/raid1/www/Hosts/bankrupt/TCRLA

/raid1/www/Hosts/bankrupt/TCRLA_Public/030414.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 Monday, April 14, 2003, Vol. 4, Issue 73 Headlines A R G E N T I N A ACINDAR: Faces Two Lawsuits Seeking Firm's Liquidation ARGENTINE BANKS: Senate Extends Ban Against 'Home Foreclosure' B E R M U D A GLOBAL CROSSING: Offers Military Family Members Special Rates B R A Z I L ARACRUZ CELULOSE: Books BRL320 Million First Quarter Net Profit SOUTHERN ELECTRIC: Solons Want Cemig 2002 Dividend Garnished VESPER: Communications Minister Chides Anatel for Fickle Ruling C H I L E ENDESA: Highway Construction Unit Sale Now Free of Roadblocks ENERSIS: Debt Refinancing Completion Within Weeks, Says Analyst GUACOLDA: Fitch Assigns 'BBB' to US$150 Mln New Securities D O M I N I C A N R E P U B L I C BANCO INTERCONTINENTAL: Fitch Cuts Ratings to 'E' from 'D' E C U A D O R PETROECUADOR: Row With Economy Ministry Could Lead to Strike J A M A I C A CABLE & WIRELESS: Denies Holding Up Interconnection Talks M E X I C O ASARCO INC.: Concludes Restructuring with Sister's Help EMPRESAS ICA: Names J.P. Morgan Securities as Debt Talks Adviser PEMEX: To Invest US$3 Bln for New Ethylene, Aromatics Plants T R I N I D A D & T O B A G O BWIA: Launches New Business Model BWIA: Businessmen Give Nebulous Support for Turnaround Plan BWIA: Government Obligated to Protect Airline, Says Director CARONI: Union Members Want Their VSEP, Says Agriculture Minister U R U G U A Y ANCAP: S&P Grade Unchanged Despite Uruguay's Sovereign Downgrade URUGUAYAN BANKS: Employees Protest Mass Layoff in Banking Sector * S&P Lowers Uruguay to 'CC' from 'CCC' Due to Exchange Offer * Fitch Downgrades Uruguay's Ratings to Near-default Status V E N E Z U E L A PDVSA: Signs Supply Contract for Orimulsion as Demand Increases - - - - - - - - ================= A R G E N T I N A ================= ACINDAR: Faces Two Lawsuits Seeking Firm's Liquidation ------------------------------------------------------ Argentine steel-maker, Acindar, acknowledged late last week that it had received two notices from a Buenos Aires court, informing it of lawsuits calling for its liquidation. According to Business News Americas, Maximiliano Ruprecht and Pareto International filed the lawsuits. The company said the notices did not contain copies of necessary documentation. It is not certain yet what the company will do next. Meanwhile, the company launched last week an offer to redeem US$20 million worth of bonds. The offer will close May 9, says the paper. According to the company, the offer is specifically offered to the World Bank's International Finance Corporations and private banks. The bonds carry an 11.25% yield and will mature next year. The company, according to Business News Americas, is currently undergoing a financial restructuring and is in talks with lenders, who have a total exposure of US$277 million in the company. About US$100 million worth is tied up in bonds. The company declared a moratorium on principal and interest payments on these debts at the end of 2001 due to financial difficulties. Acindar is considered Argentina's largest long steel-maker with capacity of 1.2Mt/y. It is controlled by the Acevedo family and Brazilian steel company Belgo-Mineira, says the paper. ARGENTINE BANKS: Senate Extends Ban Against 'Home Foreclosure' -------------------------------------------------------------- In a move that violates an agreement with the International Monetary Fund, the Argentine senate voted last week to extend for another 90 days a ban on bank foreclosures involving private homes, Bloomberg said late last week. The moratorium has been in force since last year, a measure taken by the government to prevent an avalanche of foreclosures following its default on some US$95 billion in public debts. The ban only covers properties in which owners live, said the report, citing local daily Ambito Financiero. Earlier this year, however, the IMF allowed Argentina to defer payment on US$6.8 billion debts on condition that it won't extend the ban. Several banks have complained that the ban has hurt their ability to act against borrowers, recoup losses and stabilize the financial system. The IMF has yet to issue a statement regarding the matter. ============= B E R M U D A ============= GLOBAL CROSSING: Offers Military Family Members Special Rates ------------------------------------------------------------- To help family members of military personnel stay connected during the current conflict in Iraq, Global Crossing announced Thursday the availability of Home Connections (SM) -- a special, low-cost calling plan for residential phone customers. With Home Connections, spouses and dependent children of active, retired or reserve military personnel can stay in touch with each other for a special low rate of four cents per minute for state-to-state calls, 24 hours a day, seven days a week. In addition, eligible family members can connect with loved ones abroad with discounts of up to 45 percent on calls made to countries including Bahrain, Bosnia, Kuwait, Qatar, Serbia and Turkey. International discounts of 10 percent apply to many other countries throughout Europe, the Middle East and Asia, with no monthly services charges or minimum monthly usage limits. "We're honored to offer military families a way to stay in touch with each other more affordably," said John Legere, Global Crossing's chief executive officer. "This is our small way of showing our support for our troops in these difficult times." ABOUT GLOBAL CROSSING Global Crossing provides telecommunications solutions over the world's first integrated global IP-based network, which reaches 27 countries and more than 200 major cities around the globe. Global Crossing serves many of the world's largest corporations, providing a full range of managed data and voice products and services. On January 28, 2002, Global Crossing Ltd. and certain of its subsidiaries (excluding Asia Global Crossing and its subsidiaries) commenced Chapter 11 cases in the United States Bankruptcy