required, as it would add to the difficulties of the crisis-stricken country's population. ============= B E R M U D A ============= MUTUAL RISK: Official Board Changes Announced --------------------------------------------- Bermuda insurer Mutual Rick Management (MRM) chief finance officer Angus Aycliffe reported to the U.S. Securities and Exchange Commission the results of the latest shakeup at board level. A number of members of the board of directors ended their services to the company effective October 19 this year. The Wednesday edition of The Royal Gazette enumerated members of the MRM Board who exit on October 19 are Roger E. Dailey, Arthur E. Engel, Jerry S. Rosenbloom, Norman L. Rosenthal, Joseph D. Sargent and Richard G. Turner. Robert Mulderig chairman and chief executive was fired on November 1, to be replaced by Bermudian David Ezekiel, who becomes member of the board effective October 18. Ezekiel is president and managing director of International Advisory Services Ltd., a subsidiary of MRM, and also a director of MRM Services Ltd. Effective October 31, Paul Scope, chairman and chief executive officer of the Park Group Limited, MRM's insurance brokerage subsidiary will be on the board. In the end, the there are only two members in the MRM board: Ezekiel and Scope. Neither of them had been on the board before October 18. The report cites the company's inability to secure an extension of its current directors' and officers' insurance policy or to obtain replacement coverage as the reason for the changes. The insurance protects the directors and officers from being sued personally for the economic consequences of decisions made in their respective corporate capacities. After the wave of corporate scandals shocked the business world this year, The D&O sector is having difficulties that have seen premiums raised significantly and several issuers stop writing coverage altogether. According to the report, the board resignations en masse mean that all the actions of the previous board members would have been covered by the D&O policy that could not be renewed. Unable to renew the coverage, the directors had a choice: to continue without coverage, or to resign. They resigned. The filing did not make it clear if the coverage could have been arranged or not. MRM, which provides risk management services to clients in the United States, Canada and Europe seeking alternatives to traditional commercial insurance for certain of their risk exposures, as well as financial services to individuals and other companies, has a number of financial problems this year. In fact, it has sold its fund administration business, Hemisphere Management Ltd. in March to pay debts. At about the same time, MRM retained independent global merchant banking firm Greenhill & Co., LLC, to help develop a restructuring of its balance sheet. Later, the company announced the placement in voluntary rehabilitation of two of its insurance companies, Legion Insurance Company and Villanova Insurance Company ("Legion Companies") by order issued by the Commonwealth Court of Pennsylvania. The board of directors of both companies had given their consent in the filing of the order of rehabilitation, which took effect on April 1, 2002. After the order took effect, the Legion Companies operated in run-off under the control of the Insurance Commissioner of the Commonwealth of Pennsylvania as Rehabilitator. No new policies were to be bound and the Legion Companies were to begin a process to non-renew their in-force policies in accordance with applicable state regulations. On September 13, Pennsylvania insurance regulators sought the liquidation of Legion Insurance Company. This year, the company was delisted from the New York Stock Exchange, numerous ratings downgrades, and a number of class action lawsuits from disgruntled investors. On the Bermuda Stock Exchange, MRM stocks closed at 4 centavos Monday, down from a high of US$23.56 in October. CONTACT: MUTUAL RISK MANAGEMENT INC. P.O. Box HM 2064 44 Church Street Hamilton HM HX Bermuda Tel: (800) 772-0849 or (441) 295-5688 Contacts: Angus H. Ayliffe, Chief Financial Officer Fran Tucker, Investor Relations Legion Insurance Company (In Rehabilitation) Villanova Insurance Company (In Rehabilitation) Legion Indemnity Company One Logan Square Suite 1400 Philadelphia, PA 19103 Tel: 215.979.7879 Fax: 215.963.1205 Contacts: Joseph M. Boyle, Acting President Paul Forbes, Senior Vice President - Underwriting Andrew Walsh, General Counsel Steve Zielinski, Senior Vice President - Claims Gregg Frederick, Senior Vice President - Reinsurance TYCO INTERNATIONAL: Appeals Court Denies Trocar Products Motion -------------------------------------------------------------- Applied Medical Resources Corporation announced Monday that the United States Court of Appeals for the Federal Circuit denied the motion by Tyco International (NYSE: TYC) / US Surgical Corporation (USSC) for stay of permanent injunction prohibiting the making, using, offering to sell, or selling all Trocar products that utilize one of Applied's patents. Issued on October 31, 2002, this decision leaves standing the District Court's injunction order effective November 1, 2002 at 5 pm EST. The injunction covers more than 45 different models including the VersaStep, VERSAPORT, VISIPORT, BLUNTPORT and S. D. Port product lines. Earlier press releases relating to this case, and a list of the enjoined products by product code and description can be found on Applied's website at www.appliedmed.com (Company Information/Press Room). Trocars are access ports for instruments used during minimally invasive laparoscopic surgery. About Applied Medical Applied Medical, based in Rancho Santa Margarita, CA, is a leader in medical device technology for general surgery, vascular and cardio-thoracic surgery, and urology and pioneered the GelPortT technology for Hand Access Laparoscopic (HAL) surgery. The company currently holds more than 300 issued or pending patents. For more information, visit Applied Medical's websites at www.appliedmed.com or www.gelport.com . CONTACT: APPLIED MEDICAL RESOURCES CORPORATION Mary Jo Stegwell, +1-949-713-8000 Web site: http://www.gelport.com Web site: http://www.appliedmed.com ============= B O L I V I A ============= * Bolivia Reassured Of $1B IDB Loan Over Three Years ---------------------------------------------------- Bolivia's newly-elected president, Gonzalo Sanchez de Lozada, received confirmation that the Inter-American Development Bank (IDB) has set aside about US$1.0 billion for lending to the country, according to an article from Dow Jones Newswires. IDB President Enrique Iglesias said that that Bolivia is one of the countries hard hit by the economic crisis in the region, and that a timely solution is required. About half of the proposed amount will go to new projects and loans, while the other half will support projects that have already been approved. The country is expecting to qualify for a new loan worth US$210 