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/raid1/www/Hosts/bankrupt/TCRLA_Public/021205.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, December 5, 2002, Vol. 3, Issue 241 Headlines A R G E N T I N A CAMUZZI GAS: Shelves $300M Bond Issue CLISA: Fitch Analyst Warns Of Further Rating Downgrade * Argentine Default May Trigger IADB Fee Increase B E R M U D A FLAG TELECOM: Completes New Virtual PoP in Pakistan TRENWICK GROUP: Fitch Lowers Ratings to 'CC' TRENWICK GROUP: S&P Revises Preferred Stock Ratings to 'D' TYCO INTERNATIONAL: Names Courson Deputy General Counsel TYCO INTERNATIONAL: Over-All Loss Obscures Electronics Profits B O L I V I A COTEL: Cuts Interconnection Agreement With AES B R A Z I L AES SUL: Averts Default After Renegotiating $53.5M In Debentures BANCO FIAT: Itau Agrees To Acquire 99.99% Stake For BRL897M BCP SA/BSE SA: Parent In Sale Talks With Various Groups CEMIG: Issues Notice To Shareholders CSN: Wishes To Restart Talks With Corus CSN: Debt Elimination Believed Possible in Two Years NET SERVICOS: S&P Lowers Rating To 'D' NET SERVICOS: Shares Tumble On Word Debt Default Possible TELESP CELULAR: Offering BREW Technology Next Year USIMINAS: Seen Selling Auto Parts Unit To Boost Cash Reserves * J. P. Morgan Lowers Recommendation on Brazilian Stocks C O L O M B I A METRO: Government Lends Helping Hand M E X I C O CFE: Plans New Plant, Restores Services to Pacific Coast DESC: Moody's Cuts Ratings Following Assumption of Unit's Debt - - - - - - - - ================= A R G E N T I N A ================= CAMUZZI GAS: Shelves $300M Bond Issue ------------------------------------- Argentine natural gas distributors Camuzzi Gas Pampeana and Camuzzi Gas del Sur informed the Buenos Aires bourse that they canceled a joint issue of US$300 million in non-negotiable bonds, relates Business News Americas. "The Camuzzi distribution group will not make any further bond issues before year-end, and since there are no issues outstanding we have decided to cancel the remaining amount in the series," a Camuzzi Argentina source said. "The company has no need to issue more bonds at this time," the source added. In 1996, the group, which supplies some 45% of Argentina's total gas demand, notified the stock market of a bond issue up to US$200 million, which was subsequently increased to US$300 million. According to the source, the first issue of US$130 million in 2001, which was the only issue from the series, was repaid. Camuzzi Gas del Sur and Pampeana are controlled by Sodigas Sur, which in turn is 56.9% controlled by Camuzzi Argentina and 43.1% by US-based Sempra Energy. CLISA: Fitch Analyst Warns Of Further Rating Downgrade ------------------------------------------------------ An analyst at Fitch Ratings warned that it could lower CLISA'S (Compania Latinoamericana de Infraestructura Servicios) current rating of C (imminent default) issued earlier this year to D (default), reports Business News Americas. CLISA is currently on Watch Negative. The warning came after the Argentine infrastructure and services company missed its December 1, 2002 interest payment deadline on its US$100 million guaranteed senior notes due 2004. In a statement, CLISA said it would exercise its 30-day grace period to decide on its next course of action, and plans to host informal meetings for noteholders December 10 in New York City and December 17 in Buenos Aires to discuss its corporate operations and current financial position, as well as a preliminary restructuring plan and restructuring timetable. In addition, CLISA said it expects it will be able to positively resolve its current situation. The Company plans to continue operating its four business regions in Argentina, as well as in other countries, company spokesperson Juan Ordonez said. CLISA is a holding company mainly devoted to construction, mass transportation and toll roads, and also participates in waste management. As of September 2002, the Company's total debt amounted to US$147 million, including the US$100 million notes that mature in June 2004. About 18% of total debt matures until September 2003. * Argentine Default May Trigger IADB Fee Increase ------------------------------------------------- The Inter-American Development Bank may consider raising its fees after Argentina defaulted on an US$805 million payment due to the World Bank last month, according the IADB's deputy manager for risk management, Ira Kaylin. Gersan Zurita, an analyst for Fitch ratings company said the bank would also have to make changes in its pricing and lending priorities by curtailing lending to companies and the more prosperous among its client countries throughout Latin America and the Caribbean. A report from Bloomberg News shows that the development bank currently has a 50-basis-point spread, a credit commission of 75 basis points on all outstanding loans to a borrower, and a 1 percent up-front fee. A basis point is one one-hundredth of a percent. According to Larry Hays of Standard & Poor's, all other countries that borrow from the IADB would suffer if the lender decides to raise its fees. Latin American countries had already received a 64 percent decrease in private investment this year. Argentina has a US$160 million interest payment due to the IADB. Though the country defaulted on US$95 billion in bonds last December, it has remained current with the IADB, according to Kaylin. The report revealed that the