Court for the Southern District of New York (Bankruptcy Court) and coordinated proceedings in the Supreme Court of Bermuda (Bermuda Court). On the same date, the Bermuda Court granted an order appointing joint provisional liquidators with the power to oversee the continuation and reorganization of the Bermuda-incorporated companies' businesses under the control of their boards of directors and under the supervision of the Bankruptcy Court and the Bermuda Court. Additional Global Crossing subsidiaries commenced Chapter 11 cases on April 23, August 4 and August 30, 2002, with the Bermuda incorporated subsidiaries filing coordinated insolvency proceedings in the Bermuda Court. The administration of all the cases filed subsequent to Global Crossing's initial filing on January 28, 2002 has been consolidated with that of the cases commenced on January 28, 2002. Global Crossing's Plan of Reorganization, which was confirmed by the Bankruptcy Court on December 26, 2002, does not include a capital structure in which existing common or preferred equity will retain any value. Global Crossing expects to emerge from bankruptcy in the first half of 2003. On November 18, 2002, Asia Global Crossing Ltd., a majority- owned subsidiary of Global Crossing, and its subsidiary, Asia Global Crossing Development Co., commenced Chapter 11 cases in the United States Bankruptcy Court for the Southern District of New York and coordinated proceedings in the Supreme Court of Bermuda, both of which are separate from the cases of Global Crossing. Asia Global Crossing has announced that no recovery is expected for Asia Global Crossing's shareholders. Asia Netcom, a company organized by China Netcom Corporation (Hong Kong) on behalf of a consortium of investors, has acquired substantially all of Asia Global Crossing's operating subsidiaries except Pacific Crossing Ltd., a majority-owned subsidiary of Asia Global Crossing that filed separate bankruptcy proceedings on July 19, 2002. Global Crossing no longer has control of or effective ownership in any of the assets formerly operated by Asia Global Crossing. CONTACT: GLOBAL CROSSING Press Contacts Tom Topalian Phone: + 1 973-410-5947 Email: Thomas.Topalian@globalcrossing.com Analysts/Investors Contact Ken Simril Phone: + 1 310-385-3838 Email: investors@globalcrossing.com =========== B R A Z I L =========== ARACRUZ CELULOSE: Books BRL320 Million First Quarter Net Profit --------------------------------------------------------------- Aracruz Celulose, the world's largest producer of bleached eucalyptus pulp, recorded another high in terms of net profit, which the company credited on its new production unit, says Reuters. According to the company, net profit for the first quarter of 2003 surged to BRL320 million (US$58.5 million under US GAAP accounting rules) from just BRL22 million in the same period last year. Net revenue also leapt 157% to BRL763 million on record output of 497,000 tonnes. The company credited the positive first quarter figures on its new production unit in the State of Espirito Santo and the improvement in pulp prices, which rose to US$479 per tonne from US$425. The results caused the company's ADRs to surge to 57 cents, beating a market forecast of 34 cents per ADR, says Reuters, citing Thomson First Call research service. The firm said an average increase of $60 per tonne in wood pulp prices and the appreciation of Brazil's currency in the first three months of the year boosted the bottom line. Aracruz's eucalyptus pulp is used to make a range of papers from toilet tissue to writing pads. Aracruz said it was operating at full capacity, like much of the pulp and paper sector, with 166,000 tonnes in stock, or 29 days of output, at the end of March. Earnings before tax, interest, depreciation and amortization (EBITDA) rose 281 percent to BRL437 million (US$121 million). Aracruz said the appreciation of Brazil's real against the U.S. dollar during the period helped reduce the cost of its dollar- linked debts. SOUTHERN ELECTRIC: Solons Want Cemig 2002 Dividend Garnished ------------------------------------------------------------ Some legislators of the State of Minas Gerais have suggested seizing the dividends paid by state power firm, Cemig, to Southern Electric Brasil in order to cover its debt to national development bank, BNDES. According to Business News Americas, Cemig paid Southern Electric Brasil, a unit of AES Corp., at least BRL32 million last year and a total of BRL235 million since 1997. Southern Electric has an outstanding BRL83 million interest due the BNDES that it might not be able to meet when it falls due next month. Thus, the suggestion of the legislators. The paper says Southern Electric incurred the debt when it purchased 33% of Cemig's ordinary shares for US$650 million in May 1997. The company currently holds a 14% stake in the company. Cemig President Djalma Morais told Business News Americas he was powerless to freeze the dividend payments to Southern Electric. He, however, does not see any negative impact of a Southern Electric default on the State of Minas Gerais or any of its institution, given that the loan was taken from a federally owned bank. Still, Jo Moraes of the Brazilian Communist Pary (PCdoB) suggested asking BNDES what mechanisms are available to seize the dividends in case of non-payment. Domingos Savio of the Brazilian Social Democracy Party (PSDB) also said the Minas Gerais representatives in congress should be mobilized to ensure the country is not affected by a possible default. AES Corp. owns 65% of Southern Electric. The other known shareholders are local investment group Opportunity and US-based Mirant (formerly Southern Electric), which recently sold out of the energy concern to an undisclosed buyer, the paper said. VESPER: Communications Minister Chides Anatel for Fickle Ruling --------------------------------------------------------------- Vesper, the competitive local exchange carrier majority-owned by U.S. chipset developer Qualcomm, accused Brazil's telecom regulator, Anatel, of being inconsistent, after