/raid1/www/Hosts/bankrupt/TCRLA

/raid1/www/Hosts/bankrupt/TCRLA_Public/040827.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 Friday, August 27, 2004, Vol. 5, Issue 170 Headlines A R G E N T I N A AMARA S.A.: Court Declares Company Bankrupt BHN III: Local S&P Reaffirms Debt Ratings BOOMERANG CARDS: Judge Approves Bankruptcy Motion DEXER S.R.L.: Liquidates Assets to Pay Debts ELECTROMECANICA OISA: Seeks to Restructure Debt ELECTROZYK S.A.: Court Resets Liquidation Schedule EXPOFOT S.A.: Court Moves Assembly Date GARAVAGLIA Y CIA: Trustee to Close Claims Validation IANNONE JUAN: Court Grants Reorganization Plea LOMAS TAINER: Bankruptcy Process Initiated by Court Order MERCEDES CONFECCIONES: Credit Validation Process Nears End MIRAMAX S.A.: Court Issues Bankruptcy Order NEOFUNE: Claims Verification Deadline Approaches PANELMASTER S.A.: Court OKs Voluntary Bankruptcy Plea RECLINERS SYSTEM: Court Deems Liquidation Prudent SALPE S.R.L.: Gets Court Authorization to Reorganize SPORTBRANDS S.A.: Bankruptcy Protection Initiated SUENOS DORADOS: Court Favors Creditor's Bankruptcy Motion B R A Z I L AHOLD: Posts EUR32Mln Net Income in 2Q04 EMBRATEL: Appoints Isaac Berensztejn as New CFO TELESP CELULAR: Intends to Launch Tender Offer for Subsidiaries C H I L E ROYAL SHELL: In Talks With Petrobras Over Chilean Unit Sale SCL TERMINAL: Moody's Ups Rating to B3 From Caa1 C O S T A R I C A ICE: Finalizes Internet Access Rates D O M I N I C A N R E P U B L I C TRICOM: Names Gitner as Independent Non-executive Director M E X I C O PEMEX: Munoz Supports Move to Modify Tax Scheme T R I N I D A D & T O B A G O NWRHA: Concern Raised Over Social Events for Staff Members V E N E Z U E L A PDVSA: S&P Raises Rating After Venezuela Upgrade PETROZUATA FINANCE: S&P Raises Bond Rating To B+ * S&P Raises Long-, Short- Term Ratings On Venezuela To 'B' - - - - - - - - - - ================= A R G E N T I N A ================= AMARA S.A.: Court Declares Company Bankrupt ------------------------------------------- Amara S.A., a company operating in Buenos Aires, will enter bankruptcy protection after Court No. 6 of the city's civil and commercial tribunal ordered the company's liquidation. The order effectively transfers control of the company's assets to the court-appointed trustee who will supervise the liquidation proceedings. Infobae reports that the court selected Mr. Norberto Bonesi as trustee. He will be verifying creditors' proofs of claims until the end of the verification phase on October 20, 2004. Argentine bankruptcy law requires the trustee to provide the court with individual reports on the forwarded claims and a general report containing an audit of the company's accounting and business records. The individual reports will be submitted on November 27, 2004 followed by the general report, which is due on February 2 next year. CONTACT: Mr. Norberto Bonesi, Trustee Avda Juan B Justo 5096 Buenos Aires BHN III: Local S&P Reaffirms Debt Ratings ----------------------------------------- Standard & Poor's International Ratings, Ltd. Sucursal Argentina reaffirmed the `raD' rating assigned to various Fideicomiso Hipotecario BHN III Financial Trusts. The affected securities are: - US$14.896 million worth of "Clase A1" financial trusts due on May 31, 2017 - US$82.09 million worth of "Clase A2" financial trusts coming due on May 31, 2017 - US$5.06 million worth of "Clase B" financial trusts coming due on May 31, 2018 Also, the local S&P also reaffirmed the `raC' rating assigned to Fideicomiso Hipotecario BHN III's "Certificados de Participacion" worth US$3.374 million due on May 31, 2018. An 'raC' rating may be used to cover a situation where a bankruptcy petition has been filed or similar action has been taken, but payments on the obligation are being continued, said S&P. BOOMERANG CARDS: Judge Approves Bankruptcy Motion ------------------------------------------------- Boomerang Cards S.A. was declared bankrupt after Judge Villar of Buenos Aires' civil and commercial tribunal Court No. 13 endorsed the petition filed by Ms. Maria Lerrumbre for the company's liquidation. La Nacion reports that the court assigned Mr. Donato Antonio Sakurno to supervise the liquidation process as trustee. He will validate creditors' proofs of claims until October 1, 2004. Dr. Guerri, Clerk No. 25, assists the court on this case. CONTACT: Boomerang Cards S.A. Roseti 576 Buenos Aires Mr. Donato Antonio Sakurno, Trustee Bernardo de Irigoyen 330 Buenos Aires DEXER S.R.L.: Liquidates Assets to Pay Debts -------------------------------------------- Buenos Aires-based Dexer S.R.L. will begin liquidating its assets following the bankruptcy pronouncement issued by Court No. 8 of the city's civil and commercial tribunal. The bankruptcy ruling places the company under the supervision of court-appointed trustee, Ms. Silvia Susana Perez Leon. The trustee will verify creditors' proofs of claims until October 27, 2004. Next, the validated claims will be presented in court as individual reports on December 9, 2004. The trustee will also submit a general report, containing a summary of the company's financial status as well as relevant events pertaining to the bankruptcy, on February 21 next year. The bankruptcy process will end with the disposal company assets in favor of its creditors. CONTACT: Ms. Silvia Susana Perez Leon, Trustee Avda Cordoba 850 Buenos Aires ELECTROMECANICA OISA: Seeks to Restructure Debt ----------------------------------------------- Electromecanica Oisa S.R.L., an elevator repair and maintenance company, requested for reorganization after failing to pay its liabilities since July 14, 2004. The reorganization petition, once approved by the court, will allow the company to negotiate a settlement with its creditors in order to avoid a straight liquidation. The case is pending before Court No. 18 of Buenos Aires' Civil and Commercial Tribunal. Dr. Cufari, Clerk of Court No. 36, assists on this case. CONTACT: Electromecanica Oisa S.R.L. Ayacucho 369 Buenos Aires ELECTROZYK S.A.: Court Resets Liquidation Schedule -------------------------------------------------- Court No. 14 of Buenos Aires' civil and commercial tribunal, assisted by Clerk No. 28, rescheduled key event in Electrozyk S.A.'s liquidation to these dates: 1. Claims Verification Deadline - October 21, 2004; 2. General Report Submission - February 16, 2005 Mr. Alberto Rotenberg serves on this case as trustee says local news source Infobae. CONTACT: Mr. Alberto Rotenberg, Trustee Avenida Cordoba 1336 Buenos Aires EXPOFOT S.A.: Court Moves Assembly Date --------------------------------------- The informative assembly for the Expofot S.A. reorganization has been moved to June 17 next year. The Company will present a completed settlement proposal for its creditors during the assembly. Court No. 26 of Buenos Aires' civil and commercial tribunal handles this case with the assistance of Clerk No. 51. CONTACT: Expofot S.A. Suipacha 597 Buenos Aires GARAVAGLIA Y CIA: Trustee to Close Claims Validation ---------------------------------------------------- Mr. Alfredo Ruben Dario Rodriguez, the court-appointed trustee supervising the Garavaglia y Cia S.A. liquidation proceedings, is set to close the verification of creditors' claims Monday, August 30, 2004. Creditors who fail to comply with the submission deadline will not qualify for the post-liquidation payments to be made once all the company's assets are disposed. CONTACT: CONTACT: Garavaglia y Cia S.A. 25 de Mayo 196 Buenos Aires Mr. Alfredo Ruben Dario Rodriguez, Trustee Marcelo T de Alvear 1775 Buenos Aires IANNONE JUAN: Court Grants Reorganization Plea ---------------------------------------------- Iannone Juan y Iannone Pascual S.H. successfully petitioned for reorganization after Court No. 11 of Mar del Plata's civil and commercial tribunal issued a resolution opening the company's insolvency proceedings. During insolvency, the company will continue to manage its assets subject to certain conditions imposed by Argentine law and the oversight of a court-appointed trustee. Infobae relates that Ms. Elsa Beatriz Palavecino will serve as trustee during the course of the reorganization. She will be accepting creditors' proofs of claims for verification until September 6, 2004. CONTACT: Iannone Juan y Iannone Pascual S.H. Ruta 226 Km 7,5 Nave 2 Puesto 85 del Mercado de