/raid1/www/Hosts/bankrupt/TCRLA_Public/030206.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, February 6, 2003, Vol. 4, Issue 26
Headlines
A R G E N T I N A
CAPEX SA: Fitch Assigns Low Ratings To Corporate Bonds
EDIFICIO LA NACION: Fitch Expects Default on $27M Of Debt
EUROMAYOR: Fitch Gives D(arg) Rating To $10M Worth of Bonds
IMPORTADORA: Two Agencies Assign Rating To $100M Worth of Bonds
INVERSORA ELECTRICA: Fitch Gives D(arg) Ratings To Corp. Bonds
B E R M U D A
TRENWICK GROUP: Reserve Charge Swells; Fitch Lowers to 'C'
B R A Z I L
EMBRATEL: Reports 2002 Net Revenues of BRL7.1 Bln
VARIG: Stock Drops On Reports of No Helping Hand from Government
C O L O M B I A
TERMOEMCALI: CCC Rating Goes Watch Negative Restructuring Doubts
E C U A D O R
FILANBANCO: US Embassy Submits Complaint Over Contract
M E X I C O
CORPORACION DURANGO: Ratings Lowered to 'D'
GRUPO MEXICO: Asarco Ratings Lowered to 'D' After Missed Payment
GRUPO MEXICO: Transfer of SPCC Stake To Another Unit Looms
P E R U
EMPRESAS LUCHETTI: Exits Peru Following Eviction Order
NUEVO MUNDO: Regulator Carries On Liquidation
V E N E Z U E L A
PDVSA: Government Denies Citgo Sale In The Short Term
PDVSA: Increasing Gasoline Purchases To Alleviate Scarcity
* Two-Month Old Strike Ends But Presidential Ouster Continues
- - - - - - - - - -
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A R G E N T I N A
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CAPEX SA: Fitch Assigns Low Ratings To Corporate Bonds
------------------------------------------------------
Fitch Argentina Calificadora de Riesgo S.A. on Jan. 29 assigned
various ratings to corporate bonds issued by Capex S.A. The
securities affected, as revealed in the posting on the official
web site of the National Securities Commission of Argentina, are:
- D(arg) to US$105 million worth of bonds described as
`Obligaciones Negociables Simples' and come due on Dec. 23, 2004;
- D(arg) to US$40 million worth of bonds described as
`Obligaciones Negociables Simples' and come due on June 11, 2004;
and
- C(arg) to US$150 million worth of bonds described as
`Obligaciones Negociables Simples' and come due on Jan. 1, 2005
All the rating actions were based on Capex's financial status as
of Oct. 31, 2002.
EDIFICIO LA NACION: Fitch Expects Default on $27M Of Debt
---------------------------------------------------------
Local ratings agency Fitch Argentina Calificadora de Riesgo S.A.
assigned a CC(arg) rating to Edificio La Nacion on January 31,
2003. The rating covers US$27,000,000 worth of debt securities,
according to a posting in the official website of the National
Securities Commission of Argentina. The posting however, didn't
reveal the securities' final maturity date.
The securities were described as `Titulo de Deuda.'
Fitch, at its website, says that a CC rating indicates that a
default of some kind appears probable. Capacity for meeting
financial commitments is solely reliant upon sustained, favorable
business or economic developments.
EUROMAYOR: Fitch Gives D(arg) Rating To $10M Worth of Bonds
-----------------------------------------------------------
Fitch Argentina Calificadora de Riesgo S.A., a local ratings
agency, gave Euromayor S.A. de Inversiones a D(arg) rating on
Jan. 29, 2003.
According to a posting in the official website of the National
Securities Commission of Argentina, the rating covers US$10
million worth of corporate bonds that come due in April 28 2003.
The Commission also revealed that the rating was based on the
Company financial status as of Oct. 31, 2002.
The bonds are described as `Primera Serie por 10 millones de U$S
dentro de un Programa Global'
Based on the definitions stated by Fitch in its Web site, a
rating of `D(arg)' is given to financial obligations currently in
default.
IMPORTADORA: Two Agencies Assign Rating To $100M Worth of Bonds
---------------------------------------------------------------
S.A. Importadora y Exp. de La Patagonia was assigned a D(arg)
rating by local ratings agency Fitch Argentina Calificadora de
Riesgo S.A. on Jan. 29.
The rating covers US$100 million worth of corporate bonds, a
posting of the official Web site of the National Securities
Commission of Argentina stated without revealing the final
maturity of the bonds. The rating was based on Importadora's
financial status as of Sep. 30, 2002.
The Commission describes the bonds as `Obligaciones Negociables.'
Separately, on Jan. 30, another local ratings agency Evaluadora
Latinoamericana S.A. Calificadora de Riesgo assigned a D rating
to the bonds mentioned above. The rating was also based on
Importadora's financial status as of Sep. 30, 2002.
INVERSORA ELECTRICA: Fitch Gives D(arg) Ratings To Corp. Bonds
--------------------------------------------------------------
Fitch Argentina Calificadora de Riesgo S.A. assigned a D(arg)
rating to US$140 million worth of corporate bonds issued by
Inversora Electrica de Buenos Aires S.A.
The National Securities Commission described the bonds as
`obligaciones negociables Clase B' without revealing the date of
its final maturity. The rating action, which was taken Jan. 29,
was based on the Company's financial status as of Sep. 30, 2002.
At the same time, Fitch also assigned a D(arg) rating to US$100
million worth of corporate bonds issued by Inversora. The bonds
were described as `obligaciones negociables Clase A' by the
Commission. The final maturity date on the said bonds however,
was not revealed.
