/raid1/www/Hosts/bankrupt/TCRLA

/raid1/www/Hosts/bankrupt/TCRLA_Public/050609.mbx T R O U B L E D C O M P A N Y R E P O R T E R L A T I N A M E R I C A Thursday, June 9, 2005, Vol. 6, Issue 113 Headlines A R G E N T I N A ACEROS ZAPLA: Workers Go On Strike to Demand Wage Increase ARTES GRAFICAS: Local Court OKs "Concurso Preventivo" Petition CAMERPLAST S.R.L.: Court OKs Creditor's Bankruptcy Call CENTRIFIN S.A.: Court Grants Reorganization Plea EL MUELLE: Reorganization Proceeds To Bankruptcy ESTRUCTURAS METALICAS: Court Declares Company Bankrupt IDEAS GRAFICAS: Court Designates Trustee for Liquidation KEY ENERGY: Receives Notice of Default From Bondholders METROGAS: Rating Reflects Decision to Suspend Debt Payments PAMPA BYTES: Court Converts Reorganization to Bankruptcy PONY EXPRESS: Initiates Bankruptcy Proceedings ROILMAR S.A.: Court Deems Bankruptcy Necessary SATELITAL: Liquidates Assets to Pay Debts TALLERES OLGUIN: Court Appoints Trustee for Reorganization * ARGENTINA: World Bank Approves $150M for Provincial Roads B E L I Z E * BELIZE: Moody's Cuts Ratings, Changes Outlook to Negative B E R M U D A LORAL SPACE: Wins Contract to Build Satellite for XM B O L I V I A * BOLIVIA: S&P Revises Outlook to Negative, Affirms Ratings B R A Z I L BANCO BMG: S&P Assigns 'BB-' Rating to $150M MTNs VARIG: Debt Dilemma Likely to Hinder Reorganization H A I T I * HAITI: World Bank Approves $2M Grant M E X I C O AHMSA: Kicks Off Study of Timna Copper Mine V E N E Z U E L A PDVSA: Denies Reports on Alleged Transfer of Orimulsion Rights PDVSA: IDB Apprised of Experience in Social Development PDVSA: To Hire Replacements for Fired Workers PDVSA: Lawmakers Recommend 60% Control Over New JVs - - - - - - - - ================= A R G E N T I N A ================= ACEROS ZAPLA: Workers Go On Strike to Demand Wage Increase ---------------------------------------------------------- Workers at steel producer Aceros Zapla, in the town of Palpala in the northwest province of Jujuy, began a strike on June 2, paralyzing the plant's operations, reports Business News Americas. According to company engineer Luis Miguel Zayago, workers are demanding a salary hike of ARS300 (US$104) a month and are refusing to negotiate despite offers from management. The management has offered ARS130 hike by June, to be upped to ARS160 by July and to ARS200 by August. "But the union rejected the offer," Zayago said. Zayago assured customers that the strike will not immediately affect supply. Zapla has 50% of its stocks in Palpala and the other 50% in other provinces, "so there will not be an immediate shortage. Some clients could be affected, but only a few," he added. Aceros Zapla, which employs 700 workers, produces hot-rolled long steel primarily for the oil industry and construction and also for the automobile industry, machinery and equipment manufacturers. ARTES GRAFICAS: Local Court OKs "Concurso Preventivo" Petition -------------------------------------------------------------- Court No. 3 of Mendoza's civil and commercial tribunal granted Artes Graficas Melfa S.A. approval on its petition to start a reorganization process, reports Infobae. The Court, however, is yet to appoint a receiver, as well as establish a timetable for the Company's reorganization process. CONTACT: Artes Graficas Melfa S.A. Mendoza CAMERPLAST S.R.L.: Court OKs Creditor's Bankruptcy Call ------------------------------------------------------- Camerplast S.R.L., a company which operates in the plastic industry, entered bankruptcy after Court No. 6 of Buenos Aires' civil and commercial tribunal approved a bankruptcy motion filed by the Union Obreros y Empleados Plasticos, reports La Nacion. The Company's failure to pay P1,845.37 in debt prompted the creditor to file the petition. Working with the city's Clerk No. 11, the court assigned Ms. Adriana Benzer as trustee for the bankruptcy process. The trustee's duties include the authentication of the Company's debts and the preparation of the individual and general reports. Creditors are required to present their proofs of claim to the trustee before Aug. 31, 2005. The Company's assets will be liquidated at the end of the bankruptcy process to repay creditors. Payments will be based on the results of the verification process. CONTACT: Camerplast S.R.L. Colonel Apolinario Figueroa 474 Buenos Aires Ms. Adriana Benzer, Trustee Montevideo 149 Buenos Aires CENTRIFIN S.A.: Court Grants Reorganization Plea ------------------------------------------------ Centrifin S.A. successfully petitioned for reorganization after Court No. 2 of Buenos Aires' civil and commercial tribunal issued a resolution opening the Company's insolvency proceedings. Under insolvency protection, the Company will continue to manage its assets subject to certain conditions imposed by Argentine law and the oversight of a court-appointed trustee. Infobae relates that Jorge Eladio Feito will serve as trustee during the course of the reorganization. The trustee will be accepting creditors' proofs of claim for verification until June 21, 2005. After verifications, the trustee will prepare the individual reports and submit it in court on Aug. 16, 2005. He will also present a general report for court review on Sep. 28, 2005. The Company will endorse the settlement proposal, drafted from the submitted claims, for approval by the creditors during the informative assembly scheduled on April 12, 2006. CONTACT: Mr. Jorge Eladio Feito, Trustee Medrano 537 Buenos Aires EL MUELLE: Reorganization Proceeds To Bankruptcy ------------------------------------------------ The reorganization of El Muelle Place S.R.L. has progressed into bankruptcy. Argentine news source Infobae relates that San Lorenzo Court No. 19 of Buenos Aires' civil and commercial tribunal ruled that the Company is "Quiebra Decretada". The report adds that the court assigned Carlos Enrique Wulff as trustee, who will verify creditors' proofs of claim until July 1, 2005. The court also ordered the trustee to prepare individual reports after the verification process is completed, and have them ready by Aug. 12, 2005. A general report on the bankruptcy process is expected on Sep. 26, 2005. CONTACT: El Muelle Place S.R.L. Guemes 4173 Buenos Aires Mr. Carlos Enrique Wulff, Trustee Virrey del Pino 2354 Buenos Aires ESTRUCTURAS METALICAS: Court Declares Company Bankrupt ------------------------------------------------------ Court No. 6 of Buenos Aires' civil and commercial tribunal declared local company Estructuras Metalicas SRL "Quiebra", relates La Nacion. The court approved the bankruptcy petition filed by Granalladora Americana S.C.A., whom the Company has debts amounting to ARS1,689. The Company will undergo the bankruptcy process with Cesar Pireni as trustee. Creditors are required to present proofs of their claim to Mr. Pireni for verification before Aug. 15, 2005. Creditors who fail to submit the required documents by the said date will not qualify for any post-liquidation distributions. Clerk No. 12 assists the court on