handing a crucial ruling against the company last week. The regulator disallowed the company from proceeding with its plan to use its 1900MHz fixed wireless network to offer full- fledged mobile operations. The decision, although not yet final, could reportedly forced the company to close shop. In November last year, Vesper spent US$84.4 million on three mobile licenses, which are tied to the 1800MHz band. It did so, however, believing that it could use the license on its CDMA 1900MHz network as a "secondary" operations on top of fixed wireless services. The company based its assumption on Anatel's resolution 314, published two months prior to the license auction, and the ministry of communications' opinion. Communications Minister Miro Teixeira also criticized the regulator's decision: "Anatel looks at best inconsistent because it published Resolution 314 and then retracted it. The minister of communication will look weak because the decision would be against his stated preference." Meanwhile, the contentious decision will also apply yo other local telecom operators such as Vivo, Brazil's only CDMA player, and Brasil Telecom, which also would like to use its existing 1900MHz license to launch mobile operations. The latter is now expected to opt for GSM technology, which will require it to build out a new network on the 1800MHz band, as stipulated in the regulations tied to the PCS licenses sold in November, says the paper. ========= C H I L E ========= ENDESA: Highway Construction Unit Sale Now Free of Roadblocks ------------------------------------------------------------- The sale of Infraestructura 2000, a subsidiary of Chilean power firm Endesa, is now cleared of obstacles, says Reuters. Spain's OHL had earlier urged the highway construction subsidiary to issue US$85 million in domestic securities before it would agree to buy the firm. The Spanish company wants the unit to pay all its obligations to Endesa before acquiring it for US$200 million. The bond placement, according to Reuters, was completed Wednesday last week, with US$70 million going to Endesa's books. Autopista de los Libertadores, an Infraestructura subsidiary, issued the bonds. Endesa confirmed the bond issue, but did not say when the sale of Infraestructura to OHL will take place. The sale is part of a broader plan by Endesa and its parent company, Enersis, to reduce their debt through asset sales and a capital increase for up to US$2 billion. ENERSIS: Debt Refinancing Completion Within Weeks, Says Analyst --------------------------------------------------------------- With improved liquidity following the sale of US$487 million in assets, market observers expect Enersis to complete its US$2.3 billion debt refinancing within weeks, Business News Americas says. Bear Stearns Analyst Gabriel Salas, in an interview with Business News Americas, predicts lenders will likely open up their credit lines to the company once more. "If I was a creditor I would be willing to lend money to Enersis now rather than before because now I know they have all this liquidity following the sale of assets, the equity increase and the US$1.1 billion placement by the lead banks." Business News Americas says Enersis raised US$174 million from the sale of the Canutillar hydro plant belonging to generation subsidiary Endesa, US$203 million from the disposal of power distributor Rio Maipo, and US$110 million from the sale of its northern transmission lines. Company shareholders also approved a US$2 billion capital increase. The US$1.1 billion refinancing agreement forged by Enersis and generation subsidiary, Endesa Chile, with four banks in March also helped, according to the paper. The banks are BBVA, Dresdner Kleinwort Wasserstein, Salomon Smith Barney and Santander Central Hispano Investment Securities. "It helped a lot that the lead banks took over almost 50% of the package because it tells the other banks that the leaders are committed to it," Mr. Salas said. The remaining US$1.2bn debt is a syndicated loan with 30 banks, which is being managed by the Dresdner, Citibank, and BBVA banks. Out of this refinancing deal, Enersis got US$1.6 billion, while Endesa took home US$700 million. The refinancing bumps the due date to 2008, and establishes biannual payments starting 30 months after the agreement comes into force. "If Enersis can complete this refinancing in the next few weeks it will avert any kind of liquidity crisis over the next two years," Mr. Salas told Business News Americas. GUACOLDA: Fitch Assigns 'BBB' to US$150 Mln New Securities ---------------------------------------------------------- Fitch Ratings has assigned a foreign currency rating of 'BBB' to the US$150 million, senior secured loan participation certificates due on April 30, 2013, issued by Empresa Electrica Guacolda S.A. The certificates will have an average life of 7.1 years, a 12-month grace period and semiannual interest and amortization payments on April 30 and October 30 of each year. Proceeds from the issuance will be used to refinance outstanding debt at Guacolda. The company will purchase all of the US$52 million net outstanding participation certificates in the Merrill Lynch loan agreement and prepay the US$48.8 million outstanding loan under the Mitsubishi credit facility and the US$35.3 million local syndicated loan. The remaining proceeds will be used to fund a portion of the reserve amount, pay related expenses, and for general corporate purposes. The rating of Guacolda is supported by its competitive position, sound operating and commercial strategies, long-term contract cover and growing electricity demand in the region. Guacolda's ongoing strategy has been to stabilize revenue streams and reduce competitive risks by entering into long-term contracts for most of its firm capacity, primarily with a financially strong electric distribution company and mining and industrial companies located nearby. At present, 89% of the company's total capacity is committed under contract with an average term of 9.6 years. In 2004 and 2005, approximately 