/raid1/www/Hosts/bankrupt/TCRLA

/raid1/www/Hosts/bankrupt/TCRLA_Public/040311.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, March 11, 2004, Vol. 5, Issue 50 Headlines A R G E N T I N A DESINFECTADORA DEL PLATA: Proof of Claims Review Ends Today EMPRESA FRUTICOLA: Court Declaration Makes Bankruptcy Official GRUPO BA'AIRES: Court Orders Company to Undergo Bankruptcy LA MODERNA: Receiver to Close Credit Verifications Today PERFUMERIAS SAN REMO: Claims Review Deadline Expires Today SUDAMERICAN SHIPPING: Creditor Claims Review Ends TELECOM ARGENTINA: Positive 2003 Results Reflect ForEx Moves * Argentina Negotiates $3.1B Payment to IMF B R A Z I L COPEL: Parana Head Seeks Exemption From New Rules EMBRATEL: Hires Jacada to Improve Fraud Analysis Process METRON: Bankruptcy Petition Gets OK From Brazilian Judge SABESP: Board Approves Water Program C H I L E PARMALAT CHILE: Bethia's Reiterates Acquisition Interest C O L O M B I A COLOMBIA TELECOMUNICACIONES: To Pay Nortel $80M Settlement E C U A D O R PETROECUADOR: 26 Ousted Executives to be Replaced by Month End PETROECUADOR: Calling for Pipeline Contract Bids M E X I C O DESC: Notifies Shareholders of Equity Classification Changes TFM: S&P Rates KCS Railway's $250M Credit Facility 'BB' V E N E Z U E L A PDVSA: NB Power Favors Out-of-Court Deal * Fitch Rates Venezuela's New US Dollar, Bolivar Notes - - - - - - - - - - ================= A R G E N T I N A ================= DESINFECTADORA DEL PLATA: Proof of Claims Review Ends Today ----------------------------------------------------------- Mr. Jose Francisco Ruiz, the appointed receiver for the bankruptcy of Buenos Aires company Desinfectadora del Plata S.A., winds up the credit verification process today. Judge No. 13 of Buenos Aires Court declared the Company bankrupt early this year. Clerk No. 25 assists the court on the case. Deadline for the submission of the individual and general reports will be disclosed at a later date. CONTACT: Jose Francisco Ruiz Avenida Corrientes 4264 Buenos Aires EMPRESA FRUTICOLA: Court Declaration Makes Bankruptcy Official -------------------------------------------------------------- Buenos Aires Court No. 22 declared local company Empresa Fruticola Argentina S.A. "Quiebra", reports local news portal Infobae. The Company will undergo the bankruptcy process with Ms. Cecilia Montelvetti overseeing the proceedings as receiver. Creditors are required to file their claims before April 26, 2004. The receiver will examine and authenticate claims to ascertain the nature and amount of the Company's debts. Working with Clerk No. 44, the court requires the receiver to file the individual reports on June 7, 2004. The general report, which will be prepared after the individual reports are processed, must be submitted to the court on July 20, 2004. CONTACT: Cecilia Montelvetti, Receiver General Urquiza 2134 Buenos Aires GRUPO BA'AIRES: Court Orders Company to Undergo Bankruptcy ---------------------------------------------------------- Buenos Aires Court No. 26 declared local company Grupo BA'Aires Emprendimientos Ind & Com S.R.L. "Quiebra", according to a report by Argentine news source Infobae. Clerk No. 52 assists the court on the case, which will close with the liquidation of the Company's assets to repay creditors. So far, the court has neither assigned a receiver to examine and authenticate creditors' claims nor set the official bankruptcy timetable. CONTACT: Grupo BA'Aires Emprendimientos Ind & Com S.R.L. Boyaca 751 Buenos Aires LA MODERNA: Receiver to Close Credit Verifications Today -------------------------------------------------------- Creditors of bankrupt company La Moderna have until today to get their claims authenticated by the Company's receiver, Mr. Javier de Franceschi, the Troubled Company Reporter - Latin America said in an earlier report. The receiver will immediately prepare the individual reports based on the verification results and submit this to court on April 29, 2004. The general report, which will be prepared after the processing of the individual reports, is due to be submitted to court on June 15, 2004. Court No. 3 of San Francisco in Cordoba declared La Moderna bankrupt just recently. The Company's assets will be liquidated at the end of the bankruptcy process to repay creditors. PERFUMERIAS SAN REMO: Claims Review Deadline Expires Today ---------------------------------------------------------- Mr. Ricardo Bataller, receiver for Perfumerias San Remo S.A.C.I.F.I., is scheduled to close the credit verification process for the Company's bankruptcy today. Creditors' claims are examined to determine the nature and amount of the Company's debts. On orders from insolvency Judge Dieuzeide of Buenos Aires Court No. 1, the receiver will now prepare the individual reports based on the results of the verifications and submit these reports at a yet-to-be-disclosed date. The court is yet to set a date for the submission of the general report also. However, it has set a