IADB's staff is considering urging the board to end this year's policy of waiving all fees on new loans except for a 10-basis-point spread on the lender's average cost of borrowing. A default by Argentina would not jeopardize the bank's finances even if the country holds 18 percent of the banks loans outstanding. Rating agencies agree, saying that the banks reserves are 21 percent of loans outstanding. However, the bank may be compelled to deny Argentina loan disbursements worth millions of dollars if it fails to make a payment 39 days after the December 15 deadline. Kaylin said that the planned lending is roughly equal to what the country owes the bank. Argentina had received approval of the US$2.5 billion loan in 1998 in a bid to cushion the country from the financial crisis in East Asia and a debt default by Russia. According to the report, the five-year loan features a three-year grace period and a variable interest rate of 400 basis points over the London interbank offered rate, or the interest rate banks charge one another on short-term money. In July Argentina made an on-time payment on the loan of $670 million. ============= B E R M U D A ============= FLAG TELECOM: Completes New Virtual PoP in Pakistan --------------------------------------------------- FLAG Telecom Group Limited (OTC: FTGLF), ("FLAG Telecom"), announced Tuesday that it has completed the installation of a new virtual point of presence (VPoP) in Karachi, Pakistan. The VPoP is now fully operational and will be managed and operated locally by leading telecom operator Pakistan Telecommunication Company Limited ("PTCL"). This collaboration between FLAG Telecom and PTCL is the first to offer a seamless one stop shop for international managed bandwidth between Pakistan and key international business centers on the FLAG Telecom global network in Europe, the United States and Asia. Customers are also now able to purchase high quality IP transit bandwidth from the Karachi VPoP and take advantage of FLAG's low latency Internet backbone, which incorporates both eastwards and westwards routing and peering at major Internet exchanges around the globe. "We are excited to have completed this VPoP in an emerging and growing market like Pakistan, and that we were able to fully meet the needs and high quality standards of PTCL," said Walid Irshaid, FLAG Telecom's regional vice president for the Middle East. "The Karachi VPoP will enable PTCL and FLAG Telecom to provide customers with a high level of global connectivity, designed to offer resilience, reliability and superior quality of service at a competitive price." "This node will provide valuable services to our company and our customers, and give us a wider range of choice for international connectivity to world-wide destinations," said Akhter Jamil, General Manager Information Technology Infrastructure Karachi of PTCL. "We have tested FLAG Telecom's Internet bandwidth and we have been extremely impressed with the quality and performance of the network. We look forward to continuing to work jointly with FLAG Telecom as we ensure the success of this partnership venture." PTCL owns and operates the public telephone network in Pakistan and also provides various other telecommunication services. It is currently the sole provider of all core infrastructure services including international Data and Voice services out of Pakistan. All necessary information about PTCL is available on the website http://www.ptcl.com.pk About FLAG Telecom FLAG Telecom, along with its group companies, is a leading global network services provider and independent carriers' carrier providing an innovative range of products and services to the international carrier community, ASPs and ISPs across an international network platform designed to support the next generation of IP over optical data networks. Recent news releases and further information are on FLAG Telecom's website at: www.flagtelecom.com. CONTACT: FLAG Telecom Willem Baralt Tel +44 20 7317 0837 Email: Wbaralt@flagtelecom.com or Sloane & Company Dan O'Connor Tel +1 212 446 1865 Email: DOconnor@sloanepr.com or Pakistan Telecommunications Company Ltd Sultan Ahmad Hasan Tel +92 51 2251926 Email: Gmpr@isb.paknet.com.pk TRENWICK GROUP: Fitch Lowers Ratings to 'CC' -------------------------------------------- Fitch Ratings lowered its long-term and senior debt ratings on Trenwick Group, Ltd. and its subsidiaries, (collectively Trenwick) to 'CC' from 'CCC'. In addition, Fitch lowered its ratings on Trenwick's preferred capital securities to 'C' from 'CC' and its preferred stock to 'C' from 'CC'. The ratings remain on Rating Watch Evolving. Fitch's rating action follows Trenwick's November 29, 2002 announcement that it was suspending dividends or distributions on its preferred stock and trust preferred capital securities. This included a preferred dividend payable on December 2, 2002 to holders of record on October 31, 2002. Trenwick had agreed to refrain from making such payments or distributions under a forbearance agreement it entered into with its letter of credit providers on November 13, 2002. Entity/Type/Issue Action Rating/Rating Watch Trenwick Group, Ltd. --Long-term Downgrade 'CC'/Evolving. Trenwick America Corp. --Long-term Downgrade 'CC'/Evolving; --Senior debt Downgrade 'CC'/Evolving. LaSalle Re Holdings, Ltd. --Long-term Downgrade 'CC'/Evolving; --Preferred stock Downgrade 'C'/Evolving. Trenwick Capital