/raid1/www/Hosts/bankrupt/TCRLA

/raid1/www/Hosts/bankrupt/TCRLA_Public/050103.mbx T R O U B L E D C O M P A N Y R E P O R T E R L A T I N A M E R I C A Monday, January 3, 2005, Vol. 6, Issue 1 Headlines A R G E N T I N A COMPLEJO JAI ALAI: Court Declares Company Bankrupt CRESUD: Convertible Notes Holder Exchanges Debt for Equity IRSA: Note Conversion Reduces Indebtedness JOYERIA RICCIARDI: Files Petition to Reorganize MORON METALES: Court Rules for Liquidation PEOPLE S NETWORK: Bankruptcy Initiated via Court Order TOM DISTRIBUIDORA: Liquidates Assets to Pay Debts B A R B A D O S C&W BARBADOS: Forecasts Negative Impact if FTC Nixes Application B R A Z I L BANCO SANTOS: Discloses Restructuring Plan BNDES: S&P Releases Report on Ratings UNIBANCO: Board OKs Stock Dividend Payment M E X I C O CORPORACION DURANGO: Creditors Approve Reorganization Plan SATMEX: Misses $188M Debt Payment to Government P A R A G U A Y PARMALAT FINANZIARIA: Citigroup Seeks Approval to Sue LatAm Arms U R U G U A Y UTE: Demand For First Trust Deed Issue Exceeds Expectations UTE: Calls for Brazilian Bids for 2-Month Power Supply V E N E Z U E L A PDVSA: Reaches New Collective Labor Accord With Unions PDVSA: Invests $3.7B on Public Projects - - - - - - - - - - ================= A R G E N T I N A ================= COMPLEJO JAI ALAI: Court Declares Company Bankrupt -------------------------------------------------- Judge Carrega of the civil and commercial tribunal court of Buenos Aires declared local company Complejo Jai Alai S.R.L. "Quiebra", relates local daily La Nacion. The court approved the bankruptcy petition filed by Mr. Hector Nordheim, to whom the company failed to pay debts amounting to US$31,829.31. The Company will undergo the bankruptcy process with Mr. Francisco Cano as its trustee. Creditors are required to present their proofs of claim to the trustee for verification before March 18, 2005. Creditors who fail to have their claims authenticated by the date specified will be disqualified from the payments that will be made after the Company's assets are liquidated at the end of the bankruptcy process. Clerk No. 8 assists the court on the case. CONTACT: Complejo Jai Alai S.R.L. Avda Teniente General Donato Alvarez 750 Buenos Aires CRESUD: Convertible Notes Holder Exchanges Debt for Equity ---------------------------------------------------------- Cresud S.A.C.I.F. y A. (Nasdaq: CRESY - News; BCBA: CRES), a leading Argentine producer of agricultural products, informed the Bolsa de Comercio de Buenos Aires and the Comision Nacional de Valores that a holder of Company's Convertible Notes exercised its conversion rights. Hence, the financial indebtedness of the Company shall be reduced in US$363,974 and an increase of 716,766 ordinary shares face value pesos 1 (V$N 1) each was made. The conversion was performed according to terms and conditions established in the prospectus of issuance at the conversion rate of 1.96928 shares, face value pesos 1 per Convertible Note of face value US$1. As a result of that conversion the amount of shares of the Company goes from 152,788,284 to 153,505,050. On the other hand, the amount of registered Convertible Notes is US$41,875,863. CONTACT: Mr. Gabriel Blasi - CFO Phone: +011-54-11-4323-7449 e-mail: finanzas@cresud.com.ar Web Site: http://www.cresud.com.ar IRSA: Note Conversion Reduces Indebtedness ------------------------------------------ Inversiones y Representaciones Sociedad Anonima informed the Bolsa de Comercio de Buenos Aires and the Comision Nacional de Valores that a holder of the Company's Convertible Notes has exercised its conversion right. Hence, the financial indebtedness of the Company shall be reduced in US$ 135,884 and an increase of 249,328 ordinary shares face value pesos 1 (V$N 1) each was made. The conversion was performed according to terms and conditions established in the prospectus of issuance at the conversion rate of 1.83486 shares, face value pesos 1 per Convertible Note of face value US$ 1. As a result the Company's outstanding shares will go from 259,628,044 to 259,877,372. Concurrently, the amount of registered Convertible Notes is US$ 86,172,381. CONTACT: IRSA Inversiones y Representaciones S.A. 1066 Phone: 541-342-7555 Bolivar 108 Buenos Aires Argentina JOYERIA RICCIARDI: Files Petition to Reorganize ----------------------------------------------- Joyeria Ricciardi SACIyA filed a "Concurso Preventivo" motion, reports La Nacion. The Company is seeking to reorganize its finances following cessation of debt payments since Oct. 14, 2004. The Company's case is pending before Court No. 6, under Judge Cirulli, who is assisted by Clerk No. 12 Dr. Davila. CONTACT: Joyeria Ricciardi SACIyA Marcelo Torcuato de Alvear 512 Buenos Aires MORON METALES: Court Rules for Liquidation ------------------------------------------ Buenos Aires Court No. 24 ordered the liquidation of Moron Metales S.A.C.I.M.M. after the company defaulted on its obligations, Infobae reveals. The liquidation pronouncement will effectively place the company's affairs as well as its assets under the control of Mr. Eduardo Miguel Echaide, the court- appointed trustee. Mr. Echaide will verify creditors' proofs of claim until Feb. 25, 2005. The verified claims will serve as basis for the individual reports to be submitted in court on April 8, 2005. The submission of the general report follows on May 20, 2005. Clerk No. 47 assists the court on this case, which will end with the disposal of the company's assets in favor of its creditors. CONTACT: Mr. Eduardo Miguel Echaide Sanchez de Loria 155 Buenos Aires PEOPLE S NETWORK: Bankruptcy Initiated via Court Order ------------------------------------------------------ People S Network Argentina S.A. will enter bankruptcy protection after Buenos Aires Court No. 9, with the assistance of Clerk No. 18, ordered the company's liquidation. The bankruptcy 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. Pedro Luis Santa Maria as trustee. He will be verifying creditors' proofs of claim until March 4, 2005. 