schedule for the informative assembly on November 24, 2004. The Company's assets will be liquidated at the end of the bankruptcy process to repay creditors. Clerk No. 1 Dr. Fernandez Garello assists the court on the case. CONTACT: Perfumerias San Remo S.A.C.I.F.I. Ave Independencia 1992 Buenos Aires Ricardo Bataller Rodriguez Pena 486 Buenos Aires SUDAMERICAN SHIPPING: Creditor Claims Review Ends ------------------------------------------------- The bankruptcy of Buenos Aires company Sudamerican Shipping Agency S.R.L. will proceed with the preparation of the individual reports as the credit verification period is slated to expire today. The Company's receiver, local accountant Edith Regazzoni, examined and validated creditors' claims in order to determine the nature and amount of the Company's debts. The individual reports on the verifications are to be submitted to court on April 27. The receiver is also required to prepare a general report after the individual reports are processed at court. This report is due for filing on June 9. Sudamerican Shipping was declared bankrupt last month by Buenos Aires Court No. 10, which is assisted by Clerk No. 19. CONTACT: Edith Regazzoni Lavalle 1145 Buenos Aires TELECOM ARGENTINA: Positive 2003 Results Reflect ForEx Moves ------------------------------------------------------------ Telecom Argentina (TEO), Argentina's leading fixed line provider, posted positive results for full-year 2003 despite a hefty net loss in the fourth quarter of the year, reports Dow Jones. The Company reported net profit of ARS351 million ($1=ARS2.9125) for full-year 2003, a significant turnaround from its ARS4.386-billion loss in 2002. Telecom Argentina managed to return to black last year despite a net loss of ARS428 million in the last quarter. Telecom Argentina attributed positive results to foreign exchange movements. For the full year, net revenue were ARS3.753 billion, down 6% from ARS4.012 billion in 2002. Without inflation adjustments, net revenue would have been ARS3.752 billion, a 16% increase over a non-adjusted 2002 figure of ARS3.228 billion. The Company said it saw a significant recovery in demand, especially in its cellular operations. Financial and holdings results produced a gain of ARS48 million for the year, compared with a loss of ARS5.302 billion in 2002. Telecom Argentina said it gained ARS673 million from the peso's appreciation against the dollar in 2003, although the local currency's decline against the U.S. currency during the fourth quarter produced a net loss for that period. Meanwhile, operating profit for 2003 came in at ARS107 million, up from a ARS204-million loss in 2002. Telecom Argentina said its fixed telephony operations are still running operating losses. The Company said cost cutting measures in 2003 led to a 14% decrease in cost of services, administrative expenses and selling expenses from a year earlier. These costs totaled ARS3.646 billion. Telecom Argentina also said it set aside less in 2003 for past- due or delinquent accounts. This cost was ARS11 million for the most recent year, a 94% decrease from 2002. Nortel Inversora SA owns a 54.74% stake in Telecom Argentina. In December, Argentine regulators approved France Telecom's sale of its indirect stake in Telecom Argentina to local investment group W de Argentina. The investment fund paid US$121 million for France Telecom's stake in Sofora Telecomunicaciones SA, a holding company that owns a 51% stake in Nortel Inversora SA. CONTACT: TELECOM ARGENTINA S.A. Alicia Moreau de Justo 50, 10th Floor Capital Federal (1107) Republica Argentina Phone: +54 11 4968 4000 Home Page: http://www.telecom.com.ar Contacts: Alberto J. Ricciardi, Chief Financial Officer Elvira Lazzati, Finance Director Pedro Insussarry, Investor Relations Manager Phone: (5411) 4968-3626/3627 Fax: (5411) 4313-5842/3109 E-mail: inversores@intersrv.telecom.com.ar * Argentina Negotiates $3.1B Payment to IMF ------------------------------------------- Argentina's beleaguered government agreed Tuesday to make a US$3.1-billion payment to the International Monetary Fund, missing by five hours a second default on an IMF loan repayment schedule, reports AFP. The decision, however, didn't come until after IMF pledged to release more financing to the country. President Nestor Kirchner had threatened to withhold payments if IMF officials did not give a clear indication they would soon approve the second review of a stand-by credit package established in September. Argentina's total foreign debt, mostly to private lenders, tops a hefty US$166 billion. It is calling for its debt to be slashed by some 75%. The Argentine government defaulted on its public debt in January 2002 amid violent street riots and an economic meltdown. The IMF, with the support of the Group of Seven of the world's wealthiest nations, has tried to push Argentina to press on in negotiations with holders of paper worth US$81 billion. In September, Argentina signed an agreement with the