Trust I --Preferred capital sec Downgrade 'C'/Evolving. CONTACT: FITCH RATINGS Mark E. Rouck CPA, CFA, 312/368-2085, Chicago; Michael J. Barry, 212/908-0621, New York. Media Relations: James Jockle, 212/908-0547, New York. TRENWICK GROUP: S&P Revises Preferred Stock Ratings to 'D' ---------------------------------------------------------- Standard & Poor's Ratings Services said Tuesday that it revised its preferred stock ratings on Trenwick Group Ltd., Trenwick America Corp, LaSalle Re Holdings Ltd., and Trenwick Capital Trust I to 'D' from 'CC' following the announced non-payment of the preferred dividend on Lasalle Re Holdings Ltd.'s Series A preferred stock, which had a declared dividend due Tuesday. Trenwick has also suspended dividends and distributions payable on all other outstanding preferred securities, including Trenwick Group Ltd.'s Series B cumulative convertible perpetual preferred shares and Trenwick Capital Trust I's 8.82% exchange subordinated capital income securities. "The remaining ratings on Trenwick Group Ltd. and its subsidiaries remain on CreditWatch with negative implications, as management is in the process of restructuring its obligations to maintain itself as an ongoing concern," noted Standard & Poor's credit analyst Karole Dill Barkley. "Standard & Poor's expects management, the banks, and Lloyd's to resolve the pending renegotiation discussions within the next two to three weeks." CONTACT: STANDARD & POOR'S Karole Dill Barkley, New York, 212/438-7167 Robert G Partridge, New York, 212/438-7231 TYCO INTERNATIONAL: Names Courson Deputy General Counsel -------------------------------------------------------- Tyco International Ltd. (NYSE: TYC, BSX: TYC, LSE: TYI) announced Tuesday that Gardner G. Courson has been appointed VP, Deputy General Counsel, Litigation. Mr. Courson will be responsible for corporate legal issues regarding litigation. He will report to Tyco General Counsel William B. Lytton. Mr. Courson has practiced as a trial lawyer for 28 years, and is admitted to six of the United States Courts of Appeals and the U.S. Supreme Court. He is the former managing partner of the Atlanta office of McGuireWoods and was a member of the Firm's Board of Partners before leaving the firm to join Tyco. Mr. Courson has successfully handled hundreds of lawsuits across the U.S., focusing on complex employment, labor relations and related business tort issues. He has acted as employers' legal advisor in numerous individual and class actions and is widely viewed as an authority on litigation management, alternative fees and the use of legal technology. Mr. Lytton said, "We're building a strong, professional legal team at Tyco. Gardner Courson has extensive experience in the courtroom dealing with and managing difficult and multifaceted corporate litigation. He will make a valuable contribution to Tyco and we are very excited that he is joining the Company at this important transition period." Mr. Courson said, "Tyco is working hard to demonstrate clear leadership for American business in all facets of the legal area and I am enthusiastic about being a part of that effort. This is a Company with enormous potential and I look forward to working with Ed Breen, Bill Lytton and the talented group of people they are assembling to lead Tyco into its promising future." Mr. Courson graduated from the University of Virginia and earned his law degree from Emory University School of Law in Atlanta, Georgia. He is a Fellow of The College of Labor and Employment Lawyers; recipient of the General Counsel's Award for Achievement in Diversity from the DuPont Legal Department and a member of the Advisory Board of the University of Virginia's McIntire School of Commerce. ABOUT TYCO INTERNATIONAL LTD. Tyco International Ltd. is a diversified manufacturing and service company. Tyco is the world's largest manufacturer and servicer of electrical and electronic components; the world's largest designer, manufacturer, installer and servicer of undersea telecommunications systems; the world's largest manufacturer, installer and provider of fire protection systems and electronic security services and the world's largest manufacturer of specialty valves. Tyco also holds strong leadership positions in medical device products, and plastics and adhesives. Tyco operates in more than 100 countries and had fiscal 2002 revenues from continuing operations of approximately $36 billion. CONTACT: Gary Holmes (Media) Tel +1-212-424-1314 or Kathy Manning (Investors) Tel +1-603-778-9700 TYCO INTERNATIONAL: Over-All Loss Obscures Electronics Profits -------------------------------------------------------------- Bermuda-based conglomerate Tyco International, Ltd. reported a net loss of US$9.1 billion on sales of US$35.7 billion for the fiscal year ending September 30 this year. However, not all of Tyco's divisions contributed to the loss. Tyco Electronics had profits of US$1.5 billion on sales of US$10.5 billion despite turbulence in the electronics industry. Tyco Electronics has 54 divisions, subsidiaries and brands including M/A-Com, a unit in Lowell, Mass., which makes land mobile radio equipment and systems. According to a report from Mobile Radio Technology, Tyco International had not reported a breakdown of figures for M/A- Com, which has an estimated US$60 million in annual sales, according to the report. Sales from land mobile radio equipment and systems account for