the case. CONTACT: Estructuras Metalicas S.R.L. Anchorena 1758 Buenos Aires Mr. Cesar Pireni, Trustee Avenida Callao 930 Buenos Aires IDEAS GRAFICAS: Court Designates Trustee for Liquidation -------------------------------------------------------- Buenos Aires accountant Susana Ines Santorsola was assigned trustee for the liquidation of local company Ideas Graficas S.A., relates Infobae. Ms. will verify creditors' claims until July 28, 2005, the source adds. After that, she will prepare the individual reports, which are to be submitted in court on Sep. 8, 2005. The submission of the general report should follow on Oct. 20, 2005. The city's civil and commercial Court No. 12 holds jurisdiction over the Company's case. Clerk No. 24 assists the court with the wind-up proceedings. CONTACT: Ms. Susana Ines Santorsola, Trustee Marcelo T. de Alvear 1364 Buenos Aires KEY ENERGY: Receives Notice of Default From Bondholders ------------------------------------------------------- Key Energy Services, Inc. (OTC Pink Sheets: KEGS) announced Tuesday it has received notice from the trustee that the Company is in breach of the financial reporting covenants contained in the indentures of its 8.375% Senior Notes due 2008 and 6.375% Senior Notes due 2013, and stating that unless the deficiency is remedied within 60 days, an event of default would occur under the indentures. Unless the deficiency is cured or waived within the 60 day cure period (before August 5, 2005), the trustee or holders of 25% of the outstanding principal amount of either series of notes will have the right to accelerate the maturity of that series of notes. The default notice pertains to the failure of the Company to file its Annual Report on Form 10-K for the year ending December 31, 2003 by the May 31, 2005 deadline. Under terms of the most recent consents by the noteholders, the Company has until July 31, 2005 to file its Annual Report on Form 10-K for the year ending December 31, 2004 and until August 31, 2005 to file its Quarterly Reports on Form 10-Q for 2005. Key Energy Services, Inc. is the world's largest rig-based, onshore well service company. The Company provides diversified energy operations including well servicing, contract drilling, pressure pumping, fishing and rental tool services and other oilfield services. The Company has operations in all major onshore oil and gas producing regions of the continental United States and internationally in Argentina and Egypt. CONTACT: Key Energy Services, Inc. John M. Daniel Tel: +1-432-620-0300 METROGAS: Rating Reflects Decision to Suspend Debt Payments ----------------------------------------------------------- Corporate Credit Rating: D/Nm/-- Outstanding Rating(s) Senior unsecured debt (Foreign currency): D Major Rating Factors Strengths: * Argentina's largest natural gas distributor Weaknesses: * High regulatory risk and uncertainties about future cash- flow generation ability * Timing of renegotiation remains uncertain * Restricted financial flexibility Rationale The 'D' rating on Metrogas S.A. reflects the company's decision to suspend interest and principal payments on all of its outstanding debt following the negative impact on its financial profile of government intervention in the concessions pricing mechanism (with the pesification and freeze of the tariffs) and a severe devaluation of the Argentine peso and high inflation. This situation has created a significant mismatch between Metrogas' peso-denominated cash flow and its mostly U.S. dollar- and euro-denominated debt, and led to the suspension of payments in March 2002. The company has retained J.P. Morgan Chase Bank Buenos Aires Branch and JP Morgan Securities as its advisor for this process. Furthermore, there are still uncertainties about the company's cash-flow generation potential, given that the renegotiation of the concession contracts in Argentina, mandated by the government after the pesification of the tariffs, is still pending. On Nov. 7, 2003, Metrogas launched a proposal to restructure all its financial debt under an out-of-court agreement (Acuerdo Preventivo Extrajudicial-APE). As of March 31, 2005, Metrogas had $538 million of debt (including $380 million in bonds, $73 million in bank loans, and accrued interest expenses). The company offered two options for restructuring, as follows: - A cash tender offer for up to $100 million (at a price of $0.50 per $1 of principal amount); and - A modified option, under which the principal amount is increased by capitalizing interest expenses at 2.5% since the last payment. The final maturity date is extended by nine years. In addition, a cash sweep for 50% of excess funds generation is included. After many extensions, the current expiration date of the APE solicitation is now July 18, 2005. As of May 18, 2005, favorable votes reached about $77 million of the total debt. Standard & Poor's Ratings Services will closely monitor further developments under the restructuring process and, once it is completed, evaluate Metrogas' resulting repayment capacity to determine the appropriate rating. During 2004, the natural gas regulatory framework in Argentina was exposed to significant changes, which we expect to continue in the medium term. The final effect of those changes on the company's cash-generation ability is still uncertain. On Feb. 13, 2004, the Argentine government issued Decrees 180/2004 and 181/2004, introducing changes in the existing regulation. Distributors could be negatively affected, as large industrial and commercial consumers will have to buy natural gas directly from producers or brokers, thus bypassing the distributors. Although this does not affect the value added of distribution charges collected by the distributors, it affects their ability to use contracted capacity efficiently and may affect margins. A positive factor for the company is Decree 1834/2002, issued on Sept. 17, 2002, which states that during the public emergency period (which currently lasts until December 2005), insolvency, voluntary filing for reorganization, or a creditor requesting bankruptcy will not constitute cause for termination of the concession. These provisions allow companies to file for the protection of such proceedings, somewhat alleviating their cash needs and giving them more leverage to negotiate with investors without risking the loss of the concession. During fiscal 2004 and first-quarter 2005, demand continued to grow, with 21.5% and 13.4% increases in Metrogas' total volumes delivered, when compared to 2003 and first-quarter 2004, respectively. Since the pesification and freezing of natural gas tariffs, the relative price of natural gas decreased and energy demand started to replace the more expensive crude-related products with natural gas. The growth of demand, in a relatively moderate-inflation and stable U.S. dollar exchange rate, resulted in increased cash generation and better operating results for Metrogas: EBITDA margin reached 18.4% for the last 12 months ended March 31, 2005, from 