/raid1/www/Hosts/bankrupt/TCRLA_Public/060307.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, March 7, 2006, Vol. 7, Issue 47
Headlines
A R G E N T I N A
BY PLASTIC: Trustee to Stop Validating Claims on April 12, 2006
CANTRILAR S.A.: Reaches End of Reorganization Process
CUIMBO S.A.: Debt Payments Halted, Moves to Reorganize
ESTABLECIMIENTO TRICARICO: Claims Verification Ends on March 20
IEF LATINOAMERICANA: Claims Verification Deadline Is April 26
INDELFIN S.A.: Concludes Reorganization Process
LUCCA HNOS: Court Appoints Maria Poratti as Trustee
PETROLGE S.A.: Debt Payments Halted, Set To Reorganize
ROJAS & VERGARA: Files for Bankruptcy After Payment Defaults
TICKET PLAZA: Claims Verification Begins, Ends May 2
B E R M U D A
AUGHRAS TRADING: Creditors Must File Proofs of Claim by Mar. 17
CISCO SYSTEMS: Liquidator Announces Liquidation Stay
ENERGY & TECHNOLOGY: First Meeting to be Held on March 20
FITX GROUP: Schedules Final General Meeting on April 5
B O L I V I A
REPSOL YPF: Agrees to Abide by Bolivia's 50% Share Law
* BOLIVIA: Investing US$18.3 Million in Telecom Program
B R A Z I L
BANCO DO BRASIL: Pension Unit Reports US$68.4-Mil Profit in 2005
BICBANCO: Moody's Rates Long-term Foreign Currency Debt at B2
COSAN S.A.: S&P Assigns BB Corporate Credit Rating
PETROLEO BRASILEIRO: Wins Bids to Look for Oil in Turkish Waters
* Brazil Buying Back US$6.6 Billion of Brady Bonds by April
* Brazil's Textile and Apparel Industries Ready for World Market
* JPMorgan Recommends Buy on Brazil, Mexico Currencies
C A Y M A N I S L A N D S
BIBBY INT: Liquidator Presented Wind Up Process to Shareholders
CABL LIMITED: Shareholders' Final Meeting Conducted
CITIGROUP ALTERNATIVE: Shareholders Set Final Meeting Today
FARREL INVESTMENTS: Shareholders Hold Final Meeting
INDIA CAPITAL: Liquidation Process to be Presented on March 7
JANIS INVESTMENTS: Wind Up Process Held March 6
LEVANT SERVICES: Liquidator to Present Liquidation Accounts
MULTI ASSETS: Wind Up Process Presented on March 6
MUSEUM MILE: Liquidator Presents Wind Up Process
SORAYA LTD.: Shareholders to Hold Final Meeting on March 7
STFG FUNDING: Liquidator Explains Wind Up Process
C O L O M B I A
COLOMBIA TELECOMUNICACIONES: Gov't Expects More Than US$350M Bid
E L S A L V A D O R
AES EL SALVADOR: Issues US$300 Million in Bonds
G R E N A D A
GRENADA: S&P Affirms B- Long-term Sovereign Credit Ratings
M E X I C O
DESARROLLADORA HOMEX: US$255M Offering Receives Oversubscription
GRUPO POSADAS: S&P Assigns BB- Corporate Credit Rating
* JPMorgan Recommends Buy on Brazil, Mexico Currencies
* MEXICO: Strike Incited by Grupo Mexico Mining Accident Ends
P E R U
BCP: Recommends Sale of Minsur Shares at US$2.60 per Share
P U E R T O R I C O
AOL LATIN: Court Extends Cicerone's Employment
U R U G U A Y
* URUGUAY: Brazilian Company to Supply 700MW of Electric Power
* URUGUAY: Seeks Support from Brazil to Build Coal-Fired Plant
V E N E Z U E L A
EDC: Lower Financing, Depreciation Costs Boost Income
* VENEZUELA: Paying US$800 Million in Loans Ahead of Schedule
* VENEZUELA: Realizes US$75 Mil. from Sale of Argentine Bonds
* VENEZUELA: S&P Minds Gap as Sovereign and Country Risk Diverge
- - - - - - - -
=================
A R G E N T I N A
=================
BY PLASTIC: Trustee to Stop Validating Claims on April 12, 2006
---------------------------------------------------------------
Mr. Roberto Leonardo Sapollnik, a Buenos Aires-based bankrupt
company By Plastic S.R.L.'s trustee, will stop validating
creditors' claims on April 12, 2006.
Mr. Sapollnik will present the validated claims in court as
individual reports on May 30, 2006. The trustee will also
submit a general report on the case on July 26, 2006.
Mr. Roberto Leonardo Sapollnik, the trustee, can be reached at:
Parana 851
Buenos Aires, Argentina
CANTRILAR S.A.: Reaches End of Reorganization Process
-----------------------------------------------------
The reorganization of Cantrilar S.A. has concluded. According
to Infobae, the process was concluded after a Buenos Aires court
homologated the debt agreement signed between the company and
its creditors.
CUIMBO S.A.: Debt Payments Halted, Moves to Reorganize
------------------------------------------------------
Buenos Aires-based Cuimbo S.A., has requested permission to
reorganize after failing to pay its liabilities since Feb. 20,
2006.
The reorganization petition, once approved by the court, will
allow the company to negotiate a settlement with its creditors
in order to avoid a straight liquidation.
The case is pending before the city's Court No. 21. Clerk No.
41 assists on this case.
Cuimbo S.A. can be reached at:
Avenida del Libertador 5881
Buenos Aires, Argentina
ESTABLECIMIENTO TRICARICO: Claims Verification Ends on March 20
---------------------------------------------------------------
The verification phase for the claims submitted by creditors
against bankrupt company Establecimiento Tricarico Hermanos S.A.
has started, Infobae reports. The verification will end on
March 20, 2006.
The submission of individual reports on the validated claims
will follow on May 4, 2006.
A general report on the case is expected on June 16, 2006.
Establecimiento Tricarico Hermanos S.A. was declared bankrupt by
a Buenos Aires court. Mr. Juan Carlos Flores was appointed as
trustee.
Mr. Juan Carlos Flores, the trustee, can be reached at:
Araoz 1056
Buenos Aires, Argentina
IEF LATINOAMERICANA: Claims Verification Deadline Is April 26
-------------------------------------------------------------
The verification of creditors' claims for the Ief
Latinoamericana S.A. insolvency case is set to end on April 26,
2006, states Infobae.
The case is being handled by a Mendoza court. Ms. Monica Rubio
and Ms. Maricel Sottano are the appointed trustees.
Ms. Monica Rubio and Ms. Maricel Sottano, the trustees, can be
reached at:
Buenos Aires 33
Ciudad de Mendoza
Mendoza, Argentina
INDELFIN S.A.: Concludes Reorganization Process
-----------------------------------------------
The reorganization of Buenos Aires-based Indelfin S.A. has
ended. Data revealed by Infobae on its Web site indicated that
the process was concluded after the city's court approved the
debt agreement signed between the company and its creditors.
LUCCA HNOS: Court Appoints Maria Poratti as Trustee
---------------------------------------------------
A Santa Fe court appointed Maria Alejandra Poratti as trustee
for the bankruptcy of Lucca Hnos. S.R.L., reports Infobae.
Ms. Maria Alejandra Poratti, the trustee, can be reached at:
Corrientes 3521
Ciudad de Santa Fe
Santa Fe, Argentina
PETROLGE S.A.: Debt Payments Halted, Set To Reorganize
------------------------------------------------------
Buenos Aires' Court No. 24 is reviewing the merits of Petrolge
S.A.'s petition to reorganize. La Nacion recalls that the
company filed the petition following cessation of debt payments
on Feb. 1, 2006. Reorganization will allow Petrolge S.A. to
avoid bankruptcy by negotiating a settlement with its creditors.
Clerk No. 47 is assisting the court on the company's
reorganization case.
Petrolge S.A. can be reached at:
Uriburu 1010
Buenos Aires, Argentina
ROJAS & VERGARA: Files for Bankruptcy After Payment Defaults
------------------------------------------------------------
Buenos Aires-based Rojas & Vergara S.R.L. has filed for
bankruptcy before the city's Court No. 21 after defaulting on
its debt payments since Feb. 24, 2006, La Nacion reports.
Clerk No. 41 assists the court on this case.
Rojas & Vergara S.R.L. can be reached at:
Tapalque 6366
Buenos Aires, Argentina
TICKET PLAZA: Claims Verification Begins, Ends May 2
----------------------------------------------------
Ms. Mabel Tumilasci, court-appointed trustee, has started
verifying claims against Ticket Plaza S.A. The verification is
set to end on May 2, 2006.
La Nacion relates that Buenos Aires' Court No. 14 declared the
company's bankruptcy in favor of Philips Argentina S.A., the
company's creditor.
Clerk No. 27 assists the court in this case.
Ticket Plaza S.A. can be reached at:
Segui 3582
Buenos Aires, Argentina
Ms. Mabel Tumilasci, the trustee, can be reached at:
Callao 449
Buenos Aires, Argentina
=============
B E R M U D A
=============
AUGHRAS TRADING: Creditors Must File Proofs of Claim by Mar. 17
---------------------------------------------------------------
Creditors of Aughras Trading Bermuda Limited are given until
March 17, 2006, to prove their claims to Mr. Robin J. Mayor, the
company's liquidator, or be excluded from receiving any
distribution or payment that the company will make.
Creditors are required to send by the said date their full
names, addresses, descriptions, the full particulars of their
debts or claims, and the names and addresses of their lawyers
(if any) to Mr. Mayor
A final general meeting will be held at the office of the
liquidator on April 19, 2006, at 9:30 a.m., or as soon as
possible thereafter, for the purposes of:
-- receiving an account laid before them showing the manner
in which the winding-up of the company has been conducted
and its property disposed of and of hearing any
explanation that may be given by the Liquidator;
-- by resolution determining the manner in which the books,
accounts and documents of the company and of the
Liquidator will be disposed of; and
-- by resolution dissolving the company.