about 1 percent of Tyco International's business. Meanwhile, the conglomerate is undergoing a forensic investigation on transactions engineered by its former chief executive Dennis L. Kozlowski. Kozlowski, along with former finance chief Mark Belnick, face larceny and enterprise corruption charges for allegedly looting company coffers. Both are currently out on bail. CONTACT: TYCO INTERNATIONAL LTD. Corporate Office The Zurich Centre, Second Floor 90 Pitts Bay Road Pembroke HM 08, Bermuda Phone: 441-292-8674 Home Page: http://www.tyco.com ============= B O L I V I A ============= COTEL: Cuts Interconnection Agreement With AES ---------------------------------------------- Bolivia's largest fixed-line operator Cotel is planning to offer long distance and data transmission service on its own. The announcement follows the dissolution of its partnership with AES Communications Bolivia following a year-long negotiation on the terms. AES agreed to pay within a year, retroactive interconnection costs worth about US$400,000 plus interest, according to a report from Business News Americas. According to AES Chairman Jon Elorriaga, his company will maintain a commercial relationship with Cotel. Although the agreement had been closed, Cotel might seek another partnership with AES for international connectivity once it obtains a long distance license. Cotel may also seek out a similar deal with other long distance providers. Last year, Cotel had agreed to take a 15 percent stake in AES worth US$21 million, to be paid through the charges AES would have to pay for local loop access. Cotel's new management believes the AES deal was preventing the Company from offering long distance and data services. Cotel was taken into government control in August 2000 due to administrative irregularities, labor unrest and debt problems. The government had also given German telecoms consultant, Detecon, in an attempt to help Cotel recover, and make it competitive by November 2001. But the move failed due to a power struggle between Detecon executives and the local board. CONTACT: COOPERATIVA DE TELEFONOS DE LA PAZ-COTEL Avenida Mariscal Santa Cruz 980 La Paz Bolivia Phone: 591 2373432 Fax: 591 2310331 Home Page: Homepage: http://www.cotel-bo.net/ Contact: Jurgen Kurz DETECON Germaniastra? 18 - 20 D-12099 Berlin Telephone : (+49-30) 7508-1100 Fax : (+49-30) 7508-1444 Home page: http://www.detecon.com/ Contact: Karen Litters Phone: (0049) (0)6196-903-131 Fax: (0049) (0)6196-903-465 E-Mail: info@detecon.com AES CORP Investor Relations Kenneth R. Woodcock, 703/522-1315 www.investing@aes.com =========== B R A Z I L =========== AES SUL: Averts Default After Renegotiating $53.5M In Debentures ---------------------------------------------------------------- AES Sul, a subsidiary of US-based AES Corp., narrowly escaped default after it successfully renegotiated US$53.5 million in debentures, reports Business News Americas. The Company, which operates in Rio Grande do Sul state, informed the Sao Paulo stock exchange that a majority of debenture holders, believed to be led by US-based BankBoston, agreed to the new terms offered by AES Sul. They delayed principal repayment by one year in exchange for a slightly better interest rate and a 1.25% one-off bonus. AES Sul will honor all interest payments on the debentures. Altogether, there are US$53.5 million in debentures outstanding in three tranches, which will now be paid back in 12 monthly installments starting December 2003. The Company was scheduled to pay 25% of the principal on December 1. Despite the recent completion of the negotiations, credit rating agency Standard & Poor's, which recently lowered AES Sul's rating to brCC, expressed concern that AES Sul might not be able to meet payments in 2003, including a US$64 million syndicated loan due in the first half of the year. S&P noted that the Company's cash flow for the year will be about US$68 million. BANCO FIAT: Itau Agrees To Acquire 99.99% Stake For BRL897M ------------------------------------------------------------ Banco Itau S.A. (Itau), Fiat Auto S.p.A. and Fiat Automoveis S.A. (Fiat) announced they have signed an agreement Tuesday for the acquisition of 99.99% of Banco FIAT S.A.'s total capital by Itau. Following its acquisition by Itau, Banco Fiat S.A.'s Brazilian operations will focus on vehicle financing and leasing operations, financial services and the management of the consortium under the FIAT brand name. Traditional operations involving inventory financing (Floor Plan) and investments in the dealer network and the car manufacturer's suppliers will remain under the control and management of Fiat through Banco Fidis de Investimento S.A. Corporate reorganization necessary to the structure above is being submitted to the approval by the Central Bank of Brazil. The acquisition price will correspond to the payment of approximately BRL897 million, thus implying goodwill of BRL462 million (1.06 times Stockholders' Equity). Among finance companies and banks associated to car manufacturers, Banco Fiat S.A. is the market leader in Brazil, accounting for the financing of approximately 40% of the total sales volume of new vehicles with the Fiat brand. Under Itau's control, Banco Fiat S.A., through the signed agreement, will hold in Brazil, for 10 (ten) years: - Exclusivity in new vehicle financing and leasing related to all promotions organized by the manufacturer Fiat with