/raid1/www/Hosts/bankrupt/TCRLA

/raid1/www/Hosts/bankrupt/TCRLA_Public/050524.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 Tuesday, May 24, 2005, Vol. 6, Issue 101 Headlines A R G E N T I N A ARTE GRAFICO: Court Approves Plan, Reorganization Concludes BANCO GALICIA: Secures $40M Long-Term Loan From IFC CLAXSON INTERACTIVE: Fitch Reiterates `B(Arg)' Rating on Bonds EDENOR: Emgasud Presents Offer To Buy Power Utility GEOMATICA: Court Order Makes Bankruptcy Official GRACIELITA: Court to Oversee Reorganization ISMO SALUD: Proceeds With Liquidation PETROBRAS ENERGIA: Releases April Oil, Gas Production Figures TONIC: Court Declares Company Bankrupt TRENES: Court Authorizes Reorganization YORKVILLE: Initiates Bankruptcy Process on Court's Order * ARGENTINA: Seeks to Quash ICSID Ruling B E R M U D A NORTHERN OFFSHORE: Proposed Plan Gets Unanimous Support B O L I V I A AGUAS DEL ILLIMANI: Regulator Moves for Audit, Review B R A Z I L ARACRUZ CELULOSE: FC Rating Reflects Sovereign Rating BRASKEM: S&P Details Improved Liquidity EMBRATEL: Board to Vote on Capital Increase PARANAPANEMA: Posts Lower 1Q05 Net Loss on Increased Sales VARIG: TAP Rules Out Merger C O L O M B I A FERROVIAS: Liquidation, Closure Anticipated End of June TELECOM: Former Clients Granted More Time to Settle Balances M E X I C O AHMSA: Gets Wage Agreement With Workers at No. 2 Plant BALLY TOTAL: Board Member Steps Down to Avoid Potential Conflict GRUPO MEXICO: SPCC Minority Shareholders Prepare to Sell Stakes PYCSA: Defends Delays in Construction of Panama Highway P A N A M A WILLBROS GROUP: Federman & Sherwood Files Class Action Lawsuit WILLBROS GROUP: Schiffrin & Barroway Files Class Action Suit P E R U BANCO WIESE: Intesa Reaffirms Commitment to Peruvian Unit P U E R T O R I C O R&G FINANCIAL: Moves to Defer Nasdaq Delisting U R U G U A Y UAIR: Faces Bankruptcy Threat, Suspends Flights V E N E Z U E L A PDVSA: Sets End-June Target for 2003 SEC Report - - - - - - - - - - ================= A R G E N T I N A ================= ARTE GRAFICO: Court Approves Plan, Reorganization Concludes ----------------------------------------------------------- Buenos Aires-based company Arte Grafico S.A. has concluded its reorganization, according to data released by Infobae on its Web site. The conclusion came after the city's Court No. 2 of Buenos Aires' civil and commercial tribunal, with assistance from Clerk No. 4, made official the debt plan signed between the Company and its creditors. BANCO GALICIA: Secures $40M Long-Term Loan From IFC --------------------------------------------------- The International Finance Corporation, the private sector arm of the World Bank Group, signed Friday an agreement with Banco de Galicia y Buenos Aires S.A. in Argentina to provide a $40 million seven-year loan facility. The proceeds will be used by the bank to on-lend to small and medium enterprises (SMEs) and mid-sized Argentine corporate borrowers with exporting and other hard-currency generating capacity. This investment marks IFC's first direct financing to an Argentine financial institution since the onset of the Argentine financial crisis. Banco Galicia is the largest private sector commercial bank in Argentina in terms of assets ($7.8 billion as of March 31, 2005) and third in terms of shareholders' equity ($417 million as of March 31, 2005). In May 2004, Banco Galicia successfully completed a debt restructuring totaling $1.37 billion, in which IFC served as chair of the Ad Hoc Steering Committee of Banco Galicia's unsecured creditors. Building on that important milestone, the bank has steadily increased its private sector lending activities while increasing its deposit market share. Jyrki I. Koskelo, IFC's Global Financial Markets director, said, "IFC is pleased to support Banco Galicia, as the bank reengages in providing long-term financing to a core segment of Argentina's productive base. We expect the Argentine banking sector to maintain its improving trend, with the continued support of the Argentine authorities on remaining structural issues. As Banco Galicia approaches its 100th anniversary, its strong and resilient franchise and clear vision provide a base for success in a rapidly changing environment." Sergio Grinenco, vice chairman of Banco Galcia, acknowledged IFC's strong support and underscored the opportunity that the Bank will have, through this facility, to finance export- oriented projects of small and medium enterprises in Argentina. "Banco Galicia," he said, "is a leading financial institution in providing finance to these sectors of the Argentine economy." Atul Mehta, IFC's director for Latin America, added, "The reactivation of the private banking sector as a dynamic player in credit intermediation is crucial to the sustainable recovery of the Argentine economy. IFC welcomes and supports Banco Galicia's efforts to make long-term funding more accessible to viable borrowers in Argentina." Argentina has steadily regained economic ground. In tandem with this recovery, the banking sector is now faced with rapidly increasing credit demand stemming from the sharp growth rates in exports, the creation and expansion of SMEs, and industrial output. IFC recognizes Banco Galicia's particular expertise in funding SME, corporate and agribusiness borrowers. From the beginning of the financial crisis in Argentina, IFC has played an essential role supporting its clients in the private sector. IFC remained engaged in Argentina throughout the crisis, providing over $300 million in financing from June 2002 to date. CLAXSON INTERACTIVE: Fitch Reiterates `B(Arg)' Rating on Bonds -------------------------------------------------------------- Fitch Argentina Calificadora de Riesgo S.A. maintained the 'B(arg)' rating assigned on US$44.4 million worth of "Obligaciones negociables" bonds issued by Claxson Interactive Group Inc. The action was based on the Company's financial status as of December 31, 2004. Argentina's securities regulator, the Comision Nacional de Valores noted that the bonds were classified under "Simple Issue" with undisclosed maturity date. Fitch said that the `B(arg)' rating indicates significant credit risk although a limited margin of safety remains. Capacity for payment at this juncture is dependent on a sustained, favorable business climate. CONTACT: Mr. Ezequiel Paz Claxson Interactive Group, Inc. 404 Washington Ave. 8th floor Florida, 33139, Miami Beach USA E-Mail: epaz@claxson.com Phone: 305-894-3574 Web Site: http://www.claxson.com EDENOR: Emgasud Presents Offer To Buy Power Utility --------------------------------------------------- Argentine gas pipeline operator Emgasud has made an offer to acquire a stake in local power distributor Edenor, currently controlled by Electricite de France (EdF), in partnership with US-based Latin American Energy Fund (LAEF). EdF hired JPMorgan to find an investor willing to buy part or all its 90% interest in Edenor, which serves over 2.2 million clients in the northern part of capital city Buenos Aires. Edenor has around US$524 million in debts, 55% of which is in hands of investments funds. The other candidates for Edenor are local funds Dolphin and Pegasus, US-based fund Leucadia and Brazil's GP Investimentos. The term for submission of bids expired on May 16. CONTACT: EDENOR S.A. Azopardo Building Azopardo 1025 (1107) Capital Federal Phone: (54-11) 4346-5000 Fax: (54-11) 4346-5300 E-mail: to ofitel@edenor.com.ar Web Site: http://www.edenor.com.ar GEOMATICA: Court Order Makes Bankruptcy Official ------------------------------------------------ Geomatica Argentina S.A. enters bankruptcy protection after Court No. 15 of Buenos Aires' civil and commercial tribunal, with the assistance of Clerk No. 29, ordered the Company's