22% of the amount contracted will expire. The majority of these contracts are expected to be renewed. The expectation is supported by the company's competitive position. Un-contracted remaining capacity is sold in the spot market. Guacolda's generating units are two of the lowest marginal cost coal-fired facilities in the Central Interconnected System (SIC) and are therefore among the first thermoelectric units to be dispatched in the system. The units are in excellent condition, having recently completed their general maintenance cycles. The company's geographical location, which is in close proximity to its customers, provides Guacolda with a cost advantage relative to other generators located in the south, including the combined cycle gas-fired plants located near Santiago. Additional competitive advantages include the following: a low fuel transportation cost profile that is not subject to the restrictions of the fixed contract associated with gas generation facilities, alternative storage of coal near the plants, diversification of fuel sources, flexibility in supply contracts and no exposure to pipeline failure risk. In 2002, Guacolda had operating revenues of US$88 million, EBITDA of US$42 million and debt of US$192 million. These figures result in a total debt-to-EBITDA ratio of 4.6 times (x) and an EBITDA-to-interest expense ratio of 2.9x, which are consistent with the assigned rating given the companies many project like characteristics. Following the proposed debt issuance, Fitch expects relatively stable credit-protection measures, primarily reflecting stable operating cash flows, low future capital expenditures and a more manageable amortization schedule. Guacolda is a Chilean electric-generating company that operates a 304-MW coal-fired plant (two 152-MW units) in Huasco, which is located in the third region of Chile, 710 km to the north of Santiago, in the northern part of the SIC. Guacolda is owned by Gener (50%, rated 'B+' by Fitch), COPEC (25%, rated 'BBB+' by Fitch) and Ultra Terra (25%). For additional information, contact: Giovanny Grosso (Chicago) Phone: +1-312-368-2074 Jason Todd (Chicago) Phone: +1-312-368-3217 Carlos Diez (Santiago) Phone: +562-206-7171, ext. 25 Matt Burkhard (Media Relations/New York) Phone: +1-212-908-0540 =================================== D O M I N I C A N R E P U B L I C =================================== BANCO INTERCONTINENTAL: Fitch Cuts Ratings to 'E' from 'D' ---------------------------------------------------------- Fitch Ratings, the international rating agency, has downgraded to 'E' from 'D' the Individual rating of Banco Intercontinental (BanInter) in the Dominican Republic and affirmed the 'BB-' long-term foreign currency (stable rating outlook) and 'B' short-term foreign ratings as well as the '4T' support rating assigned to BanInter. The long-term rating is in line with our assessment of the sovereign. This action follows the announcement by the Banco Central de la Republica Dominicana that it would take over control and management of BanInter on April 8, 2003. On March 24, 2003, the shareholders of Grupo Progreso (main shareholder of BDP) reached a preliminary agreement with BanInter's majority shareholders, the Baez family, to buy 90% of BanInter. The agreement also included the purchase from the Baez family of its stakes in La Intercontinental de Seguros, the second largest insurance company in the country and BanInter & Trust Co., an offshore bank located in the Cayman Islands. On that date the Junta Monetaria announced that they were informed about the proposed operation and had no objections with the acquisition and proposed merger. After reviewing BanInter's financial information and taking into consideration other issues related with the acquisition, on April 7, 2003, the 'Junta Monetaria' decided to withdraw its previous statement and transfer BanInter's control to the Central Bank. In a statement issued on April 8, the Central Bank indicated that it would name an executive team of three experienced bankers (two of which have already been named), who will manage BanInter going forward. It is the Central Bank's intention to keep BanInter open and operating under its current name. The Central Bank further stated that it guarantees all of BanInter's deposits; in contact with a member of the aforementioned management team appointed by the Central Bank, Fitch Ratings has been told that the Central Bank intends to honor all third party obligations of BanInter. The lowering of BanInter's individual rating reflects the determination by the local authorities that the bank required support to continue its normal operations. The affirmation of the support and long-term foreign currency ratings reflect the action taken by the Central Bank to assure depositors and creditors of BanInter that it stands behind the bank's obligations. In July 2002 Fitch Ratings downgraded the individual rating of BanInter to 'D' from 'C/D' given the diminishing levels of the bank's equity as a consequence of rapid asset growth, the quality of equity as it includes goodwill from past M&As and limited operating flexibility, which was constrained by the high proportion of fixed assets. BanInter is the third largest bank in the Dominican Republic, with a market share of around 13% at end-2002. Its traditional focus has been corporate banking but in the past few years it has been steadily moving toward retail and investment banking. The bank has undergone a number of mergers and acquisitions since 1998, the latest being in November 2001, when it merged with Banco Osaka. For more information, contact: Franklin Santarelli (Caracas) Phone: +58 212 286 3356 Carlos Fiorillo (Caracas) Phone: +58 212 286 3232 Gustavo Lopez (New York) Phone: +1-212-908-0853 Matt Burkhard (Media Relations/New York) Phone: +1-212-908-0540 ============= E C U A D O R ============= PETROECUADOR: Row With Economy Ministry Could Lead to Strike ------------------------------------------------------------ The insistence of the economy ministry to cut Petroecuador's budget by US$200 