Frutas y Verduras Procosud S.A. Mar del Plata Ms. Elsa Beatriz Palavecino Alberti 3065 Mar del Plata LOMAS TAINER: Bankruptcy Process Initiated by Court Order --------------------------------------------------------- Court No. 18 of Buenos Aires' civil and commercial tribunal declared local company Lomas Tainer S.R.L. bankrupt after the company defaulted on its debt payments. The order effectively places the company's affairs as well as its assets under the control of court-appointed trustee, Mr. Xilef Irureta. As trustee, Mr. Irureta is tasked with verifying the authenticity of claims presented by the company's creditors. The verification phase is ongoing until September 17, 2004. Following claims verification, the trustee will submit the individual reports based on the forwarded claims for final approval by the court on Novenber 1, 2004. A general report will also be submitted on December 14, 2004. Infobae reports that Clerk No. 35 assists the court on this case, which will end with the disposal of the company's assets in favor of its creditors. CONTACT: Mr. Xilef Irureta, Trustee Parana 145 Buenos Aires MERCEDES CONFECCIONES: Credit Validation Process Nears End ---------------------------------------------------------- Mr. Roberto Zapata, the court-appointed trustee supervising the reorganization of Mercedes Confecciones S.A. will verify creditors' proof of claims until Monday, August 30, 2004. The court will use the submitted proofs to finalize the list of creditors eligible to receiver post-liquidation payments. CONTACT: Mercedes Confecciones S.A. Ruta 7 Km. 791 Aerea Indust Parque Norte San Luis Mr. Roberto Zapata, Trustee San Martin 1387 San Luis MIRAMAX S.A.: Court Issues Bankruptcy Order ------------------------------------------- Buenos Aires-based Miramax S.A. entered bankruptcy after Judge Gutierrez Cabello of Buenos Aires' civil and commercial tribunal Court No. 7 approved a bankruptcy motion filed by Banca Nazionale del Lavoro SA. La Nacion says that the Company's failure to pay US$22,344.33 in debt prompted the liquidation call. Working with Dr. Giardinieri, the city's Clerk No. 14, the court assigned Mr. Jorge Stanislavsky as trustee for the bankruptcy process. The trustee's duties include the authentication of the Company's debts and the preparation of the individual and general reports. Creditors are required to present their proofs of claims to the trustee before October 14, 2004. The Company's assets will be liquidated at the end of the proceedings to repay creditors. Payments will be based on the results of the verification process. CONTACT: Miramax S.A. Girardot 232 Buenos Aires Mr. Jorge Stanislavsky, Trustee Talcahuano 768 Buenos Aires NEOFUNE: Claims Verification Deadline Approaches ------------------------------------------------ Creditors of bankrupt Argentine company Neofune S.A. are requested to submit proof of their claims before the verification period ends Monday, August 30, 2004. All documents should be forwarded to the court-appointed trustee, Mr. Aldo Markman, before the deadline. Judge Fernandez of Buenos Aires Court No. 19 has jurisdiction over this case. CONTACT: CONTACT: Neofune S.A. Lavalle 662 Buenos Aires Mr. Aldo Markman, Trustee Alsina 1441 Buenos Aires PANELMASTER S.A.: Court OKs Voluntary Bankruptcy Plea ---------------------------------------------------- Judge Villar, serving for Court No. 13 of Buenos Aires' civil and commercial tribunal, declared Panelmaster S.A. bankrupt, says La Nacion. Clerk No. 25, Dr. Guerri, assists the court on the case, which will conclude with the liquidation of the Company's assets. The court-appointed trustee, Mr. Jose Ruiz, will examine and authenticate creditors' claims until October 8, 2004. This is done to determine the nature and amount of the Company's debts. Creditors must have their claims authenticated by the trustee by the said date in order to qualify for the payments that will be made after the Company's assets are liquidated. CONTACT: Panelmaster S.A. Marcelo T. de Alvear 1381 Buenos Aires Mr. Jose Ruiz, Trustee Avenida Corrientes 4264 Buenos Aires RECLINERS SYSTEM: Court Deems Liquidation Prudent ------------------------------------------------- Court No. 12 of Buenos Aires' civil and commercial tribunal ordered the liquidation of Recliners Systems S.A. after the company defaulted on its debt obligations, Infobae reveals. The liquidation pronouncement will effectively place the company's affairs as well as its assets under the control of Ms. Norma Alicia Balmes, the court-appointed trustee. Ms. Balmes will verify creditors' proofs of claims until September 30, 2004. The verified claims will serve as basis for the individual reports to be submitted in court on November 11, 2004. The submission of the general report follows on December 27, 2004. Clerk No. 24 assists the court on this case, which will end with the disposal of the company's assets in favor of its creditors. CONTACT: Ms. Norma Alicia Balmes, Trustee Avda Roque Saenz Pe�a 1185 Buenos Aires SALPE S.R.L.: Gets Court Authorization to Reorganize ---------------------------------------------------- Salpe S.R.L. will begin reorganization following the approval of its petition by Court No. 24 of Buenos Aires' civil and commercial tribunal. The opening of the reorganization will allow the company to negotiate a settlement with its creditors in order to avoid a straight liquidation. Ms. Alicia Zurron will oversee the reorganization proceedings as the court-appointed trustee. She will verify creditors' claims until September 28, 2004. The validated claims will be presented in court as individual reports on November 10, 2004. The trustee is also required by the court to submit a general report essentially auditing the company's accounting and business records as well as summarizing important events pertaining to the reorganization. This report will be presented in court on December 23, 2004. The Informative Assembly, the final stage of a reorganization where the settlement proposal is presented to the company's creditors for approval, is scheduled on June 22 next year. CONTACT: Salpe S.R.L. Pasaje Rivarola 170 Buenos Aires Ms. Alicia Zurron, Trustee Avda Corrientes 2963 Buenos Aires SPORTBRANDS S.A.: Bankruptcy Protection Initiated ------------------------------------------------- Buenos Aires-based Sportbrands S.A. entered bankruptcy after Judge Dieuzeide, serving for Court No. 1 of the city's civil and commercial tribunal, approved a bankruptcy motion filed by Banco General de Negocios S.A., reports La Nacion. The Company's failure to pay US$64,931.04 in debt prompted the creditor to file the petition. Working with Dr. Galli, Clerk No. 2, the court appointed Mr. Mauricio Gola as trustee for the bankruptcy process. The trustee's duties include the authentication of the Company's debts and the preparation of the individual and general reports. Creditors are required to present their proofs of claims to the trustee before October 12, 2004. The Company's assets will be liquidated at the end of the bankruptcy process to repay creditors. Payments will be based on the results of the verification process. CONTACT: Sportbrands S.A. Correa 3545 Buenos Aires Mr. Mauricio Gola, Trustee Maipu 509 Buenos Aires SUENOS DORADOS: Court Favors Creditor's Bankruptcy Motion --------------------------------------------------------- Stylus S.A. successfully sought for the bankruptcy of Suenos Dorados S.A. after Judge Villar, serving for Court No. 13 of Buenos Aires' civil and commercial tribunal, declared the Company "Quiebra," reports La Nacion. As such, the Company will now start the bankruptcy process under the supervision of court-appointed trustee Alberto Lopez. Creditors of the Company must submit their proofs of claim to the trustee before September 24 for authentication. Failure to do so will mean a disqualification from the payments that will be made after the Company's assets are liquidated. The creditor sought for the Company's bankruptcy after the latter failed to pay debts amounting to US$4,420. Dr. Guerri, Clerk No. 25, assists the court on the case, which will culminate in the liquidation of all of its assets. CONTACT: Suenos Dorados S.A. Av. Independencia 2490 Buenos Aires Mr. Alberto Lopez, Trustee Bernardo of Irigoyen 330 Trustee =========== B R A Z I L =========== AHOLD: Posts EUR32Mln Net