/raid1/www/Hosts/bankrupt/TCRLA

/raid1/www/Hosts/bankrupt/TCRLA_Public/030522.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 22, 2003, Vol. 4, Issue 100 Headlines A R G E N T I N A ACINDAR: Bond Issue Subject of May 30 Shareholder Meeting BANCO DE LA PAMPA: Bonds Get `BB(arg)+'; `BBB(arg)-' Ratings BANCO FRANCES: Fitch Rates US$1 Billion of Bonds `BBB(arg)+' CAPEX: Fitch Issues Default Ratings to Two Bond Traunches DINAR: Viability Dwindles, Problems Continue IMPSA: Fitch Rates Bonds `Junk' Rating LAPA: Pres Duhalde Approves Replacement Company's Creation TASA/COINTEL/THA: S&P Revises Ratings To `CC' From `SD' TELFONICA DE ARGENTINA: Aims To Keep Up With Debt Payments B R A Z I L AES CORP.: BNDES Trashes Debt-Restructuring Proposal CEMIG: Stock Drops on Planned Acquisition of AES Asset USIMINAS: Denies Reported Preparations For Debt Issue C H I L E SUPERMERCADOS UNIMARC: 1Q03 Results Disappoint as Sales Drop C O L O M B I A AVIANCA: Reduces Workforce, Air Fleet to Survive J A M A I C A AIR JAMAICA: Suspends Belize Flights As Demand Wanes M E X I C O DESC: S&P Lowers Corporate Credit Rating to 'BB-' GRUPO IUSACELL: Shelves National Expansion GRUPO TFM: 1Q03 Numbers Modestly Lower GRUPO TMM: Reports First Quarter Financial Results MEXLUB: Pemex Becomes 100% Owner TV AZTECA: Weak Economy Takes Toll on Shares P A R A G U A Y CORPORACION FINANCIERA: Goverment Intervenes Over Liquidity Woes ESSAP: Obtains Financial Backing From Finance Ministry T R I N I D A D & T O B A G O CARONI LTD.: Lowers Output Expectations U R U G U A Y URUGUAYAN BANKS: Fitch Content With Bond Swap Effects V E N E Z U E L A CITGO PETROLEUM: Fitch Affirms Rating; Removes Rating Watch - - - - - - - - - - - ================= A R G E N T I N A ================= ACINDAR: Bond Issue Subject of May 30 Shareholder Meeting --------------------------------------------------------- Shareholders of Argentine steelmaker Acindar postponed a meeting, previously scheduled for May 16, to May 30, reports Business News Americas. At the meeting, shareholders will discuss, among other things, whether to approve a bond and/or convertible debenture issue of up to US$350 million. Acindar, which defaulted on its US$354-million debt in December 2001, is undergoing a restructuring process. The Company is controlled by the Acevedo family and Brazilian steel company Belgo-Mineira. CONTACT: Acindar Industria Argentina de Aceros SA 2739 Estanislao Zeballos Beccar Buenos Aires Argentina B1643AGY Phone: +54 11 4719 8500 Fax: +54 11 4719 8501 Home Page: http://www.acindar.ar.com Contact: Arturo Tomas Acevedo, Chairman BANCO DE LA PAMPA: Bonds Get `BB(arg)+'; `BBB(arg)-' Ratings ------------------------------------------------------------ Corporate bonds issued by Banco de la Pampa received junk ratings from Fitch Argentina Calificadors de Riesgo S.A., the National Securities Commission of Argentina reveals on its Web site. The bonds, called "obligaciones negociables subordinadas", were rated `BB(arg)+', says the NSC. These bonds, classified under `simple issue', are worth a total of US$10 million, and come due on December 22, 2005. Fitch said that the `BB(arg)+' rating denotes a fairly weak protection parameters relative to other issues in Argentina. Payment on this debt is fairly uncertain. Meanwhile, some US$100 million worth of bonds were rated `BBB(arg)-`. The bonds, which the NSC described as "obligaciones negociables subordinadas y no subordinadas", are classified under `simple issue'. The maturity date, however, was not indicated. According to the ratings agency, `BBB(arg)-' ratings denote an adequate credit risk relative to other issues in Argentina. However, changes in circumstances or economic conditions are more likely to affect the capacity for timely repayment. BANCO FRANCES: Fitch Rates US$1 Billion of Bonds `BBB(arg)+' ------------------------------------------------------------ Fitch Argentina Calificadora de Riesgo S.A. assigned a rating of `BBB(arg)+' to corporate bonds issued by BBVA Banco Frances S.A. The National Securities Commission of Argentina described the bonds as "programa de obligaciones negociables" and classified them under `Program'. The bonds, whose maturity date was not indicated, are worth a total of US$1 billion. The rating, based on the Company's financials as of the end of December 2002, denotes an adequate credit risk relative to other issues in Argentina, said Fitch. The Company's principal activity is the provision of general banking services to corporate and retail customers including deposits, checking and savings accounts, automatic teller machines, Visa credit cards, mortgage financing, commercial loans, Credit-Logro consumer loans, electronic collections, foreign currency transactions, investment advisory services, and custody of securities and travelers' check, pension and asset management, insurance and other related services. CONTACT: BBVA Banco Frances SA 199 Reconquista Buenos Aires Argentina 1003 Phone: +54 11 4346 4000 Home Page: http://www.frances.com.ar Contact: Jaime Guardiola Romajaro, Chairman CAPEX: Fitch Issues Default Ratings to Two Bond Traunches --------------------------------------------------------- The National Securities Commission announced that two series of bonds issued by Capex S.A. received junk ratings from Fitch. The ratings were based on the Company's financial situation as of the end of January this year. Classified under `simple issue', bonds which the NSC described as "obligaciones negociables simples" were rated `D(arg)'. These bonds, worth a total of US$40 million, mature on June 11, 2004. Another set of bonds, this time worth US$105 million received the same ratings. The NSC also described this set as "obligaciones negociables simples", also under `simple issue'. This set would mature on December 23, 2004. In the meantime, bonds also called "obligaciones negociables simples" were rated `C(arg)'. This means that debt has weak protection parameters relative to other issues in Argentina. This set of bonds would mature on the first day of January 2005. CONTACT: Capex SA 5/F DepartmentC 948/950 Av Cordoba Buenos Aires Argentina Phone: +54 11 4322 4884 Home Page: http://www.capex.com.ar Contacts: Enrique Gotz, Chairman Dr. Alejandro Enrique Gotz, Vice Chairman DINAR: Viability Dwindles, Problems Continue -------------------------------------------- Argentine airline Dinar, which has asked for its 'concurso preventivo' last year registering debts of US$25 million, has seen three changes in its ownership structure. The current owner, according to Clarin, is Fideicomiso Ca¤uelas, whose shareholders are not known in the air flight business. Dinar now has only one plane but it is grounded, as it needs repair and the Company doesn't have enough money to pay for the repair. IMPSA: Fitch Rates Bonds `Junk' Rating -------------------------------------- Fitch Argentina Calificadora de Riesgo S.A. assigned less than investment grade ratings to various bonds issued by Industrias Metalurgicas Pescarmona Sociedade Anonima (IMPSA). The ratings were based on the Company's financials as of January 31, 2003. According to the National Securities Commission of Argentina, Fitch issued a 'C(arg)' rating to the following bonds: -- US$250 million of bonds called "programa de obligaciones negociables" , classified under `program'. -- US$9.004 million of bonds called "SERIE 7 DE POR ON US$ 9, 04 MM EMITADA DENTRO DEL PROGRAMA DE US$ 250 MM", under `series and/or class'. -- US$11.359 million worth of bonds called "obligaciones negociables serie 11", under `series and/or class'. -- US$700,000 of bonds called "obligaciones negociables Serie 12", under `series and/or class'. The maturity dates of these bonds were not indicated in the posting. Fitch said the given rating denotes an extremely weak credit risk relative to other issues in Argentina. Capacity for meeting financial commitments on these bonds is solely reliant upon sustained, favorable business or economic conditions. Concurrently, another set of the Company's bonds were given default ratings by the same ratings agency. Fitch issued a rating of `D(arg)' to US$150 million worth of bonds called "2 Serie emitada por US$ 150 millones del programa global de US$ 250 millones", which matured in May last year. The rating signifies that the obligation is in financial default. LAPA: Pres Duhalde Approves Replacement Company's Creation ---------------------------------------------------------- Argentine President Eduardo Duhalde has finally signed the proposal to replace the embattled LAPA with a new company, which is linked to state-owned Intercargo, reports Clarin. The establishment of the new company will allow LAPA to continue operations temporarily with state funds, leading to privatization later on. The new company, which will be registered as 'sociedad de derecho privado' under the law 19.550, will initially operate with 5 planes and will absorb the 850 employees of LAPA, says Clarin. LAPA has been in bankruptcy protection since May 2001, but its financial crisis deepened in April when two of its four Boeing 737-200s were repossessed after payments were missed, and a fifth sub-leased aircraft was returned to American Falcon. TASA/COINTEL/THA: S&P Revises Ratings To `CC' From `SD' ------------------------------------------------------- Standard & Poor's Ratings Services upgraded ratings on Argentine telecom provider Telefonica de Argentina S.A. (TASA) and holding companies Compania Internacional de Telecomunicaciones S.A. (COINTEL) and Telefonica Holding de Argentina S.A. (THA) to 'CC'. The outlook is negative. The foreign currency ratings of TASA, COINTEL, and THA were revised to 'CC' from 'SD' (selective default) where they were placed on Jan. 21, 2002, reflecting the difficulties faced by companies operating in Argentina to fulfill all their foreign currency obligations in a timely manner due to sovereign induced constraints. "Following the publication of Communication 3944 by the Central Bank on May 6, 2003, foreign exchange controls are no longer a limitation to the companies' ability to make payments to foreign creditors," said credit analyst Ivana Recalde. "Nevertheless, the group's liquidity is very tight. Funding flexibility is impaired by the limited credit availability for Argentine companies, the mismatch between peso flows and a high dollar debt burden, and the weaker expectations of support from its Spanish parent, Telefonica S.A. (TESA) who directly and indirectly owns almost 100% of the three Argentine entities," she added. As of December 2002, aggregated debt at TASA, COINTEL, and CEI was about US$2.8 billion, of which about US$1.6 billion matures before December 2003 and about US$700 million matures in 2004. Those maturities include US$1.5 billion in intercompany loans provided by TESA or its affiliates, which are classified as short-term debt. The pesification and freeze of tariffs after the severe devaluation of the peso since early 2002 significantly weakened TASA's capacity to service its debt and stream up the dividends, which constitute its holding companies' only cash source. The downgrade of the local currency corporate credit rating of COINTEL and THA to 'CC' from 'CCC-' reflects the significant refinancing risk faced by the group as a result of the factors mentioned above. TASA is one of two incumbent telephone companies in Argentina, with approximately 55% of total lines in service. COINTEL owns 64.83% of TASA, and THA owns 50% of COINTEL. The stakes in TASA and COINTEL are COINTEL's and THA's only significant assets. All operations are carried out at the TASA level. TELFONICA DE ARGENTINA: Aims To Keep Up With Debt Payments ----------------------------------------------------------- Telefonica de Argentina SA gained approval from its board to swap two series of convertible bonds worth a total of some US$670 million, reports Dow Jones. The Company, which is controlled by Spanish telecommunications giant Telefonica SA, said in a filing with the Argentine stock exchange that it would respect the interest rates and principal of its obligations but would seek to extend the maturity of its debt. The Company said it hopes to swap convertible bonds due to mature in 2004 for new convertible bonds, which mature in 2007, and another series of convertible bonds due to mature in 2008 for new paper, which mature in 2010. Creditors who participate in the swaps would get cash payment, the filing said. Meanwhile, the Company proposed a complex voluntary debt exchange that involves swapping convertible bonds issued by one shareholder, due to mature next year, for new paper with a maturity date of 2011, which would be issued by