million next year. More than half of that amount would fund projects promoting sector development including a natural gas pipeline. Soon to be passed for he board's final approval is another US$100 million loan to aid he country in overcoming the spillover from Argentina's economic crisis. Iglesias said that the loans are also aimed at helping the advancement of reforms to facilitate the country's return to growth and stability. He added that the country's success relies in the improvement of health and education services and in the creation of productive jobs for its citizens, as well. The new government, under de Lozada is currently in the process of revising its economic strategy for cutting poverty. De Lozada won over Evo Morales, a radical Indian leader of Bolivia's coca growers, by an 84-43 vote by congress. The new president, a centrist mining executive educated in the U.S. received IDB's reassurance shortly after his meeting with Iglesias. =========== B R A Z I L =========== ACESITA: Restructuring Improves 3Q02 Financial Results ------------------------------------------------------ Belo Horizonte, November 4 2002 - A ACESITA S.A. (BOVESPA: ACES3 e ACES4, OTC: ACAEY/ACAIY), the only integrated stainless and silicon flat steel producer in Latin America, released Monday its third quarter (3Q02) results. All operating and financial information, except where otherwise indicated, is in Reais, based on non-consolidated figures as per Brazilian corporate legislation. All comparisons, except where otherwise indicated, are with third quarter 2001 (3Q01). Comments from Gilberto Audelino Correa, CFO and Investor Relations Officer "We are very pleased to announce a quarter of excellent operating results, in line with the Company's plans as communicated to the market. As we said in our last report, the second half of 2002 began on a completely different footing than the first half. It can be truthfully said that Acesita is another company from this quarter on. For the first time Acesita is able to display its new profile after exiting the bar business and concentrating on the production and sale of stainless steel. As a result of the restructuring of its operations, Acesita today has achieved new levels of sales and margins. Net revenues for the quarter were R$499.0 million and earnings before interests and taxes (EBIT) reached R$127.0 million, a 101.8% increase over 3Q01. This outstanding operating performance allowed us to chalk up a gross margin of 34.1% and an EBITDA margin of 31.1% in the quarter, well above international averages for the stainless business. We expect to be able to maintain this level of sales and margins through year-end. Achieving this kind of performance under today's levels of domestic and international uncertainty makes us very optimistic about the Company's perspective under more favorable market conditions in the future. Enhanced competitiveness gave Acesita the opportunity of increasing exports and opening up new export markets. After a first half- year of limited supply, we had a quarter of accelerating overseas sales, leading us to believe that we can close the year with exports of over 150 thousand tons. With the new industrial structure operating at virtually full capacity, setting new operating standards for the Company, we are now focusing on the Company's finances. Management, supported by the controlling shareholders, is working on a better match between the company's debt schedule and its new levels of cash generation. By year-end, the Company will have undergone a process to lengthen the maturity schedule of the debt, which it commenced on October 21 2002, when the General Shareholders' Meeting approved the issue of R$800 million of four year tenor non-convertible debentures. NET INCOME Acesita's net results suffered the effects of the sharp devaluation of the Real during the quarter, which inflated financial expenses. The loss for the quarter was R$255.1 million. The new revenue and cash generation levels produced by Acesita's new configuration in the third quarter and going forward are the basis for concluding that Acesita is a highly efficient Company which results have been negatively affected by events in the exchange markets. This becomes clear through August results in which month there was a 11.8% valuation of the Real, which lead Acesita to a R$ 153.0 million net income in the month. OPERATING PERFORMANCE Production and sales Total steel production in the quarter was 171.6 thousand tons, 3.3% lower than the previous quarter and 12.3 % lower than 3Q01. The improved product mix, with greater emphasis on the higher value-added products, visibly impacted the Company's sales, raising Acesita to unprecedented levels of industrial and commercial performance. This was the first quarter of normal operations, after completion of the technical reconfiguration project and mastery of the learning curve of the new equipment and processes. Operating performance expectations were fully met within the time frames proposed. Acesita today has a great competitive advantage in the flexibility of its productive structure, allowing it to adjust the mix of products in response to market conditions for each product, thus eliminating production bottlenecks. With two converters and one degasser in the melt shop, the Company has capacity for approximately 850 thousand tons/year of liquid steel. Total sales volume for the quarter was 187.8 thousand tons, 6.5% up on the previous quarter. As foreseen in the Strategic Planning that the company has been sharing with the market, the termination of mechanical bar production immediately freed up about 20% of total steel production for higher value-added, higher margin stainless steel production. Last quarter's sales mix already reflect the new configuration of the Tim�teo mill. Acesita today is a company focused on producing stainless and silicon steel, with a carbon alloy steel production line as well, to add flexibility and permit optimization of the sales mix. The strong increase in stainless sales in 3Q02 bear witness to the competitiveness Acesita has achieved with the investments in its plant, putting it on the same level as the world's most efficient stainless steel producers. The value added by the new sales mix could be more clearly felt in the third quarter's sales figures. The 32.4% increase in stainless sales volume over the previous quarter translated into a 56.5% increase in net revenues of this kind of steel and 36.1% in total revenues, proof of Acesita's new potential for revenues and cash generation. The new mill configuration also permitted Acesita to significantly increase third quarter stainless steel exports to 54.3 thousand tons, a 72.1% gain on the previous quarter and a 60.6% gain over 3Q01. Currently, stainless steel accounts for over 50% of sales volume and 73.9% of net revenues. The first half of 2002 was spent in adapting to the newly re- lined blast furnace, and the reconfiguration and modernization of the melt shop