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/raid1/www/Hosts/bankrupt/TCRLA_Public/030508.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, May 8, 2003, Vol. 4, Issue 90 Headlines A R G E N T I N A AOL LATIN AMERICA: Losses Shrink in 1Q03 DAISYTEK INT'L.: May Exclude LatAm Units In Possible Bankruptcy * IMF OKs Money Release If Argentina Pays Defaulted Debt * Argentina May Start Negotiations On Defaulted Debt in August B R A Z I L AES CORP.: BNDES Refuses To Accept Power Plants As Debt Payment BRASKEM: Hires Banks To Advise On Assets Sale CATAGUAZES LEOPOLDINA: Hires Unibanco To Sell $125M of Debt CEMIG: Guarantees Water Supply Thru End 2005 COSIPA: BNDES Loan Won't Have Big Impact On Operations EMBRATEL PARTICIPACOES: 1Q03 Financial Results Improve VARIG: Bovespa Suspends Shares In Information Vacuum C H I L E ENAMI: Codelco Takes On Citibank To Evaluate Ventanas C O L O M B I A AVIANCA: Seeks To Reject Aircraft Leases, Spare Engines AVIANCA: Committee Responds To Motion For Time Extension FERROVIAS: To Open a 254km Stretch in August PAZ DEL RIO: Awaiting Permit To Launch Plan With Hornasa E C U A D O R PETROECUADOR: Financial Solution Expected Later This Week E L S A L V A D O R FRANCE TELECOM: In Advanced Talks With Buyers of CTE Stake M E X I C O GRUPO SIMEC: Posts Final (Audited) Results for the Year 2002 T R I N I D A D & T O B A G O BWIA: VAA Owner May Buy Upon Government Request V E N E Z U E L A CARGILL VENEZUELA: Dollar Sale Ban Could Prompt Closure EDC: Slashes Debt to $743M at the End of 1Q03 PDVSA: To Close Puerto La Cruz Refinery For Maintenance Work PDVSA: To Consider Cerro Negro Proposal - - - - - - - - - - ================= A R G E N T I N A ================= AOL LATIN AMERICA: Losses Shrink in 1Q03 ---------------------------------------- America Online Latin America, Inc. (Nasdaq:AOLA) reported Tuesday the results for the quarter ended March 31, 2003, underscored by reduced costs and expenses that contributed to the Company's eleventh straight quarter of narrowed losses. The Company's net loss applicable to common stockholders in the quarter ended March 31, 2003 narrowed by more than 45.8% to $31.2 million, or $0.25 per class A common share, basic and diluted, compared with a loss of $57.6 million, or $0.86 per share, for the quarter ended March 31, 2002, and approximately 19.1% lower than the loss of $38.6 million, or $0.58 per share, in the quarter ended December 31, 2002. During the first quarter of 2003, the partial conversion of preferred to common shares by America Online, Inc. and the Cisneros Group increased the number of class A common shares outstanding to approximately 135.1 million, from approximately 67.1 million at the close of the previous quarter. The increase in the number of shares of class A common stock outstanding had the effect of reducing loss per share in the first quarter of 2003. The Company's first quarter net loss before dividends on preferred stock was $28.2 million improving from a loss of $52.9 million on the same basis a year ago, and a loss of $33.8 million for the quarter ended December 31, 2002. The Company also reported an improvement in cash used in operating activities, which was $15.1 million in the first quarter of 2003, as compared to $43.8 million in the prior-year period, a reduction of 65.4%. Compared with the quarter ended December 31, 2002, cash used in operating activities improved by $4.9 million, or 24.5%. These improvements were a direct result of the Company's focus on reducing its losses by targeting higher value members through efficient acquisition marketing strategies, aided by reduced network cost and the impact of devaluation on local currency costs. The Company's cash and cash equivalents position, which is affected by capital spending and exchange rate fluctuations as well as the impact of cash used in operating activities, decreased by $15.0 million in the first quarter of 2003. The Company continues to expect its cash on hand to be sufficient to finance operations into the first quarter of 2004. AOL Latin America reported total revenues of $16.3 million in the first quarter, compared to $18.2 million in the quarter ended March 31, 2002, and $17.8 million in the fourth quarter of 2002. The decline in revenues from the prior-year quarter was primarily due to weakness in advertising and other revenues and currency devaluation in the Company's countries of operation. Subscription revenue totaled approximately $15.0 million, a decline of 4.7% from $15.7 million in the year-ago quarter and a reduction of 2.3% from $15.3 million in the fourth quarter of 2002. Devaluation reduced subscription revenues by $3.8 million as compared with the prior-year quarter, but had a negligible impact sequentially from the fourth quarter of 2002. Advertising and other revenues totaled $1.3 million, a reduction of 45.9% as compared with $2.5 million in each of the quarters ended March 31, 2002 and December 31, 2002. Continued softness in the online advertising markets across the region impacted the Company's advertising and other revenues. AOL Latin America ended the first quarter of 2003 with approximately 795,000 members, down 32.6% from 1.18 million members in the fourth quarter of 2002. As previously announced, the resulting decline in members was primarily attributable to the reduction of approximately 300,000 inactive members of the Banco Itau co-branded service, as well as the termination of members who are not paying on a timely basis. The Company noted that the reduction in membership did not have a material impact on revenues or expenses in the first quarter. As with the Company's previous member reports, the 795,000 members includes members participating in the services' free trial periods, as well as members of the co-branded AOL Brazil service with Banco Itau. In line with earlier announcements, the Company expects further, but moderated, declines in membership over the near term, as a result of further termination of members of the co- branded service who fail to select a paid plan, in line with the terms of the revised Banco Itau marketing agreement, increased competition and efforts to target higher value members. Targeted Marketing, Operating Efficiencies and Currency Devaluation Drive Reduced Costs and Expenses Total costs and expenses for the first quarter of 2003 were $40.1 million, a reduction of 44% from $71.6 million in the quarter ended March 31, 2002, and a reduction of 18.6% from the fourth quarter of 2002, when costs and expenses were $49.2 million. Devaluation of local currencies helped reduce total costs and expenses by $6.6 million, as compared with the prior-year quarter. Lower marketing expenses and cost of revenues drove the reduction in costs and expenses. The Company was successful in reducing marketing expenses by approximately 46% from the prior-year quarter, through efforts to target member acquisition strategies through personalized marketing initiatives, such as the installation of kiosks in hundreds of Banco Itau branches during the quarter, while reducing a significant number of its own kiosks that were not meeting productivity objectives. The initiatives allowed the Company to leverage partner relationships, reducing advertising costs and the level of expenditures dedicated towards CD production and distribution activities. The Company also recently announced that AOL Brazil is collaborating with McDonald's of Brazil and Banco Itau to establish McInternet kiosks providing exclusive Internet access at 584 McDonald's restaurants in Brazil. McDonald's serves an average of 1.5 million people per day in Brazil. This partnership is an additional step in the Company's efforts to strengthen member acquisition efforts. AOL Latin America also reported continued reduction in cost of revenues during the quarter ended March 31, 2003 as compared to the year-ago quarter. This improvement was driven by reductions in network and call center costs. Network costs decreased as a result of negotiated reductions and the impact of currency devaluation. Call center costs improved as the result of two recent strategic initiatives related to the Company's focus on higher-value members -- restricted access for members who were not current on their payments and the consolidation of Spanish- language call center operations in a pan-regional "Center of Excellence" in Argentina. Charles