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 April 15, 2005 followed by the general report, which is due on May 30, 2005. CONTACT: Mr. Pedro Luis Santa Maria, Trustee Viamonte 1785 Buenos Aires TOM DISTRIBUIDORA: Liquidates Assets to Pay Debts ------------------------------------------------- Tom Distribuidora S.R.L. will begin liquidating its assets following the pronouncement of the city's Court No. 1 that the company is bankrupt, Infobae reports. The bankruptcy ruling places the company under the supervision of court-appointed trustee, Sara Rey de Lavople. The trustee will verify creditors' proofs of claim until Feb. 25, 2005. The validated claims will be presented in court as individual reports on April 11, 2005. Ms. De Lavolpe 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 May 23, 2005. The bankruptcy process will end with the disposal company assets in favor of its creditors. CONTACT: Ms. Sara Rey de Lavolpe, Trustee Cerrito 1136 Buenos Aires =============== B A R B A D O S =============== C&W BARBADOS: Forecasts Negative Impact if FTC Nixes Application ---------------------------------------------------------------- Cable and Wireless (Barbados Limited) warned that the country could lose out on significant inflows of direct foreign investment if the Fair Trading Commission (FTC) again refuses to grant its application for rate adjustment, The Barbados Advocate relates. According to the company, the denial has the potential to delay the liberalization of the telecommunications market in Barbados; "It will hinder and delay new market entrants who may wish to compete in the Barbados telecommunications sector; "Such delay is potentially detrimental to the country and to customers; "It will unfairly deny the applicant the right to make a fair return on its investment in the domestic market; and "It will act as a disincentive to investment in the domestic network by both Cable and Wireless and new market entrants. Cable and Wireless earlier applied to the FTC for a rate adjustment to the domestic line rate for business and residential customers. It also sought the introduction of flat rate charging plans and usage-based rates for domestic calls made from fixed lines, and such further or other relief. It was also proposed that the rate adjustment be made in two phases, six months apart. But the FTC subsequently ruled against the application, citing lack of sufficient information, inadequate documentation to support certain aspects of the company's case, and saying that its Enhanced Allocation Model (EAM) designed to ascertain was not useful. The regulators also said that no alternative rate structure was presented. Cable and Wireless appealed the decision and has subsequently submitted a 158-page review, which deals with all the issues involved. FTC is expected to give its verdict in a matter of weeks or even days. =========== B R A Z I L =========== BANCO SANTOS: Discloses Restructuring Plan ------------------------------------------ Brazil's Banco Santos, which was intervened by the Central Bank on Nov. 14, presented a proposal to reopen for business under government supervision and asked creditors and depositors to keep funds in the bank. The bank's owner, Edemar Cid Ferreira, wants the central bank to hand over control of the bank to a special management team that could then negotiate a "market solution" with creditors. The owner has hired consulting firm Valora Participacoes SA to prepare the restructuring process. The plan would also require customers to agree to leave their money untouched in the bank for 180 days, after which the special management team would take over. The Central Bank froze all Banco Santos accounts after the intervention, but authorized customers last week to withdraw up to BRL20,000 ($1=BRL 2.69). A central bank spokesman said the monetary authority will analyze the proposal and any decision would be taken in conjunction with the Banco Santos's owner. A creditor group of Banco Santos showed a positive reaction to the restructuring plan. "One should support any initiative to reach an agreement because a liquidation process would be draw-out and painful," said Jairo Saddi, a lawyer representing a group of creditors. Saddi said that the creditors are willing to make sacrifices to reach an agreement that avoids liquidation but a condition for such an agreement is that Edemar Cid Ferreira also makes a sacrifice and uses his own money to compensate creditors. BNDES: S&P Releases Report on Ratings ------------------------------------- CREDIT RATING: Local currency BB/Stable/-- Foreign currency BB-/Stable/-- OUTSTANDING RATING(S): Counterparty Credit Local currency BB/Stable Counterparty Credit Foreign currency BB-/Stable Senior unsecured Foreign currency BB- Major Rating Factors Strengths: * The Federative Republic of Brazil's direct, full ownership * The bank's key public-policy role in Brazil * A steady liquidity inflow and a favorable liability structure Weaknesses: * The rating is constrained by Brazil's sovereign risk * Potential asset quality risk due to concentration Rationale The ratings on Banco Nacional de Desenvolvimento Economico e Social (BNDES) reflect the demonstrated support of the government of the Federative Republic of Brazil (LC: BB/Stable/B; FC: BB-/Stable/B), underpinned by its direct ownership of 100% of BNDES' share capital. Although there is no timely government guarantee on BNDES' obligations, strong sovereign support is demonstrated by government funding and capitalization policies-including periodic capital increases and stable, constitutionally mandated funding. As Brazil's largest development bank, BNDES has a key public policy role in the execution of the government's economic policy. It marshals domestic and multilateral funds into productive long-term investments; and provides key sectors, underdeveloped regions, and exporters with low-cost financing. The bank's key public-policy role has been underscored by various policy decisions, such as providing interim financing to utility companies following the 2000 electricity crisis, and extending trade credit as international trade lines dried up in 2002. BNDES enjoys a steady liquidity inflow and a favorable liability structure. About 60% of BNDES' funding is constitutionally mandated and derived