another shareholder. The two shareholders - Telefonica Internacional SA, or TISA, and Compania Internacional de Telecomunicaciones SA are both controlled by Spain's Telefonica SA. Again, the Company said it would make cash payments to those who participate and promised to keep up on its interest payments. The recently approved voluntary debt swap offer and the proposed complex voluntary debt exchange are part of Telefonica de Argentina's latest efforts to keep servicing its obligations. CONTACT: TELEFONICA DE ARGENTINA Tucuman 1, 18th Floor, 1049 Buenos Aires, Argentina Phone: (212) 688-6840 Home Page: http://www.telefonica.com.ar Contacts: Carlos Fernandez-Prida Mendez Nunez, Chairman Paul Burton Savoldelli, Vice Chairman Fernando Raul Borio, Secretary =========== B R A Z I L =========== AES CORP.: BNDES Trashes Debt-Restructuring Proposal ---------------------------------------------------- U.S. energy firm AES Corp. was dealt with a blow Tuesday when Brazil's National Development Bank (BNDES) rejected a proposal to restructure the debt load of its biggest Brazilian asset, Reuters indicates. BNDES president Carlos Lessa said the bank received a proposal from AES last Friday, but discarded the plan because it did not foresee the reimbursement in cash for missed debt payments. Earlier this year, AES defaulted on a US$1.2-billion loan from BNDES that was used to buy Eletropaulo Metropolitana Eletricidade de Sao Paulo, Latin America's biggest power distributor. Earlier this month, BNDES moved to strip AES of control of Eletropaulo by announcing plans to auction off the Sao Paulo- based distributor's ordinary voting shares. Lessa said the bank is currently in the process of drawing up the decree that would authorize the auction, but did not say when it would be ready. AES can contest the move in court, says Reuters. 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 CEMIG: Stock Drops on Planned Acquisition of AES Asset ------------------------------------------------------ Shares of Cemig fell 59 centavos, or 1.9%, to BRL29.81, reports Bloomberg. Citing Cemig Chief Executive Djalma Morais, Valor Economico newspaper reports that the utility is interested in buying the stake held by AES Corp. in Eletropaulo Metropolitana SA. "In our view, any potential big acquisition in the short term would likely imply increased corporate governance risk and potentially lower dividends for Cemig shareholders in the short term," F. Rowe Michels, an analyst with Bear, Stearns & Co., said in a report. USIMINAS: Denies Reported Preparations For Debt Issue ----------------------------------------------------- Usinas Siderurgicas de Minas Gerais Usiminas PN A is not preparing a debt issue, clarifies a spokesman for the Company, denying reports made by local paper Valor Economico. The Sao Paulo business daily reports that the Brazilian flat steelmaker would issue debt that that would mature in at least one year, and would be guaranteed with export receipts. The spokesman told Business News Americas that the Company is not in the process of issuing US$100 million-150 million in debt on international capital markets backed by export receivables. CONTACT: Usinas Siderurgicas de Minas Gerais Usiminas PN A Rua Prof. Jose Vieira de Mendonca, 3011 Engenheiro Nogueira 31310-260 Belo Horizonte - MG Brazil Tel +55 31 3499-8000 Fax +55 31 3499-8475 Web http://www.usiminas.com.br Contact: Jose Augusto Muller de Oliveira Gomes, Chairman ========= C H I L E ========= SUPERMERCADOS UNIMARC: 1Q03 Results Disappoint as Sales Drop ------------------------------------------------------------ Supermercados Unimarc S.A. (until April 30, 2003 listed on the NYSE under symbol UNR), a leading Chilean retailer, announced Tuesday results for the first quarter 2003. Figures are expressed in Chilean pesos at March 31, 2003 and are reported in accordance with Chilean Generally Accepted Accounting Principles (GAAP). At March 31, 2003, the exchange rate was Ch$ 731.56 = US$1. Supermercados Unimarc reported net sales of Ch$30,435 million during the first quarter 2003, a 5.4% increase compared to Ch$28,873 million reported during the first quarter 2002. Net sales increased during the first quarter 2003 mainly due to the opening of a new supermarket and the renovation plan of existing stores in spite of greater competition and a decrease in consumer spending. The Company's same store sales decreased 5.9% during the first quarter 2003 compared to the first quarter 2002. Gross profit during the first quarter 2003 was Ch$6,757 million, which represents a 10.2% decrease compared to Ch$7,526 million in the first quarter 2002. As a percentage of sales, gross margins were 22.2% during the first quarter 2003 and 26.1% during the first quarter 2002. Selling, General and Administrative (SG&A) expenses during the first quarter 2003 were Ch$7,834 millions, a 9.0% increase compared to Ch$7,189 million reported during the first quarter 2002. As a percentage of sales, SG&A expenses were 25.7% for the first quarter 2003 and 24.9% for the first quarter 2002. The opening of new supermarkets and the renovation of existing ones explain this increase. Operating loss for the first quarter 2003 was Ch$1,076 million and for the first quarter 2002 operating income was Ch$337 million. The non-operating result for the first quarter 2003 was Ch$-1,325 million and a non-operating result was Ch$3,103 million for the first quarter 2002. Net loss for the first quarter 2003 was Ch$-2,521 million, while net income for the first quarter 2002 was Ch$3,651 million. The EBITDA margin increased from 3,4% in the first quarter 2002, to 4.8% in the first quarter 2003. Net loss per share at the end of the first quarter of 2003 was Ch$2.00. Net loss per ADR was Ch$99.90, or US$ 0.14. At the end of the first quarter of 2003, Unimarc had 36 stores in Chile, with a total sales area of 65,285 square meters. In April 2003 Unimarc opened a supermarket in the City of Pitrufquen, which is located in the IX Region of Chile. UNIMARC is the fourth largest food retailer in Chile and operated 36 supermarkets in Chile during the first quarter 2003. The stores target the middle- to high-income level group. The Company offers a wide selection of both food and non-food items. Its efforts aim to offer its customers the lowest price in the market and personalized