Herington, President and CEO of AOL Latin America, said: "AOL Latin America has continued to significantly reduce our losses in these difficult times by staying focused on a strategy of building the most efficient operating and marketing structures possible, with marketing targeted to attract and retain higher- value members. We're continuing to build on our past achievements through new initiatives like our exciting partnership with McDonald's, the leading global foodservice retailer, and through the consolidation of our Spanish-language pan-regional call center in Argentina. We are also pleased with our progress on cash utilization, and will continue to make this an area of prime focus." Other Highlights Over the past several months, AOL Latin America continued to make progress on several fronts, including: -- Content Programming: AOL Latin America served consumers with a variety of high-value content features during the quarter. These included a range of special programming in Brazil during Carnival celebrations, with features highlighting Gilberto Gil, Brazil's current Minister of Culture, and Daniela Mercury, two of Brazil's most treasured musical talents. AOL Brazil sponsored the special Carnival appearances of Gil. Additionally, AOL Latin America services launched online areas to promote the releases of X Men 2 from Fox Entertainment and Matrix Reloaded from Warner Bros. Throughout the region, AOL Latin America provided consumers with a range of content relating to the war in Iraq. -- Interactive Marketing: During the quarter, the Company announced interactive marketing agreements with a number of global and regional brands, including: Citibank, Amigos.com, Kodak, and Kellogg's. The Citibank and Kellogg's campaigns are focused on the youth market in Puerto Rico. Amigos.com, a popular online dating service, will be featured region-wide, while Kodak Brazil, among others, participated in a special Carnival promotion in Brazil. About AOL Latin America America Online Latin America, Inc. (Nasdaq:AOLA) is the exclusive provider of AOL-branded services in Latin America and has become one of the leading Internet and interactive services providers in the region. AOL Latin America launched its first service, America Online Brazil, in November 1999, and began as a joint venture of America Online, Inc., a wholly owned subsidiary of AOL Time Warner Inc. (NYSE:AOL), and the Cisneros Group of Companies. Banco Itau, a leading Brazilian bank is also a minority stockholder of AOL Latin America. The Company combines the technology, brand name, infrastructure and relationships of America Online, the world's leader in branded interactive services, with the relationships, regional experience and extensive media assets of the Cisneros Group of Companies, one of the leading media groups in the Americas. The Company currently operates services in Brazil, Mexico and Argentina and serves members of the AOL-branded service in Puerto Rico. It also operates a regional portal accessible at http://www.aola.com. America Online's 34.4 million members worldwide can access content and offerings from AOL Latin America through the International Channels on their local AOL services. To see financial statements: http://bankrupt.com/misc/AOLA.htm DAISYTEK INT'L.: May Exclude LatAm Units In Possible Bankruptcy --------------------------------------------------------------- Daisytek International Corp. (Nasdaq:DZTK) continues to restructure portions of its United States operations in an ongoing effort to improve the company's financial situation and ease the liquidity constraints currently impacting some of the company's U.S. business units. Daisytek announced the following developments: -- On Monday, May 5, 2003, the company carried out a significant reduction in the U.S. workforce at Daisytek's headquarters in Allen, including both parent company and U.S. supplies operations employees, as well as in its warehouse distribution facility in Memphis. Combined with additional cuts within recent weeks in Allen, Memphis and satellite distribution centers in Albany, NY and Bakersfield, Calif., the total number of employees recently released is approximately 400. -- The Albany and Bakersfield distribution centers of the company's U.S. supplies business are no longer operational; the Memphis facility is operating with a significantly reduced staff and has ceased order shipment. Employees and services at Daisytek subsidiaries Arlington Industries, Digital Storage and The Tape Company and foreign subsidiaries were not affected. -- Customer orders received at the Allen facility are being diverted to Daisytek's subsidiaries, including Arlington Industries and Digital Storage. Customers may call 1-800-887-3040 to place an order with Arlington or 1-800-232-3475 to place an order with Digital Storage. Daisytek continues to pursue financial alternatives that would allow the company to continue to meet its obligations. These options include but are not limited to negotiating with parties interested in purchasing portions of the company's assets and, if necessary, voluntary filing to reorganize certain aspects of its U.S. business under Chapter 11 of the U.S. Bankruptcy Code. If the company were to elect this course of action, management anticipates that its foreign subsidiaries in Europe, Australia, Mexico, Canada and Argentina would not be included in any bankruptcy filing in the United States. Daisytek's foreign subsidiaries utilize separate foreign credit facilities and are continuing to operate in normal course. The company believes that a "wall of separation" exists around the foreign subsidiaries. The foreign credit facilities have a perfected lien on inventory and accounts receivable. Further, the underlying inventory within the foreign subsidiaries is subject to the claims of vendors under retention of title statutes in the various countries. The company believes that the underlying assets and operations of the foreign subsidiaries are not subject to the jurisdiction of the U.S. Bankruptcy Courts, and that the underlying assets are not subject to liens of the U.S. lending syndicate. About Daisytek Daisytek is a global distributor of computer supplies, office products and accessories and professional tape media. Daisytek sells its products and services in North America, South America, Europe and Australia. Daisytek is a registered trademark of Daisytek, Incorporated. All rights reserved. * IMF OKs Money Release If Argentina Pays Defaulted Debt -------------------------------------------------------- Argentine daily El Cronista reports that the International Monetary Fund will allow Argentina to introduce more money into the market if it begins making payments on its US$95 billion in defaulted debt. Argentina is bound by an agreement with the IMF to limit the number of pesos in circulation. An earlier report by the Troubled Company Reporter - Latin America indicated that Argentina wants to print as much as ARS3 billion to prevent the local peso from further strengthening. According to Bloomberg, the Argentine peso is currently the strongest currency among the ones they are tracking. Argentina needs a weaker currency to boost its exports, said Cronista. Funds from the new money will be used to buy dollars. Bloomberg reports that Argentine Economy Minister Roberto Lavagna met with IMF officials in Buenos Aires on Tuesday. * Argentina May Start Negotiations On Defaulted Debt in August -------------------------------------------------------------- Argentine President Eduardo Duhalde said that negotiations on some US$60 billion in defaulted debt will start in August or September. Reuters reports that bondholders all over the world have been waiting for more than a year to renegotiate their debt holdings and limit loses. "The negotiation will definitely begin around August or September," Mr. Duhalde announced over local television. Mr. Duhalde's presidency ends on May 25, but center-left provincial Gov. Nestor Kirchner, is expected to win a May 18 presidential election runoff against ex-President Carlos Menem and broadly continue with the current government's policies, the report suggests. Mr. Kirchner indicated that if he wins the elections, he would keep incumbent Economy Minister Roberto Lavagna, who advocates a reduction in debt principal from holders of the defaulted debt. "It is important because we must