million this year could trigger a full-blown strike, says Business News Americas. The paper interviewed several oil workers recently who expressed disappointment over the budget cut and the plan by the government to award some of the company's projects to private firms. They called on Energy Minister Carlos Arboleda to resign for failing to stand up for the company's interests. Petroecuador workers union VP Mario Escobar complained that the government is using 80% of the country's oil revenues to service Ecuador's debt with the International Monetary Fund, while leaving only 20% for public services. In addition, Mr. Escobar questioned the government's recent contracts signed with private sector companies: "Contracts should not be based on the reserves of a particular [oil]field, but on their production." Meanwhile, the paper says, Petroecuador is still having trouble with some private oil service companies that have not been paid in months. Some 270 workers of Ecuadorian company Llori Hermanos have stopped work on four of Petroecuador' top producing oil fields: Auca, Sacha, Shushufindi and Lago Agrio. The finance manager of Petroecuador's production subsidiary Petroproduccion, Francisco Jacome, said in a letter that all debts had been paid to the company, but a Llori Hermanos spokesperson contradicted the report, saying that Petroproduccion is scheduled to pay US$103,000 this week. ============= J A M A I C A ============= CABLE & WIRELESS: Denies Holding Up Interconnection Talks --------------------------------------------------------- Cable & Wireless Jamaica, which used to have a virtual monopoly of the country's telephony services, has pointed back the blame at the Office of Utilities Regulation (OUR) on why interconnection talks with rivals have taken so long. Reacting at the comments of J. Paul Morgan, director-general of OUR, C&WJ Spokesman Errol Miller said the company has in fact proceeded with negotiations even absent the approval of its Reference Interconnect Offering (RIO). Parties to the talks had earlier agreed to use this document as basis for any interconnection agreement, Mr. Miller told The Jamaica Gleaner. About two weeks ago, Mr. Morgan said there was growing dissatisfaction over the slow movement towards interconnection; an essential facility to fully liberalized the local telephony market. Mr. Miller denied this assertion, calling it "blatantly misleading." He added, "At no time has C&WJ behaved in any way that would be prejudicial to any party which is seeking to interconnect with our network." A senior officer at one of the newly licensed companies, though agreeing with OUR's observation, told The Jamaica Gleaner that he did not believe that "C&WJ's inefficient handling" of the arrangements for interconnection was intended to be a hostile act. He suggested instead that although his company maintains a "guarded" relationship with C&WJ, the telecommunications giant was more likely just ill-prepared for the March 1 opening up of the telecommunications market. =========== M E X I C O =========== ASARCO INC.: Concludes Restructuring with Sister's Help ------------------------------------------------------- The financial restructuring of Asarco Inc. is now complete, according to the company, thanks to Americas Mining Corp., which shelled out US$765 million to help the company settle its obligations. Both are subsidiaries of Mexican minerals and transport conglomerate, Grupo Mexico. Business News Americas says AMC rescued Asarco by buying its 54.4% stake in Southern Peru Copper Corp. (SPCC). The transaction allowed Asarco to reduce its net debt by 77% to US$226 million and pay 100% of its US$550 million short-term debt, on which it defaulted at the beginning of February this year. According to the paper, which cited a U.S. Securities Commission disclosure, AMC paid Asarco US$500 million in cash, US$123.25 million and US$100 million in promissory notes A and B, and cancelled US$41.75 million in debt. AMC funded the deal through a combination of working capital, capital contributions from Grupo Mexico, and a US$310 million loan signed with Mexico's Banco Inbursa on February 28. In turn, the SPCC shares were used to guarantee the Inbursa credit. The paper says the deal also improved the general debt profile of Grupo Mexico, which stood at US$2.9 billion as of December 31, 2002. G-Mex now holds the majority stake in SPCC, followed by Cerro Trading with 14.2%; Phoenix-based Phelps Dodge, 14%; and other shareholders, 17.6%. SPCC is Peru's largest copper miner while G-Mex is the world's third largest copper producer. EMPRESAS ICA: Names J.P. Morgan Securities as Debt Talks Adviser ---------------------------------------------------------------- Engineering and construction group, Empresas ICA, has taken serious steps towards initiating debt-restructuring talks with creditors, appointing J.P. Morgan Securities last week as adviser. Dow Jones says the company is bent on improving its debt portfolio, which includes a convertible bond that matures in March next year. The report did not specify when negotiations with creditors will take place. ICA was among the few major Mexican construction groups that had to massively downsize and reduce debts during the economic crisis of the late 1990s. Recently, the company won two major energy sector contracts, including a US$750 million hydroelectricity project for the Federal Electricity Commission, as the state-owned power utility is called. ICA's total debt at the end of 2002 stood at MXN5.06 billion, of which MXN1.12 billion are short-term debt. PEMEX: To Invest US$3 Bln for New Ethylene, Aromatics Plants ------------------------------------------------------------ State-run Petroleos Mexicanos is going to build two petrochemical plants within the next five years, said Bloomberg last week, citing the La Reforma Newspaper. According to the report, the company has started inviting foreign and local contractors to bid for the project, which will cost US$3 billion to complete. The two plants will manufacture ethylene and aromatics, and