Income in 2Q04 ---------------------------------------- HIGHLIGHTS: - Net income EUR 32 million (Q2 2003: net income EUR 3 million) favorably impacted by lower net financial expenses; - Operating income EUR 169 million (Q2 2003: operating income EUR 222 million) - Net sales EUR 12.3 billion, a decrease of 4.9% compared to Q2 2003. Net sales growth was 3.0% excluding currency impact and impact of divestments - Net cash flow before financing activities amounted to an outflow of EUR 5 million (Q2 2003: net cash inflow before financing activities EUR 399 million). Ahold published Thursday its second quarter 2004 results. "Many of our main operating companies showed improved performance against the same quarter of last year," commented Anders Moberg, Ahold President and CEO. "The recovery of U.S. Foodservice is well underway and we are pleased to show a positive operating income this quarter. In Europe, the ongoing repositioning of Albert Heijn is strengthening the company's market leadership while cost reductions have led to higher operating income." "Our results for U.S. Retail continue to be impacted by strong competition. We've also experienced pressure on operating expenses and incurred certain fixed asset impairment charges and costs associated with the integration of Giant-Landover and Stop & Shop into one business arena," Mr. Moberg continued. "This integration process, a part of our Road to Recovery program, is proceeding according to plan. As this huge task and other ongoing projects progress towards completion, we will begin to see the full impact on our competitive position." Summary Q2 2004: Net sales increased excluding impact of currency and divestments In the second quarter of 2004 net sales amounted to EUR 12.3 billion, a decrease of 4.9% compared to the same period in 2003. Net sales growth was 3.0% excluding currency impact and the impact of divestments. Operating income below last year Operating income amounted to EUR 169 million in the second quarter of 2004 (Q2 2003: operating income EUR 222 million). Europe Retail and U.S. Foodservice reported higher operating income while U.S. Retail reported significantly lower operating income. U.S. Retail and South America were both negatively impacted by fixed asset impairment charges. The costs related to the settlement with AIG Europe (Netherlands) N.V., as announced on July 16, 2004, have also been included. Net income favorably impacted by lower net interest expenses The improvement of net income to EUR 32 million in the second quarter of 2004 (Q2 2003: net income EUR 3 million) was primarily caused by lower net interest expenses related to the early repayment of debt in the second quarter and during 2003. Net debt substantially unchanged Net debt only changed marginally in the second quarter of 2004. Gross debt, however, was further reduced from EUR 10.6 billion at the end of the first quarter of 2004 to EUR 9.6 billion at the end of the second quarter of 2004, the result of Ahold's ongoing efforts to strengthen its balance sheet. Net cash flow In the second quarter a small net cash outflow before financing activities of EUR 5 million was reported (Q2 2003: net cash inflow EUR 399 million). This decrease was mainly due to lower real estate divestments, higher income taxes paid and a net cash outflow for working capital. Ahold reiterates its outlook for 2004: a year of transition 2004 is a year focused on continued efforts to strengthen the organization, and restructure and integrate the businesses in order to build a solid platform for future growth and profitability. Management will concentrate on achieving the previously announced Road to Recovery performance objectives for 2005 and beyond. Ahold continues to strengthen and improve its internal controls and corporate governance, as well as solidify compliance with the regulatory environment in 2004. All of these changes are important cornerstones of our Road to Recovery program. They require considerable resources and effort from our operations and corporate support office in 2004. Retail operations continue to face increased competition and price pressure. Specifically the competitive pressure on the U.S. Retail operations continues to be very challenging. On the other hand, Ahold expects healthy sales development in the foodservice sector. Operating income before impairment and amortization of goodwill and exceptional items at U.S. Foodservice is expected to be positive for 2004 and exceed the level of 2002, no later than 2006. Operating expenses are impacted by costs related to legal proceedings and investigations as well as initiatives underway to begin reporting under International Financial Reporting Standards and ongoing work to comply with the U.S. Sarbanes- Oxley Act. As previously announced, the accumulated foreign currency adjustments ("CTA losses") related to certain divestments, of which a substantial portion was booked in the first quarter, will have a significant impact on net income for 2004. However, this will have no net impact on equity or cash. Ahold expects to record an expense in the profit and loss account under Dutch GAAP resulting from the transfer of shares to ICA F�rbundet under the agreement with ICA F�rbundet (as announced on July 19, 2004) following Canica exercising its relevant put option to Ahold. The timing of the transfer is subject to the arbitration and valuation process of the underlying share price relating to the put option. Net cash from operations is expected to improve as a result of initiatives to reduce working capital. Capital expenditure will be approximately in line with depreciation level. Ahold's divestment program is on track. Based on the current state of the processes underway, the company reasonable expectation is to close the divestments of its operations in Spain and at BI-LO/Bruno's later this year. The general economic outlook in the U.S. has become more difficult to predict for the remainder part of the year, due to the uncertainty regarding macro-economic developments. NOTES: Ahold prepares its financial statements in accordance with accounting principles generally accepted in the Netherlands ("Dutch GAAP"). Dutch GAAP differs in certain material respects from accounting principles generally accepted in the United States ("US GAAP"). All financial information in this press release is based on Dutch GAAP unless otherwise noted. The quarterly figures reported in this press release are unaudited. Ahold's reporting is based on 13 periods of 4 weeks. The fiscal year of our operations in Central Europe, Spain and South America corresponds to the calendar year and ends on December 31. The quarters that these entities use for interim financial reporting end on March 31, June 30 and September 30. The following three non-GAAP financial measures appear in this press release (1) operating income (loss) before impairment and amortization of goodwill and exceptional items, (2) net sales excluding currency impact and the impact of divestments and (3) the effective income tax rate, excluding the impact of non-tax- deductible impairment and amortization of goodwill and exceptional items. The results for the second quarter of 2003 and the first half of 2003 presented in this press release have been adjusted to make them comparable to the results for the second quarter of 2004 and the first half of 2004. For a discussion of these adjustments, see "Adjustments" below. Ahold Q2 2004 Results: Net sales increased excluding impact of currency and divestments In the second quarter of 2004 net sales amounted to EUR 12.3 billion, a decrease of 4.9% compared to the same period in 2003. Net sales growth excluding currency impact and impact of divestments was 3.0% in the second quarter. Ahold's retail operations in the United States reported in USD a net sales growth in the second quarter of 2004 of 2.0% excluding the impact of the divestment of Golden Gallon in 2003. Net sales were positively impacted by the Easter impact (soft post-Easter sales in 2004 included in the first quarter rather than in the second quarter) and the stable food price inflation compared to the first quarter and negatively impacted by increased competitive activities. In the European retail operations net sales growth excluding currency impact and the impact of divestments compared to the same quarter of 2003 