from two public-worker insurance funds. Most of BNDES' funding is long-term, including a high portion of nondated liabilities. The ratings on BNDES, however, are constrained by Brazil's sovereign risk. BNDES relies upon public financing and is governed by public policy. BNDES' risk-weighted capital ratio was 17% in June 2004, above the 11% statutory minimum and in line with the top-tier commercial banks in the system. Nevertheless, given BNDES' riskier business, long-term lending, and equity investments, maintaining a higher capital base reflects prudent management. Outlook The stable outlook on the long-term foreign currency counterparty credit rating on BNDES is based on that on the Federative Republic of Brazil. All things being equal, the ratings on the bank are expected to move in tandem with those on the sovereign. BNDES' high economic and public-policy importance makes the risk of default on its obligations equal to the risk of sovereign default. Profile Established in 1952 as a federal agency, BNDES became a government-owned enterprise subject to private company law with its own share capital in 1971. Although there are other development banks in Brazil, BNDES is the largest supplier of long-term debt and equity financing to Brazilian private- and public-sector enterprises. The bank is key in implementing the government's economic strategy, which places particular emphasis on private-sector investment projects and public-sector infrastructure projects. BNDES provides below-market borrowing rates for priority industries and impoverished regions. BNDES' lending strategy aims to increase private-sector production and competitiveness in the Brazilian economy. An update of the bank's strategic plan that comes into effect in 2005 is underway. BNDES has highlighted the following key areas for investment: * Infrastructure: transportation, energy, telecommunications; * Exports; * Modernization of production sectors; * National technology; * Small and midsize enterprises, especially those oriented toward exports; * Reduction of economic regional imbalances via small businesses; and * Continental integration in South America. The bank's policy is to promote private investment in Brazil; the share of final lending/debentures that goes to the private sector surpasses 85%. Most funds lent to the public sector have private enterprise as their final beneficiary or are aimed at restructuring a private-sector entity. To enhance the risk profile through diversification of its loan portfolio, BNDES provides finance for projects undertaken by foreign companies and Brazilian subsidiaries. BNDES' funding base is stable and derives from domestic sources. About 80% of the bank's funding is from domestic sources, with two-thirds of total funding from two government programs, PIS- PASEP and FAT, as mandated by Brazil's constitution. The PIS- PASEP fund consists of payroll contributions made before 1988, and funds redeemable in cases of employee retirement, disability, or death. The bank manages 90% of PIS-PASEP's invested resources. While PIS-PASEP has received no new resources from contributions since 1988, its account with BNDES continues to grow, as investment returns outweigh payments of obligations. PIS-PASEP funds are projected to be depleted in 18 years. FAT succeeded PIS-PASEP and is funded by payroll contributions as per the 1988 constitution. FAT is an unemployment insurance and supplementary income fund for low-wage earners that is managed by the Ministry of Finance. As constitutionally mandated, BNDES receives 40% of FAT's annual contributions in the form of an undated, remunerated loan. There are no established dates for repaying the principal invested by BNDES. FAT also extends "surplus" funds to BNDES intended for special lending programs. These funds, from the remaining 60% of FAT funds used by the Ministry of Labor to fund unemployment insurance, have a fixed term for repayment of principal, usually about eight to 10 years. These additional FAT borrowings account for 18% of the Brazilian reais (BrR) 66 billion FAT funds disbursed to BNDES at December 2003, and 20% of BrR74.4 billion in FAT funds as of June 2004. The stable, low-cost, and long-dated sources of public financing provided by PIS-PASEP and FAT bolster BNDES' local currency liquidity profile. BNDES expects the contribution from FAT resources and international borrowings (traditionally a complementary source of funding) to increase steadily. Most, but not all, of BNDES' lending to financial intermediaries occurs through FINAME. FINAME lends funds to financial institutions operating in Brazil, which onlends funds to firms for purchases of equipment and machinery (in line with its mission to promote the development and modernization of Brazil's capital goods sector) and for export financing. In recent years, 100% of FINAME financing has been to the private sector. FINAME financing reaches large as well as small and midsize firms in sectors ranging from utilities, steel, mining, and agro-industry to the transportation/infrastructure sector. FINAME works with more than 189 financial intermediaries- including regional development, commercial, and investment banks and credit, finance, and investment companies-to reach a wide borrower base. FINAME assumes the direct credit risk of the intermediary in the domestic market, rather than that of the ultimate borrower. In certain cases of intermediary insolvency, however, BNDES has direct recourse to the ultimate assets of the borrower. BNDES' investments are executed through BNDESPAR, whose objective is to improve Brazil's capital markets. BNDESPAR focuses on companies in the high-technology and infrastructure sectors, and those with the potential to modernize and expand trade and productive industrial capacity. BNDESPAR aims to strengthen companies' equity and financial structures via share participation, bonds, and convertible/exchangeable debentures. Ownership and Legal Status BNDES is wholly and directly owned by the Federal Republic of Brazil, with the government owning 100% of its share capital. Since 1999, the bank has been under the supervision of the Ministry of Development, Industry, and