liquidation. The order effectively transfers control of the Company's assets to a court-appointed trustee who will supervise the liquidation proceedings. Infobae reports that the court selected Alberto Jose Rotenberg as trustee. Rotenberg will be verifying creditors' proofs of claim until the end of the verification phase on July 7, 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. CONTACT: Jose Rotenberg, Trustee Avda Cordoba 1336 Buenos Aires GRACIELITA: Court to Oversee Reorganization ------------------------------------------- Gracielita S.R.L. begins reorganization proceedings after Court No. 5 of Mercedes' civil and commercial tribunal granted its petition for "concurso preventivo," according to Argentine news source Infobae. During the process, the Company can negotiate a settlement with its creditors so as to avoid a straight liquidation. Creditors with claims against Gracielita S.R.L. must present proofs of the company's indebtedness to Jorge Omar Vazquez, the court-appointed trustee, before June 3, 2005. These claims will constitute the individual reports to be submitted to court on Aug. 1, 2005. The court also requires the trustee to present an audit of the Company's accounting and business records through a general report due on Sep. 19, 2005. The informative assembly, the last stage of a reorganization process, will be held on Dec. 16, 2005. CONTACT: Jorge Omar Vazquez, Trustee Calle 22 Nro. 695 (Edificio Apolo) Mercedes ISMO SALUD: Proceeds With Liquidation ------------------------------------- Diagnostico Tesla S.R.L. successfully sought for the bankruptcy of Ismo Salud S.A. after Court No. 9 of Buenos Aires' civil and commercial tribunal declared the Company "Quiebra," reports La Nacion. As such, the medical services company will now start the process with Mr. Mario Krasnansky as trustee. Creditors must submit proofs of their claim to the trustee by August 8 for authentication. Failure to comply with this requirement will mean a disqualification from the payments that will be made after the Company's assets are liquidated. The city's Clerk No. 17 assists the court on the case that will close with the sale of all of its assets. CONTACT: Ismo Salud S.A. Escalada 1612 Buenos Aires Ms. Mario Krasnansky, Trustee Juan Ramirez de Velazco 813 Buenos Aires PETROBRAS ENERGIA: Releases April Oil, Gas Production Figures ------------------------------------------------------------- Petrobras Energia Participaciones S.A. (Buenos Aires: PBE, NYSE:PZE), controlling company of Petrobras Energia S.A. (Buenos Aires: PESA), announces Petrobras Energia S.A.'s oil and gas daily average production for April 2005. For comparative purposes production for 2004 fiscal year includes Petrolera Santa Fe's and Petrobras Argentina's production. For conversion into barrels of oil equivalent, gas production is expressed at 9,300 kilocalories. Production from bock 18 in Ecuador is reported on a 70% interest. Produccion Total de Petroleo y Gas (*) (miles de barriles de petroleo equivalente diarios) Abr-05 Abr-04 - Petroleo Argentina 53.8 63.9 - Petroleo Venezuela 43.6 48.3 - Petroleo Peru 12.4 11.1 - Petroleo Bolivia 1.3 1.8 - Petroleo Ecuador 7.8 6.3 Total Produccion de Petroleo 118.9 131.4 - Gas Argentina 40.5 45.3 - Gas Venezuela 3.4 4.5 - Gas Peru 1.0 1.3 - Gas Bolivia 6.2 6.5 Total Produccion de Gas 51.1 57.6 Total Produccion de Petroleo y Gas 170.0 189.0 CONTACT: Petrobras Energia Participaciones S.A. Edificio Perez Companc Maipu 1 Buenos Aires, C 1084 ABA Argentina Phone: 54-11-4344-6000 Website: http://www.petrobrasenergia.com TONIC: Court Declares Company Bankrupt -------------------------------------- Tonic S.A. entered bankruptcy on orders from Court No. 15 of the Buenos Aires' civil and commercial tribunal, reveals Infobae. Working with Clerk No. 29, the court assigned Hector Julio Grisolia as trustee. He is to verify creditors' claims until Aug. 4, 2005. Creditors who fail to have their claims validated before the deadline will be disqualified from receiving any payments to be made after the Company's assets are liquidated. Trustee Grisolia will prepare the individual reports upon completion of the verification process. The court also requires the receiver to prepare a general report. This report contains a summary of the results in the individual reports. CONTACT: Hector Julio Grisolia, Tustee Jeronimo Salguero 2533 Buenos Aires TRENES: Court Authorizes Reorganization --------------------------------------- Court No. 9 of Buenos Aires' civil and commercial tribunal authorized Trenes de Buenos Aires S.A. to start its reorganization process. According to Infobae, the court, which is assisted by Clerk No. 18, granted the Company's "Concurso Preventivo" motion, appointing Estudio Waisberg-Knoll; Estudio Roggiano y Asociados y Estudio Bosnic Lopez y Feltrin y Asocia as trustees. Creditors have until Sep. 6, 2005 to submit their proofs of claim to the trustees, who will verify these claims and submit them to court as individual reports on Nov. 29, 2005. After these reports are processed in court, the receiver will then prepare the general report and submit it to court on March 10, 2006. The informative assembly, the last stage of a reorganization process, will be held on Oct. 18, 2006. CONTACT: TRUSTEE Estudio Waisberg-Knoll Estudio Roggiano y Asociados Estudio Bosnic Lopez Feltrin y Asocia Suipacha 472 Buenos Aires YORKVILLE: Initiates Bankruptcy Process on Court's Order -------------------------------------------------------- Yorkville S.A. entered bankruptcy after Court No. 15 of Buenos Aires' civil and commercial tribunal ruled that it is "Quiebra." Infobae reveals that the city's Clerk No. 29 aids the court on the process. The court appointed Carlos Manuel Carrescia as trustee. Creditors must submit their proofs of claim to the receiver for verification before July 28, 2005. The receiver is also required to prepare the individual and general reports on the bankruptcy process. CONTACT: Manuel Carrescia, Trustee Tucuman 1621 Buenos Aires * ARGENTINA: Seeks to Quash ICSID Ruling ---------------------------------------- The Argentine government is not giving up easily on its fight against US energy company CMS Gas Transmission (NYSE: CMS) in the World Bank's International Center for the Settlement of Investment Disputes (ICSID) tribunal, reports Business News Americas. Economy minister Roberto Lavagna was cited by local press as saying that the government would seek to annul the ICSID ruling that ordered it to pay US$133 million in compensation to CMS Energy on the grounds that it does not reflect the terms of international trade treaties Argentina has signed. However, CMS said in a statement that ICSID has considered and rejected Argentina's claims, finding that "Argentina's constitution expressly mandates the recognition of international treaty obligations and compliance with those obligations." The ICSID ruling furthermore "examined Argentina's claim that its actions were justified by an economic emergency and concluded that did not excuse Argentina from liability," CMS said. ============= B E R M U D A ============= NORTHERN OFFSHORE: Proposed Plan Gets Unanimous Support ------------------------------------------------------- The joint provisional liquidators (the JPLs) of Northern Offshore Limited (NOL or the Company) announced that at the meetings of Scheme Creditors which were held on May 20, 2005 at the offices of KPMG Financial Advisory Services Limited in Bermuda, the results of the voting on the Scheme of Arrangement (the Scheme) were as follows: - 100% of US$ Notes by value and in number, who voted, supported the Scheme; and - 100% of NOK Bonds by value and in number supported the Scheme. In excess of 95% of total note