attention. =============== C O L O M B I A =============== AVIANCA: Reduces Workforce, Air Fleet to Survive ------------------------------------------------ Colombian airline Avianca will cut its workforce by roughly 30% and return about 43% of its airplanes to the lessors to save US$32 million a year on rental fees as it struggles to emerge from bankruptcy. Avianca President Juan Emilio Posada told a press conference that 13 of its 30 aircraft will be returned to various lessors, including Pegasus Aviation Inc., Ansett Worldwide Aviation Ltd. and Debis Finance Ireland Plc. Avianca filed for protection from its creditors in a New York court on March 21, citing rising fuel and insurance costs. The airline, the flagship of the Summa Alliance that also includes two smaller carriers, was seeking to restructure US$130 million in debt with bondholders, aircraft leasers and suppliers to help it become profitable. Filing for Chapter 11 protection will probably help the airline and its affiliates to survive because it allows the Company to reduce its overall liabilities, said Bob Booth, chairman of the Miami-based consultant Aviation Management Services. Avianca, which is the oldest airline in the Americas and is formally known as Aerovias Nacionales de Colombia SA, is jointly owned by the investment holding Valores Bavaria SA and the National Federation of Colombian Coffee Growers. CONTACT: AVIANCA P.O. Box 151310 Av. el Dorado no. 93-30 Bogota, Colombia Phone: (1) 413 9511 (1) 295 8977 ============= J A M A I C A ============= AIR JAMAICA: Suspends Belize Flights As Demand Wanes ---------------------------------------------------- Troubled regional carrier Air Jamaica announced that its services to Belize will be suspended starting June 2. A report by the Jamaica Observer quoted Air Jamaica Executive vice-president and chief revenue officer John Lewis as saying the passenger bookings and yields are too low for the service to continue. The airline added that passengers holding confirmed bookings on any flight to Belize after June 1 will be accommodated on other airlines. Air Jamaica said that services to the Belize was suffered major setbacks with the build-up to war between the United States and Iraq. The service showed much promise when it was opened last November. Air Jamaica has instituted several cost cutting measures such as reducing staff, salary give-backs and operational and aircraft lease costs which yielded savings of $880 million. The company's tour arm Air Jamaica Vacations also saved over $336 million from staff cutbacks and a reorganization of its operations, the Company said. CONTACT: Air Jamaica 4 St. Lucia Avenue Kingston 5, Jamaica Phone: 876/922-3460 Fax: 929-5643 Email: webinfo@airjamaica.com Contact: Gordon Stewart, Chairman Allen Chastanet, Vice President for Marketing and Sales =========== M E X I C O =========== DESC: S&P Lowers Corporate Credit Rating to 'BB-' ------------------------------------------------- Standard & Poor's Ratings Services said Tuesday that it lowered its local and foreign currency corporate credit ratings on Desc S.A. de C.V. and its autoparts subsidiary, Desc Automotriz S.A. de C.V. to 'BB-' from 'BB'. Desc is a Mexico-based diversified holding company whose subsidiaries operate in the autoparts, chemical, food, and real estate sectors. Standard & Poor's 'B+' rating on Desc's 8.75% notes due 2007 remains unchanged. The rating on the notes reflects the structural subordination of the issue. The ratings remain on CreditWatch with negative implications, where they were placed Dec. 19, 2002. "The downgrade reflects the continued weakness in Desc's operating performance during the first quarter of 2003, following the operating loss reported in the fourth quarter of 2002," stated Standard & Poor's credit analyst Jose Coballasi. The weakness in the company's operating results is reflected in its key financial measures. For the last 12 months ended March 31, 2003, the company's EBITDA interest coverage, total debt to EBITDA, and FFO to total debt ratios were 2.6x, 5.3x, and 4.4%. Desc's liquidity is limited and has weakened over the past six months. During the first quarter, the company reduced its cash position by $100 million in order to fund its working capital needs and capital expenditures, and to pay down debt. The company faces short-term debt maturities of $260 million during the rest of 2003. As of the first quarter, it held about $100 million in cash and had approximately $65 million available under a committed line of credit. Desc anticipates generating modest discretionary cash flow during the year and expects capital expenditures of about $100 million. The company is also under negotiations to sell assets from its business portfolio and has earmarked the proceeds for debt reduction. During the first quarter, the company did not meet the leverage ratio target set forth in the syndicated loans arranged by Citibank and BBVA Bancomer during 2002. The company is negotiating a waiver with the lenders. The sluggish economic environment that prevails in Mexico and the U.S. continues to hurt the performance of Desc's business portfolio. The year-over-year drop in the company's first quarter numbers reflects lower sales in the autoparts business as a result of temporary shutdowns in some assembly plants to reduce inventory levels; the closing of the DaimlerChrysler's plant in Mexico City; and the delay in one of the Tractor projects. First quarter numbers also reflect pricing pressure and higher raw materials costs in the chemical sector. The CreditWatch listing will be resolved upon the evaluation of Desc's operating performance over the coming months, the negotiation of the waiver under its syndicated loans, the success of the company's asset sale program, and the evolution of its plans to improve its liquidity and financial profile in light of the company's short-term debt maturities. ANALYST: Jose Coballasi, Mexico City (52) 55-5279-2014 GRUPO IUSACELL: Shelves National Expansion ------------------------------------------ Verizon Wireless International president Daniel Petri indicated to Business News Americas that its Mexican mobile operator Iusacell is indefinitely putting off plans to expand its CDMA2000 1xRTT network outside of Mexico City. Speaking Monday at the Mobile Americas 2003 conference in