The rating action was also based on the Company's financial
status as of Sep. 30, 2002.
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B E R M U D A
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TRENWICK GROUP: Reserve Charge Swells; Fitch Lowers to 'C'
----------------------------------------------------------
Fitch Ratings has lowered its long-term rating and senior debt
ratings on Trenwick Group. Ltd. and its subsidiaries,
(collectively Trenwick) to 'C' from 'CC'. Fitch's ratings on
Trenwick's capital securities and preferred stock remain 'C'.
Fitch's rating action follows Trenwick's recent announcement that
it is taking a $107 million reserve charge. Trenwick has $75
million of senior debt outstanding due April 1, 2003. The
company's capital structure also includes $68 million of trust
preferred capital securities due 2027 and $75 million of
traditional preferred securities.
Fitch believes that Trenwick's business prospects and financial
flexibility are very limited and that the company will be unable
to refinance its senior debt. In addition, Fitch believes that
Trenwick's ability to remain a going-concern is heavily dependent
on financing provided by an existing letter-of-credit (LOC)
facility. The LOC facility's covenants include a provision that
Trenwick refinance its outstanding senior debt by March 1, 2003.
As a result, Fitch believes that senior debt holders may be
forced to consider accepting some form of payment-in-kind
arrangement.
Trenwick's reserve charge impacted its U.S.-domiciled operating
subsidiaries and Trenwick International Limited, its U.K. based
subsidiary. At September 30, 2002 the company's lead U.S. based
subsidiary had $227 million of surplus. Depending on the amount
of the reserve charge allocated to each of Trenwick's operating
subsidiaries Fitch believes that the subsidiaries' year-end 2002
surplus position is likely to be significantly impaired.
Fitch also notes the ordinary dividend capacity of Trenwick's
lead U.S. based operating subsidiary is limited to the greater of
10% of statutory surplus or 100% of the previous year's net
income. Through the first nine months of 2002, Trenwick's lead
operating subsidiary had reported a $30 million net loss.
Note: These ratings were initiated by Fitch as a service to users
of Fitch ratings. The ratings are based primarily on publicly
available information.
Entity/Type/Issue Action Rating
Trenwick Group, Ltd.
--Long-term Downgrade 'C'.
Trenwick America Corp.
--Long-term Downgrade 'C';
--Senior debt Downgrade 'C'.
LaSalle Re Holdings, Ltd.
--Long-term No Action 'C';
--Preferred stock No Action 'C'.
Trenwick Capital Trust I
--Preferred capital sec No Action 'C'.
CONTACT: Fitch Ratings
Mark E. Rouck CPA, CFA, 1-312-368-2085
Michael J. Barry, 1-212-908-0621
James Jockle, 1-212-908-0547 (Media Relations)
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B R A Z I L
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EMBRATEL: Reports 2002 Net Revenues of BRL7.1 Bln
-------------------------------------------------
Embratel Participacoes S.A. (Embratel Participacoes or the
"Company") NYSE:EMT; BOVESPA: EBTP3, EBTP4, the Company that
holds 98.8 percent of Empresa Brasileira de Telecomunicacoes S.A.
("Embratel"). Today announced Fiscal Year 2002 and Fourth Quarter
2002 results. All financial figures are in Reais and based on
consolidated financial statements in "Legislacao Societaria"
Highlights
-- Embratel reported net revenues of R$7.1 billion in 2002 and
R$1.7 billion in the fourth quarter of 2002.
-- Continued effort to manage calls and to discontinue services
to non-payers, resulted in a more profitable revenue stream and
led to voice revenues of R$5 billion in 2002. In the fourth
quarter voice revenues were R$1.2 billion.
-- Data & Internet revenues rose 4 percent to R$1.8 billion in
2002. In the fourth quarter, data & Internet revenues also rose
3.4 percent year-over-year and 3.1 percent quarter-over-quarter
reaching R$451 million. Total data revenues were R$471 million in
the quarter.
-- EBITDA was R$1.4 billion in 2002 and R$316 million in the
fourth quarter. Adjusted for the reclassification of employee
profit sharing and the retirement incentive program, EBITDA
margin would have been 19.8 percent in 2002 and 20.1 percent in
the fourth quarter of 2002.
-- Net income for the fourth quarter of 2002 was R$ 112 million.
-- Provisions for doubtful accounts halved to 8.8 percent of net
revenues in 2002 from 15.5 percent in 2001. In the fourth quarter
provisions for doubtful accounts were 8.0 percent of net revenues
as collections continue to improve. This was the fourth
consecutive quarter of decline in provisions for doubtful
accounts.
-- Net debt amortization was US$54 million in 2002.
-- Cash from operations was R$1.5 billion and year-end cash
position rose to R$887 million, a 17.2 percent increase relative
to the previous 2002 quarter.
-- Capex was R$1.0 billion in 2002.
-- Local services were initiated on a commercial basis. Data
Communication Services Data and Internet revenues grew 4 percent
in 2002
Embratel data communications revenues (data & Internet and
wholesale) were R$1,832 million in 2002, representing a 1.0
percent increase relative to 2001. Data & Internet revenues of
R$1,757 million rose 3.9 percent from R$1,691 million in 2001. "
This performance is quite an achievement" said Jorge Rodriguez,
President of Embratel, "2002 was a year of slow economic growth,
considerable uncertainty and continued downward pressure on
prices, but Embratel increased the number of installed 2Mbit
equivalent circuits by 52 percent between December 2001 and 2002
and grew revenues."