holders eligible to vote actually voted with unanimous support for the Scheme. Accordingly, based on the above voting, the requisite voting majorities in favor of the Scheme have been received. Under the terms of the proposed Scheme, the bondholders of NOL will receive a total of 98% of the equity of the Company in exchange for the cancellation of the debt. The balance of 2% of the equity will remain with the existing shareholders. There are certain steps that need to be taken before the Scheme becomes effective. The JPLs anticipate that these steps should be completed in the next 10 days at which time the JPLs will be discharged and released and the winding up petition will be withdrawn. From the effective date of the Scheme the Company will operate under the control of its Board of Directors. Mike Morrison of KPMG Financial Advisory Services Limited, one of the JPLs commented: "The JPLs have worked closely with the various stakeholders of the Company and in particular the Ad Hoc Bondholders' Committee and their advisors, over the past 10 months and are delighted that such a significant proportion of the bondholders have unanimously supported the Scheme. The JPLs will make a further announcement when the Scheme becomes effective." The JPLs can be contacted through Adrian Bourne, KPMG in London (+ 44 (0) 207 694 3018) or Chris Giddens, KPMG Financial Advisory Services Limited in Bermuda (+ 1 (441) 294 2653) CONTACT: Northern Offshore Phone: 1 441 294 2653 Fax: 1 441 295 8280 ============= B O L I V I A ============= AGUAS DEL ILLIMANI: Regulator Moves for Audit, Review ----------------------------------------------------- Outgoing water services concessionaire Aguas del Illimani will undergo an audit following orders by the basic services regulator, says Business News Americas. The government has earmarked US$100,000 to hire an international auditing firm, which will examine economic, commercial, and contractual compliance issues, as well as administrative and technical aspects of the concessionaire. The audit will cover Aguas del Illimani's operations since 1997, when it took over basic services operations of La Paz and satellite town El Alto via concession, up to the present. The government notified Illimani of the rescission of its contract last year after residents complained about lack of services in parts of the city and water bills tied to the US dollar. Illimani, which is controlled by French water giant Suez, says it complied fully with its obligations under the contract it had with the government. =========== B R A Z I L =========== ARACRUZ CELULOSE: FC Rating Reflects Sovereign Rating ----------------------------------------------------- Rationale The 'BB-' foreign currency rating on Aracruz Celulose S.A. (Aracruz) mirrors the foreign currency rating assigned to the Federative Republic of Brazil. The 'BBB-' local currency reflects Aracruz's above-average ability to remain protected against the idiosyncrasies of the Brazilian economy because of the company's sales to the external market, its strong competitive position in the market pulp business as a low-cost producer, and its free cash flow generation from 2004 on. On the other hand, Standard & Poor's also considers that a prolonged economic crisis in Brazil could potentially curtail the company's financial flexibility in the medium term, as its ability to sustain cash generation at current strong levels and to execute adequate investment decisions to support its long- term growth could be impaired. The continuity of Brazil's improving economic and political environment provides Aracruz with more stable conditions under which to manage its financial position. For analytical purposes, Standard & Poor's projections proportionally incorporate Aracruz's USGAAP financial figures, 50% of the Veracel debt, and 50% of its projected cash generation, as Aracruz guarantees 50% of the debt and will benefit from 50% of Veracel's pulp production. In 2005, Aracruz is expected to sell 130,000 tons of pulp coming from this plant. Veracel is a 900,000-ton pulp project in association with Sweden-based pulp and paper producer Stora Enso, and the plant should be initiating production in late June 2005. Aracruz's first-quarter 2005 results show a record volume sold of 592,000 tons, 9% higher than those for first-quarter 2004. The higher volume sold and average list pulp prices 11% higher than the same period last year in the global market were both responsible for the 16% increase in net revenues for first- quarter 2005 compared with those of first-quarter 2004. As a result, EBITDA grew about 19% in the same period (US$151.5 million in first-quarter 2005 and US$126.8 million in first- quarter 2004), a great increase even considering that 60% of Aracruz's costs are denominated in local currency (Real), which has appreciated throughout the quarter. Also in first-quarter 2005, EBITDA to gross interest coverage enhanced and hit 5x (4.5x in first-quarter 2004), and funds from operations (FFO) to total gross debt (including Veracel's debt portion) reached 28%, which is fairly stable when compared to 29% in the same period last year. Aracruz's higher FFO in first-quarter 2005 of US$116 million (US$101 million in first-quarter 2004) stems from the same reason as the EBITDA growth. The company's credit metrics in first-quarter 2005 are in line with Standard & Poor's expectations. Aracruz is the world's leading producer of bleached eucalyptus Kraft pulp (BEKP), accounting for some 31% of the global supply, or some 2.5 million tons per year. Since the Fiberline C project came on stream, Aracruz is no longer self sufficient in its fiber needs. However, the company's higher wood requirements are being supplied by the Veracel project. In 2004, 35% of Aracruz's wood requirements were supplied from Veracel, and the company's projection for 2005 is 15%. Aracruz has already invested in its self-sufficiency projects and is expected to be self sufficient in fiber again by 2006. Liquidity Liquidity remains comfortable and is one of the key rating factors that sustains Aracruz's average financial risk. The company has resolved its financing needs to fund two significant investments (Veracel and Gua�ba) with long-term debt instruments in line with the return of the projects. The acquisitions of the Gua�ba mill in 2003 and the Veracel project led its formerly average debt position to increase about US$600 million from second-semester 2003 until now. Even though Aracruz has focused on the international credit markets, it also enjoys strong access to the local credit market (although bank lines are not committed in Brazil) and benefits from a "flight to quality" during a stressed macroeconomic environment. Aracruz has shown a positive free cash flow since 2004, and Standard & Poor's Ratings Services projections indicate that it will continue to be positive, even considering Aracruz's portion of investments to be completed at the Veracel project. The company is expected to use its free cash to amortize long-term debt. It is also part of Aracruz's financial strategy to seek to stretch the total debt amortization schedule, which is aimed at strengthening the company's financial flexibility. This action is already seen in the full-year 2004 figures that present a ratio of short-term to total debt of 15%, when this ratio had usually averaged 35% in the past. Moreover, Aracruz has established a financial policy directive in which cash holdings are targeted to be equivalent to 12 months of amortization (in first-quarter 2005 it represents 24 months), which improves its financial flexibility in the event of an unexpected credit crunch. As of full-year 2004, about 46% of Aracruz's partially consolidated with Veracel debt was