Miami, Petri said Iusacell introduced the network in late 2002 "to get the corporate market to pay attention to us." Indeed, the unit has "accomplished the immediate goal of catching attention." But Petri said the service is "not taking off dramatically" and not to expect expansion of the network to new markets. "We're still focused on phase one," he said. Accordingly, the Company will continue building out its footprint in the capital. Iusacell's corporate marketing director Fernando Zamarripa recently told Business News Americas the Company would upgrade more base stations and switching centers in Mexico City this year. CONTACT: Grupo Iusacell, S.A. de C.V., Mexico City Russell A. Olson, 011-5255-5109-5751 russell.olson@iusacell.com.mx or Carlos J. Moctezuma, 011-5255-5109-5780 carlos.moctezuma@iusacell.com.mx Web site at http://www.iusacell.com GRUPO TFM: 1Q03 Numbers Modestly Lower -------------------------------------- Grupo Transportacion Ferroviaria Mexicana, S.A. de C.V. and subsidiaries ("TFM") reported first quarter results on Tuesday. OPERATIONAL RESULTS FOR THE FIRST QUARTER OF 2003 TFM's first quarter car loads grew 12.3 percent compared to the first quarter of 2002, the main segments contributing to this volume increase were Cement, metals and minerals; Chemicals, Intermodal; Agroindustrial; and Mexrail. The Automotive segment reduced the number of car loads, and the revenues of this segment were approximately $10.0 million lower than the revenues of the first quarter of 2002. Volume increase was explained by the conversion effort; the recovery of the steel industry; and the penetration of the intermodal segment. Consolidated net revenues for the first quarter of 2003 were $168.5 million, which represented a decrease of $2.3 million or minus 1.3 percent from revenues of $170.8 million for the same period in 2002. Peso depreciation affected revenues by approximately $17.0 million during the first quarter of 2003, compared with revenues of first quarter 2002. Peso depreciation averaged 18.6 percent on a yearly basis. Operating profit for the first quarter of 2003 was $27.9 million, representing a decrease of $7.0 million from the first quarter of 2002. The decrease in operating profit for the first quarter of 2003 was mainly due to the above mentioned decrease in revenues, because of the Mexican peso devaluation, and an increase in fuel prices as a consequence of the Iraq war. As a result of the foregoing, TFM's operating ratio for the first quarter of 2003 was 83.5 percent. The company continues implementing various cost reduction actions especially in salaries and fringe benefits. FINANCIAL EXPENSES Net financial expenses incurred in the first quarter of 2003 were $32.5 million. TFM recognized a $5.1 million foreign exchange loss resulting from a devaluation of the peso against the dollar during the first quarter of 2003. NET INCOME Net income for the first quarter of 2003 was negatively impacted by a deferred income tax expense of $7.0 million basically as a result of the reduction in tax credit values due to the depreciation of the peso. EBITDA EBITDA for the first quarter of 2003 was $45.3 million. EBITDA margin (EBITDA as a percentage of revenues) for the first quarter of 2003 was 26.9 percent. SALE OF 51% SHARES OF MEXRAIL TO NAFTA RAIL During May 2003, TFM sold the 51 percent of the shares of Mexrail, Inc. to Kansas City Southern (KCS) that includes the TexMex railroad and the Laredo railroad-bridge, receiving an amount of $32.6 million. Proceeds of this sale will be reinvested in TFM. The financial statements shown in this release continues to include the consolidation of Mexrail into TFM. LIQUIDITY AND CAPITAL RESOURCES As of March 31, 2003, accounts receivable decreased by 6.2 percent to $190.0 million from $202.5 million at December 31, 2002. As of March 31, 2003, accounts payable and accrued expenses were $135.7 million, an increase of $7.0 million or 5.4 percent from December 31, 2002. From this balance, $17.9 million corresponds to Mexrail. TFM's capital expenditures were $8.7 million during the first quarter of 2003. At the end of the first quarter, TFM had an outstanding net debt balance of $971.9 million, including the discounted value of $115.0 million of U.S. commercial paper issuance, and $44.2 million of cash and cash equivalents. To see financial statements: http://bankrupt.com/misc/Grupo_TFM.htm GRUPO TMM: Reports First Quarter Financial Results -------------------------------------------------- Grupo TMM, S.A. (NYSE:TMM), the largest Latin American multi- modal transportation and logistics company and owner of the controlling interest in Mexico's busiest railway, TFM, reported revenues from consolidated operations of $215.5 million for the first quarter of 2003, compared to revenues from consolidated operations of $224.4 million for the same period of 2002. Reduced revenue was reported across all divisions, except Ports, due to the 18.6 percent average depreciation of the peso and continued unfavorable economic conditions, further impacted by significantly reduced automobile revenue from the railroad. Consolidated EBITDA (Earnings Before Income, Taxes and Depreciation) was $49.4 million for the first quarter of 2003, compared to $62.4 million in the first quarter of 2002. To ensure consistency in reporting, all revenue from operations sold as part of the sale of its 51 percent interest in TMM Ports and Terminals to an affiliate of its current partner in the division, SSA Mexico, are being reported as discontinued operations. Included in the transaction were the operations performed by the division at the ports of Manzanillo, Cozumel, Veracruz and Progreso. Revenues from continuing operations include the ports of Acapulco and Tuxpan. Revenue from these ports increased 19.3 percent to $5.8 million, compared to $4.9 million from these same two ports during the first quarter of 2002. Grupo TMM's consolidated first quarter 2003 operating income decreased $9.6 million, from $36.3 million in 2002 to $26.7 million in 2003 and net income for the quarter decreased from $11.9 million in 2002 to a loss of $27.9 million in 2003, caused primarily by sluggish market conditions, higher fuel costs and the impact of peso devaluation, which in the second quarter appears to be reversing. ASSET SALES On May 14, 2003, the company announced