The increase in the installed circuit base was the result of new
services, net client additions, and bandwidth capacity growth for
existing clients. It reflects the fact that Embratel maintains a
very solid position in the data market and is well prepared to
benefit from economic recovery.
Switched and satellite services revenues rose respectively 23 and
16 percent offsetting declines in dedicated services. Internet
services revenues were flat in 2002.
Since privatization, Embratel has achieved a higher level of
diversification in data revenues and grew its base in value added
services. The services that lost ground in the revenue
composition were those of a more commodity nature. As evidence of
the company's innovative capabilities, approximately 27 percent
of our data revenues derive from services that were developed in
the past 4 years.
As a recent example, Embratel enhanced its Business IP VPN
service, which is based on Multiproctocol Label Switching (MPLS)
by introducing Quality of Service (QoS) guarantees. This
additional feature enables clients to prioritize critical
applications and differentiate traffic treatment at different
parts of the VPN. This new feature is particularly useful in
Multimedia applications and is customized according to client
request. There are no restrictions as to distance nor speed since
the feature can be offered from 64Kbps to 622Kbps throughout
Embratel's entire Internet backbone currently comprising of 150
points-of-presence, 26 routing centers, two-way and 35Gbps
transport capacity.
In addition, our client base has continued to expand. In the past
2 years, the net client base rose 28 percent. Embratel has also
diversified client base in the past four years adding more medium
and small companies to its client list. This has been the result
of a coordinated strategy involving sales effort, product and
access development. Services such as the attractive Business Link
Facil, a 60Kbps dedicated Internet link geared to the medium and
small size business market can be offered competitively through
Embratel's digital access network and points of presence. Through
fiber, digital radio and wires, Embratel currently has direct
connections to more than 32 thousand clients providing both data
and voice services. This client base, which comprises most of the
country's largest companies, will be our entry point for local
services (see below).
In the fourth quarter 2002, Embratel's data communications
revenue of R$471 million rose 3.3 percent sequentially and 1.9
percent annually. Again switched services accounted for the
majority of this growth while dedicated, satellite and Internet
revenues either grew or remained flat. In October 2002 Brazil
elected senators, congressmen, state governors and a new
president in a two-round election. Winners were known on the same
day, at most, on the second day of voting. Embratel is proud to
have provided services that contributed to this process.
Embratel greatly enhanced operating efficiency in 2002. Service
recovery within six hours rose 11.1 percent. Average recovery
time fell by half. The number of activations within 30 days rose
39 percent and the average time for activation dropped by 11
days. This excellent operating efficiency was recognized by our
clients. In a Yankee Group research (Sep/Oct 2002) Embratel was
rated as either excellent or very good by 74 percent of its
clients.
Voice Services Domestic Long Distance Call management continues
to contribute to enhanced revenues
As Embratel continued to focus on profitable revenues, it
increased the number of lines blocked because of delinquency and
fraud. At the end of 2001, approximately 1.8 million lines were
blocked. This number more than doubled to 4.6 million in December
2002. This was the major cause for the decline of 4.4 percent in
domestic long distance revenues of R$4.4 billion in 2002. Average
domestic long distance revenue per minute in 2002 rose 3.0
percent year-over-year 2001 and 12 percent compared to 2000.
Market opening to more competitors also contributed to the
reduction in domestic long distance revenues. The major impact
from competition was felt on inter-regional long distance
revenues arising from 0800 services belonging to the two regional
operators that were authorized to handle inter-regional calls.
Revenues from these two operators were approximately R$73 million
in the first six months of the year. They dropped to R$20 million
in the third quarter and to zero in the fourth because these
operators directed this captive traffic to their own networks (in
turn, Embratel began to book local revenues related to its own
0800 services). Competition also impacted residential traffic.
Embratel continues to grow revenues from its core business
market. As part of its strategy to replace basic voice revenues
with Embratel services that provide more value to corporate
clients, the company continued to increase sales of VipPhone and
Advanced Voice services. Combined revenues from these value added
services increased 32 percent in 2002. The number of VipPhone
clients rose by 55 percent in 2002. Embratel had no VipPhone
clients in 1998 and today, they number nearly 5,000. Also
revenues from business clients in alternative calling plans have
grown more than 200 percent.
With respect to the residential and small company markets,
Embratel has emphasized not only profitable but also recurring
payer revenues. Embratel offered and was able to increase the
number of customers in automatic debit accounts by 34 percent in
2002, thereby ensuring payment. Internet bill payment, introduced
in December 2001, has grown significantly. Together, automatic
debit and Internet bill payment represent approximately 30
percent of basic domestic long distance voice revenues. The
number of lines co-billed monthly is approximately 25 percent of
the recurring bills. In addition, Embratel continues to attract
customers to alternative calling plans. Revenues from residential
and small company customers in alternative calling plans has
increased 131 percent in 2002.
Domestic long distance revenues in the fourth quarter were R$1.0
billion. As Embratel continues to enhance its knowledge of the
non-paying client base, a substantial amount of lines were
blocked in the fourth quarter, representing approximately 46% of
the total amount of lines blocked in 2002. Although, the impact
of this blocking on provisioning for doubtful receivables will
only be visible in subsequent months, the impact on revenues is
immediate and compared to the previous 2002 quarter, domestic
long distance revenues declined 7.5 percent. Compared to the same
year-ago quarter revenues fell 11.4 percent. Most of the decline
in basic voice revenues (does not include advanced voice,
VipPhone, etc.) is attributed to additional blocking of lines
that due to bad debt and fraud were not profitable to Embratel.