will generate 15,000 jobs, of which 2,500 will be permanent. The company will release further details of the plan over the next few weeks, the local paper said. ================================= T R I N I D A D & T O B A G O ================================= BWIA: Launches New Business Model --------------------------------- BWIA West Indies Airways unveiled its New Business Model 2003 last week, which will position the airline as an efficient player in the fiercely competitive global airline industry. Several key strategies have been identified as critical to the future success of the airline including Aircraft Reduction and Fleet Simplification as well as significant reductions in Operating Costs. In order to achieve the required cost reductions; the Airline has redirected focused on its Ramp, Maintenance and Duty Free Operations. Part of the Maintenance Department, and the entire Ramp and Duty Free Operations will be outsourced to independent contractors. The airline, which has an unblemished safety record, will continue to carry out routine aircraft maintenance and checks at Piarco, Trinidad. Annual heavy checks will be outsourced. This move will result in aligning BWIA's practices to other successful international airlines, which continue to focus on their core business. Over the past 24 hours, the airline has been issuing separation notices to 617 employees and has complied with all legal and regulatory requirements. While this separation process has been difficult for the airline, it has become necessary to ensure the future viability of the airline. The new BWIA Business Model will ensure that the airline meets the targets set by the Government of the Republic of Trinidad and Tobago, BWIA's Board of Directors and Shareholders. To view a copy of the business plan, click on these links: [Page 1] http://bankrupt.com/misc/bwia_p1.pdf [Page 2] http://bankrupt.com/misc/bwia_p2.pdf [Page 3] http://bankrupt.com/misc/bwia_p3.pdf [Page 4] http://bankrupt.com/misc/bwia_p4.pdf BWIA: Businessmen Give Nebulous Support for Turnaround Plan ----------------------------------------------------------- BWIA's quest to keep flying appears to be getting the support of businessmen after meeting with company officials to see the carrier's new business plan. Although the meeting was held behind closed doors -- with few willing to comment afterwards -- The Trinidad Guardian said CEO Conrad Aleong appeared elated emerging from the 75-minute caucus. The meeting came just a day after BWIA's management sent the business plan to the government, which had set this as a requirement before releasing additional state funds. Prime Minister Patrick Manning met with his Cabinet Thursday last week to deliberate whether the State should give BWIA the additional bailout. Among those who attended the meeting were David O'Brien, president of the Trinidad & Tobago Chamber of Industry and Commerce; Anthony Hosang, president of the Trinidad & Tobago Manufacturers Association and Dr. Brian Harry, president of the Tourism and Industrial Development Company of Trinidad & Tobago. As Mr. O'Brien made his way out of the meeting, he said Mr. Aleong gave a presentation of the new BWIA business plan. He said the State may be BWIA's last hope but expressed the private sector's full support for the airline. "We have a role to play in supporting and lobbying for Government to participate in keeping BWIA in the air. The other private sector agencies don't have capital to put into BWIA, but we certainly have an interest in BWIA and I think all of Trinidad & Tobago business is concerned about BWIA," he told the Guardian. In a press release, the Chamber said the nation needs BWIA since it contributes over $460 million to the local economy and is a net earner of foreign exchange since it earns 80% of its total gross revenue outside of the country in US, UK and other currencies. "We certainly support their position and hopefully the Government will find a mechanism to keep BWIA flying," Mr. O'Brien said. Mr. Aleong gave no comments, so did Mr. Deane, the only BWIA director who attended the meeting. A BWIA source told the Guardian that management will not issue any statements until it receives a response from the government concerning its new business plan. BWIA: Government Obligated to Protect Airline, Says Director ------------------------------------------------------------ A veteran BWIA director likens the carrier to a utility similar to the rail systems or highways in other countries; therefore it is incumbent upon the government to keep the airline flying. The unnamed director, in an interview with The Trinidad Guardian, argued that unlike Europe and North America, airline service is a critical mode of transport in the Caribbean. He said it is the government's responsibility to ensure that there are affordable air links between Trinidad & Tobago and the outside world. He denies accusations that the company is not properly managed. On the contrary, he said, since the appointment of CEO Conrad Aleong, the carrier managed to net profits in 1998, 1999 and 2000. If not for the slump in air travel following 9/11, the airline would have booked a profit four years in a row. The company ended last year with a US$29 million deficit. The BWIA director noted, however, that last year's losses were beyond the control of the BWIA board and management and that among the roadblocks to the airline's success were factors within government's control. He said the Air Transport Licensing Authority is to blame, among others, for its failure to regulate the prices charged by BWIA's competition -- both the charter airlines that operate the North American routes and Caribbean Star, which flies within the Caribbean. CARONI: Union Members Want Their VSEP, Says Agriculture Minister ---------------------------------------------------------------- Agriculture Minister John Rahael claims most union members are actually in favor of the government's Voluntary Separation of Employment Package, an integral part of Caroni (1975) Ltd's turnaround plan. Mr. Rahael