and the hot strip mill, at a time when the priority was still to supply the home market, given the shutdowns of the Tim�teo mill. Today, Acesita's new industrial specifications have permitted it, for the first time in its history, to ship more to international markets than to the domestic market. The tendency from now on will be to destine about 50% to the domestic market and about 50% to exports. Plant expenditures have made Acesita extremely competitive in world markets as regards both price and quality. That is what has made so significant an increase in exports possible. With the global economy relatively stable, the increase in Acesita's exports has been at the expense of the competition, since Acesita has been able to be very competitive with its international clients. If these results can be achieved in a market that is not growing significantly, Acesita is well placed to reap even larger gains when markets improve. Markets and prices The domestic market for steel products is going through a downturn, given adverse economic conditions and the general slowdown in economic activity in Brazil. Demand for stainless steel, however, has fallen less than demand for other steel products, mainly because of the resumption of certain industrial projects that demand stainless steel. In an attempt to benchmark domestic prices to international levels, Acesita managed to maintain its margins in the domestic market, compensating for the increased exchange rate cost of certain imported raw materials, principally nickel and coking coal. The international market is showing a light recovery in demand for inventory rebuilding, especially in Europe and Asia. This has produced a slight upward price trend, but prices are still well off their historical average. The low point for Acesita's stainless prices was 1999, followed by some recovery in 2000, another dip in 2001 and, since then, a gentle recovery. Net operating revenue For the first time, after finally mastering the learning curve of the new equipment and processes in June 2002, Acesita's 3Q02 operations fully reflect the company's new industrial profile. Net operating revenue reached R$499.0 million, a 30.0% growth over 3Q01 and a 36.1% increase compared to 2Q02. Revenues of this order elevate Acesita to a new level, where it has the potential to book net operating revenues of R$2 billion per year. Besides the new product mix, the effect of the 3Q02 devaluation of the Real on higher exports volumes also contributed to the strong net operating revenue results, as well as the fact that Acesita managed to preserve its margins in the domestic market, while remaining competitive. The distribution of 3Q02 sales by product reflects Acesita's new line-up, with stainless and silicon steel representing 88.6% of the quarter's net revenues. Sales of stainless steel, the Company's principal strategic focus, accounted for net revenues of R$368.8 million in the quarter, 52.0% higher that 3Q01 and 56.5% above 2Q02. This performance can be attributed to the following factors: (i) better average prices, (ii) higher exports as the result of a great effort by Acesita's sales department, (iii) the effect of devaluation on the Real value of export revenues, and (iv) the Company's newly acquired competitiveness. Silicon steel has a specific market and demand basically depends on the level of investments in the electricity sector. Better average prices compensated for a 2.9% drop in sales volume compared with 3Q01, and net revenues grew 10.2% in the quarter to R$73.2 million. The main market for this type of steel is the domestic market. The excellent magnetic qualities of silicon steels ensure them an important role in developing the rational use of electric energy in the country. Silicon steel, especially NOG -Non-oriented grain steel, has been enjoying increasing demand in the domestic market. Carbon alloy steel production complements Acesita's production line and represented 5.2% of the quarter's net revenues. This is a niche market where Acesita has proven to be extremely competitive, producing specialty alloy carbon steel for tools and agricultural instruments to the specifications of clients in the domestic market. The ability to produce carbon alloy steel is the "plug figure" for Acesita's product mix and allows it to maximize its product mix. As previously announced by the Company, mechanical bar production was terminated in June this year and this quarter's results no longer reflect these earnings, which, because of the low margins, always ended up weighing down the overall margin on Acesita's portfolio of products. With bar production terminated, 100% of Acesita's products now contribute towards increasing overall profitability. Gross Profit The upward trend in Acesita's gross margin during 2002 reflects the transition to its new industrial profile after getting up to speed on the new equipment and processes. The mill is running at full operational efficiency and the economies of scale place Acesita among the select group of companies capable of competing worldwide as suppliers of high quality product to international markets. After investing approximately US$780 million in its mill since privatization in 1992, Acesita has reached a level of operating profitability that serves as a benchmark for future years and confirms the Company's future earnings potential. Strong operating and commercial performance, together with firm cost control, delivered gross income of R$170.0 million for the quarter, a 66.3% improvement on 3Q01 and 27.6% higher than total gross income for all of the first half of 2002. Despite a richer product mix, which implies higher production costs, Acesita managed to keep the increase in cost of goods sold to only 16.9%, compared with a 30.0% increase in revenues. The result was a significant growth in the gross margin, that jumped from 26.6% (3Q01) to 34.1% in this quarter, one of the highest margins ever reached by the Company. Acesita has one of the most competitive stainless steel production costs in the world, which explains how it can achieve this level of gross margin - higher than the global average of other producers - despite the currently still depressed prices. The new Acesita, with its perspective of exporting half of its stainless output, will have a natural hedge against those parts of its cost structure denominated in or indexed to dollars. Operating Cash Generation - EBITDA Driven by strong operating and commercial performance, operating cash generation, as measured by EBITDA (earnings before interest, tax, depreciation and amortization) reached R$155.3 million for the quarter, 74.2% above that of 3Q01 and 28.9% higher than that registered for the whole of the first half of 2002. The EBITDA margin, which used to fluctuate between 20% and 25%, reached 31% in the quarter, peaking at 37.8% in September. These margins are above average for stainless steel producers, which normally vary between 11% to 12% when the market is weak and 22% to 