Competition and seasonal factors accounted for the remaining part
of the decline. The fourth quarter had 62 business days compared
to 66 in the third quarter and long holiday weekends contributed
to even lower business traffic.
International Long Distance Revenues stabilized in the fourth
quarter of 2002
In the fourth quarter, international long distance revenues were
R$168 million. Compared to the third quarter of 2002,
international revenues grew 1.8 percent primarily due to inbound
flows. Outbound revenues declined mainly as a result of blocking
activity (fraud) and also due to competition, which seems to have
stabilized in the fourth quarter.
International long distance revenues fell to R$667 million in
fiscal year 2002 compared to R$857 million in 2001. In addition
to our improved ability to detect fraud, which resulted in a
larger amount of blocked lines, competition also contributed to
the loss of traffic and the decline in revenues. Pricing however,
remained relatively stable for outbound calls.
Local Services
Embratel initiated local services in the fourth quarter of 2002.
Services have been launched on a commercial basis. To date, more
than 300 clients have contracted local services. As Embratel
interconnects new cities, it migrates its offices to its own
service. Embratel local services start with a 2121 prefix. The
company will be providing local services in 29 cities (including
virtually all state capitals and other cities in the state of Sao
Paulo). "As the only truly national local services player" said
Purificacion Carpinteyro, Vice President of Local Services,
"Embratel offers a single national number, per minute tariff
charges (enabling clients to really know what they are paying
for), as well as competitive prices." Embratel expects to
initiate local services in all 29 cities by the end of the first
quarter 2003.
EBITDA Significant improvement in EBITDA due to improved
collections
EBITDA was R$1.4 billion in 2002 representing a 36.2 percent
increase relative to an EBITDA of R$997 million in 2001. EBITDA
margin rose by 5.7 percentage points reaching 19.1 percent in
2002. The primary reasons for this growth were improved
collections and lower interconnection costs.
During the fourth quarter 2002, the Brazilian Securities and
Exchange Commission (CVM) determined that employee profit
sharing, not solely linked to profits, be classified under
operating expenses. Following standard practice, Embratel
previously booked this expense below the operating line. Embratel
has now recorded this expense, which is linked to company
performance and not only to profits, above the operating line.
This expense represented a 0.4 percentage point reduction in
EBITDA margin.
Also, in the fourth quarter of 2002, Embratel made provisions for
severance payments of R$21 million for an incentive retirement
plan. Excluding the above two factors, EBITDA for 2002 would have
been R$1,410 million representing a EBITDA margin of 19.8 percent
in the year.
Provision for doubtful accounts almost halved to R$627 million
(8.8 percent of net revenues) in 2002 from R$1.2 billion (15.5
percent of net revenues) in 2001. This 45.7 percent decline was
achieved through the introduction of aggressive blocking of
fraudulent and delinquent lines as well as by the continued
efficiency and cost effective collection strategies enabled by
the implementation of sophisticated blocking (Infusion) and
collection (CACs) systems in the first quarter of 2002. Co-
billing was initiated in May 2002 with Telemar and in July with
Telefonica. Embratel carefully evaluated the efficiency of co-
billing operations and expects that as the scale of accounts sent
to co-billing rises, this billing alternative will also
contribute for further reductions in doubtful accounts.
In 2002, a total of 148 points-of-presence for interconnection
(PPI) were built adding to the network which today has more than
400 owned PPIs and another 329 points-of-presence using leased
lines allowing us to reach all of Brazil. This substantial
increase in PPIs contributed to the reduction in the amount paid
for long distance interconnection (TU-RIU) and was part of the
reason that led to the decline in interconnection costs to 46.1
percent of net revenues in 2002 from 47.8 percent in 2001. The
elimination of non-paying traffic from our cost base also
contributed to the reduction of interconnection costs as a
percentage of net revenues.
Increases in third party services - associated with SG&A and Cost
of Services rose. While these expenses partially offset the
reductions mentioned above, some were related to the maintenance
of newly introduced systems - call blocking, collections, billing
and co-billing as well as higher use of outside consultants and
advisors, especially in the fourth quarter associated with the
company's financing program.
This past month, Anatel determined that local operators charge
R$0.79 per bill to a long distance competitor for co-billing
services. Embratel has applied to Anatel to receive equal
treatment. Embratel expects to be granted the same right.
Other operating income improved in 2002 due to lower provisions
for legal contingencies in the current year. Also, in 2001,
provisions were recorded for the write-off of unrecoverable tax
credits. In the third quarter of 2002 we obtained a reduction in
pension expenses related to the employer matching portion of
pension expenses for employees who left the company before
achieving a fully vested status. Additionally, we were successful
in recovering some credits in the fourth quarter.
In the fourth quarter of 2002, EBITDA was R$316 million declining
12.8 percent from the previous quarter. Continued reductions in
interconnection costs and provision for doubtful accounts were
partially offset by interconnection rate increase fully
implemented retroactively to June 2002. Additionally, the above
mentioned severance payments and advisory fees associated with
debt financing contributed to the decline in EBITDA in the fourth
quarter of 2002. Excluding the severance provision and employee
profit sharing, fourth quarter EBITDA would have been R$345
million representing an EBITDA margin of 20.1 percent.
EBIT
Operating income (EBIT) was R$216 million in 2002 compared to a
loss of R$64 million in the previous year. This significant
growth was the result of the above mentioned improvements.
In the fourth quarter 2002, EBIT was R$15 million dropping from
R$74 million in the previous quarter. In addition to a R$12
million increase in depreciation, associated with more assets
coming into service, fourth quarter labor provisions and advisory
fees related to financing, reduced earnings.