negotiate a haircut some estimate at around 70, 60 or 50 percent, reduce our debt, get a grace period and more time to pay," Mr. Duhalde said. =========== B R A Z I L =========== AES CORP.: BNDES Refuses To Accept Power Plants As Debt Payment --------------------------------------------------------------- Joseph Brandt, the vice president and restructuring chief of AES Corp., is expected to pay a visit to the headquarters of Brazil's development bank BNDES later this week to discuss a solution to the U.S. power group's debt problems, Dow Jones reports, citing a BNDES spokeswoman. AES owes BNDES US$1.2 billion for loans that financed the purchase of Eletropaulo Metropolitana SA, which serves 16 million people in Sao Paulo. AES proposed swapping AES Tiete and other companies it owns in Brazil for the debt. However, BNDES President Carlos Lessa won't accept any debt rescheduling proposal that doesn't include cash to make good on US$400 million of missed loan payments. BNDES needs cash to fund new loans by BNDES. The rest of AES's debt to BNDES is due within a year, and the Company has been trying to reschedule payments since a plunge in Brazil's currency in 2002 sent dollar debt costs soaring. Last week, BNDES said it plans to auction some AES-owned securities that back the debt. CONTACT: ELETROPAULO METROPOLITANA Avenida Alfredo Egidio de Souza Aranha 100-B, 13 andar 04726-270 San Paulo Brazil Phone: +55-11-548-9461, +55 11 5696 3595 Fax: +55-11-546-1933 URL: http://www.eletropaulo.com.br Contacts: Luiz D. Travesso, Chairman and President Orestes Gonzalves Jr., VP Finance/Investor Relations BRASKEM: Hires Banks To Advise On Assets Sale --------------------------------------------- Brazilian petrochemical giant Braskem, which announced plans to sell "some assets" as part of a measure to reduce debts, hired banks as sale adviser, Agencia Estado reports, citing company President Jos� Carlos Grubisich. Mr. Grubisich didn't disclose the names of the banks. The first transactions will likely be announced "over the next two quarters," the executive said. Braskem managed to slash gross debts by 4.4% in the first quarter of the year. However, the debt still amounted to a towering BRL7.18 billion at the end of March. CATAGUAZES LEOPOLDINA: Hires Unibanco To Sell $125M of Debt ----------------------------------------------------------- Brazilian power distributor Cia. Forca Luz Cataguazes Leopoldina hired Uniao de Bancos Brasileiros SA to manage the sale of BRL380 million (US$125 million) of debentures, reports Bloomberg. Investment Director Mauricio Botelho revealed that the Company is planning to sell BRL250 million of the notes backed by subsidiary Energipe and BRL130 million of notes backed by controlling company Energisa. The debenture sale is aimed at extending maturities to as much as five years. The debentures will also be backed by shares of three subsidiaries. Cataguazes, which serves the states of Minas Gerais, Rio de Janeiro, Paraiba and Sergipe, has debt of BRL1.2 billion, with BRL520 million, or 43%, maturing in less than a year, according to a Valor Economico report. CEMIG: Guarantees Water Supply Thru End 2005 -------------------------------------------- Brazil's Minas Gerais state power company Cemig said that its water reservoirs are at 80% capacity, guaranteeing supplies through the end of 2005, Business News Americas relates. According to Cemig hydro power planning manager Aelton Marques de Faria, the high levels at reservoirs are due to heavy rains in December 2002 and January 2003, which compensated low rainfall in February. Cemig has six reservoirs in the state: Camargos, Emborcacao, Nova Ponte, Sao Simao, Tres Marias and Furnas. Two reservoirs are still considerably lower than the others: Nova Ponte is at 66.9% of capacity, while Tres Marias is at 54.7% capacity. CONTACT: COMPANHIA ENERGETICA DE MINAS GERAIS Luiz Fernando Rolla, Investor Relations Phone: + 011-5531-299-3930 Fax: + 011-5531-299-3933 E-mail: lrolla@cemig.com.br COSIPA: BNDES Loan Won't Have Big Impact On Operations ------------------------------------------------------ Cristiane Viana, an analyst at the brokerage division of Espirito Santo bank, believes that the BRL88.9-million loan from Brazil's federal development bank BNDES will not have a significant impact on the steel producer's operations, relates Business News Americas. "The report said that the funds will be used to expand Cosipa's output to 4.5Mt, but in reality the steelmaker has been operating with an installed capacity of that amount since 3Q02," Viana said. And because the loan amount is small, BNDES's latest disbursement to Cosipa will not mark a major improvement in the Company's debt profile, the analyst said, adding that Cosipa and its controller Usiminas are looking at ways to restructure their debts. Cosipa reported a US$548.65 million net loss for 2002 despite net revenues of BRL2.71 billion and gross profits of BRL831.75 million. The Company's good performance was shadowed by a sharp decline in net financial expenses, which topped BRL1.54 billion. The Company also reported operating losses of BRL816.78 million for 2002. CONTACT: COSIPA Avenida do Cafe, 277 Torre B, 8 e 9 andar Vila Guarani 04311-000 Sao Paulo, Brazil Phone: +55-11-5070-8800 Fax: +55-11-5070-8863 URL: http://www.cosipa.com.br EMBRATEL PARTICIPACOES: 1Q03 Financial Results Improve ------------------------------------------------------ (All financial figures are in Reais and based on consolidated financial in "Brazilian Corporate Law") Highlights -- Net revenues were R$1.7 billion. -- Embratel's first quarter EBITDA was R$369 million representing a 16.7 percent increase quarter-over-quarter and a 13.6 percent increase over the same quarter of the previous year. -- Collections continued to improve enabling allowance for doubtful accounts to drop for the fifth consecutive quarter to R$106 million or 4.9 percent of gross revenues (6.2 percent of net revenues) compared to 6.1 percent of gross revenues in the last quarter of 2002 and 7.3 percent in the comparable 2002 quarter. In absolute terms, provision for doubtful accounts dropped 38.9 percent year-over-year. -- The voice aging profile has continued to improve: approximately 72.4 percent of net voice receivables were current at the end of the first quarter compared to 67.9 percent at the end of December 2002. -- Net income in the first quarter of 2003 was R$11 million, including a one-time charge of R$39 million relative to the settlement of a tax contingency. Without this one-time charge, net income in the quarter would have been R$37 million. -- EBIT in the first quarter of 2003 was R$77 million, rising 47.8 percent over the first quarter of 2002. -- Total capital expenditures in the quarter were R$86 million. -- Free cash flow after capex was R$283 million. -- During the quarter Embratel concluded its 2003 and first half of 2004 financing program extending the maturity of US$882 million (R$2,957 million) for two years. -- Approximately US$93 million (R$314 million), net of new financing, were amortized during the quarter. -- More than 800 contracts for local services had already been signed by the end of first quarter. Embratel has adopted the procedure of reporting international voice revenues on a gross basis to reflect recent changes in industry practices. Such revenues were previously reported net of international settlement payments which are now being classified as interconnection costs. While this change does not impact gross profit and the practice previously followed by the Company was in accordance with industry practice, the changed practice is currently understood as preferable. As a result of this change, prior period gross and net international voice revenues as well as interconnection costs have been restated to reflect such change. Accordingly, revenue growth and revenue based ratios and margins have changed. Data Communication Services Circuit growth continues to be strong Embratel data communications revenues (data & Internet and wholesale) were R$455 million in first quarter of 2003, representing a 1.1 percent increase relative to the first quarter 2002. Compared to the previous 2002 quarter when data revenues benefited from services provided in the presidential elections, data revenues declined 3.3 percent. Data market trends in the first quarter of 2003 did not vary substantially from