IMF rescheduling US$21 billion in debt to international financial institutions. The 2004 deal with the IMF calls for Argentina to funnel more than 3% of its of gross domestic product to debt repayments. Argentine officials maintain, however, they cannot build up such a large budget surplus -- and in any case in the next agreement, the IMF may demand more than 3% in payments. =========== B R A Z I L =========== COPEL: Parana Head Seeks Exemption From New Rules ------------------------------------------------- Parana state governor Roberto Requiao has called once again for state-controlled integrated power utility Copel (NYSE: ELP) to be exempted from the new power sector rules, reports Business News Americas. In a meeting with Brazil's President Luiz Inacio Lula da Silva and Mines and Energy Minister Dilma Rousseff, Requiao said he wants Copel's generation arm - Copel Generacao - to be able to sell 100% of its power to the Company's distribution arm - Copel Distribucao - until 2015, as laid out in contracts between the two units signed in 2003. The new model calls for generators to sell to a power pool that incorporates a wide mix of power sources and then for the pool power to be sold to the country's 64 distributors at a single tariff. Present rules allow a distributor to buy up to 30% of its power requirements from an associated company but the new model phases this out. Requiao based his request on the fact that Copel has older power plants whose costs have already been amortized and which therefore sell at cheaper prices. After the meeting, Rouseff said the matter would be for Copel to resolve with electricity regulator Aneel, which has to approve the contracts but rejected them in November 2003. Copel already exceeds the 30% self-dealing limit. EMBRATEL: Hires Jacada to Improve Fraud Analysis Process -------------------------------------------------------- Jacada Ltd. (NASDAQ: JCDA), a leading provider of software that accelerates business process improvement, announced Tuesday that Embratel, the largest telecom company in Latin America, has selected Jacada to help reduce the length of its fraud analysis process. The process, which presently takes between 30 to 45 minutes, will be reduced to about five minutes using Jacada to integrate mainframe and HTML applications. The rapid growth in telecommunications worldwide has spurred an increase in fraud. Industry estimates range from $12 to $60 billion lost annually; with nearly two-thirds of all telecom companies suffering loses due to organized fraudulent activities. "Detecting fraud requires quick analysis of large volumes of data from many disparate systems," said Carlos Falconi, Vice President of Latin America, for Jacada. "Slowing the growth of fraud requires adaptable, integrated information systems." The first phase of the project will use Jacada Integrator to automate the navigation process through various mainframe and Web-based screens and applications, reducing the number of keystrokes required to work through the fraud analysis process, improving efficiency up to 800%. In the second phase of the project, Jacada will integrate these applications to other Embratel systems, including its Siebel CRM system. Jacada is a certified Siebel partner with over 40 joint customers. By incorporating legacy data within existing business processes and applications, Embratel will cost-effectively leverage business-critical data that is often difficult to access. After a public bid for proposals, Embratel ultimately selected Jacada over several solutions because of Jacada's ability to integrate multiple types of computing systems including mainframe, Web, CRM, and Windows. Efficiency in tracking fraud is especially critical in Brazil's telecommunications industry, which is implementing sweeping deregulation and privatization. Embratel operates the majority of the corporate telecommunications market and is the leading player in promoting competition. The development and implementation of the project is being conducted by a team formed by Embratel, 3CON - Consultoria e Sistemas (Jacada's authorized partner) and Jacada professionals. About Embratel - Embratel is the premium telecommunications provider in Brazil, offering many different services such as local and long distance calls, advanced voice service, high- speed data communication, Internet access, data communication using satellites and corporate network. The company is a leader in data communication and Internet access in Brazil, with a top position to operate end-to-end networks in Latin America. Embratel fiber optic network has 29 thousand kilometres of optic cables, representing around 1 million and sixty nine thousand kilometres of optic fiber. About Jacada - Jacada Ltd. provides software solutions for accelerating business process improvement through a full range of integration, Web-to-host, and legacy access solutions. Jacada conforms to any architecture style including J2EE, .NET, and Web Services and