Foreign Trade, and it is subject to the budget, accounting, and disciplinary regulations of the National Monetary Council. According to Brazilian corporate law, the government is responsible for the solvency of public enterprises. The government, however, does not guarantee all of BNDES' liabilities, including the debt rated by Standard & Poor's Ratings Services. Since BNDES' economic and public-policy importance is high relative to that of other public financial institutions, the risk of default on its obligations nearly equals that of the sovereign. The ratings on BNDES incorporate the absence of a timely government guarantee on its obligations. Brazilian law prohibits bankruptcy proceedings against BNDES as long as the federal government remains its controlling shareholder. Although the law allows creditors to seek payment from the government after obtaining a final judgment against BNDES, the litigation process could significantly delay payments to creditors. Asset Quality BNDES' strategy is to foster economic development, while its commercial interests play an auxiliary role. Unlike other Brazilian public banks, including Banco do Nordeste do Brasil S.A. (LC: BB/Stable/B; FC: BB-/Stable/B), BNDES has no retail outlets. Its lending is mostly long-term, usually up to 10 years, with about 85% of outstanding loans extended to the private sector. BNDES' assets reached BrR165.3 billion at June 2004, from BrR152.1 billion at December 2003; this is up sharply from BrR112.7 billion at year-end 2001. Asset growth since the late 1990s can be attributed to loan growth underpinned by FAT funds and the devaluation of the real (since about BrR41 billion, or 33% of total loans are attributable to foreign currency loans). Loans as a share of BNDES' assets usually represent around 75% of total assets. BNDES' credit policy aims to limit excessive exposure to individual borrowers and sectors, and to establish controls to ensure that these limits are observed. Accordingly, it has set up adequate limits for concentration to economic groups and public exposure. BNDES is capable of financing large projects of national importance. In general, there is a 60% limit for BNDES funds provided to any investment project. Exceptions include vital social projects, and the financing of exports, agriculture, and small business. For example, an 80% limit applies to micro-, small-, and midsize companies in all regions and to midsize export companies in certain regions of Brazil, including the Northeast. BNDES' loan portfolio concentration is high. Loans to financial intermediaries have represented about 40% of the gross loan portfolio during the past several years; infrastructure loans around 25%; and machinery and equipment about 17%. The 10 largest borrowers account for one-third of the gross loan portfolio and around 300% of reported equity. Five of these top- 10 borrowers are financial intermediaries, who in turn onlend BNDES funds to final borrowers. BNDES assumes the credit risk for these financial intermediaries. BNDES' credit procedures generally limit lending to companies classified from 'AA' to 'B-' on the internal scale, which generally corresponds to the same categories on the Brazilian system-wide regulatory scale (credits are classified according to nine categories ranging from 'AA' to 'H'). Some exceptions are made for loans that serve an important development objective, such as loans to strategic regions including the Northeast. Nonperforming loans (NPLs; loans classified in the categories 'E' to 'H' as per Brazilian regulations) were 4.6% of gross loans at June 2004, versus 6.4% at December 2003 and 6.7% at December 2002. BNDES' NPLs are in line with the ratios for the largest retail banks in Brazil, which stood at 5% to 6% in the same period. The higher level of NPLs in 2002-2003 reflects the problematic loan to the AES Group. At the end of 2003, BNDES and AES completed the restructuring of the $1.2 billion (approximately BrR3.5 billion) debt-which originated from the Eletropaulo acquisition by AES. The $1.2 billion debt was split in two AES subsidiaries used to acquire Eletropaulo: AES Elpa and AES Transg s, which were in default with BNDES during 2003. The terms and conditions established in the agreement were the following: * $600 million (about BrR1.7 billion) of BNDES credits were used to create Brasiliana Energia S.A., a new holding company to control Eletropaulo, AES Tiet�, and Uruguaiana. BNDES owns 100% of the preferred shares and 49.99% of the voting shares. AES management in Brazil controls Eletropaulo's. Nevertheless, if Brasiliana defaults in any amount regarding the debentures described below, the amount is automatically converted into capital, which would give to BNDES the majority control of the group (Eletropaulo, AES Tiet�, and AES Uruguaiana). * AES Corp. paid $90 million (approximately BrR260 million) in January 2004. * $510 million (BrR1.5 billion) debt was kept as a debt, but in a different structure. This debt portion is a convertible debenture totally held by BNDES, with an 11-year tenor, and starting principal amortization in December 2007. BNDES' provisions are made in line with system-wide regulations that classify performing and nonperforming loans according to their level of risk. The central bank requires that any additional provisioning (beyond the system-wide regulations) must be authorized by BNDES' Administrative Council and accounted for as a Reserve in the Shareholder's Equity. BNDESPAR's assets include equity stakes in around 160 companies with a book value of BrR14.2 billion at June 2004. Holdings Eletrobr s, Petrobr s, Valepar (the holding company for Companhia Vale do Rio Doce), and Brasiliana Energia, represented BNDESPAR's four largest investments, accounting for 50% of BNDESPAR's portfolio. Shares in Eletrobr s and Petrobr s were part of the government's initial capitalization of BNDES. BNDESPAR plans to sell the remaining strategic shares in favorable market conditions. As part of the restructuring the default by AES Group with BNDES, Brasiliana Energia was created from all AES businesses; via BNDESPAR, BNDES converted part of AES' debt to