17.8% in fiscal 2004 and 17.1% in 2003. Nevertheless, Metrogas' future performance will remain conditioned by the outcome of the renegotiation of its concession contract and by the debt profile resulting from its debt restructuring. Metrogas is Argentina's largest natural gas distributor, serving about 1.9 million customers through a 35-year exclusive concession to distribute natural gas in the Buenos Aires metropolitan region, Argentina's most densely populated area. Liquidity Although Metrogas had about $138 million in cash and short-term investments as of March 31, 2005, its financial flexibility and liquidity position are severely restricted given its current default situation, and will remain constrained while the company negotiates with creditors to adapt its interest burden and maturity schedule to its current cash-flow generation. We expect the company to use most of this cash in its restructuring process. Business Description Metrogas is Argentina's largest natural gas distributor, serving approximately 1.9 million customers through a 35-year exclusive concession to distribute natural gas in the Buenos Aires metropolitan region, Argentina's most densely populated area. Metrogas is 70% controlled by Gas Argentino S.A, of which 54.67% is owned by British Gas and 45.33% by YPF S.A. In addition, private investors hold 20% of Metrogas' shares, while company employees retain 10%. Business Profile Metrogas' business profile deteriorated significantly following the measures adopted by the Argentine government, which exposed Metrogas to increased regulatory risk. As the peso was devalued in early January 2002, the Argentine government pesified and froze tariffs of public service companies, which were dollar denominated according to the concession contracts; suspended tariff adjustments; and mandated the renegotiation of the concession contracts for all public services companies to curb price increases after the change in the monetary regime. Metrogas continues to face high regulatory uncertainties-40 months after mandatory pesification and tariff freezes, there have not been significant improvements in the renegotiation of the company's concession contract, which was mandated by the government in 2002. Until the renegotiation of the concession contracts is concluded-especially the terms of the tariff-setting mechanism, the viability of the company's economic model, and its future- cash-flow generation remains unclear. Quality standards and the manner in which tariffs will be set from now on for natural gas utilities will be critical to the company's future financial performance. After several postponements, the Argentine government extended the date by which the renegotiation of concessions for public services must be completed to December 2005. Thus, there are still significant uncertainties about the terms (e.g., extension, tariffs, and quality of service required) of Metrogas' concession contract. In addition, there is currently a mismatch between gas supply and demand in Argentina, mainly caused by the price distortion introduced by the freezing of gas prices to regulated customers in a context of a severe devaluation of the peso. This resulted in a de facto freeze of natural gas wellhead prices while the prices of other competitive fuels (most importantly, crude oil derivatives) caught up with the international price and caused demand to replace the more expensive crude-related products with natural gas. In this context, the government has taken several measures. For example, in February 2004, Decrees 180/2004 and 181/2004 introduced changes to the existing natural gas regulation, and in April 2004, Resolution No. 208 defined certain conditions to establish a price increase path for natural gas in the domestic market. Distributors could be negatively affected by Decrees 180 and 181, as large industrial and commercial consumers will have to buy natural gas directly from producers or brokers, thus bypassing the distributors. Although this does not affect the value added of distribution charge collected by the distributors, it affects their ability to use contracted capacity efficiently and may affect on margins. Financial Policy Since 2002, Metrogas' financials show the negative effects resulting from the pesification and freeze of tariffs during a period in which the peso depreciated from Argentine peso (ArP) 1 = $1 in December 2001 to ArP2.92 = $1 as of March 31, 2005. Since 2003, the negative effects of the pesification and freeze of tariffs were partially compensated by a significant increase in volume sales. During fiscal 2004, total volume delivered (including natural gas sales and transportation and distribution services) increased by 21.5% compared with 2003, showing increases in volumes delivered to industrial and commercial customers (due to the higher economic activity), power plants (due to increasing electricity demand and lower hydrology), and users of compressed natural gas (due to a higher rate of conversion of vehicles taking into account the significant greater prices for alternative fuels such as gasoline). All these increases were partially compensated by a 2.9% decrease in volumes delivered to residential users due to higher average temperatures recorded. During first-quarter 2005, demand continued strong, with total volume delivered increasing by 13.4% compared to the same period of 2004. This was mainly caused by the price distortion explained above, and to a lesser extent by higher economic activity. Increasing demand, under a moderate-inflation environment and stability of the U.S. dollar exchange rate, resulted in better operating results for the company. EBITDA margin increased to 18.4% for the past 12 months ended March 31, 2005, from 17.8% in 2004 and 17.1% in 2003, respectively. As a result of the negative effects of devaluation on financial debt (mainly dollar- and euro-denominated) and the pesification and freezing of tariffs, Metrogas was affected by a strong imbalance between its peso-denominated cash flow and its foreign currency-denominated debt. In addition, total debt increased to 69.7% of total capital as of March 31, 2005, compared to 42.2% in 2001. The company suspended all the payments related to its financial obligations in March 2002. As of March 31, 2005, Metrogas had about $538 million in total financial debt (64% dollar denominated, 31% euro denominated, and 5% Argentine pesos). In Standard & Poor's opinion, Metrogas' future financial performance will depend mainly on the outcome of the renegotiation of the company's concession contract, especially regarding future tariff-setting mechanisms, but also on the evolution of macroeconomic variables such as exchange rate and inflation. In addition, financial flexibility will remain severely restricted while the company negotiates with creditors to adapt its interest burden and maturity schedule to its current cash-flow generation. Primary Credit Analyst: Luciano Gremone, Buenos Aires (54) 11-4891-2143; luciano_gremone@standardandpoors.com