The company began liquidating assets on Feb. 20, 2006.
Mr. Robin J Mayor, the liquidator, can be reached at:
Messrs. Conyers Dill & Pearman
Clarendon House, Church Street
Hamilton, HM DX, Bermuda
CISCO SYSTEMS: Liquidator Announces Liquidation Stay
----------------------------------------------------
Robin J. Mayor, at Conyers Dill & Pearman of Clarendon House,
Church Street, Hamilton, HM DX, Bermuda, the liquidator of Cisco
Systems Insurance Services LTD., announced that the liquidation
of the company will be stayed at the expiration of 21 days from
Feb. 22, 2006.
At that time the liquidator will give notice of stay to the
Official Receiver for Bermuda and the company will be placed
back in the state in which it was prior to the liquidation in so
far as that is possible. The stay application is made at the
request of the sole shareholder of the company.
If any creditor or shareholder objects to the stay proposed,
they have the right under the provisions of sections 230 and 231
of the Companies Act 1981 to make application to the Supreme
Court of Bermuda to require the liquidator to continue the
liquidation.
ENERGY & TECHNOLOGY: First Meeting to be Held on March 20
---------------------------------------------------------
The first meeting of the contributories and creditors of Energy
& Technology Company, LTD. will be held on March 20, 2006 at the
office of Mr. Mike Morrison, the company's provisional
liquidator. The meeting for contributories is scheduled at
10:00 a.m. while the meeting for the creditors is at 10:30 a.m.
Proxy forms to be used at the meeting have been mailed to all
known contributories and creditors and must be lodged with the
provisional liquidator by 5:00 p.m. on March 17, 2006.
Mr. Mike Morrison, the provisional liquidator, can reached at:
KPMG Financial Advisory Services Limited
Crown House, 4 Par-la-Ville Road
Hamilton, Bermuda
FITX GROUP: Schedules Final General Meeting on April 5
------------------------------------------------------
FITX Group Limited's final general meeting is scheduled on April
5, 2006, at 10:30 a.m.
The meeting will be held at:
Wakefield Quin, Chancery Hall
52 Reid Street, Hamilton, Bermuda
The purpose of the meeting is:
-- the presentation of an account on the wind up process of
the company by the liquidator -- Mr. Nicholas Hoskins.
Mr. Hoskins will show the manner in which the winding-up
has been conducted, how the property of the company has
been disposed of and explain the process;
-- determination by resolution the manner in which the
books, accounts and documents of the company and of the
liquidator shall be disposed; and
-- by resolution dissolving the company.
=============
B O L I V I A
=============
REPSOL YPF: Agrees to Abide by Bolivia's 50% Share Law
------------------------------------------------------
As previously reported, Antoni Brufau, Repsol YPF's president,
visited Bolivia last week to meet President Evo Morales and
discuss its business operation in the country as well as the
smuggling charges hauled on its local subsidiary, Andina SA.
Repsol's president said that the company will abide by Bolivia's
new law forcing private oil firms to give a 50% share to the
government, Agence France-Presse reports. The company also gave
its assurance it would cooperate with investigations into
alleged oil smuggling charges.
"We can't do anything but go along," Mr. Brufau was quoted by
AFP as saying. "We must strengthen our cooperation with YPFB."
YPFB is Bolivia's state-owned oil company.
"When we are operating in a country, we must go hand-in-hand
with the interests of that country," Mr. Brufau said. "Bolivia
is the epicenter of a very important region."
Operating in Bolivia since 1977, Repsol controls 26% of the
country's gas reserves, the largest in South America outside of
Venezuela.
In relation to the smuggling charges brought by the Bolivian
government against the company, Mr. Brufau has asked for a fair
hearing. He reiterated that the company has done nothing wrong
and has paid taxes religiously, the AFP reports.
Repsol has frozen US$480 million in planned gas investments in
Bolivia because of what it considers political uncertainty.
* * *
On June 20, 2005, Moody's Investors Service upgraded the ratings
of Spanish-Argentine oil company Repsol YPF's local subsidiary
YPF S.A. Moody's upgraded YPF's senior unsecured rating to Ba3
from B1 and the unit's domestic currency issuer rating to Baa2
from Baa3.
YPF's foreign currency issuer rating of Caa1 remained unchanged,
as it is constrained by the sovereign ceiling of Argentina.
YPF's Corporate Family Rating (formerly known as the senior
implied rating) is aligned with the foreign currency issuer
rating at Caa1.
* BOLIVIA: Investing US$18.3 Million in Telecom Program
-------------------------------------------------------
Bolivia's regional development fund agency, FNDR, along with
electricity, alternative energy and telecoms agency VEEAT, have
allocated 146 million bolivianos (US$18.3 million) to the
country's national telecommunications program Pronter, according
to a report from local daily El Diario.
The Pronter loans, among other things, may be used to:
* expand telecoms coverage or capacity,
* introduce new telecoms services where basic ones already
exist, and
* provide telecoms service in areas without coverage.
The services provided may be mobile, fixed line or public
telephony, as well as internet access, community radio
broadcasting and computer literacy programs, among others.
The loans will be funded from license fees, fines and other
charges paid by telecoms operators. Pronter will consider
requests for loans from prefectures, municipalities, public
utility companies, public service cooperatives and certain other
groups. The loans will be calculated in UFVs, an inflation-
indexed monetary unit, and paid out in bolivianos with a fixed
6% interest rate. Loans will be extended for a term of five
years if they are for less than US$100,000, and 10 years if they
exceed this amount, Business News Americas reports.
* * *
Fitch Ratings assigns these ratings on Bolivia:
Rating Rating Date
------ -----------
Country Ceiling B- Jun. 17, 2004
Long Term IDR B- Dec. 14, 2005
Local Currency
Long Term Issuer
Default Rating B- Dec. 14, 2005
===========
B R A Z I L
===========
BANCO DO BRASIL: Pension Unit Reports US$68.4-Mil Profit in 2005
----------------------------------------------------------------
Brasilprev, the pension subsidiary of Brazil's Banco do Brasil
disclosed a 39% increase in 2005 profits to 145 million reals
(US$68.4 million) compared to the previous year, Business News
Americas reports.
Premiums increased 4.5% to 2.07 billion reals, giving the
company a 10.6% market share in the pension plan industry.
Individual pension plans earned 795 million reals in premiums, a
4.6% increase over the previous year.
Premiums from corporate plans increased 26.3% to 302 million
reais.
Brasilprev's investment portfolio grew 24% to 9.65 billion
reals.
Banco do Brasil controls 49.99% of Brasilprev, while US-based
Principal Financial Group (NYSE: PFG) owns 46.01% and federal
development agency Sebrae the remaining 4%.
As reported on Mar. 3, 2006, Standard & Poor's Ratings Services
raised its foreign currency counterparty credit ratings on Banco
do Brasil S.A. to 'BB' from 'BB-'. The foreign and local
currency ratings of this bank are now equalized at 'BB'. S&P
said the outlook is stable.
Earlier this week, Standard & Poor's raised its foreign-currency
rating assigned to Brazil to 'BB' from 'BB-' and its local-
currency rating to 'BB+' from 'BB'. The outlook on the
sovereign ratings is stable.
"All changes in foreign currency and national scale credit
ratings reflect the raising of the foreign-currency sovereign
rating on Brazil," said Standard & Poor's credit analyst Laura
Feinland Katz.
Banco do Brasil S.A is categorized as a commercial bank, and the
ratings on it reflect the bank's intrinsic credit issues in the
context of proven commitment and support demonstrated by its
owner, the Federative Republic of Brazil.
BICBANCO: Moody's Rates Long-term Foreign Currency Debt at B2
-------------------------------------------------------------
Moody's Investors Service assigned a 'B2' long-term foreign-
currency debt rating to the US$120 million step-up subordinated
notes, due 2016, of Banco Industrial e Comercial S.A. aka
BICBANCO. The outlook on the rating is stable.
The rating agency said that the subordination of the notes had
been taken into consideration and applied to BICBANCO's 'Ba3'
global local-currency deposit rating. At this rating level,
Moody's notching guidelines determine a two-notch differential
from the base rating.
Moody's had assigned a D- bank financial strength rating to
BICBANCO. The bank's ratings are supported by a track record of
consistent profitability and asset quality, both of which are in
line with its business focus.
BICBANCO's operations are centered on short term, secured
lending to middle market companies. These operations are
supported by disciplined credit risk management and controls,
and by a policy of asset and liability diversification. The
bank's financial performance is therefore indicative of its
ability to intermediate to a higher-margined, riskier business
segment while maintaining adequate credit and operating costs.
BICBANCO is headquartered in Sao Paulo, Brazil. It had total
assets of BRL6.7 billion and equity of BRL505 million in
December 2005.
COSAN S.A.: S&P Assigns BB Corporate Credit Rating
--------------------------------------------------
Standard & Poor's Ratings Services assigned a 'BB' foreign
currency rating to Cosan S.A. Industria e Comercio. The company
was assigned a 'BB' corporate credit rating with a stable
outlook.
Major Rating Factors
Strengths:
-- Low cost production resulting from efficient mill
operations, logistics, and favorable weather conditions
for Brazilian sugar cane;
-- Established market presence both in Brazil and in
external markets;
-- Comfortable liquidity after IPO, which should lead to
more beneficial commercialization strategy, lower
interest burden, and unique position to remain a
consolidator in the local industry.
Weaknesses:
-- Aggressive acquisition strategy, which implies some
consolidation and contingent risks;
-- Still-high trade barriers in the sugar industry in the
major markets of the US and EU;
-- Exposure to commodities risks, particularly highly
volatile sugar prices.
Rationale
The ratings on Cosan S.A. Industria e Comerico reflect inherent
risks in its commodity business. These include the highly
volatile prices for sugar and ethanol and the seasonality and
volatility of its results and consequent substantial working
capital needs during the crop season.