capital in 2003. In addition, in 2003, BNDES purchased a share in Valepar. Stock market fluctuations have a significant effect on the market value and strategy of BNDESPAR's investments, since divestments are made according to market conditions. BNDESPAR increased its equity investment in part during 2003 owing to favorable prices on the Brazilian stock exchange. Profitability BNDES' profitability is adequate. The bank's developmental targets are a higher priority than its profit objectives. Nevertheless, the bank has been consistently profitable and has been supporting its profit margins by maintaining low administrative overhead. Nevertheless, profitability has historically been below that of Brazil's top-three commercial banks. BNDES' return on average assets (RoAA), at 1% or less during the several previous years, is lower than the average presented by the top Brazilian private banks-basically due to its development objective and higher NPLs in 2002-2003. The top banks' RoAA is generally about 1.5%-3%. BNDES' noninterest expenses were 21% and 23% of revenues at June 2004 and December 2003, respectively. The generally lower noninterest expenses at BNDES reflect much lower personnel costs to revenues-at about one-third that of private-sector banks. BNDES' wholesale nature and lack of a distribution network help keep personnel costs low. The underlying cost of funds for BNDES loans is usually, but not always, the TJLP, the long-term interest rate set quarterly by the central bank at levels generally below market rates (9.75% as of October 2004). For loans funded from domestic sources, the applicable rate is generally the TJLP; however, up to 50% of loans funded from FAT funds can be for goods where there is a recognized international demand. These loans, however, are denominated in U.S. dollars, with a cost of funds of LIBOR plus the U.S. dollar exchange rate variation. For loans funded from other foreign currencies, the cost of funds is based on a basket of interest rates and currencies. In addition to the cost of funds, BNDES' lending rates include a basic spread and a credit risk spread. The basic spread varies according to the priority of the sector, type and location of investment and size of the company; it ranges from 1% to 4%. In March 2004, BNDES changed its policy on the size of the credit risk spread. This spread is 1.5% for all loans, aimed to cover the historical level of NPLs, instead of ranging from 0.5% to 4.6% depending on the bank's assessment of the creditworthiness of the borrower. The cost of borrowing by domestic or foreign companies is the same. Asset-Liability Management BNDES aims to match its asset and liability structure as efficiently as possible. Improving asset-liability management is a medium-term priority. The bank's policy is to minimize the interest rate gap on real-denominated assets and liabilities and any foreign exchange mismatch by indexing corresponding assets to a basket of currencies. BNDES also manages its currency risk with cross-currency swaps. At times, BNDES decides to bear market risk in exchange for a spread that should compensate for this risk. BNDES' established limits on risk follow an overall risk management strategy that is based on a proprietary model for measuring market risk, Value at Risk (VaR); the bank's policy limits market VaR to a maximum of 3% of shareholder's equity. Increasing the share of debentures while reducing direct equity holdings is also part of the bank's asset-liability management strategy. Given the undated nature of a significant portion of its funding (FAT/PIS-PASEP), BNDES liabilities are longer-dated than its assets. The bank has significant flexibility on interest payments on its liabilities. While BNDES is required to remunerate FAT funds received (except for special loans) at the TJLP, it must only remit funds to FAT semiannually at the rate of 6% (per year)-historically below the TJLP; revenues in excess of 6% are capitalized and added to the outstanding principal amount of BNDES' FAT funding base. We do not expect demand for loans priced off TJLP, below most market rates, to diminish. BNDES' funding base is deemed broadly stable, long-dated, and liquid. Domestic constitutionally mandated funding (FAT and PIS- PASEP) and multilateral financing comprise almost 70% of BNDES' funding. Funding derived from PIS-PASEP and FAT resources increased to BrR95 billion at June 2004, from BrR86.7 billion at December 2003 and BrR82.6 billion at year-end 2002. These funds account for two-thirds of the funding base. BNDES bears the risk for managing PIS-PASEP-funded lending for transactions executed after 1982 (which is above 85% of the PIS- PASEP portfolio) and the risk for managing all FAT-funded lending. Up to 50% of FAT funds can be lent to finance the production of goods with international demand; such loans are indexed to the U.S. dollar. The total amount of foreign currency liabilities was BrR26.1 billion at June 2004, or 18% of BNDES' funding base (this excludes FAT Cambial-foreign exchanged referenced- funding). After the federal government, BNDES is the largest recipient of multilateral funds in Brazil. Loans from the Inter-American Development Bank (IADB) are the cheapest source of funding for BNDES after the FAT funds; BNDES and the IADB are discussing $1 billion to support micro, small- and midsize firms and investments in exporting companies. International bond financing has been on hold since 2001. While BNDES' lending is primarily real denominated, approximately 32% of BNDES loans were indexed to foreign currencies-primarily the U.S. dollar. The bank aims to match its assets and liabilities, minimizing exposure to the variation in the TJLP, LIBOR, or the real/U.S. dollar exchange rate. Following losses to BNDES' balance sheet in 1999 with the devaluation and float of the Brazilian real, BNDES established a new policy to limit losses associated with mismatched assets and liabilities. Since 2001, each new loan given has had a portion indexed to the basket of currency. Capital BNDES' capital adequacy is adequate. The government has demonstrated its commitment to the bank. The change in accounting