Secondary Credit Analyst: Pablo Lutereau, Buenos Aires (54) 114-891-2125; pablo_lutereau@standardandpoors.com PAMPA BYTES: Court Converts Reorganization to Bankruptcy -------------------------------------------------------- Pampa Bytes S.A., which was undergoing reorganization, entered bankruptcy on orders from Buenos Aires' civil and commercial Court No. 14, according to Infobae. The court, assisted by Clerk No. 28, assigned Pedro Alfredo Valle as the Company's receiver. The credit verification process will be done "por via incidental", says the report, adding that the court ordered the receiver to submit the general report on Oct. 20, 2005. CONTACT: Mr. Pedro Alfredo Valle, Trustee Avda de Mayo 1260 Buenos Aires PONY EXPRESS: Initiates Bankruptcy Proceedings ---------------------------------------------- Buenos Aires' civil and commercial Court No. 16 declared Pony Express Mensajeria S.R.L. "Quiebra," reports Infobae. Clerk No. 31 assists the court on the case, which will close with the liquidation of the Company's assets to repay creditors. Jorge David Jalfin, who has been appointed as trustee, will verify creditors' claims until Aug. 24, 2005 and then prepare the individual reports based on the results of the verification process. The individual reports will then be submitted to court on Oct. 5, 2005, followed by the general report on Nov. 17, 2005. CONTACT: Pony Express Mensajeria S.R.L. Bulnes 597 Buenos Aires Jorge David Jalfin Sarmiento 1452 Buenos Aires ROILMAR S.A.: Court Deems Bankruptcy Necessary ---------------------------------------------- Roilmar S.A., which was undergoing reorganization, entered bankruptcy on orders from La Plata's civil and commercial Court No. 13. Infobae relates that the court appointed Mr. Nestor R. Grosso to be the receiver on the case. Mr. Grosso will conduct the credit verification process "por via incidental." CONTACT: Roilmar S.A. Calle 2 Nro. 3951 Berisso Mr. Nestor R. Grosso, Trustee Calle 49 Nro. 365 La Plata SATELITAL: Liquidates Assets to Pay Debts ----------------------------------------- Satelital del Plata S.R.L. will begin liquidating its assets following the pronouncement of Buenos Aires' civil and commercial Court No. 19 that the Company is bankrupt, Infobae reports. The bankruptcy ruling places the Company under the supervision of court-appointed trustee, Horacio Jose Eugenio Caliri. The trustee will verify creditors' proofs of claim until June 13, 2005. The validated claims will be presented in court as individual reports on Aug. 9, 2005. Mr. Caliri 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 Sep. 21, 2005. The bankruptcy process will end with the disposal of company assets in favor of its creditors. CONTACT: Mr. Horacio Jose Eugenio Caliri, Trustee Lavalle 1206 Buenos Aires TALLERES OLGUIN: Court Appoints Trustee for Reorganization ---------------------------------------------------------- Talleres Olguin S.A., a company operating in Mendoza, is ready to start its reorganization after Court No. 3 of the city's civil and commercial tribunal appointed Alfonso Alfonso to supervise the proceedings as trustee. An Infobae report states that Mr. Alfonso verified creditors claims until March 14, 2005. Afterwards, he presented these claims as individual reports for final review by the court on April 29, 2005. He will also provide the court with a general report pertaining to Talleres Olguin's reorganization on June 14, 2005. The court has scheduled the informative assembly on Nov. 29, 2005. CONTACT: Talleres Olguin S.A. Dorrego 45 de Dorrego Guaymallen (Mendoza) Mr. Alfonso Alfonso, Trustee Avda Mitre 1448 Mendoza * ARGENTINA: World Bank Approves $150M for Provincial Roads ----------------------------------------------------------- The World Bank approved Tuesday a $150 million loan for Argentina to support road investment programs at the provincial level in Chubut, Corrientes, Cordoba, Entre Rios, Neuquen and Santa Fe. The project will also improve the reliability of essential roads that facilitate access of provincial production to the markets, as a means of facilitating the return to a path of sustained economic growth and poverty alleviation. "This loan is an integral part of our strategy to support infrastructure operations in Argentina. With this operation, we have now approved four operations for $630 million in the past six months and we will continue to further support the investments needs in infrastructure," said Axel van Trotsenburg, World Bank Country Director for Argentina, Chile, Paraguay and Uruguay. "We are supporting this project because improving provincial roads will benefit the agricultural and industrial industry. It has been estimated that nearly 60% of logistic costs in the country are transport costs. The loan will contribute to the reduction of operating and time related costs." The Provincial Road Infrastructure 2 Project will support the provincial network by: (i) strengthening the planning process to support the preparation and implementation of comprehensive multi-year road programs; (ii) introducing the use of performance-based contracts as a key step toward implementing a sustainable and cost effective road management strategy; and (iii) bringing about the required capacities in the provincial road agencies to confront the introduction of new management strategies, gradually supporting their transformation into results-oriented organizations. More specifically, the project will: - Rehabilitate and maintain some 2,200 km of roads through Performance-based Rehabilitation and Maintenance Contracts (CREMA); - Rehabilitate and/or pave 270 km through traditional admeasurements type contracts; - Develop a comprehensive routine maintenance program over 9,400 km approximately to ensure that no potholes remains open, no edge break occurs between the pavement and the shoulders and that all horizontal marking and vertical signs are adequately restored to comply with the most critical road safety requirements. The road network in Argentina has a total length of about 630,000 km (11% paved), divided in three administrative levels: national, provincial and municipal. More than 70% of total traffic volumes are concentrated in the paved national and provincial network. Provincial road networks comprise about 190,000 km that are under the jurisdiction of 23 Provincial Road Agencies (DPVs), representing 30% of the country's total road length. These networks serve as main collectors of the system of rural and local roads under the responsibility of municipal governments (400,000 Km), connecting productive areas with consumption centers, ports and other export gateways through the national system of national highways (38,000 km). "One of the main issues to be addressed is the development of a more comprehensive and efficient road management strategy in the provinces, based on appropriate design and maintenance standards, that ensures the convergence of the road assets towards a steady state-condition," said Maria Marcela Silva, World