the previous quarter. Price reductions for Internet services continues. Contract renewals during the quarter started to incorporate price inflation adjustments. Circuit growth expressed in 2Mbit equivalent units grew 47.9 percent year-over year and 10.3 percent when compared to the fourth quarter of 2002. Embratel continues to invest in access for data services. Digital copper wire networks, Acesso Digital Embratel (ADE), are being extended replacing expensive third party leased lines with our own networks. Over 40 digital metallic networks have been built, of which 13 were finished in the first quarter of 2003. Clients are being migrated from third party to our own access networks, thereby reducing our cost of services. Voice Services Embratel is focused on enhancing the growth of profitable revenues. Coordinated actions involving collection strategies (including blocking lines, co-billing, internet and automatic bill payment) and targeting clients with appropriate services and calling plans are being refined to optimize returns. Certain activities, such as blocking lines due to fraud or delinquency, induce reductions in revenues while increasing the profitability of Embratel's revenues. Domestic Long Distance Profitable revenues trend continues Net domestic long distance revenues in the first quarter of 2003 were R$955 million representing a decline of 5.6 percent from the previous 2002 quarter and 14.7 percent year-over-year. On a quarter over-quarter basis the decline is explained largely by seasonal factors (fewer business days and holidays) as well as by the effect of blocking of delinquent and fraudulent lines. Average domestic long distance revenue per minute in the first quarter of 2003 rose 6.2 percent year-over-year and 8.5 percent compared to the prior quarter, reinforcing our focus on profitable revenues. International Long Distance Continued stability International long distance revenues were R$226 million in the first quarter of 2003 representing a 3.0 percent decline from the previous quarter. Seasonal factors as well as competition contributed to this outcome. Compared to the first quarter of 2002, international revenues were stable, mostly due to the positive impact of stronger inbound revenues. Local Services Embratel's local services continue to expand. In total, 70 cities, including all state capitals, are covered by Embratel's local services. By the end of first quarter 2003, more than 800 contracts had been signed as medium, large and government clients are attracted by finally having a choice for local services. As Brazil's premium telecommunications provider, Embratel has been able to attract new local service customers by extending its superior quality and reliability into the local market, attracting both traditional data and long distance customers as well as new. Attributes of its local services include competitive pricing, detailed local call billing and specialized customer support. Embratel is currently the only telecommunications company providing corporate local services in all regions of Brazil. EBITDA EBITDA was R$369 million in the first quarter 2003 representing a 16.7 percent increase relative to an EBITDA of R$316 million in fourth quarter of 2002 and a 13.6 increase over the same period of the previous year. EBITDA margin rose by 3.9 percentage points reaching 21.6 percent in the first quarter 2003. The primary reasons for this growth were improved collections, lower interconnection costs and reduced billing expenses (third party services). Allowance for doubtful accounts dropped for the fifth consecutive quarter to R$106 million, or 4.9 percent of gross revenues (6.2 percent of net revenues). This is a significant reduction when compared to the fourth quarter of 2002 when provision for doubtful accounts represented 6.1 percent of gross revenues (7.7 of net revenues). It shows that Embratel's actions to improve collections, focus on profitable revenues and target clients with specific calling plans are producing returns. In absolute terms, provision for doubtful accounts dropped 22.8 and 38.9 percent quarter-over-quarter and year-over-year, respectively. Also continuing to contribute to the improvement in EBITDA is the relative reduction in interconnection costs. Directing more and more traffic to Embratel's own network which include PPI construction and also other telco management efficiencies, have helped to keep this major cost item down. In the quarter, we added 24 PPIs. Overall third party services dropped from 15.5 to 13.6 percent of net revenues. Continued pro-active actions, such as self- enveloping bills, combined with increased usage of co-billing (lower printing and banking fees and postage expenses) have helped to reduce overall billing costs. In addition, Anatel has mandated reductions in co-billing rates, further reducing overall billing costs. EBIT In the first quarter 2003, EBIT was R$77 million increasing from R$15 million in the previous quarter, evidencing the improvement in the company's operating performance. Compared to the first quarter of 2002, EBIT rose 47.8 percent. Net Income First quarter net income was R$11 million In the first quarter of 2003, net income was R$11 million compared to a net income of R$112 million in the fourth quarter of 2002 and a loss of R$36 million in the same period of 2002. In addition to the improvement in EBIT, bottom line was positively impacted by the currency parity on the company's foreign currency non-hedged debt. In the quarter, we made a one-time payment of R$39 million relative to the settlement of a tax contingency due to income tax on remittances to foreign telecommunications companies, as described in the Subsequent Event section of our fourth quarter 2002 financial statements. Without this one-time charge, net income in the first quarter 2003 would have been R$37 million. Financial Position 2003 and first half of 2004 financing is concluded. R$314 million of debt repaid during the quarter On March 17, 2003, Embratel closed its financing program, rolling over debt maturing in 2003 and the first half of 2004. The purpose of this financing program was to: (1) reduce Embratel's overall debt; (2) eliminate refinancing risk in 2003; and (3) reduce financing requirements in 2004. Embratel has achieved these three objectives. The extended maturities will ensure that Embratel continues to invest in quality services and networks to serve corporate, government and residential customers. The financing program essentially eliminates Embratel's refinancing risk in 2003 and reduces its financing requirements in 2004. Embratel has retained the ability to prepay debt from excess cash flow or new debt as market conditions improve. The conclusion of this financing program improves Embratel's overall credit standing and puts it in a stronger financial position. Embratel has also maintained the operational flexibility it needs to implement its business plan. Following the closing, a few other financial institutions joined the program under the same conditions and as a result the total amount of the financing rose from US$861 million (R$2,889 million) to US$882 million (R$2,957 million). Approximately US$306 million (R$1,057 million) of debt matured in the first quarter of 2003. Net debt amortized during the quarter was US$93 million (R$314 million). Embratel's hedged debt/currency profile is presented in Exhibit 11 (http://bankrupt.com/misc/Exhibit_11.htm) The short-term debt reflected above does not include the full benefit of the financing program. Even though contracts have been entered into that require extension of maturities on the debt, the reclassification from short-term to long-term debt only occurs at the time of the original loan maturity. Embratel ended the first quarter of 2003 with a cash position of R$526 million. In addition, at the end of the quarter, R$75.8 million of cash was reflected in Other Current Assets as this amount was applied as a temporary guarantee which was subsequently liquidated in early April. The decline in cash is associated with debt repayment and other settlements. Total outstanding debt is R$4.6 billion, of which R$1.9 billion is short term debt. Accounts Receivables The company's net receivable position on March 31, 2003 was R$1.5 billion an improvement of more than R$90 million relative to the previous 2002 quarter. The voice aging profile