Net Income Fourth quarter net income was R$112 million
In the fourth quarter of 2002, net income was R$112 million
compared to a loss of R$286 million in the fourth quarter of
2001. This result was brought about by our continued operating
improvement and by the appreciation of the currency. Fourth
quarter net income attenuated the annual 2002 loss of R$626
million. The major cause for the loss in 2002 was the effect of
the devaluation of the Real vis-a-vis the US dollar (52.3 percent
in the year) which exceeded the hedged portion of the Company's
foreign currency debt (see Financial Position below).
Interest expense in 2002 was R$388 million while interest income
was R$182 million. Interest income increased substantially
compared to 2001 mainly due to fines collected from late payment.
The negative financial result for 2002 of R$1,457 million was
mainly caused by negative exchange variation (net of exchange
variation gains and hedge income) associated with the impact of
the devaluation of the currency on the unhedged debt.
Financial Position Total debt fell by US$ 54 million. Cash
position of R$887 million.
In 2002 Embratel net debt amortization was US$54 million. US$34
million were amortized in the fourth quarter of 2002. This
reduction in outstanding debt, as well as an year-end cash
position of R$887 million evidence a continuous improvement in
cash generation. Total borrowed funds declined to R$4.9 billion
(US$1.4 billion) at year-end 2002 compared to R$5.2 billion
(US$1.3 billion) at the end of the third quarter of 2002.
The Company's short-term hedged position is 62 percent. Click
(http://bankrupt.com/misc/Exhibit_16.htm)To see the company's
hedged debt and respective average debt cost.
At the end of the third quarter 2002, Embratel initiated
discussions with creditor institutions with respect to the
financing of its debt maturing in 2003 and the first half of
2004. These discussions evolved. "The negotiations are
progressing steadily. We are in the process of finalizing
contractual details", said Norbert Glatt, Embratel's CFO.
Embratel will disclose further information about its financing
program when the transaction is completed.
Accounts Receivables
The company's net receivable position on December 31, 2002 was
R$1.6 billion an improvement of more than R$241 million relative
to the previous 2002 quarter. Gross receivables declined by R$117
million to R$3.6 billion, and accounted for approximately half of
the reduction in net receivables - Provision for doubtful
accounts of R$137 million in the fourth quarter accounted for the
balance. In 2002, Embratel provisioned a total of R$627 million
for doubtful accounts. Collections continue to improve and days
sales outstanding, based on net receivables has dropped to 67
days, reaching its lowest point since January 2000, when Embratel
initiated its own billing.
Capex
Total 2002 capital expenditures were R$1.0 billion. Compared to
2001, capex fell by a bit more than R$400 million (30 percent).
The breakout of this expenditure is the following: local
infrastructure and access - 24.6 percent (including PPIs); data
and Internet services - 16.9 percent; network infrastructure -
9.8 percent, others - 32.0 percent and Star One - 16.7 percent.
Included in "others" are investments in IT and in switches.
Embratel is the premier communications provider in Brazil
offering a wide array of advanced communications services over
its own state of the art network. It is the leading provider of
data and Internet services in the country and is uniquely
positioned to be the country's only true national local service
provider for corporates. Service offerings: include advanced
voice, high-speed data communication services, Internet,
satellite data communications, corporate networks and local voice
services for corporate clients. Embratel is uniquely positioned
to be the all-distance telecommunications network of South
America. The Company's network is has countrywide coverage with
28,868 km of fiber cables comprising 1,068,657 km of optic
fibers.
To see Income Statement:
http://bankrupt.com/misc/Income_Statement.htm
To see Balance Sheet: http://bankrupt.com/misc/Balance_Sheet.htm
CONTACT: Embratel Participacoes S.A.
Silvia Pereira, Investor Relations Manager
Tel: 55 21 2121-6474/9662 (messages)
Email: Silvia.Pereira@embratel.com.br
invest@embratel.com.br
VARIG: Stock Drops On Reports of No Helping Hand from Government
----------------------------------------------------------------
Shares of Viacao Aerea Rio-Grandense SA, Brazil's largest
airline, fell to their lowest level in more than a year following
an announcement that the government won't come to the ailing
company's rescue, reports Bloomberg.
The stock fell 8 centavos, or 8%, to 92 centavos (26 U.S. cents)
following a report in O Globo newspaper, quoting Defense Minister
Jose Viegas as saying that the government doesn't plan to bail
out the company.
Varig, now struggling with debts totaling US$764 million and a
negative net equity of US$450 million, has asked the government
for a capital injection of as much as US$400 million.
Concurrently, Development and Trade minister Luiz Fernando Furlan
said Varig is going to make an important announcement this week.
"There's speculation in the market that Varig is looking for
another partner which could put money into the company," said
Carlos Albano, an airline industry analyst at Uniao de Bancos
Brasileiros SA in Sao Paulo. However, investor speculation that
such an announcement is imminent wasn't enough to lift the
shares, he said.
Both announcements came after creditors last week seized one of
the Company's Boeing Co. 777 aircraft in Paris for failing to
make a rental payment. Varig has delayed payments to suppliers,
fired workers, cut flights, returned aircraft and sought
government funds to stay in business after a collapse of the
currency and plummeting air traffic left it unable to make
payments on $900 million of debt.
Varig has a fleet of 100 planes, employs 15,000 people and serves
110 domestic and 27 international destinations.
CONTACT: VARIG (Viacao Aerea Rio-Grandense, S.A.)