Bank task manager for the project. The objectives of this operation are in line with the Country Assistance Strategy (CAS) discussed by the Board in April 2004, which contemplates the improvement of infrastructure assets as key to sustained economic growth and mitigating the severity of poverty, as recent empirical research shows, improvements in the stock and quality of the road network leads to higher rates of economic growth and better income distribution. The $150 million single-currency, fixed spread loan has a repayment period of 12.5 years, including 6.5 years of grace. CONTACT: World Bank Yanina Budkin Phone:(5411) 4316-9700 E-mail: Ybudkin@worldbank.org Alejandra Viveros Phone:(202) 473-4306 E-mail: Aviveros@worldbank.org =========== B E L I Z E =========== * BELIZE: Moody's Cuts Ratings, Changes Outlook to Negative ----------------------------------------------------------- Moody's Investors Service has downgraded Belize's foreign- currency ratings and changed the outlook on all its ratings to negative from stable in light of the country's increased external vulnerability and macroeconomic conditions that have not been consistent with fiscal and debt sustainability. Moody's has changed the foreign-currency country ceiling to B3 from B2, as well as the country ceiling for foreign-currency deposits to Caa1 from B3. The government's local-currency rating was also downgraded to B3 from B1. In doing so, Moody's concluded that, to date, the various attempts by the government to correct the situation have proven to be insufficient The rating agency also noted the presence of additional credit risk factors derived from the potential pressures posed by economic policies that, to date, have been inconsistent with the country's fixed exchange rate regime. The negative outlook reflects Moody's concerns about the government's ability to carry out fiscal and monetary adjustments that are sufficient to reverse the deterioration in credit indicators. The ratings downgrade also incorporates indications by the government that it intends to engage creditors in order to explore alternatives to improve Belize's external debt profile. Moody's believes that debt restructuring represents a credit event that is increasingly likely to materialize. An assessment of the severity of such an event represents an important factor for Belize's credit perspective and will influence future rating actions by Moody's. The rating agency said it will closely monitor the government's recently announced "Adjustment Program" to determine if it is effective in restoring Belize's debt dynamics to a sustainable path. ============= B E R M U D A ============= LORAL SPACE: Wins Contract to Build Satellite for XM ---------------------------------------------------- Space Systems/Loral (SS/L) announced Tuesday that it has been awarded a contract by XM Satellite Radio, Washington DC, to build XM-5, a high-power, digital audio radio service (DARS) satellite that will serve as a ground spare in the XM Satellite Radio fleet, ensuring XM subscribers across North America with continued high-quality, digital- music, entertainment and data services. "This order from XM, our fourth commercial satellite award in 2005, validates SS/L's leadership in the industry," said Bernard L. Schwartz, chairman and CEO of Loral Space & Communications. "We are exceedingly proud of SS/L for continuing to gain market share in the satellite manufacturing industry under challenging circumstances." Scheduled for delivery in 2007, XM-5 has an on-orbit design life of 15 years and will carry a state-of-the-art DARS payload featuring two large, unfurlable mesh antennas. Its end-of-life power capability of more than 18 kilowatts will make it one of the world's most powerful communications satellites. "SS/L has built some of the world's most advanced direct-to-user communications satellites, allowing consumers and enterprises an expanded array of entertainment and services," said C. Patrick DeWitt, president, Space Systems/Loral. "SS/L welcomes XM to Loral's family of customers and looks forward to providing a reliable and powerful platform for its successful satellite radio service." XM-5 is based on SS/L's space-proven 1300 platform, which has an excellent record of reliable operation. Its high efficiency solar arrays and lightweight batteries are designed to provide uninterrupted electrical power. In all, SS/L satellites have amassed more than 1,200 years of reliable on-orbit service. XM is America's number one satellite radio service with more than 4 million subscribers. Broadcasting live daily from studios in Washington, DC, New York City and Nashville at the Country Music Hall of Fame, XM's 2005 lineup includes more than 150 digital channels of acclaimed radio programming from coast to coast. XM was named Best Radio Service at the 2004 Billboard Digital Entertainment Awards. For more information about XM hardware, programming and partnerships, please visit www.xmradio.com. Space Systems/Loral, a subsidiary of Loral Space & Communications (OTCBB: LRLSQ), is a premier designer, manufacturer, and integrator of powerful satellites and satellite systems. SS/L also provides a range of related services that include mission control operations and procurement of launch services. Based in Palo Alto, Calif., the company has an international base of commercial and governmental customers whose applications include broadband digital communications, direct-to-home broadcast, defense communications, environmental monitoring, and air traffic control. SS/L is ISO 9001:2000 certified. For more information, visit www.ssloral.com. Loral Space & Communications is a satellite communications company. In addition to Space Systems/Loral, through its Skynet subsidiary Loral owns and operates a fleet of telecommunications satellites used to broadcast video entertainment programming, and for broadband data transmission, Internet services and other value-added communications services. CONTACT: LORAL SPACE & COMMUNICATIONS John McCarthy (212) 338-5345 Web site: www.loral.com ============= B O L I V I A ============= * BOLIVIA: S&P Revises Outlook to Negative, Affirms Ratings ----------------------------------------------------------- Standard & Poor's Ratings Services revised its outlook on the Republic of Bolivia to negative from stable. Standard & Poor's also said that it affirmed its 'B-' long-term and 'C' short-term credit ratings on Bolivia. In addition, as a direct result of the action on the Bolivian sovereign, Standard & Poor's revised its outlook on Banco Mercantil S.A. to negative from stable. Standard & Poor's also affirmed its 'B-' long-term and 'C' short-term credit ratings on Banco Mercantil. "The revised outlook on Bolivia is based on weakening governability in the country derived from the increasingly severe political fragmentation across regional, social, and ethnic divisions," explained Standard & Poor's credit analyst Sebastian Briozzo. President Carlos Mesa's offer to resign his post