23% under more favorable conditions. These margin levels are proof that Acesita has climbed to a different level of operating efficiency, with cash flow rhythm of R$500 million p.a. and margins above 25%. It is true that this performance was also the result of Real revenue gains from the sharp currency devaluation. Nevertheless, the growth trend in operating cash flow and the achievement of new levels of operating efficiency can still be seen, even when the cash flow is analyzed in dollars. FINANCIAL RESULT Acesita's financial performance suffered from the effects of the 36.9% third quarter devaluation of the Real on its dollar- denominated/indexed debt. Net monetary variations, including exchange losses, for the quarter totaled R$226.5 million. Net financial expenses for the quarter came to R$105.8 million, for a YTD total of R$227.1 million. On the other hand, the Company has a policy of hedging most of its dollar-denominated/ indexed debt against currency depreciation, with the exception of debt using export receivables as the underlying source of payment. This policy has turned out to be well chosen and efficient and has resulted in currency hedge gains of R$404.6 million in the quarter and R$585.1 million YTD 2002. Net dollar debt, including Acesita International, at the end of September totaled US$768 million, down 2.9% from June. The priority of Acesita's management today is the restructuring of the Company's financial liabilities, for which it counts on the support of its controlling shareholders. The levels of cash generation currently being thrown off by Acesita's new industrial configuration are fully compatible with its debt service. Assuming cash generation rhythm of approximately R$500 million p.a. and stable debt levels through 2003, Acesita's debt/EBITDA ratio declines significantly from 8 times (2Q02) to the current level of 6 times. The financial restructuring currently under way will focus on lengthening the maturity schedule of the debt, currently concentrated in the short term. A series of longer-term debt transactions were done in 1999, with the assistance of the controlling shareholders, bringing long-term debt to approximately 60% of the total. These transactions, however, are already nearing maturity, especially the fourth debenture issue, the export securitization transaction and the import finance line, the last two of which supported by Usinor, and debt is becoming concentrated in the short term again. Acesita expects to be able to count on the support of its controlling shareholders once more for this debt restructuring program. The first step will be the issue in December 2002 of R$800 million of non- convertible debentures, due December 2006, as approved in the General Shareholders' Meeting of October 21. The purpose is to better match Acesita's debt structure with its new levels of cash generation. The debenture issue will allow Acesita to meet its short-term obligations and maintain a liquidity "buffer" for its working capital needs for 2003. During the third quarter, Acesita received financial support from its controlling shareholders, who subscribed securities issued by the company locally and overseas, in order to face the shortage and the prohibitive cost of finance resulting from locally imposed credit restrictions. Eurobonds During the third quarter, Acesita carried on negotiations with holders of its Eurobonds, with a view to altering the financial covenants established therein, which current Acesita's and market conditions have rendered inappropriate. The bonds, issued in 1996, set a maximum consolidated debt to net worth ratio of 2 per 1. The bondholders' meeting convened by Acesita, with the necessary quorum, approved a resolution that eliminated this financial covenant and also eliminated the negative pledge clauses that prevented the Company from offering collateral for financial transactions, freeing Acesita from the financial constrictions that the terms of the securities placed on it. One immediate effect was the reclassification of R$ 199.5 million as long-term debt, with final maturity in 2004, which had been classified as short-term debt in the June interim statements, given the theoretical threat of acceleration as the result of non- compliance with the covenants. Acesita has not undertaken any buy-back or early redemption of this debt, which continues to be held by the market in its entirety. Bondholders that opted not to continue holding the bonds after elimination of the covenants were able to sell their bonds to an international bank. CAPITAL EXPENDITURES (CAPEX) With the conclusion of the reforms at the mill, the cycle of heavy capital spending is over. New capex is expected to be limited to 50% of each period's depreciation and will be mostly aimed at maintaining the company's productive competitiveness. Capital expenditures for the quarter were R$8.1 million, bringing the YTD 2002 total to R$47.0 million. OUTLOOK The company is projecting a 4% decline in the domestic stainless steel market for 2002, a number that, in fact, could be considered favorable given today's economic conditions and the fall in domestic demand in other segments of the steel industry. While demand in international markets is forecast as stable, Acesita intends to use its newly found competitiveness to export approximately 50% of its production in 2002. The aim for following years is to maintain or even to increase this proportion, given that first quarter 2002 exports were weak, due to lower production during the start-up period of the new plant and equipment. CONTACTS: Fabio Abreu Schettino Financial and Investor Relations Manager Phone: (55 31) 3235-4241 Adriana L�cia Fernandes Investor Relations Coordinator Phone: (55 31) 3235-4270 Flavia Bozzolla Vieira, Analyst Phone: (55 31) 3235-4235 Web site: www.acesita.com.br Email: ri@acesita.com.br Doris Pompeu Brasil, Consultant Phone: (55 11) 3848-0887 ext. 208 Email: doris.pompeu@thomsonir.com.br BBA-CREDITANSTALT: Parent Sells Stake As Part Of LatAm Pullout -------------------------------------------------------------- HVB Group, Germany's second-largest lender, is selling its business in Brazil as part of an effort to exit the Latin American country. The move follows a 30%+ drop in the local currency on investor concern that the government may default on its debts. According to a report by Bloomberg, Banco Itau SA, Brazil's fourth-biggest bank, said it would buy HVB's 47.8% stake in BBA- Creditanstalt SA and most of the holdings of other investors for BRL3.3 billion (US$930 million). HVB has been planning to sell units that aren't part of its main business, said HVB CEO- designate Dieter Rampl. In Brazil, HVB, which acquired the stake in BBA-Creditanstalt through its purchase last year of Bank Austria Creditanstalt AG, plans to keep only a representative office in Sao Paulo and another office in Rio de Janeiro, the bank's spokesman Rene Beutner said. HVB posted EUR360 million (US$354 million) in losses in the third