its export future flow securitization, and the remaining were long-term trade finance (20%) and BNDES transactions (some 25%), with a comfortable amortization schedule. According to Standard & Poor's projections, total gross debt is expected to remain at US$1.6 billion until 2005 (or about US$1.2 billion when considering the total debt net of cash holdings), when it will gradually start to decline. From 2006 on, Aracruz will face higher debt amortization amounts, but the company should benefit from larger cash generation as a result of the Veracel full output coming on stream. Outlook The stable outlook on Aracruz's foreign currency rating reflects that of the sovereign rating of the Federative Republic of Brazil. The stable outlook on the local currency rating reflects the expectation that the current economic, financial, and political conditions in Brazil will allow Aracruz to sustain strong profitability and access to long-term funding either locally or internationally. Rating stability also considers that by 2006 the company (partially consolidated with Veracel) will be able to sustain coverage ratios (EBITDA to gross interest) of about 6x and total gross debt to EBITDA of about 2x, as Aracruz will benefit from Veracel's full output coming on stream. If the company's performance deteriorates as a result of a change in its fundamentals, and Aracruz fails to deliver FFO to total debt of about 35% and total debt to EBITDA of close to 2x by 2006, the outlook could be revised to negative. Primary Credit Analyst: Marcelo Costa, Sao Paulo (55) 11-5501- 8955; marcelo_costa@standardandpoors.com Secondary Credit Analyst: Milena Zaniboni, Sao Paulo (55) 11- 5501-8945; milena_zaniboni@standardandpoors.com BRASKEM: S&P Details Improved Liquidity --------------------------------------- ISSUER CREDIT RATING Corporate Credit Rating: Local currency BB/Stable/-- Foreign currency BB-/Stable/-- AFFIRMED RATING Sr unsecd debt Foreign currency BB- Major Rating Factors Strengths: - Strong market share in most product segments where it operates, and a wide-scope product portfolio, which has traditionally provided the company with the ability to sustain spreads, margins, and cash generation when compared with those of its international peers - Size (largest petrochemical producer in Latin America) and economies of scale (integrated since naphtha cracking through end polyolefins and vynilics production) allow for higher operating profitability than that of other local competitors - Some degree of geographic diversification for production and sales, with operations in two different petrochemical complexes (Cama�ari and Triunfo) providing it with some degree of operational flexibility - Technological expertise in developing new products and efficiency improvements under way that should provide steadier cash flow over time to face cyclical troughs, especially compared with the recent past Weaknesses: - Exposure to volatile feedstock cost and foreign exchange rates, potentially creating temporary mismatches between cost and price increases that can momentarily create working capital pressure and slash cash generation; - Sales concentration in its home market of Brazil, with export profitability as a direct function of international petrochemical prices, consequently exposing the company to Brazil's volatile GDP trends - Growing competition, as existing players also move toward consolidation and expand production capacity, some using alternative feedstock (tending to increase price competition) Rationale The ratings on Braskem S.A. reflect the risks associated with price volatility of its main feedstock, naphtha (sustained at historic highs for a very long time already); exposure to its home market of Brazil for EBITDA and sales generation (considering that exports cannot fully compensate for the profitability lost during cyclical downturns); and growing competition with the consolidation and expansion of other players, some of them using alternative feedstock. These negatives are mitigated by Braskem's leading business and market position in the Latin American petrochemical industry (which we see as peculiarly less fragmented and therefore more favorable than other mature markets worldwide); economies of scale and some level of geographic diversification; increasing technological expertise; and all efficiency improvement initiatives being implemented by the company, both in its financial and industrial profiles, which should result in structural cost reductions in the medium term and therefore more resilience in cash flow, especially when compared with the performance in past years. Braskem is the largest petrochemical company in Latin America, with net sales and EBITDA of $4.18 billion and $946.9 million in the 12 months ended March 31, 2005, respectively. Braskem's capital structure continued improving in first-quarter 2005, moving further in the trend seen since the second half of 2004. Total debt levels declined to $1.98 billion and net debt to $1.29 billion (from $2.13 billion and $1.46 billion, respectively, in December 2004). Cash generation, which remained robust in the period, permitted cash reserves to be preserved at $686 million, so that, on a net debt basis, the company's credit measures remain quite strong for the rating category. Nevertheless, current strong financial ratios, with total debt to EBITDA at 2.1x and funds from operations (FFO) to total debt at 38.8% in the 12 months ended March 31, 2005, reflect several improvements undertaken by the company in 2004 to extend and improve its debt profile. Braskem should also cautiously take account of the favorable market conditions for the petrochemical industry worldwide, where spreads between naphtha (Braskem's primary feedstock) and ethylene, and between ethylene and polyethylenes, continue expanding, allowing for stronger operating profitability and thus outstandingly strong cash flow. In fact, the significant improvement in cash generation in 2004 and now in first-quarter 2005 should be put in context, considering very weak levels in previous years, when the company faced not only challenging industry conditions but also an increase in operating working capital requirements, with higher raw material cost and some volume increases in a context of limited access to suppliers' financing. We understand that part of the gains that have been gathered since 2004 also reflect initiatives to reduce costs and improve efficiency, but higher utilization rates (climbing to more than 90% in 2004 and first- quarter 2005 from an average 85% in 2003), very strong prices, and a strengthening foreign exchange rate in the past two quarters (greatly offsetting feedstock cost spikes) should account for the bulk of the current operating improvement. We continue expecting FFO-to-total debt to average 30%-40% through the petrochemical cycle, with total debt to EBITDA below 2.5x. These should also be considered a reflection of a more conservative financial policy undertaken by Braskem's management from now on, which is an important supporting rating factor. The company's efforts to reduce overall cost of debt have already been reflected in an improvement of the EBITDA-to-interest ratio to 4.6x in the 12 months ended March 31, 2005, from an average of 2x in 2002 and 2003. We continue expecting this ratio to stabilize at about 4x through 2005. Pressured by volatile oil prices, naphtha price remains sustained at record highs of more than $400/ton. The average naphtha cost in first-quarter 2005 was $429/ton, comparing with $378/ton in 2004. Having a direct impact on Braskem's margins, the effect of wide oscillations of naphtha cost on working capital requirements is not negligible either. We see proactive actions undertaken by the company to manage those pressures, diversifying its base of suppliers (though still relying heavily on Petroleo Brasileiro S.A.