has continued to improve: approximately 72.4 percent of net voice receivables were current at the end of the first quarter of 2003 compared to 67.9 percent at the end of December 2002. Days sales outstanding, based on net receivables, was 62 in first quarter 2003, down from 67 and 73 in fourth quarter 2002 and first quarter 2002, respectively. CAPEX Total capital expenditures in the quarter were R$86 million. The breakout of this expenditure is the following: local infrastructure and access - 10.7 percent (including PPIs); data and Internet services - 46.8 percent; network infrastructure - 7.4 percent, others - 18.8 percent and Star One - 16.3 percent. The bulk of the investments included in "others" are investments in IT and in switches. Regulatory February 27, as part of an administrative process submitted by Embratel, the Antitrust Agency (CADE) adopted a landmark preventive decision against Telefonica on the grounds that the possibility of price discrimination of leased lines for local access would constitute an anti-competitive practice prohibited by law. CADE concluded that irreparable damage to market competition could occur and among a variety of measures it required Telefonica to immediately stop such practice, as well as to provide ample disclosure of prices and discounts practiced for such services. Telefonica has appealed before CADE, the decision continues to be in effect. A month later, and based on a different process also submitted by Embratel, Anatel adopted a similar preventive action against Brasil Telecom on the same grounds, that is, the possibility of price discrimination of leased lines for local access would constitute an anti-competitive practice prohibited by law. In addition to the preventive measures imposed by CADE on Telefonica, Anatel required Brasil Telecom to charge Embratel the same price for leased lines than the best price offered to any of its customers. Brasil Telecom has appealed before CADE and requested and obtained an injunction from a Court of Law. We expect the injunction to be lifted soon after Anatel submission of additional information required by the Judge or after CADE's final decision. These actions mark the first time the Brazilian regulators have explicitly acted on behalf of competition in telecommunications. 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 telephony, 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 financial statements: http://bankrupt.com/misc/Embratel_Participacoes.htm CONTACT: Embratel Participacoes Silvia M.R. Pereira, (55 21) 2121-9662 fax: (55 21) 2121-6388 silvia.pereira@embratel.com.br invest@embratel.com.br VARIG: Bovespa Suspends Shares In Information Vacuum ---------------------------------------------------- Viacao Aerea Rio Grandense SA's (Varig) continued failure to file year-end financial results by the deadlines set by Brazil's Bovespa stock exchange prompted the bourse to suspend trade in the shares of the ailing carrier on Tuesday. Varig was given until Wednesday morning to file its financial results. Varig plans to cut 350 jobs this week, as it struggles to service more than US$1 billion in debt. The cuts will come despite government requests to postpone layoffs until a planned merger with rival TAM Linhas Aereas and an overhaul of aviation sector rules can be completed. Varig posted a loss of BRL2.02 billion ($1=BRL2.96) over the first nine months of 2002 and had a negative book value of BRL2.54 billion at the end of September. 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 ========= C H I L E ========= ENAMI: Codelco Takes On Citibank To Evaluate Ventanas ----------------------------------------------------- Chile's state copper corporation Codelco has hired Citibank to evaluate Enami's principal asset, the Ventanas copper smelter- refinery, reports Business News Americas. The Ventanas plant produces around 320,000t/y copper cathodes, and is thought to be worth US$300 million-400 million. The plant is due to be sold to Codelco as part of a government plan to resolve Enami's US$500- million debt problem. Enami, an industrial enterprise that is wholly owned by the Chilean government, provides copper smelting and refining services to small to mid-sized mining operations. In addition, it supports these companies by providing price-stabilization programs, loans, and technical and marketing assistance. By performing these functions for companies, Enami helps to create thousands of jobs in areas of Chile where unemployment would otherwise be high. CONTACT: ENAMI (Empresa Nacional de Mineria) MacIver 459, Santiago, Chile Phone: 637 52 78 637 50 00 Fax: 637 54 52 Email: webmaster@enami.cl Home Page: www.enami.cl/ Contact: Jorge Rodriguez Grossi, President =============== C O L O M B I A =============== AVIANCA: Seeks To Reject Aircraft Leases, Spare Engines ------------------------------------------------------- COME NOW Aerovias Nacionales de Colombia S.A. Avianca ("Avianca S.A. ") and Avianca, Inc., as debtors and debtors in possession herein (collectively, "Avianca" or the "Debtors"), and respectfully move this Court, pursuant to section 365 of the United States Bankruptcy Code (the "Bankruptcy Code ") for the entry of an order authorizing the Debtors to reject leases of certain aircraft and spare engines. JURISDICTION 1. The Debtors commenced their reorganization cases on March 21, 2003 (the "Petition Date"), by filing voluntary petitions under Chapter 11 of the Bankruptcy Code. The Debtors continue in possession of their properties and operate and manage their businesses as Debtors in Possession pursuant to 11 U.S.C. 1107 and 1108. On March 28, 2003, the United States Trustee appointed an Official Committee of Unsecured Creditors. 2. This Court has jurisdiction over this matter pursuant to 28 U.S.C. 157 and 1334. This is a core proceeding pursuant to 28 U.S.C. 157(b)(2)(A) and (O). The statutory basis for the relief sought herein is section 365 of the Bankruptcy Code. BACKGROUND 3. Avianca S.A., sometimes referred to as the "Airline of Colombia" and the "First Airline in America," is a corporation organized under the laws of the Republic of Colombia as a sociedad anomina, with its administrative offices located at Centro Administrativo, Avenida Eldorado No. 92-30, Bogot , Colombia, and its principal place of business in the United States located at 720 5th Avenue, 5th Floor, New York, New York 10019-4107. 4. Avianca, Inc. is a corporation organized under the laws of the State of New York, with its principal place of business located at 8125 Northeast 53rd Street, Suite 1111, Miami, Florida 33166. Avianca, Inc. acts as Avianca S.A.'s general agent in connection with its activities in the United States pursuant to a general agency agreement which provides for Avianca, Inc., in its capacity as general agent for Avianca S.A., to market and sell tickets for air travel, to lease facilities for its operations in the United States, to procure supplies, to collect accounts, to purchase parts, and to provide other services in connection with the business of operating an international commercial airline in the United States. 5. As of the Petition Date, Avianca S.A. has destinations in 14 cities in Colombia, two cities in the United States, and 12 cities in other countries, for a total of 28 destinations. 6. Approximately 24.1% of Avianca S.A.'s international air service is between Colombia and the United States. Avianca S.A.'s principal routes between Colombia and the United States include service between Bogot and Miami and between Bogot and New York City. 7. Avianca S.A.'s operations have a hub-and-spoke structure, with domestic and international hubs at Bogot , designed to allow Avianca S.A. to maximize Bogot 's strategic geographical position in providing domestic and international connections. Avianca S.A. is the predominant carrier at Bogot , having approximately 81 scheduled daily departures, including 63 domestic and 18 international departures. 8. Avianca S.A. utilizes two passenger terminals in Bogot , one at Eldorado International Airport and one at Terminal Puerto Aereo. Avianca S.A.'s international operations consist of both nonstop and through service between Bogot , Medellin and Cali in Colombia and destinations in Europe, South America, Central America and the Caribbean, including Madrid, Aruba, Curacao, Mexico City, Guayaquil, Quito, Buenos Aires, Santiago (Chile), Sao Paolo, and Rio de Jane iro. Avianca S.A.'s principal routes to destinations outside the United States include service between Bogot and Caracas, Madrid and Buenos Aires. 