quarter as it set aside more money to cover loan losses and is cutting 12.5% of its workforce. Given the scale of losses in Germany, investors don't want the bank to be at risk in the case of a Brazilian default, said Paul Tucker, an emerging markets banking analyst at Merrill Lynch & Co. in London. BBA-Creditanstalt was founded in August 1988 as a joint venture between two Brazilian bankers Fernao Bracher and Antonio Beltran and Creditanstalt-Bankverein. Bank Austria bought rival Creditanstalt in 1998 and HVB acquired Bank Austria in 2001. In addition to buying HVB's stake, Itau bought shares in BBA- Creditanstalt from Bracher and Beltran. At the time of its creation, BBA-Creditanstalt was worth about US$20 million, now, it's valued at about US$500 million based on book value, Beltran said at a press conference. BRASIL TELECOM: Issuing $112.3M In 2-Yr. Bonds ----------------------------------------------- Brasil Telecom, controlled by Brasil Telecom Participacoes SA, is considering a BRL400 million ($112.3 million) placement of two- year bonds, says Bloomberg. The bonds, according to the Company in a statement to the Sao Paulo stock exchange, would yield 22.68% as of December 1. Analysts believe that the Company may use the cash to buy an undersea cable or a fiber-optic network. Brasil Telecom is reportedly has its eye on 360networks Inc.'s underwater cable or the network of Fidelity Investments' MetroRED Telecom Ltd. Prices for such items have fallen as Brazil's currency, stocks and bonds lost nearly a third of their value this year amid investor fears that the country may default on its public debt. "Investors are seeing the bond sale as a preparation for acquisitions," said Roger Oey, a telecommunications analyst with BBV Securities in Sao Paulo. "This means higher risk for Brasil Telecom shares as investors don't know which company could be the acquisition target, with what kind of debt profile and at what cost." Brasil Telecom, Brazil's third largest fixed line operator in terms of lines in service, recently revealed that its dollar- denominated debt climb 2.6 percentage points to 9.2% of total debt at the end of the third quarter of 2002. The Company attributed the increase to the 32.7% depreciation of the real against the dollar during the quarter. At the end of September, Brasil Telecom had BRL409 million (US$107mn) in dollar-denominated debt. The Company had hedged 38.1% of its dollar debt, and 100% of all dollar debt coming due through the end of next year. Excluding inter-company debt with controller Brasil Telecom Participacoes, the Company's debt to equity ratio stood at 34.5% at the end of the quarter. Brasil Telecom also reported a net reduction of 349 employees in 3Q02 compared to the previous quarter, with 5,770 employees at end-September. At the end of the quarter, Brasil Telecom's efficiency ratio stood at 1,599 lines in service/employee, compared to 1,460 lines/employee for 2Q02. Capex was BRL332 million for 3Q02, compared to BRL397 million in the previous quarter. Brasil Telecom has a local currency rating of Baa3 by Moody's InvestorsService and a brAA national scale rating by Standard and Poor's. In May, Brasil Telecom sold 500 million reais of debt yielding about 19.9 percent to fund day-to-day business. CONTACT: BRASIL TELECOM PARTICIPACOES Sia Sul, Asp, Lote D, Bloco B 71215-000 Brasilia, D.F., Brazil Phone: +55-61-415-1414 Fax: +55-61-415-1315 http://www.brasiltelecom.net.br Luis O. Carvalho da Motta Veiga, Chairman Paulo Pedrao Rio Branco, CFO/Investor Relations Officer CELG: Goias Calls Off Proposed Stake Sale ----------------------------------------- Brazil's Goias state abandoned a plan to sell its 49% stake in distributor Celg to federal power company Eletrobras, Business News Americas reports, citing a report by state news agency Goias Agora. The deal, which was supposedly part of Goias state's debt renegotiations with the federal government, was called off after a valuation failed to meet the state government's expectations. Brazilian bank Unibanco prepared a valuation for Eletrobras that put Celg's total worth at between BRL44-126 million (US$12.3mn- 35.3mn), meaning the government would receive between BRL21.6- 61.7 million for its stake. "That is way below the reference price expected and a long way from the evaluation carried out [by Eletrobras] some months ago of BRL350 million," Goias state governor Marconi Perillo said in a statement. The valuation, according to the governor, was "laughable." He said he would not sell state assets at "banana prices". In 2001, when the Company was scheduled for privatization, the Company was valued at BRL1.42 billion. The governor said he would still evaluate options to federalize, privatize or otherwise transfer the Company to resolve its financial problems. However, after the collapse of this latest attempt, the Company will have to be totally restructured, and staff will be laid off, he said. While the Company generates operating profit, it doesn't have enough cash reserves to cover BRL800 million in debt maturing in the short-term. The governor revealed plans to renegotiate Celg's debt by extending debt deadlines with the federal government. Also, as part of the plan, he will seek a BRL100-million loan from Eletrobras to finance investments in 2003. Celg buys 70% of its power from Eletrobras, which is also the company's largest creditor. The power purchase figure includes the buys from the Itapiu hydroelectric plant, for which Celg owes 412mn reais. CONTACT: COMPANHIA ENERGETICA DE GOIAS (CELG) Rua 2 - Qd. A-37 - Edificio Gileno Godoi Jardim Goias - Goiania - Goias Brazil CEP: 74805-180 Phone: (0XX62) 243-2222 Fax: (0XX62) 243-2100 Email: celg@celg.com.br Home Page: www.celg.com.br/ Contact: Jose Walter Vazquez Filho, President Phone: (0XX62) 243-1001 Samuel Albernaz, Administrative Director Phone: (0XX62) 243-1031 Javahe de Lima, Economic-Financial Dir./Investor Relations Phone: (0XX62) 243-1041 EMBRATEL: Hires CSN Ex-Chairman To Assist Debt-Renegotiation ------------------------------------------------------------ Ailing Brazilian telecom company Embratel retained former CSN (Companhia Siderurgica Nacional)chairman, Maria Silvia Bastos, to assist the Company in renegotiating its debts, report Jornal do Commercio. Embratel, after posting a loss of BRL549 million in the third quarter of this year, has debts of US$790 million coming due in 2003. At the end of Sep. 2002, the Company's total indebtedness stood at US$1.3 billion. Early this week, Embratel Participacoes S.A. the Company that holds 98.8% of Embratel, revealed that it has been notified by the New York Stock Exchange (NYSE) for not meeting their ongoing compliance rule of a stock price trading above US$1.00 for a period exceeding 30 days. Embratel is currently in discussions with the NYSE with respect to the potential delisting. CONTACT: EMBRATEL PARTICIPACOES Silvia M.R. Pereira, Investor Relations Tel: (55 21) 2519-9662 Fax: (55 21) 2519-6388 Email: silvia.pereira@embratel.com.br or invest@embratel.com.br EMBRATEL PARTICIPACOES Helena Duncan, Press Relations Tel: (55 21) 2519-3653/3654 Fax: (55 21) 2519-8010 Email: hduncan@embratel.com.br KLABIN S.A.: Ratings Lowered to 'SD'; Off Watch ----------------------------------------------- Standard & Poor's Ratings Services said Tuesday that it lowered its local and foreign currency corporate credit ratings on Brazilian paper company Klabin S.A. to 'SD' (selective default) from triple-'C'-plus. The ratings are removed from CreditWatch, where they were placed on Oct. 8, 2002. The rating action follows confirmation that the company missed the principal payment on an unrated $50 million eurobond on the due date, Nov. 4, 2002. The 'SD' rating indicates that, in Standard & Poor's view, the missed payment does not imply general insolvency because the company continues to honor other types of debt. Klabin has approximately $850 million of debt. "Klabin is expected to remedy this event of default shortly, as it has obtained a new syndicated credit facility with the support of local banks and the Brazilian National Development Bank (BNDES - Banco Nacional de Desenvolvimento Econ�mico). Funds from this facility are expected to cover all of Klabin's short-term refinancing needs," stated Standard & Poor's credit analyst Milena Zaniboni. Klabin had requested bondholders to extend final maturity on the notes for two years, upon the immediate payment of 15% of the bonds' face value. On Nov. 1, bondholders decided not to accept such request, so the company is already taking the necessary steps to redeem the notes. The debentures that were due on Nov. 1 were renegotiated and bondholders agreed to extend maturity until Nov. 8. Klabin is expected to meet payment on the debentures and on the eurobonds due on Dec. 28 upon maturity. Standard & Poor's lowered Klabin's ratings on Oct. 28, anticipating that the company would not be able to pay bondholders upon maturity, even though the company was very close to finalizing the local syndicated deal. Klabin posted strong sales results in the third quarter of 2002, reflecting strong seasonal sales of packaging in the local market and focus on exports. Margins were also positively affected by strong export revenues in foreign currency while most of the company's costs are denominated in reais. EBITDA margin in third quarter 2002 improved to 34%, compared to 30% on December 2001. The positive operational results reflect the company's commitment to reduce costs and streamline its business lines. However, Klabin's financial performance has been hit hard by the volatility of the currency, as 67% of the total debt is denominated in foreign currency, and the extreme lack of liquidity in both bank and capital markets. Standard & Poor's expects to review the rating on Klabin very shortly, as soon as the company confirms payment on the eurobonds and on the debentures, and is able to discuss the terms and conditions of the new credit facility. ANALYST: Milena Zaniboni, Sao Paulo (55) 11-5501-8945 ========= C H I L E ========= AES GENER: Awaits Conama's Permission To Transfer Plant ------------------------------------------------------- Chilean generator AES Gener is expecting approval from the environmental authority Conama for its proposal to transfer an 18MW gas unit from the El Indio gold mine in Region IV to its Laguna Verde plant in Valparaiso, Region V, reports Business News Americas. In presenting its proposal to Conama, AES Gener said that Laguna Verde is a 54.7MW coal-fired plant, and the addition of the unit would give added security to power generation in Valparaiso. Barrick Gold, which owns El Indio, stopped production at the gold mine earlier this year. It is now working on a process of shutting down the mine. Meanwhile, Moody's has placed AES Gener's rating under review for possible downgrade. Over the weekend, Moody's downgraded the rating on the senior unsecured notes of AES Gener to Ba2 from Baa2. Moody's attributed the downgrade to AES Gener's weak cash flow relative to cash flow needs including debt service, failure to meet plans for restructuring of its asset base, and significant reliance on cash flows from subsidiaries located in non-investment grade countries. Woes at its U.S.-based parent, AES Corp., which is attempting to restructure and lighten its own heavy debt burden, underlie the financial weakness of the subsidiary. Moody's recently downgraded the senior unsecured debt rating of AES, reflecting weak cash flow relative to its substantial debt burden, concerns about liquidity pressures, and the impact of weak power market conditions on operations in Brazil, Argentina, Venezuela, the United Kingdom and the United States. CONTACT: AES GENER S.A. Mariano Sanchez Fontecilla 310 Piso 3 Santiago de Chile Phone: (56-2) 6868900 Fax: (56-2) 6868991 Home Page: www.gener.com Contact: Robert Morgan, Chief Executive Laurence Golborne Riveros, Chief Financial Offic =========== M E X I C O =========== AHMSA: Bank Creditors Schedule Separate Assembly On Nov. 7 ---------------------------------------------------------- In addition to the shareholders meeting called on by Altos Hornos de M�xico (AHMSA) at 8 a.m. Nov. 7, another assembly called by AHMSA's bank creditors through a company commissary will also be held at 1 p.m. the same day. Now, according to a Mexico City daily el Economista report, shareholders must decide which assembly they will have to attend. Bank sources said, "We expect to have the quorum required, as the shares in our power support our having voice and vote because the board is a commercial issue and that has nothing to do with the suspension of payments." AHMSA's bank creditors led by Bank of America, Banamex and Bancomer met after a court handed down a decision that banned them from voting nor making their opinions at the Nov. 7 shareholders assembly. The banks hold 70% of the shares of the firm. The First Circuit Civil Court of the Federal District decided that Grupo Acerero del Norte (GAN) and AHMSA conserved their right to vote on all of the shares handed over as security to the banks because they are currently under the suspension of payments law. The court also determined that that in the case of stocks that were sold illegally outside and on the Mexico City Stock Exchange (BMV) by Banamex and Banco Inverlat, the voting rights would be suspended because of the demands presented by GAN to nullify the transactions. As a result, only the representatives of GAN and AHMSA will be able to vote in the November 7 assembly, "unlike the banks or other institutions that are in possession of shares used as security." Furthermore, the banks are expected to launch a lawsuit against the Company's executives. AHMSA is the largest steel producer in Mexico with two plants in Monclova, Coahuila state. CONTACT: AHMSA Prolongacion B. Juarez s/n, Monclova , Coahuila 25770 Mexico http://www.AHMSA.com Phone: +52 86 33 81 72 Fax: +52 86 33 65 66 Contacts: Alonso Ancira Elizondo, CEO, Vice