amounted to 0.5%. Net sales at U.S. Foodservice increased in U.S. dollars by 7.5% to USD 4.4 billion, mainly driven by higher pricing and increased volumes. Net sales in the first half-year of 2004 amounted to EUR 27.7 billion (first half-year of 2003: EUR 30.3 billion), a decrease of 8.6%. Net sales growth excluding currency impact and impact of divestments was 2.0% in the first half-year of 2004. Operating income in Q2 2004 lower than last year Operating income before impairment and amortization of goodwill and exceptional items Operating income before impairment and amortization of goodwill and exceptional items, decreased in the second quarter by 20.1% to EUR 207 million compared to the same period last year. Operating income before impairment and amortization of goodwill and exceptional items in the second quarter of 2004 showed improvement at all major European operating companies compared to the same period last year. U.S. Foodservice realized operating income before impairment and amortization of goodwill and exceptional items in the second quarter of 2004 compared to an operating loss in the second quarter of 2003. This improvement was mainly due to a decrease of operating expenses as a percentage of net sales. Operating expenses benefited from selling and distribution efficiencies. The improvements at the European retail operations and U.S. Foodservice were outweighed by significantly lower results at U.S. retail, impacted by pressure on operating expenses, fixed asset impairment charges, integration costs, as well as lower sales volumes in the second quarter of 2004, and also lower real estate gains. The costs related to the settlement with AIG regarding the directors and officers liability insurance policy for Ahold, are included in the Corporate costs of the second quarter. Operating income before impairment and amortization of goodwill and exceptional items for the first half-year of 2004 decreased 21.8% compared to the same period last year, impacted by the lower U.S. dollar to Euro exchange rate. Operating income Operating income of EUR 169 million for the second quarter of 2004 (Q2 2003: operating income EUR 222 million) was lower than for the same period last year. In the second quarter of 2004 and 2003 no exceptional losses were included. Operating income of EUR 24 million for the first half-year was substantially lower than the same period last year (first half- year of 2003: EUR 624 million), primarily as a result of the exceptional losses of EUR 450 million related to the divestments of Bompre�o and the operations in Thailand. These exceptional losses, which were expected and discussed in previous press releases, have no impact on shareholders' equity or cash. Goodwill amortization and impairment Goodwill amortization in the second quarter of 2004 amounted to EUR 36 million compared to EUR 37 million in the same period last year. During the second quarter of 2004 Ahold recorded a small goodwill impairment charge relating to its South American operations. Exceptional loss In the second quarter of 2004 and the second quarter of 2003 no exceptional items were reported. The exceptional loss of the first half-year was related to the divestments of Bompre�o and the operations in Thailand. Of these exceptional items, EUR 322 million related to accumulated foreign currency translation adjustments ("CTA losses") and EUR 213 million to the partial reversal of goodwill, both of which had previously been charged to shareholders' equity. These negative impacts were partly offset by an EUR 85 million gain representing the difference between the selling price and the book value of certain assets. See "Definitions" below. Net income: favorable impact of lower net interest expenses Ahold reported net income of EUR 32 million in the second quarter of 2004 compared to net income of EUR 3 million in the second quarter of 2003. This improvement was primarily caused by lower net interest expenses. Net financial expense showed a significant decrease Net financial expense for the second quarter of 2004 was EUR 169 million compared to EUR 226 million in the same period last year. Net interest amounted to EUR 166 million in the second quarter, a decrease of 23.9% compared to the same period last year. The decrease was primarily caused by lower interest expenses resulting from lower cost of borrowing and substantially decreased gross debt. This reduction in gross debt was related, among others, to the repayment of the convertible subordinated notes in September 2003, the March credit facility in December 2003 and the convertible subordinated loan in the second quarter of 2004. Interest income increased as a result of a high outstanding cash balance. In addition, the lower USD to EUR exchange rate favorably impacted net interest. Net financial expense for the first half of 2004 amounted to EUR 387 million compared to EUR 518 million in the same period last year. Income taxes The effective income tax rate, excluding the impact of non-tax- deductible impairment and amortization of goodwill and exceptional items, decreased to 46.2% in the second quarter of 2004 compared to 67.6% in the second quarter of 2003, mainly as a result of the impact of a different geographic mix of income and consequences of divestments. Share in income of joint ventures and equity investees Share in income of joint ventures and equity investees in the second quarter of 2004 increased as a result of divestments by ICA. Balance sheet strengthened In the second quarter of 2004 the balance sheet was impacted by the early repayment of the convertible subordinated notes in the aggregate principal amount of EUR 920 million and a lower USD to EUR exchange rate. No divestments were completed in the second quarter of 2004. Balance sheet total reduced The USD to EUR exchange rate decreased to EUR 0.805 per U.S. dollar at the end of the second quarter of 2004 compared to EUR 0.833 at the end of the first quarter of 2004. The company lowered its balance sheet total by repaying debt with part of the outstanding cash balances. The balance sheet total was posively impacted by the lower U.S. dollar against the Euro. The balance sheet total decreased by EUR 1.4 billion. Shareholders' equity decreased by EUR 113 million, mainly resulting from currency exchange rate differences. Net debt reduced by EUR 16 million In the second quarter of 2004 Ahold repaid early, in cash, its EUR 920 million 4% convertible subordinated notes, on June 2, 2004 versus the original due date of May 19 2005. Net debt at the end of the second quarter of 2004 decreased compared to the end of the first quarter of 2004, primarily due to the lower USD to EUR exchange rate. The EUR 1.5 billion 6.375% notes maturing June 8, 2005 have been classified as the current portion of long term debt as of the second quarter of 2004 onwards. Cash flow In the second quarter of 2004 net cash outflow before financing activities was EUR 5 million compared to a net cash inflow of EUR 399 million in the same period of last year. The net cash inflow from operating activities decreased from EUR 449 million in the second quarter of 2003 to EUR 207 million in the second quarter of 2004 as a result of, a net cash outflow for working capital (53%), lower real estate divestments (27%) and higher taxes paid (20%). The net cash outflow from investing activities increased from EUR 50 million in the second quarter of 2003 to EUR 212 million in the second quarter of 2004, as a result of lower real estate divestments. The increased net cash outflow from financing activities in the second quarter of 2004 reflects the early repayment of the EUR 920 million aggregate principal amount of the 4% convertible subordinated notes. Operational information Lower operating income at U.S. retail impacted by continued competitive pressure Net sales at the U.S. retail trade operations in the second quarter of 2004 increased 0.5% in U.S. dollars compared to the same period last year. Excluding the impact of the divestment of Golden Gallon in 2003, net sales in U.S. dollars increased by 2.0%. Identical sales growth in U.S. dollars was 0.3% and comparable sales growth was 0.9%, reflecting the positive Easter impact and the stable food price inflation in the second quarter of 2004 compared to the first quarter of 2004. Operating income before impairment and