is the preferred and certified legacy connection solution for BEA, Computer Associates, Oracle, PeopleSoft, SeeBeyond, and Siebel Systems. Jacada solutions are in use today at major corporations and government organizations such as AIG, Bank of America, Caterpillar, Citibank, Delta Air Lines, The Federal Reserve Bank, Porsche Cars North America, Prudential, and the US Department of Interior. Jacada operates globally with headquarters in Atlanta, Georgia; Herzliya, Israel; and London, England. Jacada can be reached at www.jacada.com or at 1-800- 773-9574. This news release may contain forward-looking statements that are made pursuant to the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements involve risks and uncertainties, and actual results may differ substantially from these statements. For a more complete disclosure of these risk factors, please refer to the Company's Form 20F filed with the Securities and Exchange Commission. Jacada is a trademark of Jacada Inc. All other brands or product names are trademarks of their respective owners. Siebel is a trademark of Siebel Systems, Inc. and may be registered in certain jurisdictions. All other product and company names mentioned are the property of their respective owners and are mentioned for identification purposes only. CONTACTS: Jacada Inc., Atlanta Ann Conrad, 770-352-1300 aconrad@jacada.com NEI Communications, Inc. Carl Nelson, 781-237-1040, ext. 11 cnelson111@comcast.net IMS Brasil Kelli Goncalves, 11 3047-4505 kgoncalves@imsmarketing.com METRON: Bankruptcy Petition Gets OK From Brazilian Judge -------------------------------------------------------- Metron, a Brazilian manufacturer of personal computers and electronic products, obtained a local judge's approval to seek preventive bankruptcy, reports Gazeta Mercantil. The judge appointed Alphatronic S/A, a creditor of Metron, as the trustee. Metron, which filed the bankruptcy petition in September 2003, declared liabilities totaling almost BRL80 million - 60% of which with foreign creditors and 40% with Brazilian creditors. The Company was a leader in the domestic market between 2001 and 2002 when it registered a turnover of BRL400 million. However, financial problems began to emerge in the second half of 2003 following currency devaluation. The main creditors of Metron are Globex, Ponto Frio, Casas Bahia, Extra Electro, Makro and Wal-Mart. Its main suppliers are Microsoft, Sony, Soletron, Specteck/Micro and United Accessories. SABESP: Board Approves Water Program ------------------------------------ Cia. de Saneamento Basico do Estado de Sao Paulo (NYSE:SBS) (Bovespa:SBSP3), the largest water and sewage utility company in the Americas and the third-largest in the world (in terms of number of customers), announced that in a meeting held on March 3, 2004, the Board of Executive Officers approved the Program of Incentive for Water Consumption Reduction, which aims to stimulate the population of the Sao Paulo Metro to reduce water consumption, in order to help facing the water shortage, caused by the low rainfall levels and the following low water levels in the reservoirs that supply the region. The program will compass the municipalities of the Sao Paulo Metro supplied by the metropolitan aqueduct system and it will be effective for 6 (six) months starting on March 15, 2004. A 20% (twenty percent) bonus on the water bill, or on the water plus sewage bill, will be granted in the months when consumption is reduced by 20% (twenty percent) in relation to the average consumption calculated by Sabesp, based on the consumption in the same period of the previous year. CONTACT: Helmut Bossert Tel.: 5511 3388-8664 E-mail: hbossert@sabesp.com.br Marisa Guimaraes Tel.: 5511 3388-9135 E-mail: marisag@sabesp.com.br Web site: http://www.sabesp.com.br ========= C H I L E ========= PARMALAT CHILE: Bethia's Reiterates Acquisition Interest -------------------------------------------------------- Chilean investment firm Inversiones Bethia said it is still interested to acquire the local unit of Italy's Parmalat, reports Estrategia. Bethia's announcement came after Parmalat Chile filed for protection from creditors last week. Bethia is just waiting to see which of the three options Parmalat will choose to take to resolve its debt problems. Options include the incorporation of a strategic partner, a capital infusion from its parent company or other sources, and the sale of its assets. Sources say that no matter what Parmalat will choose to take, Bethia will be involved. Bethia has already made an offer for Parmalat's plant in Victoria, and is said to be interested in Parmalat's 7% market share, hoping to use the brand name for several years under license. Sources add that the most likely scenario is that, even if the Victoria plant is sold to Bethia, the latter will also provide US$20 million in cash, taking a 51% share of the Company's shares. =============== C O L O M B I A =============== COLOMBIA TELECOMUNICACIONES: To