respect to its sales to the consumer market; - Sales of quotas in the consortium with the Fiat brand to end consumers; - Supply of financial services to Banco Fiat S.A's actual and future customers; - Fiat's recommendation of Banco Fiat S.A. to its dealer network for the purposes of channeling vehicle finance business through the Bank's intermediary; - Use of the Fiat brand name in operations linked to the above- mentioned activities. The transaction also provides for Fiat to indicate a member to Banco Fiat's Board of Directors, during the term of the exclusivity agreement, as a means of maximizing the commercial linkage existing through the close partnership between Ita� and Fiat. In this way, the parties involved will be able to coordinate their actions, maintaining the focus on their specific areas of activity. For Ita�, this acquisition means: - The enhancement of its position in the car finance market; - Development of new relationships with the Fiat brand customers; - The possibility of selling products and services to the Fiat brand customers; - Enhanced relationship with a large network of Fiat dealers and retailers; - A major boost to consortium activity, begun in September 2002 through Itaucons�rcio; - Provision of recognized expertise in technology and quality of additional services to the dealers and to the Fiat brand customers. It is expected that this operation will already be able to make a positive contribution to Itau's consolidated results in 2003. The impact of this acquisition on the Basel capital adequacy ratio will correspond to a reduction of about 0.7 percentage points, thus placing the ratio in an extremely satisfactory level estimated in 17.7%. Founded in 1976 in Brazil, Fiat is the market leader for the second consecutive year with a broad-based product range and a dynamic network of more than 300 dealers. Fiat will continue investing in its Brazilian operation, in the development of know- how and new products for the domestic and export markets in order to consolidate and increase its market share. The finalization of this operation is conditional on approval by the Central Bank of Brazil. With this operation, Itau underscores its strategy of focusing only on operations in its specialty areas of business and on acquisitions which create additional value to the shareholders. BCP SA/BSE SA: Parent In Sale Talks With Various Groups ------------------------------------------------------- BellSouth Corp. is now engaging in talks with companies interested in buying its stakes in two Brazilian units, BCP SA and BSE SA, according to an executive. Citing Paulino Barros, BellSouth's vice president for Latin America, Bloomberg reports that the Company is in "several negotiations" with an investment fund and phone operators in Brazil over the possible sale of the two units. BCP defaulted on US$430 million of debt and BSE is having trouble making payments on US$76 million, after a 37% decline in the real this year drove up financing costs for Brazilian companies. Last month, BellSouth said it might sell its stake in both units. The Atlanta-based Company and Brazilian partner, Safra Group, each own about 45% of the wireless carriers. BellSouth generates about 15% of its sales from Latin America. However, due to the rising financing costs, as well as the increasing competition in Brazil, the Company is considering of pulling out of the country where it ranks as the fifth-largest wireless operator. "We have 11 properties in Latin America and Brazil is one of these 11," Barros said in an interview. "The other 10 are very healthy, financially speaking. Brazil was important but we could do without it." Minority owners of BSE and BCP are Grupo Oesp, the newspaper holding company, with 6%, telephone equipment maker Splice do Brasil with 2.8%, and BSB Participacoes, an investment holding company, with 2.2%. CONTACT: BCP S.A. Rua Fl=rida, 1970 4o andar Spo Paulo - SP Tel: 55 11 5509-6428 Fax: 55 11 5509-6257 Home Page: http://www.bcp.com.br BELLSOUTH CORPORATION 1155 Peachtree St. NE Atlanta, GA 30309-3610 Phone: 404-249-2000 Fax: 404-249-5599 Home Page: http://www.bellsouth.com/ Contacts: Investor Relations Phone (US): 800.241.3419 Fax: 404.249.2060 E-mail: investor@bellsouth.com BANCO SAFRA Av. Paulista, 2100 - Spo Paulo Brazil - 01310-930 Phone: (11) 3175-7575 Home Page: http://www.safra.com.br/ingles/index.asp Contact: Carlos Alberto Vieira, President CEMIG: Issues Notice To Shareholders ------------------------------------ CEMIG's shareholders are hereby notified that beginning on January 22, 2002, Banco Itau S.A. will act as the registrar for, and will perform all shareholder services relating to, CEMIG's outstanding common and preferred shares, and such services will no longer be performed by CEMIG. In order to accommodate this change, all shareholder services, including updating of shareholder information, share transfers, official notations in the share registry and share conversions, will be temporarily suspended from January 7, 2002 to January 21, 2002. No action with respect to the appointment by CEMIG of Banco Itau S.A. is required on the part of holders of American Depositary Receipts representing CEMIG's preferred shares. Beginning on January 22, 2002, CEMIG's shareholders should contact Banco Itau S.A. for assistance with shareholder services. Any changes to shareholder addresses or bank account numbers should be provided to Banco