The ratings also reflect the highly protected nature of the
sugar industry with high trade barriers in major markets such as
the US and EU. The ratings also incorporate the potential risks
associated with Cosan's aggressive acquisition strategy, such as
capturing synergies and integrating companies. These negative
factors are tempered by Cosan's strong and established market
presence in Brazil and in the export market; the company's low-
cost production, which positions it to capture potential price
and volume upside in the sugar and ethanol segments; and its
strong liquidity profile after its IPO in November 2005.
The foreign currency rating assigned to Cosan is one notch
higher than the sovereign rating on its home country, the
Federative Republic of Brazil -- foreign currency BB-
/Positive/B; local currency BB/Positive/B. This reflects the
understanding that Cosan is well positioned to withstand the
intrinsic volatility of the domestic market due to its strong
export orientation and flexibility to redirect sales. The
company exports 60% of its total production through its own port
terminals in Santos. Cosan holds a leadership position in the
sugar and ethanol industries under fully deregulated market
conditions and has become a major player in the international
sugar market as one of the largest exporters. The company's
costs are denominated mostly in local currency, and foreign
currency debt consists of some short-term trade finance and a
$200 million senior unsecured bond due in 2009.
Cosan itself was incorporated quite recently in 2000, but its
origins date back to 1936, when its controlling shareholders
established their first sugar cane mill. In 2000, Cosan had a
total crushing capacity of 16 million tons, which was
subsequently significantly expanded through several acquisitions
and currently stands at 38.5 million tons -- post Corona
acquisition in January 2006. Prospects for the global sugar
industry are strong, with protection likely to be reduced in
Europe and US In addition, in view of the higher demand for
ethanol fuel in Brazil -- owing to flex power vehicles -- and
globally -- owing to high oil prices -- Cosan is expected to
continue to pursue acquisitions and be a leader in the
consolidation of the fragmented Brazilian industry. Although we
recognize Cosan's track record in terms of acquisitions and we
expect the company to carefully evaluate its acquisition
targets, the aggressive acquisition strategy implies additional
investments to maintain productivity levels and challenges the
company to incorporate the acquisition benefits within a
reasonable period.
With sales of $843.0 million in the fiscal year April 2005,
Cosan is Brazil's largest sugar producer and the second-largest
sugar producer globally -- post Corona acquisition. Sugar
accounts for 63% of Cosan's revenues and 72% of its EBITDA. In
the last crop, the company produced 2.3 million tons of sugar,
of which 85% was exported. In addition, Cosan is the largest
ethanol producer in Brazil and the second largest in the world.
Ethanol makes up 29% of sales and 26% of EBITDA. Cosan produced
825 million liters of ethanol in 2005, of which 36% was exported
and 64% was sold domestically to fuel distributors.
Cosan's business model is still mostly concentrated in the
commodity-type products of sugar and ethanol and therefore is
subject to the volatile prices of these products, which carry a
strong correlation. Sugar and ethanol prices in Brazil are free
following full deregulation of the industry in 1999, with local
prices basically moving in line with international prices.
Sugar prices are quoted internationally -- NY11 and LIFFE n5 --
and move as a result of the supply/demand, inventory, and
climate conditions of the industry players.
Cosan benefits from an advantageous cost position. Besides the
favorable soil and climate condition in Brazil, Cosan has proved
to run efficient mills and has reduced export costs owing to its
sugar terminal at the Porto de Santos, which enables the company
to be the most competitive low-cost producer. Cosan's favorable
cost position is expected to be maintained given its competitive
advantage derived from the location of the mills and refineries,
its logistic infrastructure, and its scale. Nevertheless,
Cosan's results are subject to volatile commodity prices, the
industry's seasonality, and the company's expansionist strategy.
Sugar is still one of the most regulated commodities, with sugar
beet regions such as the US and EU protecting their own
production through guaranteed minimum prices and quotas. For
this reason, most sugar production is consumed domestically, and
the trade market totals only 47 million tons out of total global
production of 140 million tons. S&P expects these markets to be
deregulated gradually. In this new environment, Brazilian
producers, and Cosan in particular, should be able to take
advantage of market liberalization. S&P expects Cosan to
maintain a solid operating performance over the next few years,
benefiting from the good industry prospects in terms of global
and local demand for sugar and ethanol.
Cosan shows the strongest EBITDA margin among its peers, even
though many of them operate in highly regulated and protected
markets. The company's consolidated EBITDA margins are expected
to remain at about 20%. Growing demand for renewable fuels and
the gradual liberalization of sugar markets is expected to push
prices to a higher level and somewhat compensate for the
commodity price volatility.
The company shows adequate hedging and financial policies, such
as funding acquisitions with a primary equity issue -- the IPO
in November 2005 -- the practice of hedging the price of a
portion of its sugar deliveries in the following crop to reduce
revenue volatility, and a conservative dividend policy.
Cosan experienced significant growth through acquisitions until
2002, which resulted in a fairly aggressive level of debt; funds
from operations -- FFO -- to debt was 15% for financial 2003.
Since then, Cosan has been focusing on improving its financial
conditions and reducing the total level of debt, mainly by
stretching tenors and reducing the cost of debt. In fiscal
2005, FFO to total debt had improved to 21%, and we expect it to
reach 32% in the financial year ending April 2006. Interest
coverage is quite low for the rating category, but in our
opinion it reflects a level of cost of debt that should change
after the IPO, which significantly increased liquidity. For the
next two fiscal years, S&P expects an EBITDA interest coverage
ratio of about 3x due to growing cash flows and a lower average
cost of debt. Cash flow coverage can be quite volatile due to
the industry's inherent price risk. S&P would therefore expect
the company to sustain average cash flow protection measures --
through quarters and through product cycles -- in line with the
metric that Cosan should show in the financial year ending April
2006.
Liquidity
Cosan is expected to show strong liquidity in the coming
quarters, as it has retained most of the Brazilian real 890
million -- $392 million -- raised in its November 2005 primary
share offer as cash. The entire amount will be maintained as a
liquidity cushion and will fund the recent acquisition of Corona
-- $170 million. In addition, the company has issued $450
million in the international market through a perpetual bond --
callable at the company's discretion in 2011 -- in order to
stretch debt profile -- including debt brought by the
acquisition of Corona -- and reduce its dependency on short-term
working capital loans.
The company's debt maturities are relatively spread out, except
for some concentration in 2009 when the $200 million senior
unsecured bond falls due. In full-year 2006 and probably also
later in full-year 2008 or full-year 2009, Cosan is expected to
report negative free operating cash flow due to stronger M&A
activity, but these investments have been pre-funded with the
equity issue. In the absence of these investments, S&P expects
Cosan to report free operating cash flow of about $130 million-
$150 million per year.
Outlook
The stable outlook reflects our expectations that Cosan will
maintain its established market presence in Brazil and strong
export orientation, benefiting from its low-cost production,
large scale, and logistics. These strengths are expected to
minimize the risks associated with its operations, including the
exposure to commodity risks and the still heavily protected
sugar industry.
The ratings could be revised downward if the company were to
relax its acquisition and financial policies, which we currently
view as fairly moderate. It would be seen as negative for the
ratings if the company were to become more aggressive in terms
of bidding prices -- making it more difficult for Cosan to
extract value from the acquisition -- or if the company were to
start leveraging its balance sheet to pursue such acquisitions.
A positive change in the ratings or outlook would depend on the
successful execution of Cosan's acquisition strategy.
Alternatively, the ratings could benefit from a relevant
consolidation of the fragmented Brazilian industry and a change
in global environment toward an open and less protected sugar
market. S&P believes such changes could result in significant
benefits to Cosan's business and financial profiles.
As with any commodity producer, the ratings on Cosan could also
be affected by a permanent change in the industry's operating
conditions, whether with regard to long-term price levels or the
supply and demand balance.
PETROLEO BRASILEIRO: Wins Bids to Look for Oil in Turkish Waters
----------------------------------------------------------------
Petroleo Brasileiro SA won two out of three bids to explore for
oil in deep water sites in Turkey, according to an article by
Estado news agency.
Estado said Petrobras will develop the sites in partnership with
Turkey's TPAO or Turkiye Petrolleri AO Orkestrasi oil company.
Headquartered in Rio de Janeiro, Brazil, Petroleo Brasileiro SA
aka Petrobras was founded in 1953. The company explores,
produces, refines, transports, markets, distributes oil and
natural gas and power to various wholesale customers and retail
distributors in the country.
* * *
Petroleo Brasileiro SA's long-term corporate family rating is
rate Ba3 by Moody's and its foreign currency long-term debt is
rated BB- by Fitch.
* * *
Fitch assigns these ratings to Petroleo Brasileiro's senior
unsecured notes:
Maturity Date Amount Rate Ratings
_____________ ______ ____ _______
April 1, 2008 $400,000,000 9% BB-
July 2, 2013 $750,000,000 9.125% BB-
Sept. 15, 2014 $650,000,000 7.75% BB-
Dec. 10, 2018 $750,000,000 8.375% BB-
* Brazil Buying Back US$6.6 Billion of Brady Bonds by April
-----------------------------------------------------------
Brazil intends to buy back in April the remaining US$6.6 billion
of bonds issued in a 1990s restructuring, taking advantage of a
rally in its currency to reduce debt held by international
investors, Bloomberg News reports.
The Brady bonds were named after former U.S. Treasury Secretary
Nicholas Brady, who orchestrated the restructuring plan.
"This is very positive for the country," Gus Sheha, who manages
US$200 million in emerging market assets for New York- based
Emerging Sovereign Fund told Bloomberg. "Brazil, as well as
some other emerging market countries, has been gaining a lot of
credibility over the past few years."
As a result of exports rise to US$120 billion in 2005, Brazil's
reserves swelled and raised the real by 51%.
* * *
Fitch Ratings assigns these ratings on Brazil:
Rating Rating Date
------ -----------
Country Ceiling BB- Nov. 18, 2004
Long Term IDR BB- Dec. 14, 2005
Short Term IDR B Dec. 14, 2005
Local Currency
Long Term Issuer
Default Rating BB- Dec. 14, 2005
* Brazil's Textile and Apparel Industries Ready for World Market
----------------------------------------------------------------
The Tehran Times relates that Brazil could become a major player
in the international textile and apparel industries.