Pay Nortel $80M Settlement ---------------------------------------------------------- Colombia's state-owned telecommunications firm Colombia Telecomunicaciones SA, formerly Telecom, will pay Canada's Nortel Networks Corp. US$80 million on May 7 to settle decade- old claims over failed joint-venture contracts, says Business News Americas. The upcoming payment is part of a preliminary agreement signed by the two companies last week. In exchange for the payment, Nortel will drop its lawsuits against Telecom. Telecom paid US$75 million to Nortel in 2002 to settle a previous lawsuit related to the same joint venture projects. Nortel is one of a group of foreign companies demanding compensation from liquidated state-owned Telecom after the company received less than the stipulated returns for installing telephone lines under joint-venture contracts signed between 1993 and 1998. Earlier, Telecom agreed to pay US$56 million to settle a similar dispute with Sweden's Ericsson. With settlement of the Nortel and Ericsson agreements, Telecom's liabilities under these joint ventures would drop to approximately US$764 million. ============= E C U A D O R ============= PETROECUADOR: 26 Ousted Executives to be Replaced by Month End -------------------------------------------------------------- Petroecuador expects an independent commission to choose by the end of the month the replacements for 26 executives who were fired last week by Ecuadorian President Lucio Gutierrez, reports Business News Americas. "We expect it will take the commission no less than 2-3 weeks due to the quantity of resum�s we have received," a company spokesperson said. President Gutierrez declared Petroecuador in a state of emergency on March 3 and subsequently fired more than twenty senior Petroecuador executives as part of an effort to trim bureaucracy and stamp out oil theft within the state-owned oil company. The president gave Petroecuador until March 24 to develop a restructuring plan that includes replacing the 26 executives. The Company will have 60 days to carry out the reorganization once the government approves the plan, the government said in a statement. Estimates of economic losses due to fuel theft vary, but the energy and mines ministry calculates that the country loses over US$100 million a year, the spokesperson added. PETROECUADOR: Calling for Pipeline Contract Bids ------------------------------------------------ Petroecuador is preparing to launch a project to automate the country's pipeline system, Business News Americas reports, citing a company spokesperson. By the end of the month, the Company will call for bids on a contract to carry out engineering studies for the project that requires investments of between US$20 million - US$25 million, the spokesperson said. The contract is part of the Company's plan to reduce losses from fuel theft. After the engineering studies are completed, the Company will call for bids on the main contract, which is designed to automate the pipeline system using the new SCADA system. Petroecuador has 1,300km of pipelines and 22 terminals, "so it will take a some time to carry out the studies to design the bidding rules," the spokesperson said. Work on the whole project is expected to wrap up in 12-18 months. The funds for the project could come from reduced fuel losses over the next year or two through increased security on the company's pipelines, the spokesperson added. =========== M E X I C O =========== DESC: Notifies Shareholders of Equity Classification Changes ------------------------------------------------------------ The General Ordinary and Extraordinary Shareholders Meeting of DESC, S.A. de C.V. (DESC), held on March 8, 2004 resolved, among other items: 1. The mandatory conversion of all Series "C" shares into Series "B" shares representing the capital stock of DESC, effective from and after the fifth business day immediately following publication of this notice of conversion. The conversion above mentioned shall be done at one Series "C" share for one Series "B" share. In the case of shareholders who physically maintain their stock certificates, the exchange of the certificates affected by the conversion aforementioned shall be done against delivery of the certificates that are presently in circulation, on business days and times in the corporate Treasury located at Paseo de los Tamarindos 400B, piso 27, Col. Bosques de la Lomas, Mexico, Distrito Federal, from and after the fifth business day immediately following publication of this notice of conversion until May 19, 2004, inclusive. The company shall directly exchange the certificates deposited with S.D. Indeval, S.A. de C.V., Institucion para el Deposito de Valores ( Securities Deposit Institution) within such period. Notwithstanding the date fixed therefore, the company shall continue performing the exchange of the share certificates as long as these be presented to the Treasury of the company within the period established by Article 1045 of the Commercial Code. By virtue of the conversion of the total Series "C" shares into Series "B" shares, the American Depositary Shares traded on the New York Stock Exchange, Inc., will represent Series "B" shares. 