9. By December 1999, the Debtors, as well as virtually all other domestic and international commercial airlines, were confronting serious financial and operational difficulties. Essentially, the Debtors found that their revenues were not sufficient to support its cost structure and that they needed to restructure its outstanding financial obligations and to address various operational issues in order to continue operations. 10. The terrorist attacks on the United States, which took place on September 11, 2001, devastated the airline industry, and Avianca S.A. was no exception. 11. The Debtors' revenues have suffered since that day, and the Debtors found themselves unable to meet their financial obligations over the past several years. This situation has been aggravated by the Venezuelan instability, exchange controls imposed by the Venezuelan Government, increase in jet fuel prices due to the war with Iraq, and deeper market reductions in first quarter 2003 as a consequence of the war fears among other factors. 12. As of the Petition Date, Avianca's operating fleet consisted of 31 aircraft, including 13 MD-83, 6 Fokker, 6 Boeing 767 and 6 Boeing 757 aircraft. Avianca leases all 31 aircraft. RELIEF REQUESTED 13. By this Motion, the Debtors respectfully request that this Court (i) approve the rejection of certain aircraft (the "Aircraft") and engine (the "Spare Engines") leases, as more fully described in Exhibit A attached hereto (the "Leases") and (ii) order that any claims arising out of or related to the rejection of the Leases be filed with the Court on or before sixty (60) days after the effective date of such rejection. 14. As part of the Debtors' ongoing restructuring efforts, the Debtors are analyzing their aircraft leases, flight schedules, aircraft and engine types and costs, projected demand for air travel, labor costs and other business factors in conjunction with the use of their entire fleet of aircraft and engines. Through this analysis, the Debtors intend to maximize the fleet's utility at the lowest possible cost to the Debtors. In accordance with this analysis, the Debtors have decided to retire certain aircraft and aircraft engines from their fleet. The Aircraft and Spare Engines currently being selected for retirement will at the time of the rejection of the Leases no longer be needed by the Debtors, are subject to leases which are at above market lease rates and are burdensome to the Debtors' bankruptcy estates. Accordingly, the Debtors seek to eliminate the costs associated with retaining the Aircraft and Spare Engines. 15. The Bankruptcy Code provides that the "[debtor in possession], subject to the court's approval, may reject any unexpired lease of the debtor." 11 U.S.C. 365(a). Courts utilize the business judgment standard to determine whether to approve the rejection of a contract or lease. N.L.R.B. v. Bildisco & Bildisco, 465 U.S. 513, 523 (1984); Sharon Steel Corp. v. National Fuel Gas Distribution Corp., 872 F.2d 36, 39-40 (3d Cir. 1989); In re G. Survivor Corp., 171 B.R. 755, 757 (Bankr. S.D.N.Y. 1994) (holding that "[i]n determining whether a debtor may be permitted to reject an executory contract, courts usually apply the business judgment test. Generally, absent a showing of bad faith, or an abuse of business discretion, the debtor's business judgment will not be altered."). 16. As part of their ongoing efforts to reduce costs, the Debtors have determined that the Aircraft and Spare Engines described in Exhibit A no longer fit into the Debtors' business plan and, accordingly, will no longer be utilized by the Debtors. The Debtors have determined that the Aircraft and Spare Engines do not have any marketable value in that the lease rates are substantially above market lease rates for comparable aircraft and equipment. Thus, the Aircraft and Spare Engines are burdensome to the Debtors and are no longer beneficial to the Debtors or their estates. Therefore, rejection of the Leases is in the best interests of the Debtors' estates and creditors and constitutes a proper exercise of the Debtors' sound business judgment. 17. The Debtors wish to reject the Leases and return the aircraft pursuant to the schedule and upon the effective dates set forth in Exhibit A hereto. 18. If the return of any of the Aircraft or Spare Engines occurs prior to the entry of an Order rejecting the Leases, the Debtors respectfully request an Order rejecting the lease nunc pro tunc to the date such Aircraft or Spare Engines are returned to the lessor. See Thinking Mach. Corp. v. Mellon Fin. Servs. (In re Thinking Mach. Corp.), 67 F.3d 1021,1028 (1st Cir. 1995) (holding that although court approval is a condition precedent to effective rejection of a lease, "bankruptcy courts may enter retroactive orders of approval, and should do so when the balance of equities preponderates in favor of such remediation."); Constant, L.P. v. Jamesway Corp. (In re Jamesway Corp.), 179 B.R. 33, 37-38 (S.D.N.Y. 1995) (affirming bankruptcy court's retroactive approval of lease rejection); In re Federated Dep't Stores, Inc., 131 B.R. 808, 814 (S.D. Ohio 1991) (affirming bankruptcy court's approval of department store debtor's rejection of real property lease where debtor had closed failing department store and no longer needed the leased premises); In re Mid Region Petroleum, Inc., 111 B.R. 968, 970 (Bankr. N.D. Okla. 1990), aff'd. 1 F.3d 1130 (10th Cir. 1993) (rejection of executory contract may be affected by affirmative act of debtor in possession prior to later court approval). WHEREFORE, Debtors respectfully request entry of an order authorizing the Debtors' rejection (i) of the Leases effective pursuant to the schedule set forth in Exhibit A, and (ii) requiring the lessor under each of the Leases to file any and all claims arising out of or related to the rejection of the Leases with the Court on or before sixty (60) days after the effective date of such rejection and (iii) granting the Debtors such other and further relief as this Court shall deem just and proper. This 5th day of May, 2003. /s/Brian P. Hall Brian P. Hall, Esq. (BH5060) Ronald E. Barab, Esq. (RB4876) SMITH, GAMBRELL & RUSSELL, LLP Suite 3100, Promenade II 1230 Peachtree Street, N.E. Atlanta, Georgia 30309 (404) 815-3500 Attorneys for the Debtors To see Exhibit_A: http://bankrupt.com/misc/Exhibit_A.pdf AVIANCA: Committee Responds To Motion For Time Extension -------------------------------------------------------- TO THE HONORABLE ALAN L. GROPPER UNITED STATES BANKRUPTCY JUDGE: The Official Committee of Unsecured Creditors ("Committee") of Aerov�as Nacionales de Colombia S.A. Avianca and Avianca, Inc., the above-captioned debtors and debtors- in-possession (collectively, the "Debtors") in these Chapter 11 cases, by and through their undersigned counsel, hereby submits this response (the "Response") to the Debtors' "Second Motion for Enlargement of Time Within Which to File Lists, Schedules and Statements" filed on April 18, 2003 (the "Second Extension Motion"). In the Second Extension Motion the Debtors are seeking an extension of time within which to file their lists, schedules and statements (the "Schedules") through and including May 20, 2003. In response, the Committee respectfully represent as follows: JURISDICTION 1. This Court has jurisdiction to entertain the Objection pursuant to 28 U.S.C. 1334. Venue is proper in this district pursuant to 28 U.S.C. 1408 and 1409. Consideration of this Objection is a core proceeding pursuant to 28 U.S.C. 157(b). The predicate for the relief sought in the Second Extension Motion is Rule 9006(b) of the Federal Rules of Bankruptcy Procedure. BACKGROUND 2. On March 21, 2003, the Debtors filed voluntary petitions for relief under Chapter 11 of the Bankruptcy Code. On the Petition Date this Court entered an Order authorizing joint administration and consolidation of the Debtors' cases for procedural purposes only. The Debtors are operating their businesses as debtors-in- possession pursuant to Sections 1107 and 1108 of the Bankruptcy Code. No trustee or examiner has been appointed to date. 3. On March 28, 2003, the United States Trustee for the Southern District of New York selected seven (7) members to the Committee pursuant to Bankruptcy Code Sections 1102(a) and 1102(b). 