-Petrobras, which accounted for 64% of total naphtha purchases in first-quarter 2005) and both accessing suppliers' credit for imports and increasing the use of alternative feedstock such as oil condensate. While we do not expect market conditions to weaken dramatically in the short term (despite some cooling-off already noticeable due to high domestic interest rates), the current fair-to- positive market environment both domestically and internationally remains an important short-term success factor for Braskem, assuming that naphtha costs will remain at substantially higher levels than historical ones. Some turbulence is not ruled out for 2006 given presidential elections; however, growth prospects should remain fairly positive in the medium term, allowing for cost increases to be passed on throughout the petrochemical chain in synch with global trends. We recognize that Braskem has traditionally managed to report much stronger operating margins than have its global peers, even during the most challenging troughs witnessed in the recent past. That reflects not only the company's very favorable market position but also the peculiarities of the more concentrated petrochemical industry in Brazil. Nevertheless, price adjustments can be more difficult to implement under less sanguine domestic market conditions. We also understand that operating improvements and synergies, marginal capacity expansions (through debottlenecking) diluting fixed costs, and a richer product mix (with higher value-added products somewhat reducing volatility and new applications helping sustain volumes) will allow Braskem to report improved results on a perennial basis even during the cycle troughs, which we expect to be more evident under less favorable petrochemical spreads. From a short-term perspective, current petrochemical prices have already allowed Braskem to absorb the 2004 and first-quarter 2005 hike of raw material cost (with currency appreciation also playing an important role in smoothing out the impact of cost spikes this year) and still report robust results, which gives the company some room to sustain operating profitability under a potential slowdown scenario. This scenario, on the other hand, could not be totally delinked from a decline in raw material cost, also alleviating overall financial pressures. In any event, foreign exchange fluctuations, spreads between naphtha and ethylene and ethylene and polyolefins in international markets, and domestic demand patterns will remain intrinsic variables with great influence on the company's performance in the longer term. Liquidity Liquidity has substantially improved after the global equity offer cashed-in by the end of September 2004 and has remained strong in 2005. Braskem's cash reserves amounted to $686 million as of March 2005 (including long-term marketable securities), favorably comparing with short-term debt maturities of $342.4 million through March 2006, a very important accomplishment in the company's strategy for longer debt duration and a smoother amortization schedule. Short-term maturities include primarily working capital loans, export prepayment amortization, and loans from government agencies and the Brazilian Development Bank (BNDES), apart from $65 million of MTNs coming due in October 2005. Refinancing risk is now concentrated in three major maturities: in 2007, the company will have to face principal payment of its 1997 Trikem bond ($250 million) and of debentures with convertible Odebrecht (which mirror an identical obligation by Odebrecht with BNDES) of BrR899 million (approximately $337 million at the foreign exchange rate of March 2005); in 2008 the third tranche of its MTNs ($275 million) come due. The only other major maturity comes due in 2014, represented by Braskem's fourth tranche of its MTNs of $250 million. FOCF is expected to continue strengthening in 2005, despite Braskem's plans to perform debottlenecking capital expenditures on top of its maintenance capital expenditures: approximately $200 million in total. In addition, the company has also announced its partnership with Petrobras to build a new 300,000- tpy polypropylene plant in Paul�nia, which should add on to current prognostics. Part of these investments already have long-term financing with favorable amortizing schedules secured. In April 2005, Braskem paid dividends for the first time since its creation in 2002, in the amount of BrR204.2 million (relative to fiscal 2004); we do expect the company to sustain a conservative dividend policy in the future. Outlook The stable local-currency rating outlook derives from the pivotal expectation that Braskem's current capital structure will be sustained (both because management has assumed a more moderate stance and because market conditions will allow its financial strategy to continue being implemented) and that the company's operating and business profiles will continue improving gradually with debottleneckings, product mix enrichment, and feedstock diversification. We believe that fundamentals for Braskem's operating profitability and cash generation are fair to positive in the medium term and stable in the long term, allowing the company to report credit measures that are quite comfortable for the rating category in 2005 and that should remain adequate throughout the petrochemical cycle. Further rating improvement can derive from the company's ability to effectively withstand the petrochemical cycle thanks to its several improvement initiatives and scale (which would prove so under less favorable market conditions), combined with further total debt reductions relative to a normalized, through-the- cycle cash flow and with the company's addressing 2007 refinancing risks. A negative rating action could be prompted by the company's inability to sustain margins or a radical reversal in the trend of cash generation, or a quick deterioration of its liquidity position. We also factor into the ratings the fact that Braskem's commitment to a more conservative financial policy since mid-2004, both in regards to its liquidity position and leverage boundaries, will be preserved in the future, providing the company with a safety cushion to weather the inevitable downturns in the cyclical petrochemical industry and of the volatile economy of its home market, Brazil. The stable outlook on the foreign-currency rating reflects the outlook on the foreign-currency sovereign rating on the Federative Republic of Brazil. Primary Credit Analyst: Reginaldo Takara, Sao Paulo (55) 11- 5501-8932; reginaldo_takara@standardandpoors.com Secondary Credit Analyst: Milena Zaniboni, Sao Paulo (55) 11- 5501-8945; milena_zaniboni@standardandpoors.com EMBRATEL: Board to Vote on Capital Increase ------------------------------------------- Embratel Participacoes S.A. (BOVESPA: EBTP3, EBTP4; NYSE: EMT), which holds 98.8% of Empresa Brasileira de Telecomunicacoes S.A. ("Embratel"), informs that its Board of Directors will meet today, May 23, 2005 at 3:00 pm to ratify the capital increase authorized in the Board Meeting of February 2 and rectified and ratified on February 23 of 2005 and which terminated on May 3, 2005. Embratel is the premier communications provider in Brazil offering a wide array of advanced communications services over its own state of the art network. It is the leading provider of data and Internet services in the country and is well positioned to be the country's only true national local service provider for corporate customers. Service offerings include: telephony, advanced voice, high-speed data communication services, Internet, satellite