treatment of BNDES' loan portfolio under the central bank's Resolution 2.682/99 makes it easier to compare BNDES with private-sector banks, but its special development role still complicates comparison. Central bank resolutions in 2001-2002 for the banking system imply that BNDES includes constitutional FAT funding as Tier 2 capital (limited to 50% of Tier I capital). Along with a change in 2003 on how to calculate exchange-rate exposure, implied that in December 2003 BNDES' risk-weighted capital ratio was 16%; at June 2004 the ratio was 17.4%. This is above the 11% statutory minimum and compares with the top-tier commercial banks in the system, whose capital ratios range from 15% to 19%. Nevertheless, given BNDES' riskier business, long-term lending, and equity investments, maintaining a higher capital base reflects prudent management. In recent years the market value of BNDES' equity investments has exceeded its book value. At BrR29.7 billion at December 2003, the market value of BNDES' investments was more than twice as large as its book value of BrR14.4 billion. The Brazilian equity market's fluctuations render the bank's capital vulnerable to swings in equity prices. Therefore, the bank's medium-term strategy has continued to be to reduce the equity share in its capital and replace it mostly with debentures. Default History Between 1983 and 1989, the government imposed defaults on some of BNDES' international bank borrowings. The government restricted debt servicing by domestic private and public entities by limiting access to foreign currency and prohibiting remittances abroad. An estimated total amount of $859 million was subject to debt-servicing suspension. These debts were assumed at the federal level for restructuring, and eventually became part of Brazil's Brady debt. BNDES was exempt from the 1989 Collar Plan, which froze deposits. Unlike the rest of the financial system, BNDES did not default on its local currency obligations. Primary Credit Analyst: Daniel Araujo, Sao Paulo (55) 11-5501- 8939; daniel_araujo@standardandpoors.com Secondary Credit Analyst: Lisa M Schineller, New York (1) 212- 438-7352; lisa_schineller@standardandpoors.com UNIBANCO: Board OKs Stock Dividend Payment ------------------------------------------ The Boards of Directors of UNIBANCO - UNIAO DE BANCOS BRASILEIROS S.A. ("Unibanco") and of UNIBANCO HOLDINGS S.A. ("Unibanco Holdings") approved Wednesday, as proposed by the respective Boards of Executive Officers on December 17, 2004: I. The payment of interest on capital stock, in the gross total amount of R$258,823,689.75 and R$127,383,724.64, and net total amount of R$220,000,136.28 and R$108,276,165.94, respectively, to be made from January 31, 2005 on. This payment shall be considered as part of the mandatory dividend corresponding to the fiscal year of 2004, in accordance with the provisions of article 9th paragraph 7th of Federal Law 9,249/95, article 44 paragraph 8th of the by-laws of Unibanco and article 35 sole paragraph of the by-laws of Unibanco Holdings. Pursuant to the approved proposals, Unibanco's and Unibanco Holdings' shareholders are entitled to receive interest on capital stock in the gross and net amounts set forth below. Such values correspond to one (1) share, one (1) Share Deposit Certificate ("Unit")*, or one (1) Global Depositary Share ("GDS")**, as the case may be. An income tax rate of fifteen percent (15%) will be withheld from such gross amounts, resulting in the net values set forth below: In R$ UBB-ON UBB-PN HOL-ON HOL-PN UNIT GDS UBBR3 UBBR4 UBHD3 UBHD6 UBBR11 NYSE-UBB Gross Value 0.1773 0.1950 0.1535 0.1535 0.3485 1.7423 Net Value 0.1507 0.1657 0.1305 0.1305 0.2962 1.4810 (*) Each UNIT represents one preferred share of Unibanco and one preferred share of Unibanco Holdings. (**) Each GDS listed on the New York Stock Exchange (NYSE: UBB) is equivalent to 5 Units. The payment of the due amounts, pursuant to the table above, shall be made according to the procedures and places set forth below: 1. GDSs' holders: The payment shall be made directly to the foreign depositary bank - Bank of New York - which will forward it to the entitled shareholders. 2. Other shareholders: 2.1. Shareholders who are Unibanco's account holders: The payment shall be made by means of credit in the respective bank accounts. 2.2. Shareholders who hold bank accounts in other banks, who have already provided to Unibanco, the bank, branch and bank account numbers: The payment shall be made by means of eletronic transfer (DOC/ TED), according to the respective amounts. 2.3. Shareholders whose shares are deposited in Stock Exhanges' custody: The payment will be made directly to the Stock Exchanges, which shall forward such amounts to the entitled shareholders, by means of the depositary brokers. 2.4. Shareholders for whom the above mentioned situations are not applicable: The payment shall be made in any Unibanco's branch at their convenience. 2.5. Shareholders who hold bearer share certificates which still have not been converted to the book-entry system: The payment will be made upon delivery of the respective certificates for mandatory conversion. 2.5.1. Assistance to the conversion will be provided by our Shareholders Assistance department in the addresses set forth below, where relevant shareholders shall attend and present the respective certificates. Sao Paulo - SP: Rua da Quitanda, 157 - 4th floor Rio de Janeiro - RJ: Rua Sete de Setembro, 111 mezzanine. 