4. On April 2, 2003, the Debtors filed their "Motion for Enlargement of Time Within Which to File Lists, Schedules and Statements" (the "First Extension Motion"). On April 11, 2003 this Court entered an Order allowing the Debtors the extension of time that they requested through and including April 20, 3003. THE COMMITTEE'S RESPONSE 5. The Committee is aware of the many, and time-consuming issues the Debtors have been faced with during the first five weeks of these Chapter 11 cases. As such, it understands the need for the extension request made in the Second Extension Motion. The Committee submits that time is of the essence to a successful reorganization in these cases. 6. The Committee does not object to the relief sought in the Second Extension Motion. It does, however, assert that the current extension should be the last extension. The Committee asks that this Court require the Debtors file their Schedules on or before the date requested by the Debtors. WHEREFORE, the Committee respectfully requests tha t this Court allow this extension requested by the Debtor as the last extension that will be granted; and (ii) grant such other and further relief as is just and proper. Dated: New York, New York May 6, 2003 GREENBERG TRAURIG, LLP Counsel for the Official Committee of Unsecured Creditors By:/s/ Richard S. Miller Richard S. Miller (RM-2428) James P.S. Leshaw (JL-8606) 200 Park Avenue New York, New York 10166 212-801-9200 FERROVIAS: To Open a 254km Stretch in August -------------------------------------------- A spokesperson from Ferrovias revealed that the Colombian state railroad company plans to open a 254km stretch in August between capital Bogota and Boyaca department city Belencito, reports Business News Americas. According to the spokesperson, the plan is part of the 1,500km, US$300- million Atlantic railroad system, currently under the control of Fenoco, which consists of Dragados, an Indian railroad company and Colombian construction firms. The Atlantic project entails repairing and managing 1,500km of railroad for about 30 years. Spain's state railroad company Renfe is the program's operational advisor. The train, which runs from Santa Marta on Colombia's northern coast to Bogota over to Belencito, is expected to transport 20Mt of cargo annually, a spokesperson with Dragados told Business News Americas. A stretch just under 200km between Drummond port and Lomo in Magdalena department is already operational. PAZ DEL RIO: Awaiting Permit To Launch Plan With Hornasa -------------------------------------------------------- Colombian steelmakers Acerias Paz del Rio and Hornasa are now ready to initiate a plan to take advantage of synergies between the two plants, Business News Americas indicates. The plan involves processing Paz del Rio liquid steel at Hornasa's plant, and requires a 150m rail link to connect the national network with the Hornasa mill. However, the companies can't launch the plan pending permits from the railroad authority to use the national line. The companies expect to receive the permits in the next couple of weeks. The two plants are 3km apart, Hornasa's in the city of Sogamoso and Paz del Rio's in Belencito, both in the central department of Boyaca. Paz del Rio will process its liquid steel using Hornasa's ladle furnace and continuous casting machine, as its own equipment is incurring losses. The project will allow Paz del Rio, which is presently in a form of bankruptcy protection, to increase its production at the blast furnace stage, and so reduce its costs and boost sales. Hornasa, on the other hand, will benefit by being able to operate its own plant, which is currently using 60% of capacity, at design rate. CONTACT: ACERIAS PAZ DEL RIO S.A. Carrera 8 # 13-31, Pisos 7 al 11 Bogota, D.C. Phone: (091) 282-8111 Fax: (091) 282-6268 282-3480 E-mail: apdr@multi.net.co ============= E C U A D O R ============= PETROECUADOR: Financial Solution Expected Later This Week --------------------------------------------------------- Ecuadorian state oil company Petroecuador is yet to see a solution to its financial problems, Business News Americas indicates. Last week, the Company's board approved the final amount of US$3.38 billion for this year's budget. However, the amount is US$231 million less than the Company's original budget, and it is struggling to pay creditors. Ecuador's respective economy and energy ministers, Maurico Pozo and Carlos Arboleda, have arranged to meet with Petroecuador president Guillermo Rosero this week to discuss a solution to the state oil firm's woes. The main problem, according to a Petroecuador source, is that Petroecuador's cash flow depends on the economy ministry because the ministry receives 100% of the Company's revenues. "It's absurd that Petroecuador should depend so much on the economy ministry, but because it does, the ministry should make it a priority to find the funds that Petroecuador needs," the source said. One possible solution is a triangular payment system between the economy ministry, Petroecuador and state owned power generators that owe Petroecuador about US$120 million for fuel sales, the source said. The generators received the fuel from Petroecuador in 2002 to maintain their operations during periods of drought and have not paid due to their own cash-flow problems. But Petroecuador could still receive some payment through government holding company Solidarity Fund (Fondo de Solidaridad, FS), which controls state-owned companies and receives 100% of income from power sales. Meanwhile, Petroecuador officials also plan to meet this week with creditors to discuss possible refinancing terms for debts going back to November 2002. ===================== E L S A L V A D O R ===================== FRANCE TELECOM: In Advanced Talks With Buyers of CTE Stake ---------------------------------------------------------- France Telecom is now in the final stages of negotiations with the potential buyers of its 51% stake in El Salvador's dominant fixed line operator CTE Telecom, Salvadorian daily El Diario de Hoy reports, citing Mexico's Telmex, a European firm and a US- based firm as interested parties. France Telecom is under pressure by creditors to offload poorly performing overseas assets after the Company reported a US$23- billion loss at the end of 2002 and debt totaling almost US$78 billion. The sale of CTE, however, would appear to conflict with this strategy since the unit ended 2002 with a US$31 million profit and the Central American division of international credit rating agency Fitch has maintained its AA rating on the said unit. But according to a company source, the sale would conform to an overall market strategy rather than being driven by political or financial reasons. France Telecom will most likely be ready to sell its 51% CTE stake in September, upon expiry of clauses in the 1998 privatization agreement that prevent France Telecom from selling the stake for five years, the source said. =========== M E X I C O =========== GRUPO SIMEC: Posts Final (Audited) Results for the Year 2002 ------------------------------------------------------------ Grupo Simec, S.A. de C.V. (Amex: SIM) ("Simec") announced Tuesday its final (audited) results of operations for the year ended December 31, 2002. Net sales increased 5% to Ps. 2,112 million in 2002 compared to Ps. 2,011 million in 2001. Primarily as a result of the recording of an exchange loss in 2002 versus the recording of an exchange gain in 2001, Simec recorded net income of Ps. 118 million in 2002 versus net income of Ps. 242 million for 2001. Simec sold 609,202 metric tons of basic steel products during 2002 as compared to 560,726 metric tons in 2001. Exports of basic steel products increased to 80,179 metric tons in 2002 versus 48,385 metric tons in 2001. Additionally, Simec sold 23,137 tons of billet in 2002 as compared to 1,248 tons of billet in 2001. Prices of finished products sold in 2002 decreased 5% in real terms versus 2001. Simec's direct cost of sales was Ps. 1,413 million in 2002, or 67% of net sales, versus Ps. 1,350 million, or 67% of net sales, for 2001. Indirect manufacturing, selling, general and administrative expenses (including depreciation) decreased 6% to Ps. 444 million during 2002, from Ps. 471 million in 2001. Simec's operating income