amortization of goodwill and exceptional items in the U.S. retail trade business in U.S. dollars decreased in the second quarter of 2004 by 29.9% compared to the second quarter of 2003. At Stop & Shop and Giant-Landover, increased promotional activities and additional sales area of competitors, as well as the ongoing integration initiatives (costs included in the second quarter amounted to USD 15 million) had an impact on net sales and operating income in the second quarter. In the second quarter higher operating expenses and fixed asset impairment charges negatively impacted operating income. Additionally, lower real estate gains were recorded in the second quarter of 2004 compared to the same period of 2003. Giant Carlisle's performance remained strong and at Tops initiatives related to pricing and operational performance have begun to yield a positive trend in sales. During the second quarter of 2004, significant progress was made on the integration of the administrative and managerial functions of Stop & Shop and Giant-Landover into one business arena. The store system conversion was substantially completed, as scheduled, during the second quarter. The integration is expected to streamline the company and improve long-term efficiency. Additionally, during the second quarter of 2004, work continued according to plan on the divestment of BI-LO and Bruno's. During the first half year of 2004, operating income before impairment and amortization of goodwill and exceptional items was negatively impacted by promotional activities and additional sales area of competitors, impairment charges, increased health and welfare costs, integration costs, and lower real estate gains. Improved operating income at the major operating companies in Europe Net sales during the second quarter of 2004 were in line with the second quarter of 2003 in the European retail operations. Excluding currency impact in Central Europe and impact from the divestments of Jamin and De Tuinen in 2003, net sales growth was 0.5% compared to the same quarter of 2003. Identical sales growth at Albert Heijn was 1.4% in the second quarter of 2004; the increase in transactions was partly offset by a lower average basket size, due to food price deflation. Net sales growth in Central Europe from store openings was largely offset by lower currency exchange rates. Net sales in Spain decreased as a consequence of a lower store count, declining tourism in the Canary Islands and increased competition. Operating income before impairment and amortization of goodwill and exceptional items for the European retail operations increased in the second quarter of 2004 to EUR 67 million compared to EUR 32 million in the same period of last year, driven by all major retail companies. At Albert Heijn higher operating income was mainly the result of ongoing cost reductions. The operations in Central Europe reported a lower operating loss due to improved margins and lower costs. Spain reduced its operating loss by improving its margins and reducing shrinkage. During the second quarter Albert Heijn continued to make progress with its repositioning in the Dutch retail market. Strong commercial programs continued to be put in place and the price position was further improved, supported by the cost reduction program, which was started in 2003. Central Europe continued to fully integrate all back-office functions, further optimized the store portfolio and reduced working capital. In Spain considerable progress was made according to plan in the divestment program, while at the same time, the company continued to rationalize its store portfolio and control operating expenses. In the first half-year of 2004, net sales amounted to EUR 6.7 billion (2003: EUR 6.8 billion). Net sales growth excluding currency impact and impact from divestments amounted to 0.2%. Identical sales growth at Albert Heijn was 0.4%. Operating income before impairment and amortization of goodwill and exceptional items in the European retail operations increased in the first half year of 2004 to EUR 144 million compared to EUR 127 million in the same period of last year, driven by improved performance at the major operating companies in the second quarter of 2004. U.S. Foodservice favorably impacted by net sales growth U.S. Foodservice showed an increase in net sales in U.S. dollars of 7.5% in the second quarter of 2004, compared to the same period last year. The increase was primarily attributable to higher pricing and improved volumes. The operating income before impairment and amortization of goodwill and exceptional items at U.S. Foodservice in the second quarter of 2004 was USD 36 million, an improvement of USD 54 million compared to the same quarter last year. This improvement was mainly due to a decrease in operating expenses as a percentage of net sales. Operating expenses benefited from selling and distribution efficiencies. During the second quarter of 2004, U.S. Foodservice continued to make progress in implementing its key initiatives including: fortifying its governance and controls, renegotiating major procurement contracts, improving its customer mix, controlling operating expenses and improving working capital. In the first half-year of 2004 U.S. Foodservice showed an increase in net sales in U.S. dollars of 5.9% compared to the same period last year, primarily attributable to higher pricing and improved volumes. The operating income before impairment and amortization of goodwill and exceptional items in the first half of 2004 was USD 8 million compared to a loss of USD 51 million during the same period of 2003. This improvement was mainly due to a decrease in operating expenses as a percentage of net sales. South America Net sales in the South American retail trade operations in the second quarter of 2004 were heavily impacted by the divestments of Santa Isabel in 2003 and Bompre�o in the first quarter of 2004. Excluding currency impact and the impact of divestments, the net sales decrease was limited to 1.8%. Operating loss before impairment and amortization of goodwill and exceptional items increased to EUR 13 million in the second quarter of 2004 compared to a loss of EUR 10 million in the same period last year. Included in the 2004 results is an impairment charge of fixed assets within the South American operations. The first half-year operating loss of 2004 of EUR 448 million was heavily impacted by the CTA loss and reversal of goodwill resulting from the divestment of Bompre�o. Corporate Beginning in the second quarter of 2004 this segment excludes the operations of three real estate companies that acquire, develop and manage store locations in Europe and the U.S. These entities are now accounted for under the segment U.S. Retail and Europe Retail. The 2003 figures used in this release have been adjusted accordingly. Operating loss at Corporate increased, fully as a result of the costs related to the settlement with AIG. On July 16, 2004, Ahold announced that it had settled all pending insurance coverage litigation with AIG Europe (Netherlands) N.V. regarding the directors' and officers' liability insurance policies for Ahold and its subsidiary U.S. Foodservice. Under the terms of this settlement giving Ahold and its subsidiary U.S. Foodservice and current and former directors and officers access to USD 125 million of coverage (and extending the discovery periods under the insurance), Ahold has committed to make payments to AIG Europe (Netherlands) N.V. which in the aggregate, after reduction of costs already reimbursable under those insurance policies, amount to approximately EUR 44 million. The Corporate segment also includes the costs related to compliance with the Sarbanes-Oxley Act and the International Financial Reporting Standards (IFRS) and the Business Support Organization, which is responsible for harmonizing back office processes and systems as part of the Road to Recovery program. Ahold will adopt IFRS accounting standards in 2005, as required under EU regulations. Applying IFRS to our financial statements may have a significant impact on a number of important areas. Ahold is currently analyzing and calculating the differences between Dutch GAAP, IFRS and US GAAP to assess in detail the impact on its consolidated financial position and results. To view financial statements: http://bankrupt.com/misc/Ahold_2Q04.pdf