Rua 18 de Novembro No. 800, Sao Joao
90240-040 Porto Alegre,
Rio Grande do Sul, Brazil
Phone: (51) 358-7039/7040
(51) 358-7010/7042
Fax: +55-51-358-7001
Home Page: www.varig.com.br/english/
Contacts:
Dorival Ramos Schultz, EVP Finance and CFO
E-mail: dorival.schultz@varig.com.br
Investor Relations:
Av. Almirante Silvio de Noronha,
n 365-Bloco "B" - s/458 / Centro
Rio de Janeiro, Brazil
KPMG Brazil
Belo Horizonte
Rua Paraba, 1122
13th Floor
30130-918 Belo Horizonte MG
Telephone 55 (31) 3261 5444
Telefax 55 (31) 3261 5151
or
Brasilia
SBS Quadra 2 BL A N 1
Edificio Casa de Sao Paulo SL 502
70078-900 Braslia - DF
Telephone 55 (61) 223 2024
Telefax 55 (61) 224 0473
BAIN & CO
Primary Contact: Wendy Miller
Two Copley Place, Boston, MA 02116
USA
Phone: +1-617-572-2000
Fax: +1-617-572-2461
Email: miles.cook@bain.com
URL: http://www.bain.com
===============
C O L O M B I A
===============
TERMOEMCALI: CCC Rating Goes Watch Negative Restructuring Doubts
----------------------------------------------------------------
Fitch Ratings placed a Rating Watch Negative on the 'CCC' rating
on the TermoEmcali project bonds. This rating action follows the
recent announcement of a federal government resolution
implemented by the Superintendencia de Servicios Publicos
(Superintendent of Public Services) regarding a possible
liquidation of Empresas Municipales de Cali (Emcali) in the near
term if the measures described in the resolution to make Emcali
viable do not yield the expected results. The resolution
specifically addresses key issues including the renegotiation of
the TermoEmcali power purchase agreement (PPA). Emcali is a
contractual offtaker of the TermoEmcali project under a 20-year
PPA and is the project's sole source of revenue The Rating Watch
Negative applies to the US$165 million 10.125% senior secured
bonds due 2014 issued by TermoEmcali Funding Corp. as well as
Emcali's national-scale rating Colombian Pesos $100,000 million
senior unsecured bonds due December 2004 and its implied foreign
currency rating, both currently at 'CCC'.
The Superintendencia initiated its intervention of Emcali in
April 2000 in an effort to resolve Emcali's severe financial
crisis. The term of the intervention was to be for two years and
was subsequently extended for an additional year until April
2003. Since the intervention took effect, Emcali's financial
situation has worsened with no real prospects for improvement.
The recent resolution addressing the possibility of Emcali's
liquidation outlines the following issues, which if resolved in
the near term by Emcali could forestall its liquidation: 1.
Restructuring of the PPA terms and conditions between TermoEmcali
S.A. ESP and EMCALI; 2. Renegotiation of union agreements; 3.
Restructuring of EMCALI's debt with local financial institutions
and with local and international suppliers; 4. Negotiate a new
agreement with the municipality of Cali for the payment of
approximately US$121 million owed to EMCALI; 5. Negotiate with
debt holders including the federal government, local banks,
suppliers, etc to convert a portion of the outstanding debt into
capital. Since early 2000, TermoEmcali has received monthly PPA
payments from Emcali, routinely within the 30-day cure period
allowed once a notice of default has been issued by the project.
TermoEmcali does benefit from two letter of credit-backed reserve
funds, namely one that provides credit support for Emcali's PPA
obligations (currently equivalent to approximately three months
of Emcali's PPA fixed capacity payments), and also a six-month
debt serve reserve letter of credit, which currently is set to
expire in April 2003. The next debt service payment of
approximately US$5 million is scheduled for March 2003, which
TermoEmcali management believes will be paid without relying on
the debt service reserve.
The Rating Watch Negative addresses the heightened degree of
uncertainty related to possible re-negotiations of the
TermoEmcali PPA and the Superintendencia's proposed liquidation
of Emcali over the near term. Emcali is the exclusive provider of
electrical power services, water and sewer services and local
exchange telephone services in the city of Cali, Colombia. The
company is wholly owned by the city of Cali. TermoEmcali is owned
54% by InterGen, a subsidiary of Bechtel and Shell, 43% by
Emcali, and 3% by Corporation Financiera del Pacifico (CFP) and
other private investors.
CONTACT: Fitch Ratings
Caren Y. Chang, 312/368-3151 (Chicago)
John W. Kunkle, CFA, 312/606-2329 (Chicago)
Giovanny Grosso, 312/368-2074 (Chicago)
Glaucia Calp, 571-347-4573 (Bogota, Colombia)
James Jockle, 212/908-0547 (Media, New York)
=============
E C U A D O R
=============
FILANBANCO: US Embassy Submits Complaint Over Contract
-----------------------------------------------------
Oscar Ayerve, a representative of Filanbanco creditors, received
a complaint from the US embassy in Quito asking him to reconsider
the application of US company Hunton & Williams that was
supposedly disqualified from the process to select a firm to help
recover some US$950 million in bad loans.
Business News Americas recalls that Hunton & Williams was
competing with Prowill, Mexico's Thesis, and Panama's Gomez
Giraldo & Asociados. The winning firm is set to get up to 17% of
the total amount recovered.
But, according to Mr. Ayerve, the complaint was submitted even
though the process is not yet over.
"The US embassy has passed judgment before the process has
closed," Ayerve said. Hunton & Williams submitted its offer
through Hunton & Williams Latinoamerica, he said, adding that
none of the bidders has been disqualified.
An official at the banking authority Superban considers the US
embassy's complaint as a serious matter, as it called into
question the transparency of the tender process.