increased 34% to Ps. 255 million during 2002 from Ps. 190 million in 2001. As a percentage of net sales, operating income was 12% in 2002 and 9% in 2001. Simec recorded other expense, net, of Ps. 36 million in 2002 compared to other income, net, of Ps. 64 million in 2001. In addition, Simec recorded a gain in the provision for income tax and employee profit sharing of Ps. 22 million in 2002 versus a reserve of Ps. 17 million in 2001. Simec recorded financial expense of Ps. 123 million in 2002 compared to financial income of Ps. 5 million in 2001 as a result of (i) net interest expense of Ps. 53 million in 2002 compared to net interest expense of Ps. 166 million in 2001, reflecting lower debt levels in 2002; (ii) an exchange loss of Ps. 100 million in 2002 compared to an exchange gain of Ps. 99 million in 2001, reflecting a decrease of 12.8% in the value of the peso versus the dollar in 2002 compared to an increase of 4.5% in the value of the peso versus the dollar in 2001; and (iii) a gain from monetary position of Ps. 30 million in 2002 compared to a gain from monetary position of Ps. 72 million in 2001, reflecting the domestic inflation rate of 5.7% in 2002 compared to the domestic inflation rate of 4.4% in 2001 and lower debt levels during 2002. At December 31, 2002, Simec's total consolidated debt consisted of approximately $48 million of U.S. dollar-denominated debt (including $14.4 million of debt owed to Simec's parent company, Industrias CH, S.A. de C.V. ("ICH"), while at December 31, 2001, Simec had outstanding approximately $103 million of U.S. dollar- denominated debt (including $14.8 million of debt owed to ICH); Simec's lower debt level at December 31, 2002 reflects the prepayment of $48.1 million of bank debt in 2002 (Simec financed $24.4 million of this prepayment with loans from ICH), the amortization of an aggregate of $6.7 million of bank debt in 2002 and the conversion to common stock in June 2002 of $24.6 million of loans (plus accrued interest thereon) from ICH at a conversion price equivalent to U.S. $1.51 per American Depositary Share. Substantially all of Simec's remaining consolidated debt (other than debt owed to ICH) matures in 2009 and amortizes in equal semi-annual installments. All figures were prepared in accordance with Mexican generally accepted accounting principles and are stated in constant Pesos at December 31, 2002. Simec is a mini-mill steel producer in Mexico and manufactures a broad range of non-flat structural steel products. ================================= T R I N I D A D & T O B A G O ================================= BWIA: VAA Owner May Buy Upon Government Request ----------------------------------------------- Virgin Atlantic Airways owner Sir Richard Branson is not ruling out a possibility of acquiring troubled Caribbean airline, BWIA, but that would only take place if the government requests the billionaire to do so. At a press conference at Hilton Tobago, Sir Branson said, "We know that BWIA has had it difficulties. We don't normally get involved in companies that are already up and running. If the Government ever said to us to invest in Trinidad in an airline industry. We would certainly talk to them about it." Sir Branson also advised against the regional governments running a single regional carrier. He indicated that he contacted the region's Prime Ministers and offered his help to establish a regional carrier. "The track record of Government running airlines is not a good one. It would be wonderful if there is a good regional airline because obviously we need a seed, like Virgin Atlantic, between the islands," the Trinidad Guardian quoted Mr. Brandon. In case no acquisition takes place, Mr. Brandon gave assurance that he plans to compete with BWIA and the other regional airlines "fairly and ethically." CONTACT: BRITISH WEST INDIES AIRWAYS Phone: + 868 627 2942 E-mail: mailto:mail@bwee.com Home Page: http://www.bwee.com/ Contacts: Conrad Aleong, President and CEO (Trinidad) Beatrix Carrington, VP Marketing and Sales (Barbados) Paul Schutz, CFO (Trinidad) ================= V E N E Z U E L A ================= CARGILL VENEZUELA: Dollar Sale Ban Could Prompt Closure ------------------------------------------------------- Venezuela's ruling to ban dollar sales may lead Cargill Inc., the U.S.' largest agricultural company, to shut down its operations in the country, Bloomberg indicates. Cargill warned that it might close down Venezuelan operations within 15 days because it couldn't receive dollars to import grain from the country's foreign exchange commission. The Company submitted its dollar request to the country's exchange commission 25 days ago, Cargill Venezuela President Roberto Moro said, adding that up to now, it hasn't received any indication whether its request will be approved "We are at the mercy of exchange controls," Moro said. Cargill Venezuela owes foreign suppliers about $80 million, and operates nine plants in the country, he said. Venezuela banned dollar sales in January to stem a decline in international reserves after a two-month strike cut oil output, which accounts. EDC: Slashes Debt to $743M at the End of 1Q03 --------------------------------------------- CA Electricidad de Caracas, the Venezuelan subsidiary of AES Corp., ended the first quarter of the year with US$743 million of debt, Bloomberg reports, citing a company press statement. The figure is 28% less than the total debt the Company reported in the same quarter a year ago. Furthermore, the Company revealed that it rolled over US$128 million in the first quarter, of which 70.3% was bolivar- denominated. It secured new loans of US$27.5 million, with US$20 million of that from domestic banks. Electricidad de Caracas is managing to reduce its debt even after Venezuela imposed restrictions on the sale of dollars, which has frozen companies' ability to repay dollar-denominated debt. The Company recently reported a VEB25.6-billion net loss (US$16 million) in the first quarter. CONTACT: AES VENEZUELA Avenida Rio de Janeiro Qta. Tres Pinos Chuao, VE-1061 Caracas, Venezuela Phone: +58 14 929 2552 Fax: +58 2 9937296 E-mail: venezuela@aes.org Contact: Elmar Leal, Chairman Juan Font, Vice Chairman AES CORP Investor Relations Kenneth R. Woodcock, 703/522-1315 www.investing@aes.com Website: http://www.aesc.com/ PDVSA: To Close Puerto La Cruz Refinery For Maintenance Work ------------------------------------------------------------ Venezuela's state oil company, Petroleos de Venezuela SA(PdVSA) announced that its Puerto La Cruz refinery will be shut down beginning the middle of this month for maintenance work. The planned shutdown, which was postponed because of the strike aimed at ousting president Hugo Chavez, will commence on May 16, and is expected to be completed by 20 days. Business News Americas reports that said refinery was the only one that remained in operation during the strike. The massive shutdowns brought PdVSA's production level down to about 10 percent during the strike. PdVSA said that the shutdown will be used to overhaul the plant's gasoline- making catalytic cracker and other units. However, said the Company, deliveries wont be affected as it has built up its inventories. The Puerto La Cruz refinery, which was almost closed two years ago, has a capacity of 203,000 barrels a day. PDVSA: To Consider Cerro Negro Proposal --------------------------------------- Venezuela's state-owned oil monopoly Petroleos de Venezuela will study a request made by the Cerro Negro extra-heavy crude joint venture to increase its daily production by 10-30 percent, local daily El Universal reports. However, PdVSA president Ali Rodriguez said that the Company will also consider other joint ventures. "It is not only about Cerro Negro, other joint ventures have made the same request. We need to take that into account," Mr. Rodriguez said. Cerro Negro is a project that is owned by ExxonMobil and PdVSA, each with a 41.7 percent stake, while Veba Oel AG owns the rest, Business News Americas recalls. The president of ExxonMobil's Venezuela unit said that Cerro Negro's production should be doubled in the long term, if PdVSA agrees to the proposal. Cerro Negro 120,000 barrels of extra- heavy crude into 108,000 barrels of synthetic crude daily. The output is then exported to the United States. *********** 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 * * *