Chairman, Pres./CEO Jorge Ancira Elizondo, Chief Financial Officer Manuel Ancira Elizondo, Chief Operating Officer BANRURAL: Fox's Plan Remains Before Congress -------------------------------------------- The Mexican Congress is yet to approve a plan that will see the government widening its budget deficit this year, Bloomberg reports, citing Finance Ministry Planning Director Andres Conesa. Mr. Conesa indicated that Mexico may spend MXN42.9 billion to shut down Banrural, the defunct state-owned rural development bank, and to create its replacement, to be called Financiera Rural. The amount, Conesa said, includes writing off bad loans made by Banrural to growers over the last three decades. "This will have an effect on the 2002 fiscal deficit," Conesa said. President Vicente Fox's plan of shutting down a bank, which used to provide subsidies to growers in the form of loans that were rarely repaid, and replace it with a new bank, has been criticized by economists. Economists criticized Fox for not holding anyone responsible for Banrural's failure or introducing measures to prevent its replacement from misuse by future administrations. Financiera Rural, which will start operations April 1, 2003 when Banrural will be phased out, will be able to grant loans, issue credit cards, buy and sell dollars and make deposits in foreign banks. CONTACT: BANRURAL Agrarianism No. 227 Col. Escandsn Deleg. Miguel Hidalgo 11800 Mexico, D.F. Lada 01 Phone: 57-23-13-00 Home Page: www.banrural.gob.mx/ Contact: Dr. Jose Antonio Meade Kuribreqa, Main Directorate Agrarianism no. 227 70 floor Ext. 2000 Fax Dir. 5230-1639 Fax 1639 CORPORACION DURANGO: Fitch Affirms Ratings; Outlook Goes Stable --------------------------------------------------------------- Fitch Ratings has affirmed its 'B+' ratings of Corporacion Durango's (Durango) senior unsecured notes due in 2003, 2006, 2008, and 2009. The outstanding amount of debt for these notes is $18.2 million, $301.7 million, $10.3 million and $175.0 million, respectively. The Rating Outlook for these notes has been changed to Stable from Positive. The 'B+' rating continues to reflect the high level of debt at Durango and its subsidiaries, relative to cash flow from operations (EBITDA). Durango finished the period ended September 30, 2002 with $835 million of total debt and only $30 million of cash and marketable securities. During the next 12 months, the company has approximately $132 million of debt coming due. The rating also takes into consideration Durango's significant amount of exposure to the financial condition of clients in Mexico, with nearly $179 million of receivables outstanding at the end of September. In an attempt to shore up its liquidity, earlier in the year the company announced its intent to sell some assets or enter into some strategic joint ventures. By the end of 2002, the company plans to raise more than $100 million from such efforts. These assets sales are factored into the 'B+' rating. The change in the Rating Outlook to Stable from Positive reflects a poor third quarter performance by the company. As a result, the assets sales will not have as large of an impact upon the company's capital structure as originally indicated. The change in Rating Outlook also reflects a significant downward revision by the company in its midpoint EBITDA from $240 million to $175 million. While the businesses that will be sold account for some of the difference in this figure, they do not represent the entire figure. During the third quarter, Durango generated only $21 million of EBITDA, a decline from $39 million in the same quarter of 2001. The company's performance was hindered by a spike in the price for old corrugated containers (OCC) during the quarter. In addition, during September, one of the recovery boilers exploded at the company's plant in Georgia. As a result of this explosion, plus the company's inability to lower production costs at this facility, Durango shuttered its operations in Georgia. This closure represents a significant setback for the company, as it had spent more than $150 million on the facility, including purchase price and capita expenditures, since 1999. As a result of these recent events, on October 28, the company announced an additional round of asset sales. By the middle of 2003, the company hopes to sell more than $110 million of packaging assets in the United States. Durango intends to use most of the proceeds from these sales for debt reduction. This second round of asset sales and the resultant debt reduction has not been factored into the company's credit rating. CONTACT: (Chicago) Joe Bormann, CFA 1-312-368-3349 Roberto Guerra 1-312-368-3343 (Monterrey) Adriana Beltran Victor Villarreal 011-52-818-335-7239 Media Relations (New York) James Jockle 1-212-908-0547 DESC: Bear Stearns Downgrades Stock Outlook ------------------------------------------- Bear Stearns cut its investment recommendation on the shares of Mexican conglomerate Desc SA from "Peer Perform" to "Underperform," reports Dow Jones. The downgrade came because Desc "has failed to deliver a clear strategy aimed at spurring growth," said Analyst Rodrigo Goes, in a research note. Lower volumes and margin pressure at auto-part manufacturer Unik, a weakened variable cost and price outlook for pork, relentless overcapacity in the chemicals Desc produces, and "a general disappointment in management," also prompted the downgrade. Goes said Desc still trades at a premium. "Despite a 20% drop since July, other larger conglomerates are cheaper, offer a stronger outlook or at least better visibility," he said. CONTACTS: Arturo D'Acosta Alejandro de la Barreda Tel: 5255-5261-8037 abarredag@mail.desc.com.mx Blanca Hirani Melanie Carpenter Tel: 212-406-3693 bhirani@i-advize.com GRUPO MEXICO: Asarco Struggles To Renegotiate Cleanup Schedules --------------------------------------------------------------- Grupo Mexico subsidiary Asarco is trying to renegotiate cleanup schedules for its Ruston smelter and other Superfund sites. The projects amount to about US$700 million in environmental liabilities, according to a Wall Street journal analyst. Knight Ridder Business News reported that the company's difficulties on the cleanup schedule are mainly with the U.S. Department of Justice and the Environmental Protection Agency. The company needs to cleanup a total of 27 sites. The company has spent over US$180 million in the cleanup of the Ruston smelter that started in 1993, but the work is half done. Asarco's woes are compounded by a US$450 million loan due on November 10, which will trigger the company's bankruptcy if it defaults. However, Wall Street analysts say the upcoming deadline is likely to be extended, as the company continues talks with the banking syndicate and the U.S. Justice Department. The US$450 million loan is part of a US$1.2 billion financial package Grupo Mexico secured from U.S., German, French, Canadian and Mexican banks in its hostile takeover of Asarco in 1999. Grupo