Itau S.A. so that dividends and interest on capital declared by CEMIG may be properly credited. Shareholders may provide such information through any branch office of Banco Itau S.A. in Brazil or by mail to Banco Itau S.A., Assessoria de Acoes e Debentures, Rua Boa Vista, n� 176 - 4� andar, Sao Paulo, SP, CEP 01092-900, Brazil. In addition, any shareholders holding bearer shares may convert them into registered shares by presenting their identification, taxpayer registration number and share certificates with all coupons to any Banco Itau S.A. branch office, including the branches specializing in shareholder services listed below, during branch operating hours. Banco Itau S.A. Branch Addresses in Brazil for Shareholder Services Belo Horizonte (MG) Av. Joao Pinheiro, 195 - mezanino Sao Paulo (SP) Rua XV de Novembro, 318 - t�rreo Rio de Janeiro (RJ) Rua Sete de Setembro, 99 - subsolo Porto Alegre (RS) Rua Sete de Setembro, 746 - sobre loja Curitiba (PR) Rua Joao Negrao, 65 Brasilia (DF) SCS Quadra 3, Ed. Dona Angela - terreo Salvador (BA) Rua Estados Unidos, 50 - 2� andar Ed. Sesquicentenario For further information, CEMIG's shareholders may contact Banco Itau S.A.'s "Departamento de Investifone" by telephone at (55 31) 3188-5909. Belo Horizonte, Brazil January 2, 2002 Stalin Amorim Duarte Acting Investor Relations Officer CSN: Wishes To Restart Talks With Corus --------------------------------------- An executive at Brazilian flat steel maker CSN is seeking to restart negotiations with Anglo-Dutch steel group Corus after the latter scrapped a proposed US$3.5 billion takeover last month. Business News Americas relates that CSN chairman Benjamin Steinbruch said he would like to begin talks again in March with Europe's second largest steel producer and reaffirmed that the merged entity would boost profits and reduce costs. Steinbruch said his company has much to teach Corus in restructuring its inefficient mills. "The path for Corus to grow is to restructure its assets and not sell them," he was quoted as saying. However, the European group, which broke off the merger due to lower-than-expected steel prices and difficulties in raising capital to carry out the merger, thinks differently about CSN's plans. "We made it clear that the proposed merger was off and we have no present plans to re-open discussions with CSN," said Mike Hitchcock, a spokesman for Corus. Corus, which hasn't reported an annual profit since 1998, has seen its shares fall by more than half since the merger was announced in July. CONTACT: Luciana Paulo Ferreira, CSN - Investor Relations Tel. 021 2586 1442 luferreira@csn.com.br www.csn.com.br CSN: Debt Elimination Believed Possible in Two Years ---------------------------------------------------- CSN chairman Benjamin Steinbruch is confident that the Brazilian flat steel maker can eliminate its debt in two years time, relates Business News Americas. CSN carries a debt of US$2.1 billion but given an Ebitda margin of 40% this debt could be reduced to zero in just two years. At the end of September, the Company was able to reduce debt by US$700 million to US$1.4 billion even with a consolidated net loss of BRL574 million during the period. NET SERVICOS: S&P Lowers Rating To 'D' -------------------------------------- NEW YORK (Standard & Poor's) Dec. 3, 2002--Standard & Poor's Ratings Services said Tuesday that it lowered its corporate credit rating on Brazilian pay-TV provider Net Servi�os de Comunica�ao S.A. (Net) to 'D' from 'CC'. The total debt outstanding is $354 million, as of September 2002. The downgrade follows Net's announcement that it would be "re- evaluating its cash flow obligations while the company pursues an adequate capital structure," said Standard & Poor's credit analyst Milena Zaniboni. Net already missed payments on the interest of the convertible and non-convertible debenture issues due on Dec. 1, 2002 (BrR4.5 million and BrR19 million, respectively), and Standard & Poor's expects that the company will suspend payment of other immediate maturities. Other public debt maturities include interest on the $185 million senior guaranteed notes ($6 million due on Dec. 13, 2002), and on the $80 million Net Sul floating-rate notes (approximately $3 million due on January 2003). Although a legal default on the debentures will only be characterized after 30 days of the non-payment, Standard & Poor's considers the company to be in default as it does not intend to remedy such missed payment in that time frame. Net engaged The Blackstone Group as its financial advisor, and expects to start discussions with creditors by the end of January 2003. The company seeks to restructure its debt profile to make it compatible with its cash generation capacity. The ratings on Net will be raised once this solution is reached. ANALYSTS: Milena Zaniboni, Sao Paulo (55) 11-5501-8945 Jean-Pierre Cote Gil, Sao Paulo (55) 11-5501-8946 NET SERVICOS: Shares Tumble On Word Debt Default Possible ---------------------------------------------------------- Net Servicos de Comunicacao SA, Brazil's largest cable television operator, indicated it might default on some debt maturing in the coming months. In a statement to the Sao Paulo stock exchange, the troubled unit of media giant Globopar SA said it "is not able to refinance its financial obligations" because of adverse market conditions. Continued weakness in Brazil's real has driven up dollar- denominated