that it completed the sale of its 51 percent interest in the TMM Ports and Terminals division to an affiliate of its current partner in the division, SSA Mexico. Included in the transaction were the operations currently performed by the division at the ports of Manzanillo, Cozumel, Veracruz and Progreso. Net proceeds from the transaction of approximately $114 million will be used to repurchase receivables sold to a trust under the company's existing Receivables Securitization Facility in an amount of $31.7 million, to repay other indebtedness and for working capital purposes. Also, the company reached an agreement with one of the holders ‹f certificates under its Receivables Securitization Facility to extend approximately $49.7 million of the certificates until June 30, 2003. On April 22, 2003, the company announced it had entered into definitive agreements to place its interest in Grupo TFM (TFM) under common control with Kansas City Southern (KCS) for $200 million in cash and 18 million shares of KCS common stock. Grupo TMM will receive an additional cash payment, not to exceed $180 million, upon the successful resolution of the VAT lawsuit. As part of the transaction, KCS will assume the outstanding contingent obligations of Grupo TMM to purchase shares of TFM held by the government of Mexico upon exercise of a put valued at approximately $480 million as of December 31, 2002. The combined companies of Grupo TFM and KCS will be renamed NAFTA Rail and will continue to trade on the NYSE. At the closing, Jose Serrano, Chairman of Grupo TMM will remain Chairman of TFM and become Vice Chairman of NAFTA Rail. Both Mr. Serrano and Javier Segovia, president of Grupo TMM, will become members of the NAFTA Rail Board of Directors. Grupo TMM will become the largest stockholder of NAFTA Rail, which, on a combined basis after giving effect to the transaction, would have had fiscal year 2002 revenues and EBITDA of approximately $1.3 billion and $368 million, respectively. Once the transaction closes, the results of TFM will no longer be included in the Grupo TMM's consolidated financial statements, including the approximately $993 million of TFM's outstanding debt (net of TFM's cash) as of December 31, 2002. The transaction requires approval by the stockholders of KCS and the stockholders and bondholders of Grupo TMM and certain governmental approvals, including approval of the Mexican Competition Commission, the Mexican Foreign Investment Commission, and the United States Surface Transportation Board ("STB") approval for KCS's acquisition of the Tex-Mex Railway. KCS has already obtained $200 million in financing to close the transaction. This transaction, together with the sale of the Grupo TMM's interest in TMM ports and Terminals brings the total amount of expected cash proceeds from asset transactions under contract to approximately $270 million plus 18 million shares of NAFTA Rail, and up to a potential total number of $450 million upon the successful resolution of certain future contingencies, which includes the VAT award. LIQUIDITY AND DEBT PROFILE The company was granted an injunction by a court of local jurisdiction in Mexico (the "Court"), which by its terms, prevents for all purposes in Mexico any of the company's current creditors from bringing any claims in Mexico for defaults on the company's existing debt obligations while the Order is in effect. The Order will stay in effect until the conclusion of the case on the merits of the claim. On May 15, 2003, the company announced it initiated a legal proceeding in Mexico and petitioned the court for an order which effectively prevents creditors of the company including all the holders of the notes from pursuing in Mexico the exercise of their remedies. The company initiated the proceedings to prevent the effects of an imminent default, and provided the company with the additional time to complete the re-structuring or re- financing of its debt obligations in an orderly fashion and to preserve the company's business. The company, in seeking this relief has acknowledged its legal obligation to make payments and cited, among other factors, the efforts that the company had made in good faith over an extended period of time to re-structure its obligations through the exchange offers. The company requested that the court allow at least one year of relief from the exercise of remedies by all such creditors. Management will work diligently to resolve issues with all creditors in a manner that is in the interests of the company. In the interim the company will preserve cash as it continues to operate its business in a way that compliments its customers' needs and expectations. Javier Segovia, president of Grupo TMM, said, "Having amended the bond exchange three times, extended it five times and made a personal appeal to bond holders on a conference call held on May 6, 2003, we were left with no other choice, but to seek an order that grants us relief from actions that could have been taken by our creditors. I must stress that we did this to protect the equity investors, employees and the company from being forced down a path that would focus on meeting the company's short-term obligations, not on the future of TMM. We are exploring many alternatives, each with a focus on maximizing value for investors and treating the bondholders fairly." VAT LAWSUIT As previously disclosed on December 9, 2002, the Federal Tribunal of Fiscal and Administrative Justice (the "Tax Court") in Mexico issued a ruling denying TFM's right to receive a value added tax (VAT) refund from the Mexican Federal Government. The lower court's objection stated that the law was violated by issuing a certificate in the name of a third party and not to TFM, but it also stated that TFM did not have a right to that certificate. Based on the advice of TFM's legal counsel, who has carefully reviewed the prior favorable decision of the appellate court, Grupo TMM remains confident of TFM's right under Mexican law to receive the VAT refund. TFM has returned to the Mexican Magistrates Court (Federal Court) and requested that they enforce the original ruling as outlined in their decision of September 25, 2002. UNCONSOLIDATED RESULTS (Unconsolidated TMM includes its Specialized Maritime, Logistics and Port and Terminal operations.) Revenues from