Monday underscores the difficulties posed by this phenomenon. Regardless of the outcome of the current crisis, the level of polarization makes it unlikely that anyone could build a government agenda that can find some support among the disparate groups. Standard & Poor's believes that political turmoil in Bolivia will continue even if there are early presidential elections. Recently, most of the country's economic indicators have improved. For example, GDP grew by 2.4% in 2003 and 3.7% in 2004, the budget deficit decreased to 6.1% of GDP in 2004 from 8.1% in 2003, and exports increased by an estimated 35% in 2004, boosted by high commodity prices. Regardless, increasing political instability led to an almost complete disruption of activities in the capital city of La Paz this past week. The deterioration in Bolivia's institutional framework negatively affects the already frail operating environment of Bolivian banks, making banking more difficult in a country that already poses big challenges to its financial institutions. Nevertheless, Banco Mercantil has shown a relatively consistent performance over the past stressful times, and, at this point, the ratings remain constrained by the sovereign's creditworthiness. Even though multilateral funds--coupled with access to domestic borrowing--should continue to provide financing for the government over the short term, Standard & Poor's believes that Bolivia's ability to honor its domestically issued government bonds (Bolivia does not have any indebtedness outstanding in international capital markets) would be threatened if political developments worsens. "Signs of a further deterioration in governability might trigger a downgrade," Mr. Briozzo added. "Conversely, the emergence of a solution to the country's immediate political agenda that has sufficient support across political parties and social groups could stabilize the country. Such an agreement would therefore constitute a positive rating factor and might lead to a revision of the outlook back to stable." PRIMARY CREDIT ANALYST: Sebastian Briozzo, New York (1) 212-438-7342; sebastian_briozzo@standardandpoors.com SECONDARY CREDIT ANALYST(S): Joydeep Mukherji, New York (1) 212-438-7351; joydeep_mukherji@standardandpoors.com Carina Lopez, Buenos Aires (54) 11-4891-2118; carina_lopez@standardandpoors.com =========== B R A Z I L =========== BANCO BMG: S&P Assigns 'BB-' Rating to $150M MTNs ------------------------------------------------- Standard & Poor's Ratings Services assigned its 'BB-' foreign- currency long-term senior unsecured debt rating to Banco BMG S.A.'s $150 million MTNs. "The counterparty credit ratings assigned to Banco BMG (BB- /Stable/B) incorporate the intrinsic risks to a small to midsize bank operating in a highly competitive market, with significant product concentration," said Standard & Poor's credit analyst Daniel Araujo. The ratings also incorporate the challenge to consolidate a stable and diversified funding base to support its growth strategy. These risks are partially offset by the bank's position as one of the leaders in its niche market, good business execution and controls benefiting from technological features and distribution capabilities, consistent growth in its loan portfolio, and high profitability, while maintaining good asset quality indicators. Banco BMG holds a leading market share in the payroll discount segment and has been able to capture the strong growth of the industry as a pioneer in this market. It has long developed the technology and distribution capabilities to achieve a large number of target clients and show continuous expansion in its portfolio. The successful implementation and execution of its niche strategy reflect a large and loyal distribution network based on bank correspondents and agents that cover most of the country and an updated technological platform allowing for good control of operations and agile decision making. The main challenges in the medium term are to confront the competitive pressures from new entrants in a market viewed as very attractive by larger players and the maintenance of more stable and diversified funding to sustain its strategic plan. Based on the opportunities currently available in the market and the bank's expertise, we expect Banco BMG to continue benefiting from the potential market expansion, although its high participation tends to decline gradually as other players fight for market share. The increase in volumes should compensate for the gradual decline in bank spreads in the medium term. The stable outlook on the counterparty credit ratings of Banco BMG reflects our expectations that Banco BMG will benefit from the maintenance of its core competencies, with further growth in its niche operations in payroll-discount loans, maintaining asset quality and capitalization at levels similar to those of 2004. The bank is also expected to maintain efficiency indicators at levels better than the market average, with the ratio of nonfinancial expenses to revenues ranging from 40%-50%. The ratings may be lowered or the outlook may be revised to negative if there is a significant worsening in asset quality to levels higher than 5% (loans from "E" to "H" according to local regulations); if profitability (ROA) levels drop drastically to less than 1.5% on an adjusted basis (excluding sales of the loan portfolio); if funding becomes problematic to support the bank's operations; and if liquidity is significantly impaired. The ratings are not constrained by the sovereign credit rating on Brazil, meaning that an upgrade of the sovereign credit rating would not prompt a rating or outlook change at Banco BMG. If, on the other hand, the foreign currency sovereign credit rating is lowered or its outlook revised to negative, the foreign currency rating on Banco BMG would be changed in tandem. VARIG: Debt Dilemma Likely to Hinder Reorganization --------------------------------------------------- Analysts and officials believe that Brazilian flagship airline still faces a major debt problem as part of its reorganization, relates Dow Jones Newswires. Varig has debts totaling approximately BRL9 billion, of which BRL2.5 billion are owed to the Federal Tax Authority and to the Federal Airport Authority. Last week, the airline signed a memorandum of understanding with Portugal's TAP Air Portugal (TPA.YY) on ways for the Portuguese company to aid the financially stricken Brazilian carrier. On Thursday, executives from Varig and TAP met with top government officials to seek a solution to Varig's debt problem. According to Dow Jones Newswires, the executives appealed to Finance Minister Antonio Palocci to "marry up" Varig's BRL2.5 billion in government-held debts with the BRL2.5 billion in damages awarded to it by a federal appeals court last year for losses from government price control policies in the 1990s. However, Finance Ministry officials said Palocci rejected the appeal, saying the federal government was still in the process of appealing the court decision. Finance Ministry officials added Palocci was unwilling to cancel the government's appeal in the price control case because of the administration's commitment to fiscal austerity. Meanwhile, Pedro Galdi, an airline industry analyst for the ABN- Amro Bank subsidiary in Brazil believes that the federal government "will eventually give Varig a break." "It's a fact that, if Varig were to go under, its rivals would not have the scale to be able to take over all of its routes." 