2. The voluntary conversion of Series "A" shares into Series "B" shares, and voluntary conversion of Series "B" shares into Series "A" shares, at one for one, per request of the corresponding shareholders. The period for presentation of the requests for voluntary conversion commences on the fifth business day immediately following publication of this notice of conversion and concludes on May 19, 2004. In the case of shareholders who physically maintain their stock certificates, the request for conversion and consequent exchange of the corresponding certificates shall be done on business days and times in the corporate Treasury located at Paseo de los Tamarindos 400B, piso 27, Col. Bosques de la Lomas, Mexico, Distrito Federal, from and after the fifth business day immediately following publication of this notice of conversion until May 19, 2004, inclusive. The company will receive the request of voluntary conversion and exchange the certificates directly through S.D. Indeval, S.A. de C.V., Institucion para el Deposito de Valores (Securities Deposit Institution), regarding the certificates deposited with this institution, within such period. The aforesaid exchanges shall be done against delivery of the certificates presently outstanding. The series "A" shares have not been, and will not be, registered under the securities laws of any jurisdiction outside of Mexico. Accordingly, the voluntary conversion will be exercised solely in Mexico by shareholders of DESC. DESC, S.A. de C.V. (NYSE: DES; BMV: DESC) is one of the largest industrial groups in Mexico, with 2003 sales of approximately US$ 2 billion and nearly 14,000 employees, which through its subsidiaries is a leader in the Automobile Parts, Chemical, Food and Property sectors. CONTACTS: Arturo D'Acosta Ruiz Marisol Vazquez Mellado Jorge Padilla Ezeta Tel: (5255) 5261-8044 jorge.padilla@desc.com.mx Maria Barona Melanie Carpenter Tel: 212-406-3690 desc@i-advize.com www.desc.com.mx TFM: S&P Rates KCS Railway's $250M Credit Facility 'BB' ------------------------------------------------------- Standard & Poor's Ratings Services assigned its 'BB' rating and its recovery rating of '1' to Kansas City Southern Railway Co.'s (KCSR) new $250 million credit facility, consisting of a $150 million term loan B facility due 2008 and a $100 million revolving credit facility due 2007. Ratings on the company's existing credit facility are withdrawn. The debt is guaranteed by parent Kansas City Southern and certain subsidiaries. The 'BB-' corporate credit ratings for both KCSR and Kansas City Southern are affirmed. The new credit facilities are rated 'BB', one notch above the corporate credit rating, indicating high expectation of full recovery of principal in the event of default. The outlook is negative. The Kansas City, Mo.-based Class 1 railroad has about $850 million of lease-adjusted debt outstanding. "The ratings on Kansas City Southern reflect its aggressive financial profile and uncertainties related to its strategically important investment in TFM S.A. de C.V., somewhat offset by the favorable risk characteristics of the U.S. freight railroad industry and the company's strategically located (albeit limited in size) rail network," said Standard & Poor's credit analyst Lisa Jenkins. Kansas City Southern is a Class 1 (major) railroad, but it is significantly smaller and less diversified than its peers. Its core rail operations cover a 10-state region. Operating results have been depressed by the weak economy and increased cost pressures (especially fuel) over the past two years. Results in 2003 were also adversely affected by an adjustment in claims reserves and significantly reduced equity in earnings from the company's investment in Grupo Transportacion Ferroviaria Mexicana S.A. de C.V. (TFM), the main privatized Mexican railroad. In 2003, Kansas City Southern reported net income of $11.2 million versus $57.2 million in 2002. The new credit facility will consist of a $150 million term loan maturing in 2008 and a $100 million revolving credit facility maturing in 2007. The bank loan rating incorporates Standard & Poor's expectation that the collateral package will retain significant value in the event of a default or bankruptcy, and that there is a high expectation of full recovery of principal (100%), given the pledged collateral pool. Kansas City Southern's relationship with its affiliate, TFM, is strained at this time, and the status of its proposal to take control of TFM is uncertain. Ratings incorporate room for the company to pay its portion of the put option or for the company to complete the TFM transaction as originally proposed. However, if Kansas City Southern is forced to pay the full amount of the put, or if financial performance at Kansas City