2.5.2. For all other locations, such assistance shall be made at Unibanco's branches. Unibanco's and Unibanco Holdings' shares and Units will be traded in the Brazilian market and in the US market without the right to receive payment of interest on capital stock (ex- interest on capital stock) from December 30, 2004 on. January 3, 2005 will be the Record Date for purposes of compliance with obligations arisen from the GDS program maintained by the Companies in the United States of America. II. The proposal of quarterly payment of dividends and/or interest on capital stock to Unibanco's and/or Unibanco Holdings' shareholders, to be implemented in the first quarter of the year 2005. CONTACT: Unibanco - Uniao de Bancos Brasileiros S.A. Investor Relations Area Ave. Eus�bio Matoso, 891 - 15th floor - Sao Paulo, SP 05423-901- Brazil Tel.: (55 11) 3097-1980 Fax: (55 11) 3097-6182 E-mail: investor.relations@unibanco.com URL: http://www.ir.unibanco.com =========== M E X I C O =========== CORPORACION DURANGO: Creditors Approve Reorganization Plan ---------------------------------------------------------- Corporacion Durango, S.A. de C.V. (BMV: CODUSA) (the Company or Corporacion Durango), announced Wednesday that recognized creditors holding recognized claims of Corporacion Durango in a principal amount sufficient to confirm a plan of reorganization under the Mexican business reorganization law have executed an agreement approving the Company's plan of reorganization. The Company expects that the Mexican court presiding over the Company's concurso mercantil proceeding will confirm the Company's plan of reorganization in early 2005. Once confirmed by the judge, the plan of reorganization will be binding on all of the Company's unsecured creditors. The Company's secured creditors and the non-financial creditors of the Company's operating subsidiaries, including their employees, vendors, suppliers and customers, will not be affected by the plan of reorganization. Miguel Rincon, Chairman of Corporacion Durango, commented: We are pleased to be able to announce the signing of our plan of reorganization. We believe that the terms of the plan of reorganization are fair and equitable to all our stakeholders. The plan of reorganization will result in a more adequate and competitive capital structure for Corporacion Durango and substantially enhance the financial flexibility of the Company and its operating subsidiaries. Under the plan of reorganization, the Company's unsecured creditors will receive new debt equal to 85% of the outstanding principal amount of their recognized claims. The Company's unsecured bank creditors will amend and restate their existing loans as Series A Loans in an aggregate principal amount of approximately $116.1 million. The holders of the Company's other unsecured indebtedness, including the Company's 12 5/8% Senior Notes due 2003, 13 1/8% Senior Notes due 2006, 13 1/2% Senior Notes due 2008 and 13 3/4% Senior Notes due 2009, will receive Series B Notes in an aggregate principal amount of approximately $433.8 million in exchange for their debt. In addition, all such creditors will receive an aggregate of 17% of the Company's capital stock on a fully diluted basis. The Series A Loans and Series B Notes will be guaranteed by certain of the Company's subsidiaries, and will be secured ratably by real estate and other fixed assets of the Company and certain of the Company's Mexican subsidiaries and the common shares of two of the Company's subsidiaries. Corporacion Durango is the largest producer of containerboard in Mexico through its Grupo Durango division; the largest Mexican producer of newsprint through its Pipsamex division; the largest manufacturer of corrugated containers in Mexico through its Titan division; a leading independent paper and packaging producer in the U.S. through its McKinley division; and one of the largest manufacturers in Mexico of uncoated free-sheet and multi-wall sacks. CONTACTS: Corporacion Durango, S.A. de C.V. Ms. Mayela R. Velasco Phone: +52 (618) 829 1008 e-mail: mrinconv@corpdgo.com.mx Mr. Miguel Antonio R. Phone: +52 (618) 829 1070 e-mail: rinconma@corpdgo.com.mx The Global Consulting Group Mr. Kevin Kirkeby Phone: (646) 284-9416 e-mail: kkirkeby@hfgcg.com SATMEX: Misses $188M Debt Payment to Government ----------------------------------------------- Mexican satellite operator Satelites Mexicanos SA (STM.YY) committed its third major debt default in 2004 when it missed a US$188-million debt payment to the government on Wednesday. Satmex, which is 49% owned by Loral Space & Communications Ltd (LRLSQ.OB), has already defaulted on US$525 million in debt and needs to raise cash to launch the Satmex 6 satellite, which is seen as key to its survival. A company spokesman said talks are continuing with creditors and with the government, with the idea of including the debt to the government in an overall agreement. "The matter is being attended to, and there are talks with all parties involved," the spokesman said. Satmex has been working on its debt refinancing for about a year but has failed to reach an agreement with its creditors that could put the company back on its feet. Besides tight liquidity, Satmex has faced technical problems with its satellites that has cut deep into its transmission capacity and scared potential new clients away. Despite its problems, the company has caught the eye of some investors who think the company still has a future and could return to profitability. Mexico City-based Constellation Group, which represents at least four other satellite operators including Spain's Hispasat, recently presented the government with a proposal to buy Satmex. Constellation, an investment vehicle created solely for the takeover effort, has pledged a cash infusion of $120 million and the assumption of more than $700 in debt to rescue the company. =============== P A R A G U A Y =============== PARMALAT FINANZIARIA: Citigroup Seeks Approval to Sue LatAm Arms ---------------------------------------------------------------- U.S. bank Citigroup Inc. has asked Bankruptcy judge Robert Drain for permission to sue Parmalat Finanziaria's Latin American units over defaulted loans, Reuters says. Citigroup claimed Parmalat Del Ecuador S.A. and Parmalat Paraguay S.A. have defaulted loans worth US$6.05 million and US$4.8 million respectively. In a motion, the world's largest financial services group told Judge Drain it intends to recover the amount through lawsuits in the units' respective locations. The financial group is seeking relief from a July 2 preliminary injunction, which it said blocks such lawsuits. Citigroup argued the injunction was not intended to protect operating Parmalat subsidiaries that are not covered by any insolvency proceeding. The injunction prevents Parmalat's creditors, including Citibank, from suing the group's