Authorities intervened Filanbanco, formerly the largest bank in
the system, during the 1998-1999 financial crisis and ran the
loss-making operation until the bank's closure on July 17, 2001.
Ayerve is scheduled to meet with President Lucio Gutierrez to
discuss the state of Filanbanco and the criteria for selecting a
company to collect its bad loan book.
CONTACT: FILANBANCO
Av. 9 of 203 October and Pichincha
Guayaquil, Ecuador
Phone: 322780 ext. 2885
Fax: 329451
E-mail: mailto:administrador@filanbanco.com
Home Page: http://www.filanbanco.com/
Contacts:
International Business Division
Germania Narv ez Brandon
E-mail: mailto:mgnarvaez@filanbanco.com
Legal Divison (Guayaquil)
Marks Arteaga Valenzuela, Departmental Manager
E-mail: mailto:mmarteaga@filanbanco.com
===========
M E X I C O
===========
CORPORACION DURANGO: Ratings Lowered to 'D'
-------------------------------------------
Standard & Poor's Ratings Services said Tuesday it lowered its
local and foreign currency corporate credit ratings on Mexican
packaging company Corporacion Durango S.A. de C.V. to 'D' from
'SD' (selective default) following missed interest payments on
the company's 12.625%, 13.125%, and 13.5% notes due in 2003,
2006, and 2008 respectively. The ratings on the notes were also
lowered to 'D'.
Corporacion Durango was severely affected by its high debt
burden, its tight liquidity, the low prices for its products, and
the effect that the economic slowdown has had on the maquiladora
exports. As of September 2002, the company's debt totaled
US$836.41 million.
Corporacion Durango continues to work jointly with Rothschild
Inc. and PricewaterhouseCoopers to evaluate debt-restructuring
alternatives.
ANALYST: Beatriz Coll, Mexico City (52) 55-5279-2016
Manuel Guerena, Mexico City (52) 55-5279-2011
GRUPO MEXICO: Asarco Ratings Lowered to 'D' After Missed Payment
----------------------------------------------------------------
Standard & Poor's Ratings Services said Tuesday it dropped the
rating on the $100 million bond of Asarco Inc., one of the three
mining subsidiaries of Grupo Mexico S.A. de C.V. (GMexico), to
'D' from 'C' based on the default of the principal payment
scheduled for Feb. 1, 2003. The corporate credit rating on Asarco
was also lowered to 'D' from 'SD' (selective default).
Regarding the ratings of GMexico's related companies, Southern
Peru Copper Corp. (SPCC) 'CC' rating remains on CreditWatch
negative, where it was placed on Aug. 21, 2002, while the rating
for Grupo Minero Mexico S.A. de C.V. (GMM) remains 'SD' since the
same date. GMexico had $2.7 billion in debt as of Sept. 30, 2002.
GMexico recently reported that Asarco reached an agreement with
the U.S. Department of Justice regarding the sale of its
ownership in SPCC to its U.S. subsidiary Americas Mining Corp. As
a result of this agreement, the company awaits a favorable
resolution by the U.S. District Court of Phoenix.
"Since the disbursement of the newly obtained credits through
GMexico's subsidiary Ferrocarril Mexicano S.A. de C.V.
(Ferromex), are subject to the judge's favorable resolution and
this has taken more time than expected, Asarco didn't have the
required resources to pay neither for the $100 million bond due
Feb. 1, 2003, nor for the $450 million revolving credit facility
with a rescheduled maturity for Jan. 31, 2003," stated Standard &
Poor's credit analyst Federico Mora. The rating on the facility
was lowered to 'D' on Nov. 12, 2002, when the company defaulted
on the principal payment on the original payment date.
GMexico is in the process of preparing the signing of the
definitive agreements for the financial restructuring of GMM and
it expects to conclude the process within the next few days.
ANALYST: Federico Mora, Mexico City (52) 55-5279-2036
Manuel Guerena, Mexico City (52) 55-
5279-2011; Patricia Calvo, Mexico City (52) 55-5279-2073
GRUPO MEXICO: Transfer of SPCC Stake To Another Unit Looms
----------------------------------------------------------
Asarco spokesperson Clay Allen said that the sale of the Grupo
Mexico subsidiary's 54.2% stake in Southern Peru Copper Corp to
another G-Mex subsidiary, Americas Mining Corp, "should take
place in the next few days," recalls Business News Americas.
The operation is imminent as the agreement signed last week by
copper miner Asarco and the US Department of Justice (DOJ)
already has the approval of the federal court in Arizona.
While the authorization from the court paves the way for the
sale, it also allows Grupo Mexico to access newly arranged
credits to complete the transaction, said Allen.
The sale of Asarco's interest in SPCC will allow the Arizona-
based company to "confront its financial and environmental
responsibilities with greater economic strength," Grupo Mexico
said in a statement.
Cash-strapped Asarco defaulted on a US$450 million loan due
January 31, extended from the original date of November 10, with
a group of lenders led by JP Morgan Chase, and another US$100
million in bonds maturing February 3. It is currently in
negotiations with its creditors to complete payment once the SPCC
sale goes through, G-Mex told the Mexico City stock exchange.
Based on SPCC's current market value, the 54.2% is worth US$680
million.
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 Garca 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
=======
P E R U
=======
EMPRESAS LUCHETTI: Exits Peru Following Eviction Order
------------------------------------------------------
Empresas Lucchetti SA, a pasta maker owned by Chile's Luksic
family, kicked off the process of liquidating and selling off of
all machineries at its pasta factory in the city of Lima as part
of its Peruvian exit, reports South American Business
Information.