debt servicing costs at a time when access to financing is scarce. Following the disclosure, the Company's shares lost 2 centavos (1 U.S. cent), or 5.3%, to 36 centavos on the Sao Paulo stock exchange. "Net Servicos is again showing its fragility," said Jacqueline Lison, an analyst with Fator Doria Atherino brokerage. "The Company had investments to be able to attend 6 million subscribers and it has only 1.3 million so far. The Company is too far from a break-even point." The stock has plunged 96% this year as the Company has been unable to expand its subscribers amid weak economic growth and a tumbling currency, which has lost 37% of its value this year. The Company already won in July an extension on US$200 million in debt from creditors. Bloomberg reveals Net Servicos has hired the Blackstone Group and Bank of America Corp. as financial advisers to help renegotiate the debt. Earlier this year, the Company raised more than BRL1 billion (US$272.4 million) in capital markets to reduce its BRL1.4 billion debt, about 73 % of which is denominated in dollars. To see financial statements: http://bankrupt.com/misc/Net_Servicos.pdf CONTACTS: Marcio Minoru Miyakava (5511) 5186-2811 minoru@netservicos.com.br Lu Yuan Fang (5511) 5186-2637 lfang@netservicos.com.br TELESP CELULAR: Offering BREW Technology Next Year -------------------------------------------------- Brazilian mobile operator Telesp Celular will be launching Qualcomm's BREW wireless applications platform in early next year, reports Business News Americas, citing Qualcomm Brasil senior markerting manager Jacqueline Lee. According to Lee, Telesp will be the first Latin American operator to commercialize BREW, after having successful tests with 250 subscribers in Sao Paulo last June and July. BREW, short for Binary Runtime Environment for Wireless, which enables operators to select downloadable wireless applications for their subscribers. According to Qualcomm, it provides the "kick-start" needed to fuel mass-market adoption of wireless data applications and services. The cost for launching BREW is not higher for GSM than CDMA subscribers, since it is an open platform said Peggy Johnson, president of Qualcomm Internet services. But the report also mentioned that costs may limit mass-market penetration of data applications among Latin American subscribers, who spend little on data services, except for SMS messaging. BREW is available for handsets with grayscale screens, though most BREW-capable handsets are being developed for color screens, according to the report. Color screen handsets are relatively more expensive than most, selling for about BRL1,800 (US$492) in Brazil said Lee, though he expects prices would be coming down. Qualcomm Mexico's business development VP Flavio Mansi said that operators would probably be focusing on high-end markets, though they may subsidize handsets to some extent. But Qualcomm's strategic marketing senior director Clint McClellan said that the actual cost of downloading applications can be quite low. He added that BREW may even be advantageous for prepaid subscribers, though the operators would be the ones to determine its economic viability. Telesp, which is controlled by Portugal Telecom, had already had some success with Wireless Application Protocol (WAP)- based mobile data services, which it markets under the brand Waap. CONTACT: Qualcomm Inc 5775 Morehouse Dr. San Diego, CA 92121-1714 Phone: 858-587-1121 Fax: 858-658-2100 Web: http://www.qualcomm.com Contact: Dr. Irwin M. Jacobs, Chairman & Chief Executive Telesp Celular Participacoes, Sao Paulo Investor Relations: Edson Alves Menini, (55 11) 3059-7531 Email: mailto:emenini@telespcelular.com.br USIMINAS: Seen Selling Auto Parts Unit To Boost Cash Reserves ------------------------------------------------------------- Brazilian flat steel maker Usiminas is yet to confirm a report that it could divest its auto parts and components unit in order to raise cash and reduce consolidated debt, which at the end of September amounted to BRL10.6 billion. Business daily Valor Economico suggested that Usiminas could divest Usiparts, whose factory is located in Pouso Alegre, in the southeast state of Minas Gerais. Usiminas has been suffering from the effects of the depreciation of the real currency on its dollar-denominated debt. For the third quarter of this year, the Company widened its consolidated net loss to BRL684 million (currently US$185mn) from the BRL23 million loss posted in the same-period 2001. The Company's accounting procedures also contributed to its loss since BRL969 million is a result of future export guarantee contracts from the steelmaker's subsidiary, Sao Paulo-based flat steelmaker Cosipa. CONTACT: USIMINAS Rua Prof. Jos, Vieira de MendonOa 3011 Engenheiro Nogueira 31310-260 Belo Horizonte Minas Gerais, Brazil Phone: +55-31-3499-8000 Fax: +55-31-3499-8899 Web http://www.usiminas.com.br * J. P. Morgan Lowers Recommendation on Brazilian Stocks -------------------------------------------------------- J. P. Morgan Chase & Co. has cut Brazilian bonds' recommendation to underweight on concerns that the tax policies and cabinet appointments would not be able to sustain a recent rally by the country's debt. According to Graham Stock, head of J.P. Morgan Chase's Latin American sovereign strategy, the move is to demonstrate that Brazil faces "tremendous challenges" ahead. Bloomberg reports that Brazilian