unconsolidated operations were $51.0 million for the first quarter of 2003, compared to revenues of $70.4 million for the same period of 2002. Unconsolidated EBITDA was $4.1 million for the first quarter of 2003, an EBITDA margin of 8.1 percent. Grupo TMM's unconsolidated first quarter 2003 operating loss was $1.1 million compared to operating income of $0.6 million in 2002. In 2003, unconsolidated net income for the quarter was a loss of $27.9 million, compared to a gain of $11.9 million for the first quarter of 2002. Operating and net income in the first quarter of 2003 were impacted primarily by sluggish demand, higher financial costs associated with the convertible and securitization, and the impact of peso devaluation on both the exchange rate and value of the company's deferred tax credits. Grupo TMM will broadcast its first quarter 2003 conference call for investors over the Internet on Wednesday, May 21, 2003, at 11:00 a.m. EDT. To listen to the live call, please go to http://www.visualwebcaster.com/event.asp?id=14731to register, download and install any necessary audio software, or dial 800- 218-0713 (domestic) or 303-262-2141 (international). If you are unable to participate on the call, a replay will be available through May 28, 2003, 11:59 p.m. EST at this website or by dialing 800-405-2236 or 303-590-3000 and entering conference ID 538411. Headquartered in Mexico City, Grupo TMM is Latin America's largest multimodal transportation company. Through its branch offices and network of subsidiary companies, Grupo TMM provides a dynamic combination of ocean and land transportation services. Grupo TMM also has a significant interest in Transportacion Ferroviaria Mexicana (TFM), which operates Mexico's Northeast railway and carries over 40 percent of the country's rail cargo. Visit Grupo TMM's web site at www.grupotmm.com and TFM's web site at www.tfm.com.mx. Both sites offer Spanish/English language options. To see financial statements: http://bankrupt.com/misc/Grupo_TMM.htm MEXLUB: Pemex Becomes 100% Owner -------------------------------- Mexico's state oil company Pemex now owns 100% of Mexicana de Lubricantes (Mexlub) after it exercised an option to buy out Impulsora Jalisciense's 51% stake in the lubricants joint venture. Pemex said Mexlub's poor economic performance led the state company to exercise its option. "In its 10 years of operations, Mexlub has had losses in excess of 600 million pesos ($1=MXN10.3170), and profits of only MXN70 million," Pemex said. Mexlub has the exclusive lubricant and oil distribution rights at Pemex service stations throughout Mexico. All service stations in Mexico belong to Pemex. But despite this dominant position, Mexlub has racked up some MXN1 billion (US$109mn) in debts since Impulsora Jaliscense purchased a controlling share in the Company for US$120 million in 1993. Pemex will seek to renegotiate Mexlub's debt with main creditor Grupo Financiero Banorte SA. TV AZTECA: Weak Economy Takes Toll on Shares -------------------------------------------- Shares of TV Azteca, Mexico's second-largest broadcaster, declined 13 centavos, or 3.5%, to MXN3.63 on investor concern a strong peso and record low interest rates are pointing to a weak Mexican economy. According to Bloomberg, the stock fell on expectations that demand for advertising spots will wane as the economy, which contracted in the first quarter from the fourth, fails to show signs of a recovery. A stronger peso, which gained 1 percent against the dollar today while interest rates fell to historic lows in last week's Treasury bill auction, are signs that consumer demand is weak, said Alfredo Rotemberg, who helps manage about US$500 million in Latin American equities at the Armada International Equity Fund in Cleveland, Ohio. "The Mexican economy is not doing very well," Rotemberg said. "The peso is strong and interest rates are not rising, and they tend to rise when the economy is thriving, as demand grows and people spend." =============== P A R A G U A Y =============== CORPORACION FINANCIERA: Goverment Intervenes Over Liquidity Woes ---------------------------------------------------------------- Corporacion Financiera, a Paraguayan finance company which is experiencing liquidity problems, was intervened by the central bank, reports Business News Americas. According to a central bank spokesperson, the government's intervention committee will investigate the real situation of the finance company and issue its verdict this week or next. The committee is likely to declare the closure of the Company, the spokesperson added. ESSAP: Obtains Financial Backing From Finance Ministry ------------------------------------------------------ Paraguayan state water utility Essap averted a default after the country's president, Luis Gonzalez Macchi, ordered the finance ministry to pay the Inter-American Development Bank (IDB) US$2.33 million, reports Business News Americas. The payment corresponds to a US$79.6-million loan approved by the IDB in 1995 for a US$140-million urban water supply and sewerage project. Essap is seeking for an up to 20% rates increase in order to help it meet its foreign debt obligations, which this year will reach some US$19.5 million, according to company chairman Cesar Pastore. But earlier this month, Gonzalez indicated that any public service rates increases would correspond to President-elect Nicanor Duarte's administration that takes office August 15. ================================= T R I N I D A D & T O B A G O ================================= CARONI LTD.: Lowers Output Expectations --------------------------------------- Trinidad & Tobago state sugar enterprise Caroni (1975) Ltd. reduced its estimated sugar output by 31,000 tonnes. The Trinidad Express reports that the Company expects to produce 65,000 tonnes of sugar, instead of its original target 96,000 tonnes, just two weeks before the close of this year's crop. According to a senior Caroni official, the Company's failure to meet its expected output was due to industrial problems, and this year's drought. He explained that the while sunshine is good for ripening the cane; too much of it affects the yield per acre. Up to last Saturday, from 768,000 tonnes of cane, Caroni had produced just 58,697 tonnes of sugar, the report reveals. The report adds that the Company's officials