The value of the equipment in the factory is not known, but the
factory itself was built at an investment of US$40 million, part
of the US$156 million, which Lucchetti had invested in Peru prior
to its current departure.
The decision to leave Peru is based on Lucchetti's claim that the
country has not lived up to the commitments of an agreement with
Chile regarding protection of foreign in investments.
In August 2001, Luchetti got an order from the city government of
Lima to close its factory within 12 months due to environmental
concerns. The Company requested for an extension of the eviction
order but majority of Lima's city council members rejected the
request. In January, the Lima government enforced the order.
Lucchetti, which lost US$5.4 million in the first nine months of
2002, is seeking compensation before a World Bank arbitration
court, claiming it is a victim of discrimination. Lucchetti
warned last July that an eviction could hamper efforts to repay
debt.
CONTACT: EMPRESAS LUCCHETTI S.A.
2600 Av Vicuna Mackenna
Comuna de Macul Santiago
Chile
Phone: +56 238 2711
+56 238 6592
Home Page: http://www.lucchetti.cl/
NUEVO MUNDO: Regulator Carries On Liquidation
---------------------------------------------
The liquidation of the defunct Peruvian bank Banco del Nuevo
Mundo resumes after being suspended in April last year due to a
legal motion filed by the former owner, the Levy group, to regain
control of the bank. The motion was denied by the supreme court.
According to Business News Americas, the country's insurance
regulator SBS hired a consortium to liquidate Nuevo Mundo and has
appointed Manuela Carrillo Portocarrero and Beatriz Olvido Vega
Villacampa to act as its representatives in the liquidation.
Three local consulting firms form the consortium - Define S.A.,
Dirige S.A.C. and Soluciones en Procesamiento S.A.
Nuevo Mundo was intervened together with NBK Bank in December
2000, when former President Alberto Fujimori sought asylum in
Japan. Fujimori's surprise exit provoked a run on deposits at
some banks, which prompted authorities to intervene the two banks
due to liquidity problems.
NBK Bank was cleaned up and the healthiest part of the bank was
sold off to local bank Banco Financiero. However, in the case of
Nuevo Mundo, the Levy group began a legal battle to prevent the
bank from being liquidated or sold. The Levy group claimed it was
capable of cleaning up Nuevo Mundo on its own.
CONTACT: BANCO DEL NUEVO MUNDO
Av Paseo de la Repzblica 3033,
27 Lima, Peru
Phone: 472-5121
Fax: 440-2940
=================
V E N E Z U E L A
=================
PDVSA: Government Denies Citgo Sale In The Short Term
-----------------------------------------------------
Venezuela's government could sell Citgo, the US oil refiner and
marketer subsidiary of state oil company PDVSA, but not in the
short term, mines and energy minister Rafael Ramirez indicated to
state news agency Venpres.
The ministry is currently drawing up a plan for the sale of
certain PDVSA assets, Ramirez said, indicating that divestments
would initially focus on Venezuelan assets.
President Hugo Chavez will announce which of the ministry's
recommendations he will go through with after announcing exchange
rate measures.
"Studies have been done on the matter and we haven't made an
announcement because we are waiting to analyze the pros and cons
of the measures before carrying them out," Ramirez said.
One possibility is transferring the Moron fertilizer plant from
PDVSA petrochemical arm Pequiven to the Venezuelan Agricultural
Corporation (CAV), he said.
PDVSA: Increasing Gasoline Purchases To Alleviate Scarcity
----------------------------------------------------------
Petroleos de Venezuela SA will buy 12 million barrels of gasoline
this month to offset shortages caused by a work stoppage, PDVSA
President Ali Rodriguez told state news agency Venpres without
giving a value of the purchases. Bloomberg reports that at market
prices, the cost is about US$480 million. Since the strike began
Dec. 2, the Company has bought 11 million barrels of gasoline at
a cost of $442 million, Rodriguez said earlier.
According to PDVSA spokesman Rafael Gomez, all the Company's
refineries should "return to normal production" by the end of the
month.
* Two-Month Old Strike Ends But Presidential Ouster Continues
-------------------------------------------------------------
Venezuelan bankers, storeowners and factory workers went back to
work Monday, ending a 63-day general strike without achieving
their goal of ousting President Hugo Chavez. According to
Business News Americas, Chavez, who was elected in 1998 and
survived a brief coup last April, on Sunday declared victory over
the strike.
However, opposition leaders refuse to give up saying they would
focus on new measures to seek an electoral solution to the
political crisis. They claimed more than 4 million Venezuelans on
Sunday signed a petition for a constitutional amendment to cut
the presidential term from six years to four.
In reaction, the government dismissed the opposition's proposal
and instead suggested a referendum on Chavez's rule later this
year as a way out of the country's political crisis.
According to Ronald Blanco la Cruz, a government negotiator at
talks mediated by the Organization of American States, under the
government's proposal, opponents can start collecting signatures
for recall referendum in August, halfway into Chavez's six-year
term.
Chavez repeatedly has pledged that a recall vote can be held in
August -- not just that it can start to be organized, as
indicated by Blanco la Cruz.
Blanco la Cruz, governor of Tachira state, also said the
government has rejected the opposition's proposals to amend the
constitution.
"Otherwise, people would start collecting signatures as soon as a
president is elected," he told the government's Venezolana de
Television.
Venezuela's constitution requires signatures from 20 percent of
11 million registered voters -- roughly 2.2 million people -- to
demand a recall vote.
***********
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 2003. 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
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Information contained herein is obtained from sources believed to
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