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/ ========= H A I T I ========= * HAITI: World Bank Approves $2M Grant -------------------------------------- The World Bank Group's Board of Directors approved Tuesday a US$2 million grant from the International Development Association (IDA) to assist the Government of Haiti in its efforts to strengthen economic governance. "Without careful and accountable management of public resources - including those supplied by donors - poverty reduction, emergency relief, and recovery will not be effective," said Caroline Anstey, World Bank's Country Director for the Caribbean. "The grant approved today supports more inclusive government policies and programs not only by strengthening the public's access to information, but by having civil society groups monitor and oversee the progress of government reform." The Economic Governance Technical Assistance Grant (EGTAG) aims to improve the government's ability to program, execute and track use of public resources and better link them to concrete development goals. It will also strengthen the government's role as an overseer of procurement practices. A human resource management plan and system will be developed. The grant will also assist with the development of the Anti-Corruption Unit as an effective check on corruption while also encouraging the greater involvement of civil society in its own operations, and as a monitor of economic governance reforms. Finally, the grant will fund an adequate system for communicating information on the reform programs, and coordinating activities financed by different donors. Specifically, the project will support the following activities: Financial Resource Management: This component will aim to develop the government's capacity to produce and execute a budget, track its implementation, and reduce irregular uses and expenditures. Human Resource Development: This component will support the development of a Human Resource Management System and the strengthening of human resources capacity under the direction of the Human Resources Unit within the Prime Minister's Office. Anticorruption and Civil Society Engagement: The EGTAG will help develop the Anticorruption Unit capacity, including skills and techniques needed for diagnosing institutional vulnerabilities and the design of remedies. It will also provide assistance in drafting improved laws, such as a freedom of information law, and fund an evaluation of the early performance of the mechanisms for monitoring of economic governance reforms by civil society organizations. Communication, Coordination and Project Management: This component will strengthen the Ministry of Economy and Finance program for communication of economic governance reforms to the public, enhance its ability to coordinate donor programs in economic governance and strengthen the Project Coordination Unit. "The proposed operation is part of a package of assistance the Bank is providing to Haiti in the area of economic governance," said Linn Hammergren, World Bank's team leader for the grant. "The grant approved today is intended to build on progress already achieved by the Low-Income Countries Under Stress Trust Fund, and the Economic Governance Reform Operation, to move Haiti towards more sustainable patterns of good economic governance." The World Bank's Board of Directors approved a two-year Transitional Support Strategy for Haiti on January 6, 2005, along with two operations for US$73 million to support economic governance reforms and emergency recovery efforts in flood- affected areas. The two operations, financed by the International Development Association (IDA), are the first approved by the Bank for the Government of Haiti since 1996. The Bank's Transitional Support Strategy is built on two pillars: one is to help the government deliver hope to the population through quick wins-in the provision of basic services and job creation; and the second is to restore credibility in public institutions by helping the government launch reforms that promote sound economic governance and institutional development. The Bank is providing a total of US$75 million in financing from IDA this fiscal year, of which US$38 million will be provided in the form of grants. In addition to these US$75 million, the World Bank is providing a grant of US$6.4 million drawn from the LICUS Trust Fund. The Bank has disbursed US$50 million from IDA and from the Low-Income Countries Under Stress (LICUS) Trust Fund. The Bank also expects to be able to provide 100 percent of its IDA assistance on grant terms for investment projects in World Bank fiscal year 2006. CONTACT: World Bank Washington Karina Manasseh Phone:(202) 473-1729 E-mail: kmanasseh@worldbank.org =========== M E X I C O =========== AHMSA: Kicks Off Study of Timna Copper Mine ------------------------------------------- Mexican steelmaker Altos Hornos de Mexico SA (AHMSA) has started conducting a study on how to revive Israel's Timna copper mine following authorization from Israel's national infrastructure ministry. The Company, which created a subsidiary in Israel known as Timna Mines Ltd., is likely to complete the studies in one year. "If [AHMSA] shows copper can be produced in an economically feasible way, then it can receive a development permit," said Israeli mining commissioner Yaakov Mimran. According to reports, AHMSA also needs to prove that it complies with environmental protection regulations. Troubled Company Reporter - Latin America earlier reported the AHMSA will invest US$100 million in a pilot for the project. As part of the pilot, AHMSA will employ 700 people, training them as miners, at Timna through the end of 2006. 