CONTACTS: Ahold head office Albert Heijnweg 1 1507 EH Zaandam The Netherlands Phone: +31 (0)75 659 9111 General inquiries Phone: +31 (0)75 659 9111 Investor Relations e-mail: investor.relations@ahold.com Phone: +31 (0)75 659 58 28 Media Relations (for business press members only): e-mail: corp.communications@ahold.com Phone: +31 (0)75 659 57 20 (office hours) Phone: +31 (0)75 659 91 11 (outside office hours) Web Site: http://www.ahold.com/ EMBRATEL: Appoints Isaac Berensztejn as New CFO ----------------------------------------------- Embratel Participacoes S.A. (Embratel Participacoes or the "Embrapar") (NYSE: EMT; BOVESPA: EBTP3, EBTP4), the Company that holds 98.8 percent of Empresa Brasileira de Telecomunicacoes S.A. ("Embratel"), announced Wednesday that Mr. Isaac Berensztejn was elected as Executive Director of Finance and CFO. Norbert Glatt is leaving the company to pursue personal interests. Mr. Isaac Berensztejn joined Embratel in 1979 and has occupied various positions in the company's financial area. He was Finance Director at Telerj and Telemar during the privatization process. Mr. Berensztejn returned to Embratel in 1999 where he acted as Corporate Planning Director and most recently Financial Director of Embratel's satellite subsidiary Star One. We believe Mr. Berensztejn's extensive financial experience and in-depth knowledge of Embratel will be instrumental in leading the company in this new phase. Mr. Norbert Glatt led Embratel through a challenging financing period with much success. Embratel would like to thank Mr. Glatt for his important contribution and wish him luck in his next endeavor. Embratel is the premium telecommunications provider in Brazil and offers an ample variety of telecom services -local and long distance telephony, advanced voice, highspeed data transmission, Internet, satellite data communications, and corporate networks. The company is a leader in the country for data services and Internet, and is highly qualified to be an all-distance network carrier in Latin America. Embratel's network spreads countrywide, with almost 29 thousand kms of optic cables, which represents about one million and sixty-nine thousand km of fiber optics. CONTACT: Ms. Silvia M.R. Pereira Investor Relations tel: (55 21) 2121-9662 fax: (55 21) 2121-6388 e-mail: silvia.pereira@embratel.com.br invest@embratel.com.br TELESP CELULAR: Intends to Launch Tender Offer for Subsidiaries --------------------------------------------------------------- Brasilcel, the 50-50 joint-venture of Telefonica Moviles (NYSE:TEM) and Portugal Telecom for mobile operations in Brazil, operating under the brand Vivo, announces its intention of launching voluntary cash tender offers for a portion of the outstanding shares of some of its subsidiaries, directly, and indirectly through its subsidiary Telesp Celular Participacoes (TCP). With these transactions, Telefonica Moviles and Portugal Telecom affirm and seek to reinforce their commitment to the Brazilian cellular market and to Vivo, and Brasilcel seeks to increase its ownership interest in its subsidiaries. In addition, these offers will provide an opportunity to remunerate those minority shareholders tendering their shares at a premium to market prices. The Proposed Tender Offers: Brasilcel intends to launch voluntary cash tender offers for the following securities of its subsidiaries: - Tele Sudeste Celular Participacoes (TSD): up to 7,332 million Common shares (ON) and 12,700 million Preferred shares (PN). - Tele Leste Celular Participacoes (TBE): up to 16,723 million ON and 92,499 million PN shares. - Celular CRT Participacoes (CRT): up to 61 million ON and 442 million PN shares. Simultaneously, TCP intends to launch a voluntary cash tender offer for up to 84,253 million PN shares of Tele Centro Oeste Celular Participacoes (TCO). The number of shares that Brasilcel and TCP will be offering to acquire has been determined to allow Brasilcel and TCP to increase their participation in the subject companies without suppressing the liquidity of the remaining shares of those classes for purposes of CVM regulations. The offer prices will be: Price per 1,000 shares (R$) ---------------------------------- ON PN ------------------------------------------------ TSD 6.35 7.80 ------------------------------------------------ TBE 0.90 1.10 ------------------------------------------------ CRT 575.31 718.69 ------------------------------------------------ TCO ----- 10.70 ------------------------------------------------ These offer prices represent a premium of 20% over the respective weighted average closing price of each class of shares in the last 30 trading days prior to announcement. Telefonica Moviles and Portugal Telecom intend to provide funding to Brasilcel for the tender offers on a 50-50 basis. TCP intends to fund its tender offer with debt and, taking into account the outcome of the tender offer, amongst other factors, will evaluate a potential capital increase, if it considers a reduction of its level of indebtedness to be advisable. The Rationale: - Increase Brasilcel's ownership of its subsidiaries Telefonica Moviles and Portugal Telecom have increased their ownership in the Vivo subsidiaries since their initial acquisition, and these offers will further increase their economic interest, while allowing continuing liquidity in the equity capital markets for those shares. - Opportunity for minority shareholders to realize gains These offers provide the minority shareholders with the opportunity of selling their shares at a premium over market prices and to realize gains. - Reinforces Telefonica Moviles and Portugal Telecom's commitment to the Brazilian cellular market and to Vivo Telefonica Moviles and Portugal Telecom continue to believe the Brazilian cellular market, with 160 million inhabitants and relatively low cellular penetration, continues to offer substantial growth potential. The proposed transaction strengthens Vivo's position in the Brazilian market and enhances its participation in the potential growth of its subsidiaries. The Impact on Ownership: The table below illustrates the impact on the ownership of Brasilcel and TCP of its subsidiaries, assuming 100% acceptance levels: Brasilcel Current Ownership Pro-forma Ownership (assuming 100% acceptances) ----------------- ----------------- ON PN Total ON PN Total --------------------------- ----- ----- ----- ----- ----- ----- TSD 88.5% 85.4% 86.7% 92.3% 90.3% 91.1% --------------------------- ----- ----- ----- ----- ----- ----- TBE 58.7% 11.4% 27.9% 68.7% 40.9% 50.6% --------------------------- ----- ----- ----- ----- ----- ----- CRT 86.6% 26.3% 51.5% 91.0% 49.7% 67.0% --------------------------- ----- ----- ----- ----- ----- ----- TCP Current Pro-forma Ownership Ownership (assuming 100% acceptances) ---------------- ----------------- ON PN Total ON PN Total ---------------------------------- ---- ----- ----- ----- ----- TCO 86.2% 0.0% 28.9% 86.2% 32.8% 50.6% ---------------------------------- ---- ----- ----- ----- ----- The Expected Timing: The offers are expected to begin in the first week of September and will be open for at least 30 days from the date of the publication and filing of the formal documentation. The offers are expected to be completed by mid-October. The tender offers will be subject to certain terms and conditions that will be included in the formal offer documentation. CONTACT: Telesp Celular Participacoes SA Rua Abilio Soares 409, - 10o andar Sao Paulo, 04005 Phone: (212) 889-4350 ========= C H I L E ========= ROYAL SHELL: In Talks With Petrobras Over Chilean Unit Sale ----------------------------------------------------------- Brazil's federal energy company Petrobras (NYSE: PBR) is now in talks with Royal Dutch Shell to buy the latter's 360 gas stations throughout Chile, local newspaper El Mercurio reports, citing Luis Carlos Moreira, Petrobras's business development executive. "Yes, we have met with Shell. Nothing has been decided, we are (still) negotiating," El Mercurio quoted Moreira as saying. The paper said a decision is due within 30 days and that Petrobras wants a local partner. With 51% of the market, Copec would be the obvious candidate to be a local partner, but Shell's stations would increase Copec's market share to over 70% and possibly create antitrust issues. Petrobras is therefore