Mexico and Asarco has suffered after copper prices plunged to less than 70 cents from US$1 per pound, after the takeover. Asarco tried to sell its majority interest in two Peruvian copper mines to its parent company in a bid to ease its financial strains. But the Tacoma federal court blocked the move, saying it would seek the company's bankruptcy. Asarco had technically defaulted on its loan from the banking syndicate as its collateral, the mines in Peru, fell US$84 short of what was required. Luckily for Asarco, the syndicate took no action. Asarco had announced the closure of its mine in Mission, Arizona last week. Asarco's parent, Grupo Mexico has reported a net loss for this year's third quarter, though not as huge as for the same period last year. Grupo Mexico's outstanding debt mow totals US$2.7 billion. Earlier, Grupo Mexico received a US$250 million loan from a Mexican bank, using its extensive railway holdings. According to the report, some of the money could be funneled to Asarco. CONTACT: Asarco 2575 E. Camelback Rd., Ste. 500 Phoenix, AZ 85016 Phoenix City Phone: 602-977-6500 Fax: 602-977-6701 Home Page: http://www.asarco.com Contacts: Germ n Larea Mota-Velasco, Chairman and CEO Genaro Larrea Mota-Velasco, President Daniel Tellechea Salido, VP and CFO Grupo Mexico S.A. de C.V. Avenida Baja California 200, Colonia Roma Sur 06760 M�xico, D.F., Mexico Phone: +52-55-5264-7775 Fax: +52-55-5264-7769 Home Page: http://www.gmexico.com Contacts: Germ n Larrea Mota-Velasco, Chairman and CEO Xavier Garc�a de Quevedo Topete, President and COO Alfredo Casar P�rez, COO, Ferrocarril Mexicano Daniel Ch vez Carre�n, COO, Industrial Minera M�xico Daniel Tellechea Salido, VP and Administration and Finance President GRUPO MEXICO: San Luis Plant Closes Over Labor Dispute ------------------------------------------------------ Grupo Mexico SA zinc refinery in San Luis Potosi state has been shut down since Sunday, the Mexican mining concern revealed. In a filing with the Mexican Stock Exchange, the Company explained that closure came after shift workers left the plant after remaining on duty for almost a week because of demonstrations outside the plant organized by the National Mining, Metallurgical and Similar Workers Union. Workers belonging to the said union didn't allow shift changes needed to keep operations going at the plant. According to a report released by Dow Jones, around 600 unionized workers at the refinery went on strike Wednesday, demanding that the Company bring its payroll lists up to date, allow for shifts with different starting times as it had agreed, meet certain safety demands and respect union autonomy. According to Grupo Mexico, a majority of workers had voted in favor of switching the collective labor contract to the Monterrey-based Iron and Steel Workers Union. The Union is now threatening to extend the strike to four other units of Grupo Mexico, claiming that the Company is pressuring workers to change unions. The union also charged that the vote, conducted in August as workers came on duty, was suspended by the federal arbitration board before the third shift started, "denying around 40% of unionized workers the chance to vote." IUSACELL: S&P Cuts Ratings On Financing Concerns ------------------------------------------------ Standard & Poor's downgraded the credit rating of Grupo Iusacell SA to CCC+ from B+ on concern Mexico's third-largest mobile phone service provider won't be able to raise additional financing, reports Bloomberg. The rating now stands five levels from default rating. The downgrade reflects "continued loss of market share and declining revenues, as well as uncertainty on whether the Company's strategy to increase revenues, cut costs, and improve internal cash flow generation will be sustainable," S&P said in a statement. Iusacell, which has about US$810 million in debt, has been losing customers to its larger competitors, including America Movil SA, Latin America's largest cellular phone service provider that is based in Mexico City, S&P said. Iusacell's share value has now dropped more than 80% and it faces delisting from the New York Stock Exchange if the price does not reach at least one dollar in the next six months. Iusacell is majority owned by Vodafone Group Plc and Verizon Communications Inc.. To see financial statements: http://bankrupt.com/misc/Grupo_Iusacell.htm Investor Contacts: Russell A. Olson Chief Financial Officer 011-5255-5109-5751 russell.olson@iusacell.com.mx Carlos J. Moctezuma Manager, Investor Relations 011-5255-5109-5780 carlos.moctezuma@iusacell.com.mx ================================= T R I N I D A D & T O B A G O ================================= BWIA: Barbados May Help BWIA Recover ------------------------------------ The government of Barbados is considering support for troubled airline BWIA as the carrier accounts for more than a quarter of all air traffic into the country. According to The Barbados Nation, sources close to the government said a direct cash injection into the airline is unlikely. Instead, the report suggested greater marketing support may be offered, without disclosing the extent of the support. The country is deeply concerned by the troubles the airline is facing as it plays a vital role in the country's bread-and-butter tourism industry. According to the report, some 58,944 passengers were carried through the Grantley Adams International Airport out the 1.4 million passengers BWIA carried last year. BWIA's claims its troubles are caused by the decline in the global airline industry following the Sept. 11 attacks. The airline's debts now total TT88 million. BWIA had a net loss of nearly US$9 million (TT55 million) for the first six months of this year. Executives fear the airline would go to the hands of its creditors if losses were not reduced. The airline is seeking a US$13 million bail out fund from the government of Trinidad and Tobago. However, the Manning Administration has announced that they should be considered as a "lender of last resort" adding that the company and the employees should make sacrifices before a loan is approved. The government now holds a 35 percent stake in BWIA. Despite the airline's problems, Chairman of the Barbados Tourism Authority, Hudson Husbands, expressed confidence that BWIA will survive the current slump in the industry as it has a long and distinguished record and provided reliability and consistency of air access out of the most important tourism markets, such as London, Manchester, Miami, New York, Toronto and Washington. BWIA flies to 22 international destinations and serves eights flights to Barbados from major tourist markets and the Caribbean everyday. CONTACT: British West Indies Airways Phone: + 868 627 2942 E-mail: mailto:mail@bwee.com Home Page: http://www.bwee.com/ Contacts: Conrad Aleong, President and CEO (Trinidad) Beatrix Carrington, VP Marketing and Sales (Barbados) Paul Schutz, CFO (Trinidad) *********** 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 * * *