Having a fully-integrated cotton industry, Brazil has also
invested in a huge polyester project to develop its man-made
fiber textile and apparel industries. The country also has very
large textile groups that are ready to make further progress on
the global denim market, the Tehran Times says.
In 2005, Brazil's total production of the sector amounted to
US$26 billion, of which US$2.2 billion were exported, the Tehran
Times says.
Jorg Dieter Albrecht, president of Polyenka and Abrafas, the
Brazilian Association of man-made fibre products, explained to
the Tehran Times that because of the investment made by the Port
of Suape, Brazil will be able to produce polyester fibers and
yarns at Asian prices.
* * *
Fitch Ratings assigns these ratings on Brazil:
Rating Rating Date
------ -----------
Country Ceiling BB- Nov. 18, 2004
Long Term IDR BB- Dec. 14, 2005
Short Term IDR B Dec. 14, 2005
Local Currency
Long Term Issuer
Default Rating BB- Dec. 14, 2005
* JPMorgan Recommends Buy on Brazil, Mexico Currencies
------------------------------------------------------
According to JPMorgan Chase & Co., the Brazilian real and
Mexican peso will extend their gains against the dollar as
strong economic growth and high interest rates attract buyers.
Bloomberg News quoted JPMorgan Latin America strategist Drausio
Giacomelli as saying that investors have been buying the real
and peso and financing the bets in lower-yielding currencies in
what is known as a carry trade.
"The carry is still attractive," Mr. Giacomelli told Bloomberg
in a telephone interview. "It's not as much from the potential
for nominal appreciation but from the carry it offers."
JPMorgan cites lower risk and high interest rates as added
attraction to Brazil and Mexico.
Latin America's currencies may also be attracting interests as
volatility in currencies from developed countries has declined,
Bloomberg relates.
According to Bloomberg, the real was the world's top-performing
currency last year, rising 13.7% versus the dollar. The Mexican
peso gained 4.8% in 2005. Mexico's central bank recently
reduced the benchmark lending rate to a 17- month low of 7.5%.
* * *
Fitch Ratings assigns these ratings on Brazil:
Rating Rating Date
------ -----------
Country Ceiling BB- Nov. 18, 2004
Long Term IDR BB- Dec. 14, 2005
Short Term IDR B Dec. 14, 2005
Local Currency
Long Term Issuer
Default Rating BB- Dec. 14, 2005
===========================
C A Y M A N I S L A N D S
===========================
BIBBY INT: Liquidator Presented Wind Up Process to Shareholders
---------------------------------------------------------------
Shareholders of Bibby International Services (Hotel Services)
(Cayman Islands) Limited convened on March 6 for a final general
meeting at 10 Mountain View, Ballaugh, Isle of Man, IM7 5EW.
Accounts on the company's liquidation process was presented
during the meeting. The shareholders also authorized the
liquidators to retain the records of the company for a period of
five years, starting from the dissolution of the company.
Destruction of the records may then be allowed after that
period.
The liquidator can be reached at:
Mr. Martyn Howard
10 Mountain View
Ballaugh, Isle of Man, IM7 5EW
CABL LIMITED: Shareholders' Final Meeting Conducted
---------------------------------------------------
Shareholders of CABL Ltd. convened on March 6 for a final
meeting at the offices of BNP Paribas Private Bank & Trust
Cayman Limited in George Town, Grand Cayman.
Accounts on the company's liquidation process was presented
during the meeting. The shareholders also authorized the
liquidators to retain the records of the company for a period of
five years, starting from the dissolution of the company.
Destruction of the records may then be allowed after that
period.
The liquidator can be reached at:
Ms. Ellen J. Christian
Piccadilly Cayman Limited
3rd Floor Royal Bank House, Shedden Road
George Town, Grand Cayman
Tel: 345 945 9208
Fax: 345 945 9210
CITIGROUP ALTERNATIVE: Shareholders Set Final Meeting Today
-----------------------------------------------------------
Shareholders of Citigroup Alternative Investments Libra
Strategies Master Company Ltd. will convene to hold a Final
Meeting at the registered office of the Company at 12:00 p.m.
today.
Accounts on the company's liquidation process will be presented
during the meeting. The shareholders will also authorize the
liquidators to retain the records of the company for a period of
five years, starting from the dissolution of the company.
Destruction of the records may then be allowed after such
period.
Any person who is entitled to attend and vote at this meeting
may appoint a proxy to attend and vote in his stead. A proxy
need not be a member or a creditor.
The liquidators, John Cullinane and Derrie Boggess, can be
reached at:
c/o Walkers SPV Limited
Walker House, P.O. Box 908
George Town, Grand Cayman
FARREL INVESTMENTS: Shareholders Hold Final Meeting
---------------------------------------------------
Shareholders of Farrel Investments Limited convened on March 6
for an extraordinary final general meeting at the registered
offices of Cititrust (Cayman) Limited, CIBC Financial Centre,
in George Town, Grand Cayman.
Accounts on the company's liquidation process was presented
during the meeting. The shareholders also authorized the
liquidators to retain the records of the company for a period of
five years, starting from the dissolution of the company.
Destruction of the records may then be allowed after that
period.
The liquidator can be reached at:
Buchanan Limited
P.O. Box 1170
George Town, Grand Cayman
INDIA CAPITAL: Liquidation Process to be Presented on March 7
-------------------------------------------------------------
India Capital Appreciation Fund's liquidators, Messrs. Derek Van
Eck and Jan Van Eck, will explain the company's liquidation
process at the final meeting on March 7, 2006, at 3:00 p.m. The
meeting will be held at:
Van Eck Associates Corp.
99 Park Avenue
New York, NY 10016
USA
During the meeting, the shareholders will also authorize the
liquidators to retain the records of the company for a period of
five years, starting from the dissolution of the company.
Destruction of the records may then be allowed after such
period.
Any person who is entitled to attend and vote at this meeting
may appoint a proxy to attend and vote in his stead. A proxy
need not be a member or a creditor.
Messrs. Derek Van Eck and Jan Van Eck, the liquidators, can be
reached at:
Van Eck Associates Corp.
99 Park Avenue
New York, NY 10016
USA
JANIS INVESTMENTS: Wind Up Process Held March 6
-----------------------------------------------
Buchanan Limited, Janis Investments Ltd.'s liquidator, presented
a report on the company's wind up process during an
extraordinary final general meeting on March 6, 2006. The
meeting was held at:
Smith Barney Private Trust Company Limited
CIBC Financial Centre, George Town
Grand Cayman, Cayman Islands
The shareholders also authorized the liquidator to retain the
records of the company for five years, starting from the
dissolution of the company.
As reported by Troubled Company Reporter on Feb. 24, 2006, Janis
Investments Ltd. started voluntary wind up of its operations
Jan. 27, 2006. Creditors were given until March 6, 2006, to
present claims against the company to the liquidator.
Buchanan Limited, the voluntary liquidator, can be reached at:
P.O. Box 1170
George Town, Grand Cayman
Cayman Islands
LEVANT SERVICES: Liquidator to Present Liquidation Accounts
-----------------------------------------------------------
Commerce Corporate Services Limited, Levant Services'
liquidator, will present liquidation accounts during an
extraordinary final meeting at the registered office of the
company on March 7, 2006.
During the meeting, the shareholders will also authorize the
liquidator to retain the records of the company for a period of
five years, starting from the dissolution of the company.
Destruction of the records may then be allowed after such
period.
Any person who is entitled to attend and vote at this meeting
may appoint a proxy to attend and vote in his stead. A proxy
need not be a member or a creditor.
As reported by Troubled Company Reporter on Feb. 24, 2006, the
shareholder of Levant Services decided during an extraordinary
general meeting held on Jan. 27, 2006, to liquidate the company.
Wind up process will begin on March 7, 2006.
Commerce Corporate Services Limited, the liquidator, can be
reached at:
P.O. Box 694GT
Grand Cayman, Cayman Islands
Telephone: 949 8666
Facsimile: 949 7904
MULTI ASSETS: Wind Up Process Presented on March 6
--------------------------------------------------
Multi Assets Corporation held a final meeting on March 6, 2006,
at:
BNP Paribas Private Bank & Trust
Cayman Limited, 3rd Floor Royal Bank House
Shedden Road, George Town
Grand Cayman, Cayman Islands
Accounts on the company's wind up was presented during the
meeting. The shareholders also authorized the liquidators to
retain the records of the company for a period of five years,
starting from the dissolution of the company.
Piccadilly Limited, the liquidator, can be reached at:
Attention: Ellen J. Christian
3rd Floor Royal Bank House, Shedden Road
George Town, Grand Cayman, Cayman Islands
Telephone: 345 945 9208
Fax: 345 945 9210
MUSEUM MILE: Liquidator Presents Wind Up Process
------------------------------------------------
Shareholders of Museum Mile Holdings Limited held an
extraordinary final meeting on March 6, 2006, at:
Cititrust (Cayman) Limited
CIBC Financial Centre
George Town, Grand Cayman
Cayman Islands
Accounts on the company's liquidation process was presented
during the meeting. The shareholders also authorized the
liquidators to retain the records of the company for five years,
starting from the dissolution of the company.
As reported by Troubled Company Reporter on Feb. 23, 2006,
Museum Mile Holdings Limited's voluntary liquidation began on
Jan. 27, 2006. Creditors were given until March 6, 2006, to
prove their claims to the liquidator of the company.
Buchanan Limited, the voluntary liquidator, can be reached at:
P.O. Box 1170
George Town, Grand Cayman
Cayman Islands
SORAYA LTD.: Shareholders to Hold Final Meeting on March 7
----------------------------------------------------------
Shareholders of Soraya Ltd. will hold an extraordinary final
meeting at the registered offices of the company on March 7,
2006.
Accounts on the company's liquidation process will be presented
during the meeting. The shareholders will also authorize the
liquidators to retain the records of the company for a period of
five years, starting from the dissolution of the company.
Destruction of the records may then be allowed after such
period.