talking to other possible players, Moreira said. The Argentine-Spanish Repsol-YPF consortium, which already owns 190 gas stations in Chile, has also expressed interest on the Shell assets. Shell Chile is an attractive option for Petrobras and Repsol-YPF since the Company's 21.6 percent share in the liquid-fuel segment would solidify both companies' hold in the Southern Cone. Shell is expected to sell its Chilean assets in a move to consolidate investments in key countries such as Russia. The oil giant recently disposed of properties in Peru and is scheduled to sell its assets in Argentina. SCL TERMINAL: Moody's Ups Rating to B3 From Caa1 ------------------------------------------------ Moody's Investors Service raised its public underlying rating for the outstanding senior secured debt of SCL Terminal Aereo Santiago S.A. Sociedad Concesionaria to B3 from Caa1. The rating action reflects improvements in passenger traffic and financial results. SCL saw a 7.88% increase in total passenger flows in 2003 over 2002 levels. Total passenger flows are projected to increase in 2004 by over 8% over the previous year. Furthermore, SCL's mid-year filing with the Chilean securities regulator indicated a growth of over 21% in operating revenues over the previous year. The SCL debt rating remains under review for possible further upgrade. The bonds are insured by MBIA and remain Aaa rated based upon the financial strength of the insurance company. SCL's debt ratings have been put under review for possible further upgrade reflecting the potential for improvements in the company's financial and liquidity position. Moody's noted that SCL has entered into the Convenio Complementario No. 2, which amends the terms of the 1997 Concession Grant and provides for greater revenue generation potential and tighter management controls. The Concession amendment also provides for an extension to the concession term of up to 78 months. SCL has filed an application with the securities regulator for the issuance of approximately US$85 million of local currency debt. Proceeds from the 2004 bonds will be used for additional capital projects (per the Convenio Complementario No. 2) and to support the US$171 million outstanding 1998 bond debt service requirements. MBIA is expected to provide credit enhancement for the 2004 bonds. SCL was formed by an international consortium in 1998 specifically to construct, renovate and operate the Arturo Merino Benitez International Airport in Santiago, Chile. The company's shareholders include Agunsa (47.02%), ACS (14.77%), Fomento de Construcciones y Contratas S.A. (14.78%), Sabco Administradora de Fondos de Inversion (13.43%) and YVR Airport Services Ltd (10%). =================== C O S T A R I C A =================== ICE: Finalizes Internet Access Rates ------------------------------------ ICE, Costa Rica's electricity and telecoms monopoly, has finalized Internet access rates using mobile devices in a proposal before the public service regulatory authority ARESEP. Citing local daily Al Dia, Business News Americas reports that ICE will charge CRC10/kb (US$0.02/kb) for Internet access using wireless application protocol (WAP) technology on mobile devices and CRC4/kb for fixed Internet access using mobile phones. Both technologies utilize the country's GSM network through a GPRS connection which offers speeds of up to 171 kbs, supports basic internet protocols and enables the user to have an "always on" web connection. =================================== D O M I N I C A N R E P U B L I C =================================== TRICOM: Names Gitner as Independent Non-executive Director ---------------------------------------------------------- Tricom, S.A. (OTC: TRICY) announced Wednesday that Mr. Gerald L. Gitner has been appointed to the Company's Board of Directors as an independent non-executive director. Mr. Gitner has had substantial experience as a director, having served on the boards of numerous public and private companies, as well as non- profit entities. Mr. Gitner is Chairman of D. G. Associates, Inc. and a private investor. Mr. Gitner is presently the non-executive Chairman of Kitty Hawk, Inc., which operates an overnight express cargo network and an all-cargo airline headquartered in Dallas, TX. He served as Chairman of the Board of Trans World Airlines, Inc. from 1997 to 2002 and as its CEO from 1996 to 1999. His past experiences include the founding of an investment bank and serving as its chairman. He also co-founded and co-chaired a private leasing company, specializing in wide-bodied aircraft, from 1990 to 1997. Mr. Gitner is a past Vice Chairman of Pan American World Airways, Inc., and CEO of Pan American World Services, Inc. Mr. Gitner was President and co-founder of People Express Airlines, Inc., from 1980 to 1982. He also served as President and CEO of Atasco USA, a private aviation concern involved in commercial aircraft leasing and servicing. Mr. Gitner was educated at Boston University, where he graduated cum laude and was elected to Phi Alpha Theta, the national history honor society. He is a founding member of the Board of Advisors of the Economics Department of Boston University and a member of the Dean's Advisory Council for the College and Graduate School of Arts and Sciences at Boston University. He is a past member of Boston University's Board of Trustees and a past member of the Chancellor's Council at the University of Missouri-St. Louis. Mr. Gitner served as a member of the Board of Trustees of Rochester Institute of Technology and the American College of Management and Technology from 1999 to 2004. Following Mr. Gitner's appointment, the Company's board of directors consists of the following twelve individuals: Ricardo Valdez Albizu, Thomas Canfield, Carlos Castillo, Hector Castro Noboa, Anibal de Castro, James Deane, Gerald Gitner, Arturo Pellerano, Rosangela Pellerano, Roberto Saladin, Adriano Tejada and Valeriano Valerio. About Tricom Tricom, S.A. is a full-service communications services provider in the Dominican Republic. The Company offer local, long- distance, mobile, cable television and broadband data transmission and Internet services. Through Tricom USA, the Company is one of the few Latin American-based long-distance carriers that is licensed by the U.S. Federal Communications Commission to own and operate switching facilities in the United States. Through its subsidiary, TCN Dominicana, S.A., the Company is the largest cable television operator in the Dominican Republic, based on its number of subscribers and homes passed. CONTACT: Miguel Guerrero, Investor Relations Ph (809) 476-4044 / 4012 E-mail: investor.relations@tricom.net Web site: http://www.tricom.net http://www.tdr-investor.com =========== M E X I C O =========== PEMEX: Munoz Supports Move to Modify Tax Scheme ----------------------------------------------- Raul Munoz Leos, director of Petroleos de Mexico (Pemex), appears agreeable to a proposal by the National Treasury Convention (CNH) to modify the tax scheme of Pemex, Mexico Analytica indicates in a report. In an interview during the 39th anniversary of the Mexican Petroleum Institute, Munoz said that the proposal to reform the company's tax framework is very positive and it is a change for which the company has been struggling for years. Munoz said that he is confident that Congress would reach an agreement to pass the bill since there is a good environment to support Pemex. But according to the Pemex executive, reducing the tax burden is not enough to solve the difficult financial situation faced by the State-owned company. Pemex is currently battling with debts amounting to MXN700 billion (US$61.5 billion). ================================= T R I N I D A D & T O B A G O ================================= NWRHA: Concern Raised Over Social Events for Staff Members ---------------------------------------------------------- An audit at North West Regional Health Authority (NWRHA) revealed that the company's management spent TTD173,100 over a five-month period on social events, The Trinidad Express reports. Internal auditor Harriram Laloo said in his report that the money, which was spent for staff members that are under fire from the authority's internal auditor, was "excessive" and "exorbitant." In addition, the money was spent without the necessary approval from the board