subsidiaries and entities. Parmalat's government-appointed administrator, Enrico Bondi, filed for the injunction in June, six months after the dairy giant filed for insolvency in Italy and four months after its U.S. units filed for Chapter 11 bankruptcy protection. Madlyn Gleich Primoff, a partner at Clifford Chance U.S. LLP, said in the motion, "Absent the preliminary injunction, Citibank would not be barred under Italian law or otherwise from commencing proceedings. "The preliminary injunction, as currently in effect, thus provides the foreign debtors with more relief with respect to Parmalat Paraguay and Parmalat Ecuador than they are entitled to under Italian law." Citibank added it was "unfairly prejudiced" by the broad scope of the injunction, which it claims "flies in the face" of U.S. Bankruptcy law. The court will hear the motion on January 27, 2005, 10:00 a.m. in New York. Mr. Bondi has sued a number of financial institutions, including Citigroup and Bank of America for alleged abetting Parmalat's collapse in December 2003. The banks, however, claimed they too were victims of fraud. Parmalat has also included auditors Deloitte & Touche and Grant Thornton in the lawsuit. Bondi has been trying to recover Parmalat's money before he launches a debt-for-equity swap, which would pave way for the group relaunch. CONTACT: PARMALAT FINANZIARIA S.p.A. Legal Seat 43044 Collecchio (Pr) Via Oreste Grassi, 26 Administrative Seat 20122 Milan Piazza Erculea, 9 Phone: +39 02 806 8801 Fax: +39 02 869 3863 Web site: http://www.parmalat.net ============= U R U G U A Y ============= UTE: Demand For First Trust Deed Issue Exceeds Expectations ----------------------------------------------------------- Demand for Uruguayan state power company UTE's first trust deed issue on the local market exceeded expectations, reports Business News Americas. UTE had planned to issue up to US$25 million in trust deeds last week but demand swelled to US$86 million. The deeds, guaranteed by the company's cash flow, are for seven years with biannual payments and interest at Libor plus 3%, with a minimum of 6.5% and a maximum of 8%. The deeds were rated AA+ by Fitch Uruguay. The financial advisor on the issue was Banco Surinvest and the fiduciary is EF Asset Management Administradora de Fondos de Inversion. UTE finance manager Alejandro Peroni said that the company created a trust fund called UTE 2004 Fideicomiso Financiero to issue the deeds Wednesday on the Montevideo stock market. The funds obtained from the issue will be used to finance investments in transmission and distribution that were postponed due to Uruguay's 2002 financial crisis. Despite the financial crisis and energy shortages in recent years, the company has lowered its debt and has not passed on higher fuel costs to customers through tariff increases, Scaglia added. UTE: Calls for Brazilian Bids for 2-Month Power Supply ------------------------------------------------------ UTE opened new bidding for the 2-month supply of 500MW of interruptible power from Brazil from January 10, reports Business News Americas. The agreement can be extended for two more months if the parties agree. Interested bidders have until Jan. 7, 2:00 pm to present their bids at the Sao Paulo offices of Brazil's power trading chamber CCEE. Bidders must offer a price in Brazilian reais/MWh. Bids will be opened the same day and the contract offered to the lowest bidder. In the event of equal prices being offered, bidders will have 48 hours in which to submit a different price. CCEE said vendors must obtain an export permit from Brazil's electricity regulator Aneel by Jan. 3. Contract signing is dependent on Brazil's electricity regulator Aneel certifying that the vendor meets technical requirements to sell power, and Brazil's grid operator ONS will coordinate the dispatch of the power. The vendor will be responsible for securing all export permits and for paying duties, and is required to deliver the power at the Garabi II node on the two countries' border. ================= V E N E Z U E L A ================= PDVSA: Reaches New Collective Labor Accord With Unions ------------------------------------------------------ Venezuela's state oil company PDVSA struck a new collective labor contract with oil unions - Fedepetrol, Sinutrapetrol and Fetrahidrocarburos - on Tuesday after reaching an agreement on article 69 regarding hiring practices. The contract's last clause, defining the way the company is to hire new workers, was approved under the condition that both the corporation and the unions create a committee that, within the next 60 days, is to establish a method to ensure that candidates applying for positions in PDVSA are treated equally. The labor agreement benefits 44,000 state and sub-contracted oil workers that will see daily salary increases of VEB7,000 (US$3.65) to VEB31,000 in the first year of the agreement and VEB32,000 in the second. The accord would run through 2006. The deal sees 59% of wages paid in cash and 41% paid as social benefits, compared to a 69:31 split in the 2002-04 contract. The agreement includes education grants, housing loans and medical care contracts. Contractors' monthly pension payments will double to VEB360,000, while PDVSA workers' pension payments increase 89% to VEB700,000. PDVSA: Invests $3.7B on Public Projects --------------------------------------- The Venezuela government revealed Tuesday that PDVSA spent US$3.7 billion toward public projects in 2004, the AP relates. According to the Energy and Mines Ministry, the funds, a portion of the revenues collected by the company, went toward a wide array of projects involving infrastructure, agriculture and social programs. Among a long list of projects, the government spent US$54 million to rebuild a rundown sugar mill in the central state of Barinas, spent US$50 million building a new line to the Caracas subway and US$50 million toward construction of a commuter train in the city of Maracaibo, the ministry said. *********** 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 2005. 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. 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