data communications, corporate networks and local voice services for corporate clients. Embratel is uniquely positioned to be the all-distance telecommunications network of South America. The Company's network has countrywide coverage with 32,466 km of fiber cables. CONTACT: Investor Relations: Silvia M.R. Pereira Tel: (55 21) 2121-9662 Fax: (55 21) 2121-6388 Email: silvia.pereira@embratel.com.br invest@embratel.com.br PARANAPANEMA: Posts Lower 1Q05 Net Loss on Increased Sales ---------------------------------------------------------- Sao Paulo-based mining and metals holding company Paranapanema posted a 1Q05 net loss of BRL14.8 million (US$6.05mn), 42% lower than the 1Q04 loss, according to a filing with the Sao Paulo stock exchange (Bovespa). Business News Americas reports that the Company attributed the improvement to strong copper and tin prices, as well as increased sales volumes. Ebitda climbed 17% to BRL72.8 million in 1Q05 compared to BRL62.4 million in 1Q04. Net sales reached BRL658 million in the quarter, an increase of 24% over 1Q04. The results "showed strong increases, even though they were not sufficient to cover finance charges related to debt represented by debentures held by controlling shareholders and Brazil's national development bank BNDES which caused the loss in the quarter," Paranapanema said in the filing. Paranapanema has four main divisions: tin and industrial company Mamore, fertilizer unit Cibrafertil, copper smelter Caraiba Metais and copper tube and fixture maker Eluma. VARIG: TAP Rules Out Merger --------------------------- TAP-Portugal is not interested in forming a merger with heavily indebted Brazilian carrier Varig, Caribbean News reports, citing TAP president Fernando Pinto. Mr. Pinto said TAP wanted to acquire 20% of Varig, the maximum allowed under Brazilian law for a foreign company. "They will always be two independent companies, there is not the slightest chance of a merger, that is not the idea," said Mr. Pinto, who is Brazilian and a former president of Varig. TAP and Varig are currently in talks, which may lead to the Portuguese airline making an investment in the firm. TAP said in a statement that it had decided to open talks with Varig because the airline's controlling shareholder, Fundacao Ruben Berta, had announced that it wants to cede control of the troubled carrier. Varig is saddled with BRL9.5 billion (US$3.8 billion) in debt and has been losing domestic market share. CONTACT: VARIG (Viacao Aerea Rio-Grandense, S.A.) Rua 18 de Novembro No. 800, Sao Joao 90240-040 Porto Alegre, Rio Grande do Sul, Brazil Phone: (51) 358-7039/7040 (51) 358-7010/7042 Fax: +55-51-358-7001 Home Page: www.varig.com.br/english/ =============== C O L O M B I A =============== FERROVIAS: Liquidation, Closure Anticipated End of June ------------------------------------------------------- Defunct national railroad company Ferrovias will be completely liquidated and closed by end-June this year, Business News Americas reports, citing a Ferrovias representative. As part of the process, Ferrovias has been largely disbanded and is now led by head liquidator Emiro Aristizabal, with a small team to help him wrap up the Company. Ferrovias was established in 1989 after the government liquidated national railroad company FNC. In June 2003, President Alvaro Uribe issued a decree ordering the liquidation of Ferrovias following lawsuits stemming from disputes under the previous president's administration. The decree gave the Company "at least" two years to fully liquidate. However, Ferrovias was forced to transfer its concession programs to the national concessions institute (Inco) within six months of the decree. TELECOM: Former Clients Granted More Time to Settle Balances ------------------------------------------------------------ The former clients of liquidated state telco Telecom have until May 31 to subscribe to the Company's debt recovery program, which was launched mid-April, reports Business News Americas. Telecom en Liquidacion, an entity representing Telecom, extended the deadline from May 17 to give former owners of nearly 200,000 lines more time to renegotiate debts totaling at least COP88 billion (US$37 million). As of May 10, the debt recovery program has resulted in payments of COP1.2 billion. Telecom was liquidated in July 2003 and its assets were taken over by a new state operator Colombia Telecomunicaciones, which continues to use the Telecom brand name. =========== M E X I C O =========== AHMSA: Gets Wage Agreement With Workers at No. 2 Plant ------------------------------------------------------ Steelmaker Altos Hornos de Mexico SA (AHMSA) has reached a wage agreement for 2005-2007 with workers at its No. 2 plant, reports Business News Americas. The agreement, which was signed by AHMSA corporate director of industrial relations Enrique Rivera Gomez, and the president of the Mexican miners and metalworkers union (STMMRM), Napoleon Gomez Urrutia, gives workers a 6% collective pay rise. The wage increase reflects the fact that workers helped make AHMSA "one of the most efficient [steelmakers] in world," Mr. Rivera said. AHMSA posted a 1,318% increase in profits in the 1Q05, registering MXN1.74 billion (US$158 million) compared to ARS123 million in the 1Q04. The Company also saw its sales of steel increase 3% to 645,000t in the first quarter compared to 1Q04, while sales revenues increased 55.5% to MXN5.8 billion during the same period. Since its defaulted on US$187 billion in debt, AHMSA has seen its fortunes turn on soaring steel prices. CONTACT: AHMSA International Operations Prolongacion Juarez s/n Monclova, Coah., 25770 Phone: + 52 (866) 649 34 00 Fax: + 52 (866) 649 23 10 E-mail: sales@ahmsa.com Web site: http://www.ahmsa.com.mx BALLY TOTAL: Board Member Steps Down to Avoid Potential Conflict ---------------------------------------------------------------- Bally Total Fitness Holding Corporation (NYSE: BFT), North America's leader in health and fitness products and services, announced Friday that David Wilhelm, recently appointed to the Board of Directors, has resigned. Mr. Wilhelm is a partner in venture capital companies that bring investment capital to underserved markets in the Midwest and Appalachia. After Mr. Wilhelm's appointment to the Bally board, it came to our attention that one of the investments his companies made is in a business founded by another board member. While this fact does not constitute a legal, ethical or corporate governance conflict, Mr. Wilhelm has resigned from the board in order to avoid even the slightest appearance of a conflict of interest. Bally Total Fitness is the largest and only nationwide commercial operator of fitness centers, with approximately four million members and 440 facilities located in 29 states, Mexico, Canada, Korea, China and the Caribbean under the Bally Total Fitness(R), Crunch Fitness(SM), Gorilla Sports(SM), Pinnacle Fitness(R), Bally Sports Clubs(R) and Sports Clubs of Canada(R) brands. With an estimated 150 million annual visits to its clubs, Bally offers a unique platform for distribution of a wide range of products and services targeted to active, fitness- conscious adult consumers. CONTACT: Bally Total Fitness Holding Corporation Mr. Matt Messinger Phone: 773-864-6850 GRUPO MEXICO: SPCC Minority Shareholders Prepare to Sell Stakes --------------------------------------------------------------- On May 19, 2005, all of the holders of the Class A common stock, par value $0.01 per share (the " Class A Common Stock "), of Southern Peru Copper Corporation (SPCC), namely, SPHC II Incorporated, Cerro Trading Company, SPC Investors, L.L.C., Phelps Dodge Overseas Capital Corporation and Climax Molybdenum B.V., voluntarily converted (the " Conversion "), on a share- for-share basis, all of their shares of Class A Common Stock, totaling in the aggregate 65,900,833 shares, into 65,900,833 newly-issued shares of fully paid and non-assessable common stock of SPCC, par value $0.01 per share (the " Common Stock "). As a result of the Conversion, (1) no shares of Class A Common Stock remain outstanding and no shares of Class A Common Stock shall be reissued, and (2) the number of authorized shares of Common Stock is now 167,207,640 and there are outstanding 147,248,216 shares of Common Stock. In addition, the Agreement Among Certain Stockholders of SPCC, dated January 2, 1996, as amended, has terminated as a result of the Conversion pursuant to section 4.2 thereof. Accordingly, the right of the holders of Class A Common Stock (1) to vote as a separate class with respect to the election of directors of SPCC, (2) to elect thirteen of the fifteen members of the Board of Directors of SPCC (3) and to have five votes per share of Class A Common Stock when voting as a single class with the Common Stock on all matters other than the election of directors has been eliminated. All holders of Common Stock shall vote as a single class on all matters submitted to a vote of stockholders, with each share of Common Stock entitled to one vote. In April, Grupo Mexico merged its Mexican and Peruvian operations to turn SPCC into the world's No. 2 copper company by reserves and market capitalization. Grupo Mexico holds 75 percent of Southern Peru. After the stakes owned by Phelps Dodge and Cerro Trading, the remainder is held by small shareholders. CONTACT: GRUPO MEXICO S.A. DE C.V. Avenida Baja California 200, Colonia Roma Sur 06760 Mexico, D.F., Mexico Phone: +52-55-5264-7775 Fax: +52-55-5264-7769 Web site: http://www.gmexico.com PYCSA: Defends Delays in Construction of Panama Highway ------------------------------------------------------- Construction consortium Proyectos y Construcciones S.A. (PYCSA) counters allegations that the Company's financial woes have impeded completion of the phase two of Panama City's Northern Corridor highway. Business News Americas reports that PYCSA has attributed the delays to the disagreements between local authorities and individuals whose land holdings will be affected. Indeed, PYCSA foresees no financial problems in the short, medium or long term that will affect the contract with the Panamanian government, the Company said. =========== P A N A M A =========== WILLBROS GROUP: Federman & Sherwood Files Class Action Lawsuit -------------------------------------------------------------- On May 18, 2005, a class action lawsuit was filed in the United States District Court for the Southern District of Texas against Willbros Group, Inc. The complaint alleges violations of federal securities laws, Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Securities and Exchange Commission Rule 10b-5, including allegations that the defendants issued a series of material misrepresentations to the market which had the effect of artificially inflating the market price of Willbros Group, Inc.'s stock. The class period is from May 6, 2002 through May 16, 2005. Plaintiff seeks to recover damages on behalf of the Class. If you are a member of the Class as described above, you may move the Court no later than July 18, 2005, to serve as a lead plaintiff for the Class. However, in order to do so, you must meet certain legal requirements pursuant to the Private Securities Litigation Reform Act of 1995. If you wish to discuss this action, participate in this suit, or have any questions or concerns regarding this notice, or preservation of your rights, please contact: William B. Federman FEDERMAN & SHERWOOD 120 N. Robinson, Suite 2720 Oklahoma City, OK 73102 (405) 235-1560/FAX: (405) 239-2112 mail to: wfederman@aol.com http://www.federmanlaw.com WILLBROS GROUP: Schiffrin & Barroway Files Class Action Suit ------------------------------------------------------------ The following statement was issued Friday by the law firm of Schiffrin & Barroway, LLP: Notice is hereby given that a class action lawsuit was filed in the United States District Court for the Southern District of Texas on behalf of all securities purchasers of Willbros Group Inc. (NYSE: WG) ("Willbros" or the "Company") between May 6, 2002 and May 16, 2005, inclusive (the "Class Period"). If you wish to discuss this action or have any questions concerning this notice or your rights or interests with respect to these matters, please contact Schiffrin & Barroway, LLP (Marc A. Topaz, Esq. or Darren J. Check, Esq.) toll-free at 1-888-299- 7706 or 1-610-667-7706, or via e-mail at info@sbclasslaw.com. The complaint charges Willbros, Michael F. Curran, Larry J. Bump, Warren L. Williams, and J. Ken Tillery with violations of the Securities Exchange Act of 1934. More specifically, the Complaint alleges that the Company failed to disclose and misrepresented the following material adverse facts which were known to defendants or recklessly disregarded by them: (1) that the Company, in violation of the Foreign Corrupt Practices Act, engaged in illegal activities including the execution of related party transactions and the bribery of government officials in Bolivia, Nigeria and Ecuador; (2) that the Company filed false tax returns, failed to file required tax returns, and failed to pay certain taxes in locations outside the United States; (3) that the Company lacked adequate internal controls; and (4) the as a result of the above, Company's reported financial results were materially overstated at all relevant times and were in violation of US GAAP. On May 16, 2005, Willbros announced that, as a result of the previously disclosed tax assessment related to a completed project in Bolivia and its ongoing internal investigation into the facts and circumstances surrounding this tax assessment and other illegal activities, the Company will restate its previously issued financial statements for the 2002 and 2003 fiscal years and the first three quarters of 2004. News of this shocked the market. Shares of Willbros fell $4.92 per share or 30.9% to close at $11.00 per share. Plaintiff seeks to recover damages on behalf of class members and is represented by the law firm of Schiffrin & Barroway, which prosecutes class actions in both state and federal courts throughout the country. Schiffrin & Barroway is a driving force behind corporate governance reform, and has recovered in excess of a billion dollars on behalf of institutional and high net worth individual investors. For more information about Schiffrin & Barroway, or to sign up to participate in this action online, please visit http://www.sbclasslaw.com. If you are a member of the class described above, you may, not later than July 18, 2005, move the Court to serve as lead plaintiff of the class, if you so choose. A lead plaintiff is a representative party that acts on behalf of other class members in directing the litigation. In order to be appointed lead plaintiff, the Court must determine that the class member's claim is typical of the claims of other class members, and that the class member will adequately represent the class. Under certain circumstances, one or more class members may together serve as "lead plaintiff." Your ability to share in any recovery is not, however, affected by the decision whether or not to serve as a lead plaintiff. You may retain Schiffrin & Barroway, or other counsel of your choice, to serve as your counsel in this action. CONTACT: Schiffrin & Barroway, LLP Marc A. Topaz, Esq. Darren J. Check, Esq. 280 King of Prussia Road Radnor, PA 19087 1-888-299-7706 (toll-free) or 1-610-667-7706 Or by e-mail at info@sbclasslaw.com ======= P E R U ======= BANCO