Any person who is entitled to attend and vote at this meeting
may appoint a proxy to attend and vote in his stead. A proxy
need not be a member or a creditor.
As reported by Troubled Company Reporter on Feb. 24, 2006,
Soraya Ltd. will start winding up operations on March 7, 2006,
after its shareholder resolved to liquidate during an
extraordinary general meeting on Jan. 27, 2006.
Commerce Corporate Services Limited, the voluntary liquidator,
can be reached at:
P.O. Box 694GT
Grand Cayman, Cayman Islands
Telephone: 949 8666
Facsimile: 949 7904
STFG FUNDING: Liquidator Explains Wind Up Process
-------------------------------------------------
Ms. Ellen J. Christian, STFG Funding Corporation's liquidator,
presented an explanation of the company's wind up process during
a final meeting on March 6, 2006. The meeting was held at:
BNP Paribas Private Bank & Trust Cayman Limited
3rd Floor Royal Bank House
Shedden Road, George Town
Grand Cayman, Cayman Islands
During the meeting the shareholders also authorized Ms.
Christian to retain the records of the company for five years,
starting from the dissolution of the company.
As reported by Troubled Company Reporter on Feb. 21, 2006, STFG
Funding Corporation entered voluntary liquidation on Jan. 24,
2006. Creditors must submit claims to Piccadilly Cayman
Limited, the company's liquidator, by March 6,2006.
Ms. Ellen J. Christian, the voluntary liquidator, can be reached
at:
Piccadilly Cayman Limited
3rd Floor Royal Bank House, Shedden Road
George Town, Grand Cayman
Cayman Islands
Telephone: 345 945 9208
Fax: 345 945 9210
===============
C O L O M B I A
===============
COLOMBIA TELECOMUNICACIONES: Gov't Expects More Than US$350M Bid
----------------------------------------------------------------
The Colombian government expects companies interested in bidding
for a controlling stake in Colombia Telecomunicaciones SA to
offer more than US$350 million, the company's chief executive
Alfonso Gomez was quoted by Dow Jones Newswires as saying.
An auction for the company's 50% plus one share will be held at
the end of March, Mr. Gomez told Dow Jones.
The winning bidder will assume 7.58 trillion Colombian pesos in
debt (US$3.37 billion), mainly to the government and in pension
liabilities, and will inject cash into Colombia Telecom.
According to Mr. Gomez, the winning bidder will have to pay the
debt gradually by 2022 and won't be able to cash dividends from
Colombia Telecom in the first five years after the transaction.
In a confidential transaction last year, the Colombian
government had agreed to grant Telecom's control to Telefonos de
Mexico SA in exchange for a US$350 million investment and the
assumption of the company's debts.
However, the Colombian comptroller's office opposed the
agreement and ordered the government to repeat the process,
opening it to other potential bidders.
The six interested bidders for Colombia Telecom are:
* Cablecentro, Colombia's largest subscription television
service;
* Spain's Telefonica SA,
* Colombian municipal telcos Empresa de Telecomunicacion SA
ESP and Empresas Publicas de Medellin,
* Venezuelan operator CA Nacional Telefonos de Venezuela
(Cantv) and
* Miami-based long-distance telephone provider Phone 1.
Mr. Gomez told Dow Jones that Telmex still may bid for Telecom
as the Mexican company already had access to all the financial
information during last year's negotiations.
=====================
E L S A L V A D O R
=====================
AES EL SALVADOR: Issues US$300 Million in Bonds
-----------------------------------------------
The Latin Lawyer reports that AES El Salvador has sold US$300
million in bonds through a public offering in February. The new
issuace is guaranteed by four electricity distribution companies
that AES Corp. controls in El Salvador.
The issuance on 14 February is the first by a private company to
be guaranteed in this way originating from Central America. It
is also the first investment grade issue by a private company in
Central America, the Latin Lawyer states.
The 10-year bond's issuer was MMG Fiduciary & Trust Corp, a
Panamanian corporation, as trustee of the AES El Salvador Trust.
Credit Suisse First Boston was the underwriter of the issuance.
AES El Salvador is the principal shareholder in four
distribution companies:
* Compania de Alumbrado Electrico de San Salvador,
* AES Clesa y Compania,
* Empresa Electrica de Oriente, and
* Distribuidora Electrica de Usulutan.
Both the payment of principal and interest on the new notes will
be fully guaranteed on a senior unsecured, joint and several
basis by the four companies.
Proceeds from the debt issue will be used to repay existing
debts at CAESS, Clesa and EEO. What remains of the proceeds
will be used to pay dividends to CAESS and Clesa's shareholders.
Credit Suisse First Boston was represented by:
In El Salvador:
Ricardo A. Cevallos, Esq.
Beatriz Beltranena, Esq.
Delgado & Cevallos
67 Av. Sur Pasaje 2
#26 Colonia Escalonn, San Salvador
Tel: (503) 298-3900
Fax: (503) 298-3939
Email: info@delgadocevallos.com
In the United States:
Michael Fitzgerald, Esq.
Taisa Markus, Esq.
Stephen Diamond, Esq.
Melinda Creasman, Esq.
Ellie Kwack, Esq.
Fernando Manzini, Esq.
Milbank, Tweed, Hadley & McCloy LLP
1 Chase Manhattan Plaza
New York, NY 10005
Tel: 212-530-5000
Email: http://www.milbank.com
In Panama:
Ricardo M. Arango, Esq.
Cristina de Alba, Esq.
Arias, Fabrega & Fabrega
16th Floor, Plaza 2000 Building
50th Street
P.O. Box 0816-01098
Panama, Republic of Panama
AES El Salvador was represented by:
In-house counsel:
Vincent Mathis, Esq.
Fory Musser, Esq.
In El Salvador:
Benjamin Valdez Iraheta. Esq.
Ana Maria Castro de Langenegger, Esq.
Rusconi, Valdez, Medina & Asociados Central-LAW
Nivel Boulevard Santa Elena y Calle Alegria
Colonia Santa Elena, Antiguo Cuscatlan, La Libertad
P.O. Box 0580
San Salvador, El Salvador
In the United States:
Jose F. Valdivia, III, Esq.
Nick Buford, Esq.
Hogan & Hartson LLP
875 Third Avenue
New York, NY 10022
Tel: +1-212-918-3000
Fax: +1-212-918-3100
In Panama
Inocencio E. Galindo, Jr., Esq.
Romulo A. Roux, Esq.
Raul Castro, Esq.
Ramon Varela, Esq.
Morgan & Morgan
Swiss Tower, 16th Floor
Urb. Marbella
P.O. Box 0832-00232
World Trade Center
Panama City, Panama
* * *
As reported on Feb. 17, 2006, Fitch affirmed the 'BBB-' rating
assigned to the AES El Salvador Trust issuance of 10-year,
US$300 million Political Risk Protected notes. Simultaneously,
Fitch has withdrawn the 'BB+' foreign and local currency ratings
of AES Clesa and its PRI outstanding notes.
These rating actions follow the final settlement of the AES El
Salvador Trust issuance and the full payment of AES Clesa's
outstanding notes. The rating of the trust reflects the
combined credit quality of AES El Salvador's four operating
companies, Compania de Alumbrado Electrico de San Salvador S.A.
de C.V., AES CLESA y Compania, S. en C. de C.V., Empresa
Electrica de Oriente, S.A. de C.V., and Distribuidora Electrica
de Usulutan, S.A. de C.V. A portion of the proceeds of the
trust's issuance have been used to repay existing debt at CAESS,
CLESA, and EEO. After repayment of the existing debt, remaining
proceeds are expected to be used to pay dividends to the
shareholders of CAESS and CLESA, and for general corporate
purposes. The payment of principal and interest on the new
notes will be fully and unconditionally guaranteed on a senior
unsecured, joint and several basis by CAESS, CLESA, EEO and
DEUSEM.
The new notes are rated above the 'BB+' foreign currency rating
of the company and country because they benefit from external
liquidity facilities totaling 12 months of interest payments. A
six-month debt service reserve account coupled with a six-month
letter of credit provided by Credit Suisse (CS; acting through
its Cayman Islands branch) help protect against a potential
currency inconvertibility/non-transfer event and allow for the
rating of the notes to breach the sovereign ceiling. The
facilities will remain available for the life of the notes as
long as certain criteria are met. While the stated maturity of
the notes is 2016, the notes can be extended by 12 months during
an event of transfer and convertibility restrictions.
=============
G R E N A D A
=============
GRENADA: S&P Affirms B- Long-term Sovereign Credit Ratings
----------------------------------------------------------
Standard & Poor's Ratings Services said Friday that it affirmed
its 'B-' long-term and 'C' short-term sovereign credit ratings
on Grenada. The outlook on the long-term ratings remains
stable.
According to Standard & Poor's credit analyst Olga Kalinina, the
ratings on Grenada are constrained by the government's large
debt, which, at an estimated 118% of GDP in 2006 -- 98% of GDP
on a net basis -- is one of the highest among the 110 sovereigns
rated by S&P. However, this heavy debt burden is partly
alleviated by the debt restructuring completed in November 2005,
which extended the maturity of roughly US$261 million -- or 44%
of total debt -- to 2025 and reduced the interest payment on
total government debt by more than half -- to about 2.5% of GDP
in 2006.
"Despite the lower interest payments due in upcoming years,
fiscal pressures remain high and fiscal flexibility is limited,"
said S&P's credit analyst Olga Kalinina. "Expenditure needs are
pressing, reflecting reconstruction activity in the wake of
2004's devastating Hurricane Ivan and new capital projects that
must be implemented to sustain Grenada's economic recovery," she
added.
S&P said that capital expenditure in 2005, at 16% of GDP, was
over 50% higher than the average spending rate over the last
five years.
At the same time, donor aid-which stood at 11% of GDP in 2005
and financed a large part of the fiscal gap-will be declining in
2006 and in the future.
"Grenada's external commercial creditors are concentrated in the
Caribbean, and they wield considerable influence in the
allocation of domestic credit and the financing of foreign
investment," Mrs. Kalinina explained.