made the assertion after meeting with a delegation of daily-paid workers, who told him that union leaders did not consult them about the plan to enjoin Caroni from offering its 9,000 members the VSEP. The All Trinidad Sugar and General Workers' Trade Union (ATSGWTU) filed the injunction on March 28, five days before the deadline for acceptance. The hearing is scheduled for May 7, The Trinidad Guardian said. ATSGWTU President Rudranath Indarsingh, for his part, called the meeting "contemptuous" and urged the industrial court where the injunction is pending to penalize the minister. "A Minister doesn't seek to bulldoze his way though the Industrial Court of Trinidad and Tobago. This reeks of political interference," Mr. Indarsingh said. "Again, it shows the high- handedness of Rahael. This is treating the Industrial Court with the most contemptuous behavior." "The Minister has shown he has no appreciation for the established process laid out by the Industrial Court and he should be held in contempt for his behavior," he added. An Industrial Court judge, however, disagreed. He said he did not see Mr. Rahael's behavior as bordering on contempt: "Rahael has no locus standi in the matter. He is just farse. But he could ask for the injunction to be overturned." Mr. Rahael called on union members to urge their leaders to withdraw the injunction: "It seems as though the majority of workers want to take the offer and I think it would be good if you can prevail upon the union to lift the injunction and allow the VSEP to proceed, failing which, we will have to wait on the court to make the decision." ============= U R U G U A Y ============= ANCAP: S&P Grade Unchanged Despite Uruguay's Sovereign Downgrade ---------------------------------------------------------------- Standard & Poor's Ratings Services said Thursday that the recently announced debt exchange of the Republic of Uruguay (CC/Negative/C) has no impact on the ratings or outlook of Administracion Nacional de Combustibles, Alcohol y Portland (ANCAP, CCC/Negative/--). Although the exchange resulted in a downgrade of Uruguay and despite the fact that ANCAP is solely owned by the government, ANCAP's debt is not included in the exchange and Standard & Poor's does not perceive a variation in the government's willingness to interfere with the company's cash to serve its financial obligations. Unless these factors change, the rating on ANCAP will not change even if the government ratings are lowered to selective default when the exchange is completed. For more information, contact: Pablo Lutereau (Buenos Aires) Phone: (54) 114-891-2125 Marta Castelli (Buenos Aires) Phone: (54) 114-891-2128 URUGUAYAN BANKS: Employees Protest Mass Layoff in Banking Sector ---------------------------------------------------------------- Members of the Association of Uruguayan Bank Employees went on strike Wednesday and Thursday last week to protest the mass firings in the sector, said Xinhua News Agency. During the two days, clearings were affected with only automatic teller machines left working. Payment of wages and pensions were unaffected, however, said the news agency. According to the union, 700 employees lost their jobs at Credit Bank following its liquidation, while 500 workers in state-run, Bank Hipotecario, could lose their jobs in the plan currently backed by the government to restructure the ailing bank. The AEBU members are demanding the government to relocate workers who lose their jobs. * S&P Lowers Uruguay to 'CC' from 'CCC' Due to Exchange Offer ------------------------------------------------------------- Standard & Poor's Ratings Services announced Thursday that it lowered its long-term sovereign credit ratings on the Oriental Republic of Uruguay to 'CC' from 'CCC'. The outlook remains negative. The downgrade follows the republic's recently announced exchange offer to holders of local and global bonds that seeks to extend Uruguay's maturity schedule at interest rates similar to those in existing bond agreements. The government is expected to announce the results of the exchange offer on May 16, 2003 (unless extended). If the exchange offer is successful (namely, if a sufficient number of eligible bondholders participate and the government agrees to proceed with the exchange), Standard & Poor's will then lower its long-term sovereign credit ratings on the republic to selected default ('SD') from 'CC' on or around May 16, 2003, and the exchanged bonds will be rated 'D'. Standard & Poor's considers the transaction to be a distressed exchange, given the comparison between the interest rates offered and current market rates, and the consequences should the exchange fail. Uruguay's fiscal position, amortization schedule, and near-term macroeconomic outlook imply that existing bondholders have few alternatives to accepting the exchange offer. If the new offer closes (on or around May 21, 2003), Standard & Poor's will then consider the 'SD' to be cured. Uruguay's sovereign credit rating could then be raised to the low 'B' category, reflecting a forward-looking assessment of the republic's creditworthiness. Beyond strengthening the amortization profile of Uruguay's central government debt, the exchange offer is likely to improve investor expectations. Coupled with the government's commitment to engineer a sustained fiscal adjustment, improved expectations should enable real interest rates to fall and business confidence to rise. This in turn, could put the government's robust growth projections -- 4% per annum for several years, beginning in 2004 -- within reach. Should the exchange offer not be accepted by a sufficient number of bondholders and, hence, the government, Uruguay's long-term sovereign credit rating would remain at 'CC'. This would reflect the high risk of a default this year, given (1) lack of access to the market, and (2) the likely unavailability of official financing (the revised Stand-By Credit Arrangement with the International Monetary Fund is predicated on a successful exchange offer). For more information, contact: Lisa M