WIESE: Intesa Reaffirms Commitment to Peruvian Unit --------------------------------------------------------- Italian bank Banca Intesa placed five of its officials on the board of its Peruvian unit Banco Wiese Sudameris to quell rumors that it is pulling out of Peru, reports Business News Americas. Recent media reports have suggested that Intesa is looking to sell its majority stake in Banco Wiese. Intesa owns some 98% of the Peruvian bank, which is the country's third largest bank in terms of total loans and deposits. However, the possibility remains that Intesa would sell a portion of its shares to local business group Grupo Wong, which has publicly expressed interest in purchasing Wiese Sudameris. Canada's Scotiabank (NYSE: BNS) has also been singled out as a potential bidder for Intesa's Peruvian assets. ===================== P U E R T O R I C O ===================== R&G FINANCIAL: Moves to Defer Nasdaq Delisting ---------------------------------------------- R&G Financial Corporation (NYSE:RGF) (the "Company") a diversified financial holding company, received on May 18, 2005, a notice from the Nasdaq Listing Qualifications Department (the "Department") indicating that because The Nasdaq Stock Market ("Nasdaq") had not received the Company's Form 10-Q for the period ended March 31, 2005 (the "First Quarter 10-Q"), the Company's preferred securities listed on Nasdaq will be subject to delisting at the opening of business on May 27, 2005 unless the Company requests a hearing in accordance with Nasdaq's Marketplace Rule 4800 Series. The Company has advised that it does intend to request a hearing by a Nasdaq Listing Qualifications Panel pursuant to the procedures set forth in the Nasdaq Marketplace Rules 4800 Series. The Company's Nasdaq listed securities will remain listed pending the result of such appeal. Pursuant to Nasdaq conventions for companies with late public filings, a fifth character, "E", will be appended to the trading symbols of the Company's securities traded on the Nasdaq and other modifications will be made to the Company's trading symbols due to the unavailability of the symbols as they would have been modified. Accordingly, the trading symbols of the Company's preferred securities traded on Nasdaq will be changed from RGFCM to RGFME, from RGFCN to RGFLE, from RGFCO to RGFOE and from RGFCP to RGFPE at the opening of business on May 20, 2005. As previously disclosed, the Company determined to review the independent market valuations used in valuing residual interests retained in its securitization transactions after discussions with its independent accountants. The Company stated that it was revising its valuation methodology used in valuing these interests that are presented in the Company's audited consolidated financial statements. The Company concluded that its previously filed interim and audited financial statements for the periods from January 1, 2003 through December 31, 2004, would be materially affected as a result of the revision in the valuation methodologies being contemplated, and therefore, the financial statements for the periods therein should be restated. The Company indicated at such time that it was delaying the release of its earnings for the first quarter of 2005. As a result of these events and due to the time necessary to revise the valuation methodologies on the residual interests which will necessarily impact both the prior period financial statements and the related March 2005 financial statements, the Company was not able to meet the filing deadline of May 10, 2005, for the filing of the First Quarter 10-Q. Furthermore, the Company previously announced that it anticipated it would not file the First Quarter 10-Q by the May 16, 2005 deadline permitted by Rule 12b-25 as a consequence of the work involved. The Company is working diligently to file, as soon as practicable, the First Quarter 10-Q and the restated results for prior periods. R&G Financial, currently in its 33rd year of operations, is a diversified financial holding company with operations in Puerto Rico and the United States, providing banking, mortgage banking, investments, consumer finance and insurance through its wholly- owned subsidiaries R-G Premier Bank of Puerto Rico, a Puerto Rico-chartered commercial bank, R-G Crown Bank, its Florida- based savings bank, R&G Mortgage Corp., Puerto Rico's second largest mortgage banker, Mortgage Store of Puerto Rico, Inc., a subsidiary of R&G Mortgage, Continental Capital Corp., R-G Crown's New York and North Carolina based mortgage banking subsidiary, R-G Investments Corporation, a Puerto Rico broker- dealer, and Home and Property Insurance Corporation, a Puerto Rico insurance agency. As of December 31, 2004, R&G Financial had previously reported consolidated assets of $10.2 billion and consolidated stockholders' equity of $855.6 million. CONTACT: R&G Financial Corp. 280 Jesus T. Pinero Ave. Hato Rey San Juan, 00918 Puerto Rico Website: http://www.rgonline.com Phone: 787-758-2424 Officers: Victor J. Galan, Pres. & CEO Joseph R. Sandoval, CFO Enrique Umpierre-Suarez, Sec't. ============= U R U G U A Y ============= UAIR: Faces Bankruptcy Threat, Suspends Flights ----------------------------------------------- Uruguayan low-cost airline Uair has cancelled flights and is at risk of going bankrupt due to its critical financial situation, according to the Company's management. "We suspended operations and arrived to this situation because of not having reached agreement with the government," said company president Antonio Rama. Uair authorities had proposed to the Uruguayan government a merger with local airline Pluna, after which UK-based fund Ashmore would inject capital in both companies. Ashmore has already injected US$10 million in Uair but the government refused the proposal. "Ashmore has been very consistent and solid; it has invested an important amount of money in Uair and doesn't want to loose it. The government will have to see how to persuade Ashmore of doing business in Uruguay and how it makes it up for the US$10 million it will loose if Uair goes bankrupt and 170 people become unemployed," Mr. Rama added. Ashmore said last week it would stop funding Uair. The airline will call for a creditor's meeting in an attempt to find a solution to the Company's crisis. ================= V E N E Z U E L A ================= PDVSA: Sets End-June Target for 2003 SEC Report ----------------------------------------------- It is still not known when state oil company Petroleos de Venezuela SA will deliver its 2003 financial report to the US Securities & Exchange Commission but the Company hopes to have it ready by the end of June. Vheadline.com reports that Energy Minister and PDVSA president, Rafael Ramirez has confirmed news that the Company is currently working on the 2004 as well. The KPMG accounting firm is auditing PdVSA's results for 2003 and 2004. PDVSA was supposed to submit the 2003 report last year but missed it following the December 2002-January 2003 oil strike that disrupted its finance department. PDVSA fired more than 18,000 employees in 2003 to break the trike, which was aimed at pushing President Hugo Chavez from office. Among those fired were employees from the Company's financial department. PDVSA is required to present annual reports to the SEC due to its holdings in the US and outstanding debt. The last time PDVSA filed its results with the SEC was in October 2003, after asking for two extensions on its 2002 results. *********** 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 Sheryl Joy P. Olano, 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. 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. 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