"Standard & Poor's expects Grenada's government to resist a
second restructuring lest it damage its sources of future
external financing," she added.
Finally, rebuilding the economy, destroyed in 2004, remains a
priority, although progress in revitalizing the two main pillars
of Grenada's economy-agriculture and tourism-has been uneven.
While the tourism sector is on the rebound, with more hotels
reopening and under construction in anticipation of the 2007
World Cup Cricket tournament, the recovery of the agriculture
sector will be more difficult and prolonged. Real GDP growth is
expected to rise to 6% in 2006 from 1.5% in 2005 and a 3%
contraction in 2004.
Medium-term economic growth is projected at around 4%.
"The stable outlook assumes that Grenada's government will
remain committed to a fiscal effort that will ultimately lead to
the reduction of the country's heavy debt burden. This has to
be supported by ongoing economic restructuring, government
capital spending, and rising private investment-a scenario
crucially dependent upon political consensus," noted Mrs.
Kalinina. "Without this, the ongoing and expected positive
fiscal and economic adjustment could be hindered. In this case,
the government's creditworthiness will be negatively affected,"
she concluded.
===========
M E X I C O
===========
DESARROLLADORA HOMEX: US$255M Offering Receives Oversubscription
----------------------------------------------------------------
The Latin Lawyer reports that Desarrolladora Homex S.A.'s has
completed a US$255 million equity offering. The offering was
eleven time oversubscribed.
"The overwhelming success of the offering indicates the
continued international interest in Mexican equity securities
generally, where the returns have averaged over 45% per year for
the past three years," Michael Fitzgerald of Milbank, Tweed,
Hadley & McCloy LLP told the Latin Lawyer. "This investor
interest is particularly keen in the Mexican housing sector."
In the secondary offering, Homex's minority shareholders sold
common shares and ADRs in Mexico and internationally. The
selling shareholders included a venture capital fund controlled
by Chicago real estate investor Sam Zell, Equity International
Properties, which sold approximately one-third of its interest
in Homex. Carlos Romano and two other individuals, the former
owners of a housing company acquired by Homex, also sold their
entire stake, the Latin Lawyer says.
"The secondary offer was very interesting given that it was an
all secondary transaction, which is somewhat rare for Mexico. It
was oversubscribed at that level given the all-time high
interest in the Mexican housing industry, which has been on a
boom for the past few years," the Latin Lawyer quoted Patricio
Trad-Cepeda of Mijares, Angoitia, Cort‚s y Fuentes SC, who
advised Homex and the selling shareholders.
The offering was underwritten by Citigroup and co-managed by
Merrill Lynch and Morgan Stanley.
Desarrolladora Homex is represented by:
In-house counsel:
Javier Romero Castaneda, Esq.
In the United States:
Michael Fitzgerald, Esq.
Bruce Kayle, Esq.
Frank Vivero, Esq.
Scott Rozic, Esq.
Edgar Lewandowski, Esq.
Maria Hyde, Esq.
Milbank, Tweed, Hadley & McCloy LLP
1 Chase Manhattan Plaza
New York, NY 10005
Tel: 212-530-5000
Fax: 212-530-5219
In Mexico:
Jaime Cortes-Rocha, Esq.
Patricio Trad-Cepeda, Esq.
Mijares, Angoitia, Cortes y Fuentes SC
Montes Urales 505 3er Piso
Lomas de Chapultepec 11000
M‚xico DF
Tel: (+52-55) 5201-7400
Fax: (+52-55) 5520-1065
Citigroup is represented by:
In the United States:
Jorge Juantorena, Esq.
William Gorin, Esq.
Justo Chamas, Esq.
Ekaterina Pischalnikova, Esq.
Ximena Miaja, Esq.
Cleary Gottlieb Steen & Hamilton LLP
One Liberty Plaza
New York, NY 10006
Tel: 1 212 225 2000
Fax: 1 212 225 3999
In Mexico:
Luis A. Nicolau, Esq.
Ritch Mueller SC
Torre del Bosque Boulelarvd M. Avila Camacho No. 24
piso 20 Colonia Lomas de Chapultepec C.P.
1000 Mexico
Tel: 52 55 91 78 70 00
Fax: 52 55 91 78 70 95
Headquartered in Sinaloa, Mexico, Desarrolladora Homex, S.A. de
C.V. -- http://www.homex.com.mx-- is a vertically integrated
homebuilder focused on the affordable and middle-income housing
segments. Homex is one of the largest homebuilders in Mexico,
with operations in 25 cities in 17 states across the country.
During 2004, Homex sold 21,053 houses and reported revenues of
US$476 million.
* * *
As previously reported on Sep. 19, 2005, Standard & Poor's
Ratings Services assigned its 'BB-' corporate credit rating to
Desarrolladora Homex S.A. de C.V. (Homex). At the same time,
Standard & Poor's assigned its 'BB-' rating to Homex's $200
million notes due 2015. S&P said the outlook was stable.
Proceeds of the proposed bond will be used to repay indebtedness
of about $165 million and the remainder for working capital
purposes.
"The ratings assigned to Homex and its proposed issue are
constrained by the company's aggressive growth plans, our
expectation that the aforementioned plans could demand
additional indebtedness, and high working capital requirements
that have not allowed free operating cash flow generation up to
now," said Standard & Poor's credit analyst Raul Marquez.
"Homex's ratings also reflect the concentration of mortgage
origination in the public housing agencies and increased
competition, which are inherent risk factors to the Mexican
homebuilding industry."
Positive factors supporting the rating include Homex's position
as one of the leading homebuilders in Mexico, an improved
geographical diversification, a manageable maturity schedule
following the refinancing, and the favorable trend in Homex's
financial performance over the past couple of years. The rating
assigned to the proposed notes also considers the guarantee of
its restricted subsidiaries avoiding structural subordination
between parent-subsidiary creditors. Furthermore, with the
payment of all guaranteed debt the company is eliminating
subordination between unsecured and secured debt. However future
issuance of secured debt could lead to structural subordination.
GRUPO POSADAS: S&P Assigns BB- Corporate Credit Rating
------------------------------------------------------
Standard & Poor's Ratings Services assigned a 'BB-' corporate
credit rating to Grupo Posadas S.A. De C.V. The outlook is
stable.
S&P also affirmed the 'BB-' foreign currency rating on the
company's senior unsecured debt.
Major Rating Factors
Strengths:
-- Adequate liquidity,
-- Position as the largest hotel operator in Mexico,
-- Diversified hotel portfolio with well-recognized brands,
-- Development of competitive advantage through technology,
-- Experienced management team.
Weaknesses:
-- Somewhat high financial leverage,
-- Cyclicality of the hotel industry,
-- Geographic concentration within Mexico,
-- Higher business risk.
Rationale
On Feb. 3, 2006, S&P affirmed its 'BB-' long-term corporate
credit rating and its 'BB-' senior unsecured debt rating on
Grupo Posadas S.A. de C.V. At the same time, S&P affirmed its
'mxA-' national scale rating on the company. All ratings were
removed from CreditWatch where they were placed with negative
implications on Dec. 1, 2005, following the announcement that
Posadas' bid for the acquisition of Grupo Mexicana de Aviacion
S.A. de C.V. (Mexicana) was successful. The outlook is stable.
The rating affirmation is based on Posadas' ability to offset
the impact on its financial profile, since the company's total
investment for the acquisition will eventually be around 30%,
out of a total of $165.5 million acquisition cost, because an
important part of the balance was obtained by adding several
equity investors as partners in Mexicana, Mexico's second-
largest airline group.
These investors are not related to Grupo Posadas nor to its main
stockholder, but they have interest in the hotel, tourism,
airport, and financial industries, so we believe that the
relation between Posadas and Mexicana will be at commercial
arms'-length terms.
Posadas is also considering placing a 20% share of the capital
stock of the airline in the Mexican Stock Exchange, Bolsa
Mexicana de Valores, during the first half of 2006; however, if
this placement does not take place, Posadas' financial risk
profile would not change if a similar operation is pursued and
accomplished instead.
According to Posadas and its financial auditors, it will not
need to consolidate Mexicana into its books since not even the
49.7% of Mexicana's shares that it currently owns gives it
control of the airline; thus, its position in the airline will
be reflected as an investment in an associated company in its
financial statements.
The 'BB-' rating on Posadas reflects its somewhat high financial
leverage, the cyclicality of the hotel industry, geographic
concentration within Mexico, challenges linked to its ability to
successfully realize meaningful synergies, and a higher business
risk, as Posadas is investing in areas other than its
traditional hotel sector.
These factors are offset by the company's adequate liquidity,
its position as the largest hotel operator in Mexico, a
diversified hotel portfolio with well-recognized brands, the
development of competitive advantages through technology, and an
experienced management team.
As of the end of 2005, Posadas operated 92 hotels with a total
of 17,268 rooms. The company's operations are concentrated in
Mexico, where it runs 76 hotels -- 83% of total rooms. It also
operates 10 hotels in Brazil, five in the US, and one in
Argentina. Posadas also has 26 hotels under development to be
opened within the next three years. Nevertheless, Posadas will
only contribute 5% -- approximately $15 million -- of the total
required investment for these new hotels, as most of them will
be operated by Posadas under management or lease agreements.
Nevertheless, its owned hotels still contribute the highest
portion of the company's revenues -- 50% of the total revenues
during 2005 -- followed by leased hotels (17%), management
hotels (19%), and Vacation Club and others (14%).
During the last quarter of 2005, the revenue per available room
decreased 6% compared with 2004 due to the impact of hurricane
Wilma in Cozumel and Cancun, which caused a temporary shutdown
of operations of the five hotels that the company has in that
area. As of Sept. 30, 2005, the five hotels represented 12% of
the consolidated revenues and 9% of the EBITDA. Four of them
are already reopened, and the remaining hotel -- FA Grand Aqua -
- is scheduled to open for business again during the first half
of 2006. Thanks to Posadas' insurance policies, the company
only had to pay deductibles and coinsurance of approximately
Mexican pesos 60 million -- approximately $5 million -- or 1% of
its total costs.