bonds have grown by more than 25 percent since mid-October, after concerns of a victory by now president-elect Inacio Lula da Silva. Investors' fears that Lula would trigger a default on the country's BRL1.13 trillion of debt were allayed after Lula promised to pay the country's obligations and cut back on spending and inflation. Cabinet members may be named as early as Wednesday, when Lula returns from Chile. The report said the new president would possibly be appointing people from within the Workers' Party. This may disappoint some investors hoping he would be naming more people from outside of his party. According to the report, the benchmark 8 percent bond maturing in 2014 fell 1.75 cents on the dollar to 62, raising the yield to 19.53 percent at 5:14 p.m. New York time. The bond rose 2.63 cents on the dollar yesterday to 63.75, its highest close since July 18. The real, which has lost 37 percent of its value this year, fell another 1.4 percent to BRL3.6570 to the dollar. Inflation may rise to 11 percent this year, according to analysts. =============== C O L O M B I A =============== METRO: Government Lends Helping Hand ------------------------------------ The Colombian finance ministry was forced to bailout Medellin's metro in Antioquia department due to the Company's severe debt problems brought about by construction cost overruns. Metro, which celebrated its seventh year of operation over the weekend, was struggling with construction costs, which have tripled its original estimated amount of US$650 million. In addition, the Company had to deal with a debt expected to reach US$2.9 billion. Last month's meeting between Colombia's finance minister with Antioquia metro officials failed to yield a solution to the financial problem. However, department authorities have expressed commitment to help pay the debt without asking Colombia to increase payments. =========== M E X I C O =========== CFE: Plans New Plant, Restores Services to Pacific Coast -------------------------------------------------------- Mexico's Federal Electricity Commission (CFE) will be investing US$350 million in building a combined cycle thermo-electrical plant in Laguna II in Gomez Palacio, Durango, said the Company's director Juan Jose Ramirez Ortiz. According to a Notimex report, CFE expects the work to begin in the first week of January next year. Construction is projected to take about 30 months, employing almost 900 people. The work is set to include a contract with the Decentralized Water and Sewage System (Sideapa) to build a water treatment plant. The plant has an estimated capacity of 450MW, to support Laguna's industrial sector. Meanwhile, CFE resumed normal operations in Nayarit and Jalisco states in the Pacific Coast after suffering damages from hurricane Kenna in late October. According to Business News Americas, Kenna had damaged 58 power poles supporting 400kV transmission lines, 5,650 sections of distribution lines, 2,950 electricity meters, 348 transformers, and uprooted or dislodged 5,983 transmission posts. This had affected about 107,000 people in 443 communities. CFE ,which deployed 1,500 workers to restore service, suffered a US$10 loss due to Kenna. Earlier, CFE had to shoulder a US$30 million damage caused by hurricane Isidore in late September. CONTACT: COMISION FEDERAL DE ELECTRICIDAD Rio Rodano 14, Col. Cuauhtemoc 06598 Mexico, D.F., Mexico Phone: +52-55-5229-4400 Fax: +52-55-5310-4614 http://www.cfe.gob.mx Contacts: Alfredo Elias Ayub, General Director Arturo Hernandez Alvarez, Director of Operations Francisco J. Santoyo Vargas, Director of Finance DESC: Moody's Cuts Ratings Following Assumption of Unit's Debt -------------------------------------------------------------- Moody's Investors Service downgraded the ratings of Mexico's Desc SA on US$73 million of debt belonging to a subsidiary but is now assumed by Desc following the structural changes associated with a merger that took effect May 15 this year. According to Bloomberg, Moody's cut its rating on the debt by two levels to B2, or five steps below investment grade, from Ba3. The rating company also gave a Ba3 senior implied rating and a B2 senior unsecured issuer rating to Desc's other debt, Moody's said in a statement. Desc assumed the debt originally sold by Dine SA after the merger in May, making the Company a direct holder of the US$73 million instead of just guaranteeing it, Moody's said. Moody's also said Desc's auto parts business is struggling because it hasn't been able to replace production from a DaimlerChrylser plant in Mexico City that closed. Desc's auto parts sales will fall by US$130 million a year because of the plant shutdown, Moody's said. Desc, headquartered in Mexico City, is a diversified industrial conglomerate with operations in the autoparts, chemical, food and real estate sectors. The Company reported annual revenues equivalent to about US$2.2 billion for fiscal year 2001. New York Russell Solomon Senior Vice President Corporate Finance Group Moody's Investors Service JOURNALISTS: 212-553-0376 SUBSCRIBERS: 212-553-1653 New York Lisa B. Matalon Vice President - Senior Analyst Corporate Finance Group Moody's Investors Service JOURNALISTS: 212-553-0376 SUBSCRIBERS: 212-553-1653 *********** 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 Oona G. Oyangoren, 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. 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