Southern or TFM weakens from expected levels, or if the TFM deal goes forward under more onerous terms, ratings could be reviewed for a downgrade. ANALYST: Lisa Jenkins, New York (1) 212-438-7697 ================= V E N E Z U E L A ================= PDVSA: NB Power Favors Out-of-Court Deal ---------------------------------------- The head of Canadian electricity generator NB Power may opt for an out-of-court settlement with the Venezuelan government and its oil companies instead of pursuing a US$2-billion lawsuit in court, says an article appearing on CBC's website. "I don't like lawsuits. I'm an old lawyer by training and I got out of the business a long time ago. I want to go forward. I want to sit across the table and talk to people. And I look forward to doing that with the Venezuelans," NB Power President David Hay said. NB Power recently launched a lawsuit against Venezuelan state- owned company PDVSA for breaking a verbal agreement to supply Orimulsion fuel to its Coleson Cove power plant in Saint John. In the meantime, PDVSA President Ali Rodrigez maintains that his company never had a supply contract with NB Power. "No document has been signed," Rodriguez said. "A letter of very generic terms was signed in which there is no obligation, and where the possibility of signing a contract remains open without a set date. It's not a formal contract." He added his company is ready to fight the utility in court, if it comes to that. He says that his company will be mounting a vigorous defense. The court battle between NB Power and PDVSA is expected to drag on for years. * Fitch Rates Venezuela's New US Dollar, Bolivar Notes ------------------------------------------------------ Fitch Ratings, the international rating agency, will rate Venezuela's new U.S. dollar notes maturing September 2004 and its new Venezuelan bolivar notes maturing March 2008 and September 2008 'B-'. The notes will be sold together in investment units, but will subsequently trade separately. The U.S. dollar obligations will be governed under New York law and the Venezuelan bolivar obligations will be governed under Venezuelan law. At the official exchange rate, the U.S. dollar notes represent approximately one-third of an investment unit's face value. The Rating Outlook is Stable. Proceeds of the notes will be used to finance debt amortizations and the budget deficit. Venezuela's sovereign ratings balance a comparatively modest public external debt burden and relatively strong external liquidity against substantial political risks and a policy framework inconsistent with the medium-term objective of sustainable economic growth and diminished dependence on petroleum. The current expansionary fiscal and monetary stance in the context of capital controls and an overvalued exchange rate will face increasing pressures this year as the domestic debt market becomes more saturated and inflation will likely rise. Should the inevitable relaxation of external controls become disorderly and trigger sizeable capital flight, the comfortable external liquidity position could unravel and domestic debt markets could dry up relatively quickly. Similarly, a rapid decline in crude oil prices would pressure both fiscal and external balances, particularly since the bulk of the oil stabilization fund (formerly known as the FIEM) was spent during last year's political crisis. The process to recall President Chavez could be completed by June, but Fitch believes the most likely outcome is that he remains in office through the end of his term in 2006. Should a recall vote actually take place, it remains uncertain whether the opposition could deliver a turnout large enough to make the referendum valid. Furthermore, if the president were recalled, the Supreme Court could allow him to run again in the elections immediately following the recall - a contest he would stand a good chance of winning given that he has a loyal base of supporters and that there is no clear opposition leader. Economic projections all depend critically on assumptions about political developments, the impact of releasing capital and exchange controls, and oil prices. Although there is great potential for volatility in macroeconomic aggregates this year, economic growth is expected to be strong-perhaps over 6%. This would be among the highest of rated sovereigns, but it will primarily reflect the statistical comparison against the 19% depression of 1H 2003 and the relative stabilization in late 2003 and 1H 2004 rather than a true recovery or expansion. CONTACT: Morgan C. Harting +1-212-908-0820, New York Therese Feng +1-212-908-0230, 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 America is a daily newsletter co-published by Bankruptcy Creditors' Service, Inc., Fairless Hills, Pennsylvania, USA, and Beard Group, Inc., Frederick, Maryland USA. John D. Resnick, Edem Psamathe P. Alfeche and Oona G. Oyangoren, Editors. Copyright 2004. 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 * * *