did not declare how many unplanned fires took place this year, as it might have had affected this year's yield. However, the official said, "What I can say is that the fires also seriously affected the crop." CONTACT: Caroni Limited Old Southern Main Road, Caroni, Trinidad & Tobago Phone: (868) 663-1781 or 662-0879 Fax: (868) 663-1404 ============= U R U G U A Y ============= URUGUAYAN BANKS: Fitch Content With Bond Swap Effects ----------------------------------------------------- Fitch Ratings banking analyst Peter Shaw said that Uruguay's recently announced bond swap will have no significant adverse effects on the country's private sector banks. According to Mr. Shaw, private sector banks in Uruguay have minimal exposure to the government debt. In fact, the swap may even have an indirectly positice effect on the local private sector banks in the long term, Business News Americas suggests. Last week, the government announced that the bond swap has received the necessary approval from majority of its bondholders. Fitch Ratings "deems the exchange to be an event of default under its criteria for distressed debt exchanges" as bondholders stand to lose from the extended maturities of the new bonds, reports Business News Americas. However, Fitch Ratings' director and senior Uruguayan sovereign analyst Morgan Harting said that the bond swap - although negative for bondholders - is set to give the embattled Uruguayan government some leeway to improve its finances, which may affect the economy in a positive way. ================= V E N E Z U E L A ================= CITGO PETROLEUM: Fitch Affirms Rating; Removes Rating Watch ----------------------------------------------------------- Fitch Ratings has affirmed the senior unsecured debt rating of CITGO Petroleum Corporation at 'B+'. Fitch has also assigned a rating of 'BB' to CITGO's $200 million secured term loan and raised the rating of the senior notes of PDV America, Inc. to 'B' from 'B-'. CITGO is owned by PDV America, an indirect, wholly owned subsidiary of Petroleos de Venezuela S.A. (PDVSA), the state-owned oil company of Venezuela. Fitch has removed CITGO and PDV America's ratings from Rating Watch Negative. The Rating Outlook for the debt of CITGO and PDV America is Stable. The removal of the Rating Watch reflects the significantly improved liquidity position of CITGO as a result of management's actions following the general strike in Venezuela. In February, CITGO issued $550 million of 11-3/8% senior unsecured notes. CITGO has also entered into a $200 million three year term loan secured by the company's 15.8% interest in the Colonial Pipeline and 6.8% interest in the Explorer Pipeline. The company also established a new $200 million dollar accounts receivable securitization facility. At the end of the first quarter, CITGO had $481 million of cash, no borrowings under its $545 million credit facilities and approximately $175 million of availability under the new securitization program. The ratings, however, reflect Fitch's expectation that the proceeds from the recent $550 million bond offering will be used to pay the maturity of PDV America's $500 million of senior notes in August 2003. Fitch views the PDV America senior notes to ultimately be an obligation of PDVSA. The senior notes are supported by Mirror Notes issued by PDVSA and held by PDV America. Under the indentures of the recent bond offering, CITGO can make a one-time dividend payment to PDV America towards the August maturity subject to a post-dividend liquidity of $350 million. Fitch expects CITGO to pay for the full $500 million maturity in August. The ratings also reflect the potential for further interference from PDVSA as CITGO enters a period of high capital requirements to meet the upcoming low sulfur regulations. CITGO estimates the total capital expenditures to meet environmental regulations to be approximately $1.3 billion over the next five years. Financial flexibility could be limited by further dividend payments or additional force majeure situations interrupting CITGO's supply of heavy Venezuelan crude. Exclusive of supporting the PDV America maturity, the indentures of CITGO's recent bond offering restrict future dividend payments to: --50% of the Consolidated Net Income accrued during the period (treated as one accounting period) beginning Jan. 1, 2003. --A post-dividend liquidity requirement of $250 million --The aggregate amount of dividends during the most recent four quarters cannot exceed free cash flow during the same period (beginning no earlier than Jan. 1, 2003). CITGO also continues to address the loss of some letters of credit (LCs) supporting the company's tax exempt bonds. Through May, CITGO repurchased approximately $82 million of bonds when LC providers did not to renew the LCs supporting the bonds. Further loss of LC support could place a strain on the company's liquidity position if CITGO is not able to replace the LCs or issue new bonds. For the remainder of 2003, CITGO has approximately $200 million of LCs supporting tax-exempt bonds that are subject to renewal in 2003. In spite of the Venezuelan supply disruption, CITGO was able to maintain operations without interruption in the first quarter, generating $189 million of EBITDA (excluding $118 million of insurance recoveries in the quarter) behind strong industry margins. With the additional debt on CITGO's balance sheet, Fitch would expect CITGO to produce EBITDA-to-interest coverage of 4.0 to 6.0 times (x) with leverage, as measured by debt-to-EBITDA of approximately 3.0x in a mid-cycle margin environment. CITGO is one of the largest independent crude oil refiners in the United States with three modern, highly complex crude oil refineries and two asphalt refineries with a combined capacity of 756,000 barrels per day. The company also owns approximately 41% interest in LYONDELL-CITGO Refining L.P. (LCR), a limited liability company that owns and operates a 265,000-barrel per day (BPD) crude oil refinery in Houston, Texas. CITGO branded fuels are marketed through approximately 13,000 independently owned and operated retail sites. CONTACT: Bryan Caviness +1-312-368-2056, Chicago Alejandro Bertuol +1-212-908-0393, New York MEDIA RELATIONS: James Jockle +1-212-908-0547, New York *********** 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 * * *