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 ================= V E N E Z U E L A ================= PDVSA: Denies Reports on Alleged Transfer of Orimulsion Rights -------------------------------------------------------------- "PDVSA reminds public opinion that its business policy, as stated on numerous occasions, is aimed at raising the value of our main natural resource: oil, and the development of third- party strategies which do not undermine the rights of the Republic, but preserve our national sovereignty." The version contained in Sunday's El Universal newspaper regarding the alleged transfer by Petroleos de Venezuela of "all rights over the Orimulsion(R) trademarks and patents, without any reservation or limitation whatsoever" is totally untrue. Through Bitor, PDVSA signed in 2001 a joint venture agreement with China National Petroleum Corporation and Petrochina Fuel. The agreement in question was totally in accordance the Corporation's internal regulations and with the laws of the Republic in force at the time, and by means of which Orifuel Sinoven S.A. (Sinovensa), a company to engage in the manufacture Orimulsion(R), was founded. By means of this agreement, Sinovensa would share -prior agreement with Intevep- the Orimulsion(R) patent, which is the Bolivarian Republic of Venezuela's property. The partner companies, like PDVSA, normally use technologies from other countries and companies in the development of their activities. As it is standard practice internationally, Sinovensa will pay a royalty to the owner for the use of this technology, and it is so established in the pertinent legal document. The object of this joint venture is the construction of a 7.25 million metric ton per year module for the manufacture of Orimulsion(R), to be built in the Jose Industrial Complex areas, together with the corresponding facilities for shipping the finished product. The aforementioned newspaper version, which alleged furthermore that PDVSA had transferred its list of Orimulsion(R) customers and contracts to Sinovensa, is totally without foundation in fact. PDVSA continues fulfilling its commitments to its customers regarding Orimulsion(R) supplies, in accordance with the contracts in force, from its plant located in Morichal, in the Orinoco Oil Blt. CONTACT: Petroleos de Venezuela S.A. Edificio Petroleos de Venezuela Avenida Libertador, La Campina, Apartado 169 Caracas, 1010-A, Venezuela Phone: +58-212-708-4111 Fax: +58-212-708-4661 Web site: http://www.pdvsa.com.ve PDVSA: IDB Apprised of Experience in Social Development ------------------------------------------------------- Issues such as PDVSA's solid financial standing, the state-owned oil company's corporate budget, and the role of oil in levering social development in Venezuela, were amply covered at the meeting held by the Energy and Petroleum Minister and President of Petroleos de Venezuela, Rafael Ramirez Carreno, with members of the Inter-American Development Bank's Executive Board. Minister Ramirez considered that the meeting had afforded an excellent opportunity to show the world what is being done in Venezuela, something that has no equal in Latin America. "We are very happy and proud of the role being played by our country and by the New PDVSA", he said. The corporate finance subject was presented and developed extensively by Ramirez, who dwelt on the budget, income, profits and strengths of the national oil company. Ramirez explained to his IDB guests that PDVSA devotes 26% of its budget to social development. He added that US$6.6 billion are set aside for investment in the areas of oil, natural gas and refining. Similarly, he pointed out that PDVSA invests $1.8 billion in social development through the Missions Fund for the needy, the Zamora Fund for the development of Agriculture, and the Infrastructure Fund. "Our budget is structured on the basis of a $23 per barrel price, and we have at the moment an average per-barrel income of $39.80. In this sense, he explained how, after deducting the royalty and income tax legal commitments, "We are enabled by the rules to continue contributing to the Fund for the Social Development of the Country (Fondespa). In 2004 Fondespa had available $2 billion, which were invested in important projects, of which the IDB was apprised. This year Fondespa has $700 million, allowing us thereby to continue sustaining these national development projects". Worthy of note among other subjects touched upon were the Petrosur and Petrocaribe energy cooperation initiatives with countries in Latin America and the Caribbean. Rapprochement Mission IDB Representative Rom n Mayorga was accompanied by the executive directors for Venezuela, Panama, Belize, Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua, Brazil, Surinam, Bahamas, Barbados, Guyana, Jamaica, Trinidad and Tobago, Austria, Denmark, Spain, Finland, France, Norway, Sweden, Germany, Belgium, the Low Countries, Israel, Italy, Switzerland, Colombia, Peru, Chile, Ecuador, Uruguay, Argentina, Haiti, Japan, Korea, Croatia, Slovenia, Portugal and the United Kingdom. Besides Minister Ramirez, members of the PDVSA Board of Directors were also present. The IDB mission spokesman indicated that the visit was included in the organization's mandate to produce a rapprochement with the member countries with a view to learning about their experiences and realities, so as to identify areas for future collaboration and help. PDVSA: To Hire Replacements for Fired Workers --------------------------------------------- PDVSA Deputy President of exploration and production Luis Vierma blamed the government's decision to fire 20,000 skilled workers in 2003 for the current state of "emergency" at the state oil firm. Business News Americas recalls that President Hugo Chavez fired the workers for supporting the 2002-2003 oil strike that nearly toppled his administration. "If I was to tell you that a company lost 20,000 employees that it educated and sent to courses abroad and in Venezuela so that they were better professionals, and that these people left and we are not in an emergency, that would be very foolish," Vierma said. PDVSA has ruled out taking back fired workers to address the issue of depleted workforce. Instead, the Company will hire new employees and institute special training programs for them in the form of crash courses in several areas of operation. "We are going to recover that lost expertise and for that we have a group of young people who have a different work attitude and a great desire to forge themselves a future in PDVSA," Vierma said. "How long will this emergency last? A long time... An oil engineer is not made in a year," he added. PDVSA: Lawmakers Recommend 60% Control Over New JVs --------------------------------------------------- The National Assembly investigating the operating agreements signed between PDVSA and private oil firms in the 1990s advised that PDVSA should hold at least a 60% stake in the new joint venture partnerships to be established with these firms, reports Business News Americas. In April, Energy and Oil Minister Rafael Ramirez ordered the conversion of the 32 existing agreements into joint venture partnerships, under which PDVSA would hold at least a 51% stake. Ramirez, who is also president of PDVSA, gave the companies until December 31 to migrate to the new JVs. In order to qualify for the new JVs, companies must pay back taxes to national tax authority Seniat, which has said the 22 companies in the operating agreements owe about US$2 billion in unpaid income tax. *********** 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. Additional e-mail subscriptions for members of the same firm for the term of the initial subscription or balance thereof are $25 each. For subscription information, contact Christopher Beard at 240/629-3300. * * * End of Transmission * * *