As of December 2005, the total debt of the company was $371
million -- without considering approximately $35 million that
will be repaid upon other investors joining as Mexicana's
stockholders; representing a total debt-to-capitalization ratio
of 43% and a debt increase of 6% compared with the year before.
EBITDA interest coverage was 3.3x at the end of 2005, compared
to 3.3x and 3.2x in 2004 and 2003, respectively. The EBITDA
margin, meanwhile, remained at 24% during the past four years.
S&P expects a similar trend in the margins as a result of the
company's potential to operate hotels with minimum capital
investment and the efficiencies obtained by the technology
platforms.
Liquidity
As of Dec. 31, 2005, Posadas had about $36 million in cash,
funds from operations amounted to $55 million for the whole
year, and it had approximately $48 million available in
uncommitted credit lines -- as is customary in most countries in
Latin America. In turn, Posadas' short-term financial
obligations amounted to $18 million or 5% of its total debt.
Posadas' capital expenditures were mainly driven by maintenance
of furniture, fixtures, and equipment of existing properties --
around 60% of the $25 million total capital expenditures -- with
the balance destined basically to fund the expansion of the
Vacation Club business. S&P expects the company to continue to
expand its business through investment capital provided by third
parties.
Outlook
The stable outlook reflects our expectation that Posadas will
continue to improve its operating performance gradually, and
that it will be able to generate stable cash flows even under
adverse economic conditions. The rating could be pressured
downward if Mexicana demands more resources from Posadas, and if
further acquisitions other than its core business take place.
* JPMorgan Recommends Buy on Brazil, Mexico Currencies
------------------------------------------------------
According to JPMorgan Chase & Co., the Brazilian real and
Mexican peso will extend their gains against the dollar as
strong economic growth and high interest rates attract buyers.
Bloomberg News quoted JPMorgan Latin America strategist Drausio
Giacomelli as saying that investors have been buying the real
and peso and financing the bets in lower-yielding currencies in
what is known as a carry trade.
"The carry is still attractive," Mr. Giacomelli told Bloomberg
in a telephone interview. "It's not as much from the potential
for nominal appreciation but from the carry it offers."
JPMorgan cites lower risk and high interest rates as added
attraction to Brazil and Mexico.
Latin America's currencies may also be attracting interests as
volatility in currencies from developed countries has declined,
Bloomberg relates.
According to Bloomberg, the real was the world's top-performing
currency last year, rising 13.7% versus the dollar. The Mexican
peso gained 4.8% in 2005. Mexico's central bank recently
reduced the benchmark lending rate to a 17- month low of 7.5%.
* * *
Fitch Ratings assigns these ratings on Brazil:
Rating Rating Date
------ -----------
Country Ceiling BB- Nov. 18, 2004
Long Term IDR BB- Dec. 14, 2005
Short Term IDR B Dec. 14, 2005
Local Currency
Long Term Issuer
Default Rating BB- Dec. 14, 2005
* MEXICO: Strike Incited by Grupo Mexico Mining Accident Ends
-------------------------------------------------------------
The nationwide strike of steelworkers in Mexico has temporarily
ended to give the government time to react to the workers'
demands. The strike emerged from what started as a strike by
Grupo Mexico SA workers who were demanding better safety after
65 miners died in a coal mine accident on Feb. 19.
Napoleon Gomez said in an interview on Mexican radio station
Radio Formula, that the strikers demand among other things,
better safety protocol in their workplace.
Altos Hornos de Mexico SA also said that its employees have
already returned to work.
Bloomberg News states that the government and companies
including Grupo Mexico, the world's No. 4 copper producer,
Industrias Penoles SA, Mexico's No. 1 silver producer, and Altos
Hornos de Mexico SA, Mexico's largest steelmaker, had declared
the strike illegal and said the workers could be fired should
they continue the walkout.
Monclova-based Altos Hornos, known as Ahmsa, stopped producing
10,000 metric tons of raw steel and 30,000 tons of coal a day
before workers returned to work, spokesman Francisco Orduna told
Bloomberg. The strike cost the company $10 million a day, he
said.
=======
P E R U
=======
BCP: Recommends Sale of Minsur Shares at US$2.60 per Share
----------------------------------------------------------
Banco de Credito, Peru's largest bank, recommends that investors
sell shares in the country's tin company, Minsur, Business News
Americas reports.
The bank's analysts set a target price of 4.78 soles (US$2.60)
for Minsur shares, representing a downside of 14.6%.
BCP stressed in its report that Minsur's share price was over-
valued partly due to speculation about its Pucamarca gold
project, where the tin miner is conducting a feasibility study.
"It is not clear whether the project will be implemented because
the company has not yet provided further information on the
subject," said BCP in its report.
Minsur reported an 18.25% decrease in net profits in 2005 to
US$142 million, mainly due to lower tin prices on the
international markets that led the company to reduce production
levels, according to BCP's report.
But on the positive side, BCP noted in its report that Minsur's
policy to reduce costs and improve operations had born fruit
with Ebitda margins moving from 64.77% in 2004 to 68.15% in
2005.
Minsur operates the San Rafael mine in southern Peru and the
Funsur smelter-refinery in Pisco, 220 km south of capital Lima.
All its sales are tin metal and most are exports.
* * *
On Sept. 5, 2005, Standard & Poor's Ratings Services raised its
counterparty credit rating on Banco de Credito del Peru to 'BB'
from 'BB-'. The upgrade reflects the opinion that, given the
improvement in Peru's operating environment as well as the
bank's solid financial profile and foremost position in the
country's financial system, the ratings on BCP should be
equalized with the foreign currency ratings on the Republic of
Peru. Analogically, the outlook on BCP was changed to positive
from stable to follow the outlook on the Peruvian sovereign.
The short-term rating was affirmed at 'B'.
=====================
P U E R T O R I C O
=====================
AOL LATIN: Court Extends Cicerone's Employment
----------------------------------------------
The U.S. Bankruptcy Court for the District of Delaware
authorized America Online Latin America Inc. to extend its
employment of Cicerone Capital LLC as its financial advisors,
nunc pro tunc to Dec. 1, 2005.
As reported in the Troubled Company Reporter on Feb. 23, 2006,
the Debtor asked to extend its retention of Cicerone Capital
pursuant to the terms of a Second Extension Letter. The
Bankruptcy Court had previously allowed Cicerone Capital's
employment as the Debtor's financial advisors, nunc pro tunc to
June 24, 2005.
Cicerone Capital's services include:
a) assisting the Debtors in identifying the target,
sectors, region and quantity of business entities and
assets in Latin America with respect to a potential
sale of the Debtors, the Non-Debtor Foreign
Subsidiaries or their respective assets;
b) advising and assisting the Debtors in analyzing and
evaluating the business, operations, properties,
financial condition, major liabilities, prospects and
potential synergies of the Debtors and any potential
purchaser;
c) participating in discussions with the Company's
directors shareholders, suppliers and investment
bankers and conduct management interviews, site visits,
data analysis and due diligence of the Company and any
potential purchaser;
d) reviewing the documents related to any potential sale
of the Debtors, the Non-Debtor Foreign Subsidiaries or
their respective assets, and prepare a valuation
analysis of the Debtors and any potential purchaser in
connection with that potential asset sale; and
e) providing all other financial advisory services to the
Debtors in connection with their chapter 11 cases.
Zain A. Manekia, a managing principal at Cicerone Capital,
disclosed that under the terms of the Second Letter Agreement,
the Firm will be paid:
1) a $25,000 monthly advisory fee; and
2) a success fee in connection with a marketing operations
coordination agreement into between AOL Brasil, Ltda., a
wholly-owned subsidiary of the Debtor and Terra Networks
Brasil S.A.
Headquartered in Fort Lauderdale, Florida, America Online Latin
America, Inc. -- http://www.aola.com/-- offers AOL-branded
Internet service in Argentina, Brazil, Mexico, and Puerto Rico,
as well as localized content and online shopping over its
proprietary network. Principal shareholders in AOLA are
Cisneros Group, one of Latin America's largest media firms,
Brazil's Banco Itau, and Time Warner, through America Online.
The Company and its debtor-affiliates filed for Chapter 11
protection on June 24, 2005 (Bankr. D. Del. Case No. 05-11778).
Pauline K. Morgan, Esq., and Edmon L. Morton, Esq., at Young
Conaway Stargatt & Taylor, LLP and Douglas P. Bartner, Esq., at
Shearman & Sterling LLP represent the Debtors in their
restructuring efforts. When the Debtors filed for protection
from their creditors, they listed total assets of $28,500,000
and total debts of $181,774,000.
=============
U R U G U A Y
=============
* URUGUAY: Brazilian Company to Supply 700MW of Electric Power
--------------------------------------------------------------
Tradener Ltda. won a tender in late February to supply up to
700MW of electric power to Uruguay in March and from September-
December 2006.
The Uruguayan government called a tender in the Brazilian city
of Sao Paulo to acquire 700MW of electric power which will be
transported through the Argentine system. Since 2004 Brazil has
supplied energy four times to Uruguay. This is the second time
using the Argentine system, the El Pais reports.
Uruguay needs the external supply because of the low generation
capacity of Salto Grande due to the lack of rains, the need to
preserve the water of Rincon del Bonete reservoir and the
fluctuation of supply from Argentina.
Argentina supplies gas to Uruguay but it's facing difficulties
to export energy due to its increased domestic demand.
Under the agreement, deliveries to Uruguay will be made in
March, September, October, November and December this year.
* * *
Fitch Ratings assigns these ratings on Uruguay:
Rating Rating Date
------ -----------
Country Ceiling BB- Mar. 7, 2005
Long Term IDR B+ Dec. 14, 2005
Short Term IDR B Dec. 14, 2005
Local Currency
Long Term Issuer
Default Rating BB- Mar. 7, 2005
* URUGUAY: Seeks Support from Brazil to Build Coal-Fired Plant
--------------------------------------------------------------
Uruguay's government is seeking support from Brazil for the
construction of a coal-fired thermoelectric generation project
to supply power to the Uruguayan market from 2010, the aide to
the president of the Brazilian association of coal mining
companies Inacio Resende told Business News Americas.