of directors. The report said that "while the holding of these activities is commendable ... the expenditure incurred must be tempered by the business of the authority- "the provision of proper health care". "By frittering away such large sums of money on cultural events, it could give the public the impression that money is being frittered away by the authority while they suffer from a lack of basic amenities in the delivery of health care," the report stated. It called on management to stop making advance payments to staff for goods and services since such action contravened the Ministry of Health's financial policy. The Express recalls that the NWRHA board was under heavy scrutiny and criticism last month for failing to pay electricity bills totalling more than TTD24 million and for not paying to the Board of Inland Revenue more than TTD106 million in PAYE and Health Surcharge, which was deducted from employees' pay during the period May 2002 to June 2004. ================= V E N E Z U E L A ================= PDVSA: S&P Raises Rating After Venezuela Upgrade ------------------------------------------------ Standard & Poor's Ratings Services raised its corporate credit rating on Petroleos de Venezuela S.A. (PDVSA) to 'B' from 'B-'. Standard & Poor's also affirmed its 'BB' corporate credit rating on PDVSA-affiliate CITGO Petroleum Corp. The outlook is stable. The rating upgrade on PDVSA follows the rating upgrade of the long-term foreign and local currency sovereign credit ratings on the Bolivarian Republic of Venezuela to 'B' from 'B-'. Standard & Poor's also raised its short-term foreign and local currency sovereign credit ratings on Venezuela to 'B' from 'C'. The outlook for the ratings on Venezuela stable. The ratings on PDVSA and Venezuela are equalized because of their ties of ownership and economic interests. "The ratings on the Bolivarian Republic of Venezuela and PDVSA are equalized because of the government's control over PDVSA and its dependence on its cash flow to fund its budget. However, PDVSA also is dependent on political and economic stability in Venezuela to conduct operations smoothly," said Standard & Poor's credit analyst Bruce Schwartz. "The upgrade of PDVSA also would not have been possible if not for PDVSA's efforts to restore production since a crippling strike in early 2003." "Furthermore, PDVSA's balance sheet has strengthened from a recent tender for PDVSA Finance Ltd. debt, although this may have been achieved to some extent at the expense of investment in PDVSA. A more exuberant view of PDVSA's credit quality depends on further improvement in PDVSA's operations, including an increase in the pace of investment, in addition to continued strengthening of the government's credit quality," said Mr. Schwartz. Although CITGO has performed well in the first half of 2004, repaid substantial debt from free operating cash flow, and should benefit from a stronger and more stable owner in PDVSA, the ratings on CITGO were not raised. That is because officials in Venezuela in recent months have contemplated terminating or amending crude oil contracts with CITGO to eliminate margin-stabilization provisions. In Standard & Poor's view, elimination of these provisions would be a negative credit event for CITGO and would justify less of a separation in ratings from PDVSA. However, Standard & Poor's also said that achieving such amendments could prove difficult as it would constitute an event of default in various CITGO financing arrangements. ANALYST: Bruce Schwartz, CFA, New York (1) 212-438-7809 PETROZUATA FINANCE: S&P Raises Bond Rating To B+ ------------------------------------------------ Standard & Poor's Ratings Services raised its rating on Petrozuata Finance Inc.'s $987.2 billion in bonds due between 2009 and 2022 to 'B+' from 'B'. The outlook is stable. The rating upgrade follows Standard & Poor's upgrade of its sovereign credit ratings on the Bolivarian Republic of Venezuela (B/Stable/B). Petrozuata Finance's bonds are guaranteed by Petrolera Zuata, Petrozuata C.A. (Petrozuata). Petrozuata is a heavy oil-production and upgrading project located in Venezuela that is owned by Conoco Orinoco (50.1%), a subsidiary of ConocoPhillips (A-/Stable/A-2), and PDVSA Petroleo Y Gas (49.9%), a subsidiary of Petroleos de Venezuela S.A. (PDVSA; B/Stable/--). The project produces heavy crude oil from Venezuela's Orinoco Belt, then processes it at an upgrader on the coast to produce syncrude that it sells either to sponsors under market-priced offtake arrangements or into the market. Petrozuata demonstrates good operational and strong financial performance, but its debt rating is constrained by the creditworthiness of the Bolivarian Republic of Venezuela. The stable outlook reflects the stable outlook on Venezuela and PDVSA. Standard & Poor's could raise the rating if the risk of government interference in the project lessens or if Standard & Poor's raises its ratings on PDVSA and Venezuela. The rating on the project is not likely to fall based on operations, unless PDVSA and third parties are not able to deliver feedstocks. Standard & Poor's could lower its rating on the project if it lowers its ratings on PDVSA and Venezuela. ANALYSTS: Terry A Pratt, New York (1) 212-438-2080 Bruce Schwartz, CFA, New York (1) 212-438-7809 * S&P Raises Long-, Short- Term Ratings On Venezuela To 'B' ----------------------------------------------------------- Standard & Poor's Ratings Services raised its long-term foreign and local currency sovereign credit ratings on the Bolivarian Republic of Venezuela to 'B' from 'B-'. At the same time, Standard & Poor's raised its short-term foreign and local currency sovereign credit ratings on the republic to 'B' from 'C'. The outlook is stable. According to Standard & Poor's Ratings Services credit analyst Richard Francis, the upgrades reflect the prospect for diminished political instability coupled with sharp improvement in external indicators, attributable to a large current account surplus, high level of international reserves, and lower external debt. "Following the victory of President Hugo Chavez in the Aug. 15, 2004, referendum on his presidency and the independent verification by international observers (including an audit of the results), political instability is likely to diminish- although the country remains highly polarized," Mr. Francis said. "Furthermore, Venezuela's external indicators have improved substantially over the past two years," he noted. Mr. Francis explained that international reserves increased to over US$21 billion as of Aug. 24, 2004, and are expected to remain above this level as long as oil prices remain high, the result of capital controls put in place in early 2003 and higher foreign exchange earnings from oil exports. As a result, the public sector is expected to move from a net debtor to a net creditor position by year-end 2004. Venezuela's external liquidity indicators have improved substantially over the last two years, and its net private sector debt creditor position is also expected to show further improvement. "Political polarization, weak institutions with limited checks and balances, a large fiscal deficit despite high oil prices, and structural economic deficiencies resulting from the continued high and growing dependence on oil continue to constrain ratings on the government of Venezuela," noted Mr. Francis. "Further improvements in creditworthiness would largely depend upon enhanced fiscal prudence and improved prospects for the oil sector," he added. "The stable outlook reflects the balance between increased financial flexibility due to high oil revenue and the high fiscal deficits, political polarization, and diminished economic prospects that continue to constrain Venezuela's creditworthiness," said Mr. Francis. "The ratings could come under renewed pressure if oil revenue plummets or increased social unrest leads to further economic and/or political turmoil, resulting in falling external liquidity. Conversely, greater fiscal discipline coupled with improved prospects for the oil sector could lead to an improvement in creditworthiness," he concluded. ANALYST: Richard Francis, New York (1)-212-438-7348 *********** 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 Lucilo Junior M. Pinili, 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 * * *