Schineller (New York) Phone: (1) 212-438-7352 Sebastian Briozzo (New York) Phone: 212-438-7342 Jane Eddy (New York) Phone: (1) 212-438-7996 * Fitch Downgrades Uruguay's Ratings to Near-default Status ----------------------------------------------------------- Fitch Ratings on Thursday lowered its ratings on Uruguay's long- term foreign currency debt to 'C' from 'CCC-' on the announcement of a comprehensive foreign currency debt exchange. Fitch deems this exchange to be a distressed debt exchange, as bondholders will suffer a loss in economic terms. Upon completion of the exchange, scheduled for May 15, Fitch Ratings will place eligible bonds, as well as Uruguay's foreign currency issuer rating, in a default category. The long-term local currency ratings remain at 'CCC-', as local currency obligations are not included in the exchange. The short-term foreign and local currency ratings remain at 'C'. The government of Uruguay announced Thursday that it will exchange all of its foreign-currency denominated bonds outstanding for new bonds with maturities of at least five years longer. Although the 7.875% bonds due 2003 will be eligible for a marginal cash payment up front, as will non-collateralized Brady bonds, and certain other bonds will be eligible for marginal increases in coupons, the exchange imposes an unambiguous loss for all bondholders in present value terms. Furthermore, bondholders that elect not to participate in the exchange will face unfavorable exit amendments including the elimination of cross-default clauses on their existing contracts, the waiver of sovereign immunity on new bonds, and delisting the outstanding bonds from the Luxembourg and Montevideo Stock Exchanges. These changes to the original contract would appear to be permissible under existing bond contracts, given support from the majority of holders tendering bonds for the exchange, but would nonetheless be harmful to 'holdout' investors. Finally, the government has stated that if the exchange fails, Uruguay may not be able to continue to service its debt obligations, even during 2003, underscoring the government's financial distress. Upon completion of the exchange, Fitch would lower the ratings on eligible bonds to a default category. In accordance with Fitch's practice in distressed debt exchanges, existing bonds would retain a default rating for at least 30 days. After 30 days, if the government is committed to continuing to pay principal and interest on any outstanding defaulted bonds according to their original terms, the ratings on these securities would be raised to a non-default rating to the extent that they are not fully extinguished through tenders. New securities issued as part of the exchange would be assigned a non-default rating based on Fitch's assessment of the likelihood of timely and complete payment, potentially at the 'B-' level, assuming that the new debt service burden resulting from the exchange is manageable in the context of a credible fiscal program and that other negative developments, including severe stress in the domestic banking sector, do not obtain. A final determination of the appropriate rating for the new bonds would be made when they are issued. Bonds eligible for tender in the debt exchange and not fully extinguished would likely be rated below the new issues on the expectation that the government would make a distinction in its willingness to pay new bonds before exchange-eligible bonds. If the exchange is successful, Uruguay's liquidity position could improve considerably. Scheduled 2004 and 2005 amortizations would be due almost entirely to official creditors. These obligations would likely be refinanced, assuming IMF performance criteria are met, providing authorities with breathing room to make improvements to public finances and the country's competitiveness. Assuming a 90% pickup in the exchange, 2004 market amortizations would amount to 0.2% of GDP or 0.8% of government revenues. Market amortizations would remain very low through 2008, with the exception of approximately US$107 million in payments on bonds with original maturity in 2003 that would be extended to 2006. Total debt service, including repayments to multi-laterals, would be considerably reduced, declining to 12% of GDP in 2004 from 25% in 2003 (equivalent to 39% of revenues in 2004 from 81% of revenues in 2003). All of the adjustment in debt service would come from lower scheduled amortizations because interest payments would not be substantially altered by the exchange. ================= V E N E Z U E L A ================= PDVSA: Signs Supply Contract for Orimulsion as Demand Increases --------------------------------------------------------------- State-run oil company, PDVSA, disclosed last week that it has entered into one-year renewable contract to supply a Korean power firm with 300,000 tonnes of orimulsion. The company, according to Business News Americas, identified the Korean partner as Southern Power (Kospo), which bought 25,000 tonnes of orimulsion from the company in January. Orimulsion is a heavy grade fuel used for power generation. Accordingly, Kospo uses about 600,000 tonnes of orimulsion a year. PDVSA has seen an increased in demand for the heavy grade fuel in recent months, especially from South Korea, which is experiencing a long winter. Japan has also up orders due to the closure of its nuclear power plants on security concerns. PDVSA subsidiary Bitor manufactures orimulsion for the group. *********** 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 re-mailing and photocopying) is strictly prohibited without prior written permission of the publishers. Information contained herein is obtained from sources believed to be reliable, but is not guaranteed. The TCR Latin America subscription rate is $575 per half-year, delivered via e-mail. Additional e-mail subscriptions for members of the same firm for the term of the initial subscription or balance thereof are $25 each. For subscription information, contact Christopher Beard at 240/629-3300. * * * End of Transmission * * *