Mr. Resende related to Business News that the talks are in
initial stages but could lead to the construction of a 200-300MW
plant in the state of Rio Grande do Sul, some 40 kilometers from
the Uruguayan border. The plant is expected to supply power to
the Uruguayan market through a transmission line linking the two
countries.
"Once Brazil's government gives the green light for the project,
it would be feasible to have it ready in 3-4 years," Mr. Resende
told Business News.
Uruguay has an installed capacity of 2,000 to 3,000 megawatts
where 30% of which comes from thermoelectric generators that is
powered by Argentine gas. Uruguay has increasingly turned to
Brazil for power supply in the past two years because of gas
supply interruptions from Argentina, Business News relates.
The projects two main problems will be the difference in
transmission cycles, which in Brazil is 60Hz and Uruguay is
50Hz, and the small capacity of the existing transmission line
between the two countries. A conversion station and expansion
of the line could be included in the project, Business News
explains.
Brazilian power trading company Tradener won a tender in late
February to supply up to 700MW to Uruguay in March and from
September-December 2006, Business News reports.
Once the project has received approval, coal mining industry is
expected to boom in southern Brazil, Business News says. Coal
mining company Copelmi is prepared to invest over US$30 million
to expand production to supply fuel to the new plant when it
starts operations in 2011.
* * *
Fitch Ratings assigns these ratings on Uruguay:
Rating Rating Date
------ -----------
Country Ceiling BB- Mar. 7, 2005
Long Term IDR B+ Dec. 14, 2005
Short Term IDR B Dec. 14, 2005
Local Currency
Long Term Issuer
Default Rating BB- Mar. 7, 2005
=================
V E N E Z U E L A
=================
EDC: Lower Financing, Depreciation Costs Boost Income
-----------------------------------------------------
CA Electricidad de Caracas, the Venezuelan subsidiary of AES
Corp., reported fourth-quarter profit rose 3.2% on lower
depreciation and financing costs, Bloomberg reports.
Net income in the quarter climbed to 75.4 billion bolivars
($35.1 million), or 23.89 bolivars a share, from 73 billion
bolivars, or 23.15 bolivars a share, a year earlier, the
Caracas-based company disclosed in a statement on its Web site.
Electricidad de Caracas, which was hindered in its ability
to raise revenue because of government rate freezes, relied on
lower financing and depreciation costs to boost income.
Depreciation expenses fell 3.5% in the quarter, and total
company debt declined to $399 million as of Dec. 31, 2005, from
$780 million at the end of 2004.
"They are raising income by reducing costs," said Miguel
Octavio, executive director of brokerage BBO Servicios in
Caracas. "Given the rate freeze, they're doing a reasonably
good job."
Fourth-quarter revenue fell 4.7% to 357.2 billion bolivars from
374.6 billion bolivars. Annual income was 168.2 billion
bolivars, compared with 13.2 billion bolivars in 2004.
Venezuelans use more power per person than any other Latin
American country . Venezuelan Deputy Energy Minister Nervis
Villalobos said last month that the government doesn't plan to
raise rates this year, Bloomberg states.
AES, an Arlington, Virginia-based U.S. power producer with
businesses in 27 countries, acquired Electricidad de Caracas for
$1.66 billion in a hostile takeover in June 2000. The rate
freeze went into effect in 2003, when the country adopted
foreign-currency restrictions, Bloomberg relates.
Electricidad de Caracas shares rose 10 bolivars, or 2.1%, to 481
bolivars. The company's shares have risen 51% this year,
according to Bloomberg.
EDC is a vertically integrated utility in Venezuela, operating
in electricity distribution, transmission, and generation in the
capital city of Caracas and its metropolitan area. It is the
largest private electric utility in the country and is owned by
US-based AES Corp. (B+/Positive/--). S&P does not expect the
support from the parent company to be a meaningful credit factor
for EDC.
* * *
On Feb 9, 2006, Standard & Poor's Ratings Services affirmed its
'B' long-term corporate credit rating on C.A. La Electricidad de
Caracas aka EDC and its 'B' rating on Electricidad de Caracas
Finance B.V.'s $260 million senior unsecured notes. S&P said
the outlook is stable.
On Feb. 3, 2006, S&P raised the long-term local and foreign
currency sovereign credit ratings on the Bolivarian Republic of
Venezuela to 'BB-' from 'B+'. The decision to raise the ratings
on Venezuela was supported by the continued sharp improvements
in Venezuela's external indicators, which are attributable to a
large current account surplus, a high level of international
reserves, and lower external debt in addition to buoyant
economic growth and the potential buyback of external debt.
* VENEZUELA: Paying US$800 Million in Loans Ahead of Schedule
-------------------------------------------------------------
The Venezuelan government will be paying back about US$800
million in loans to the World Bank and commercial banks ahead of
schedule this months, Bloomberg News reports. The country's
taking advantage of high oil exports to cut its foreign currency
debt.
Venezuela has previously announced a debt-buyback of US$3.9
billion of outstanding discount and par brady bonds. The
buyback and the loan repayment will help the country save about
US$600 million in annual interest payments, Finance Minister
Nelson Merentes was quoted by Bloomberg as saying during a news
conference.
Minister Merentes told reporters that his country aims to lower
international debt to 18.3% by the end of 2007 from 23.4% at the
end of 2005.
* * *
Venezuela's foreign currency long-term debt is rated B2 by
Moody's, B+ by Standard & Poor's, and BB- by Fitch.
* * *
On Nov. 29, 2005, Fitch Ratings assigned expected 'BB-' ratings
to the pending issues of Venezuelan government bonds maturing
Feb. 26, 2016, and Dec. 9, 2020. The 2016 bond has a 5.75%
fixed coupon and the 2020 bond has a 6% fixed coupon. The bonds
are being marketed in Venezuela to be purchased in local
currency at the official exchange rate but under New York law,
with all coupon and principal payments in U.S. dollars.
Venezuela's sovereign ratings are supported by superior
international liquidity and low external financing
requirements relative to similarly rated sovereigns. The
ratings are constrained by vulnerability to external shocks
because of oil dependency; diminished capacity of the private
sector to absorb shocks because of heavy government
intervention in the productive sector; recent spending
increases that reduce fiscal flexibility; and concerns about
the rule of law and potential political instability. Fitch said
the Rating Outlook is Stable.
* VENEZUELA: Realizes US$75 Mil. from Sale of Argentine Bonds
-------------------------------------------------------------
The El Universal reports that Venezuela has sold US$1.1 billion
in Argentine debt bonds, and made profits amounting to US$75
million.
According to Finance Minister Nelson Merentes, Venezuela
purchased US$2.5 billion in Argentine debt bonds and has sold
44% to 25 Venezuelan banks, El Universal reports.
"This is a significant profit... If this (sort of transactions)
spreads, Venezuela could get profits exceeding US$400 million or
US$500 million a year," Minister Merentes told El Universal.
* * *
Venezuela's foreign currency long-term debt is rated B2 by
Moody's, B+ by Standard & Poor's, and BB- by Fitch.
* * *
On Nov. 29, 2005, Fitch Ratings assigned expected 'BB-' ratings
to the pending issues of Venezuelan government bonds maturing
Feb. 26, 2016, and Dec. 9, 2020. The 2016 bond has a 5.75%
fixed coupon and the 2020 bond has a 6% fixed coupon. The bonds
are being marketed in Venezuela to be purchased in local
currency at the official exchange rate but under New York law,
with all coupon and principal payments in U.S. dollars.
Venezuela's sovereign ratings are supported by superior
international liquidity and low external financing
requirements relative to similarly rated sovereigns. The
ratings are constrained by vulnerability to external shocks
because of oil dependency; diminished capacity of the private
sector to absorb shocks because of heavy government
intervention in the productive sector; recent spending
increases that reduce fiscal flexibility; and concerns about
the rule of law and potential political instability. Fitch said
the Rating Outlook is Stable.
* VENEZUELA: S&P Minds Gap as Sovereign and Country Risk Diverge
----------------------------------------------------------------
Pervasive country risk factors endemic to The Bolivarian
Republic of Venezuela -- BB-/Stable/B sovereign credit ratings
-- heighten operating and financial risk to the country's
business community, even as the credit quality of the sovereign
itself has improved.
The ratings on some government-owned entities -- such as
Petroleos de Venezuela S.A. aka PDVSA 'B+'; all corporate
ratings herein are long-term issuer credit ratings -- could
benefit from the higher credit quality of their sole
shareholder.
However, the likelihood of any upgrades is tempered by
governance risk and by the potential for the entities to be
burdened by policy objectives of the central government. In
fact, due to ongoing concerns regarding PDVSA's ability to
finance both its capital expenditure and growth initiatives,
PDVSA was placed on CreditWatch with developing implications on
Feb. 8, 2005. The CreditWatch also reflects the absence of
timely financial and operating information available from PDVSA,
particularly its audited financial statements.
S&P expects to resolve PDVSA's CreditWatch listing in over the
next several months following a full review of the issuer's
operating and financial prospects.
On Feb. 3, 2005, S&P raised its long-term local and foreign
currency sovereign credit ratings on Venezuela to 'BB-' from
'B+'. The sovereign ratings upgrade was supported by recent,
significant improvements in the government's net debt level and
external indicators. Thanks, in large part, to high oil prices,
Venezuela's fiscal and external balance sheets strengthened
markedly in 2005. The improvement was so significant that it
overshadowed the continued high level of political risk and the
weak fiscal and monetary policies that continue to be key
ratings constraints on the sovereign.
At the same time, further measures taken in 2005 limited the
scope of political and policy predictability. One example is
the creation of Fondo de Desarrollo Nacional aka FONDEN, a fund
created with international reserves taken directly from the
central bank. There is little transparency in how the funds are
invested or of the nature of fund expenditure
Unpredictable policy initiatives and regulatory actions depress
domestic and foreign direct investment aka FDI, which is needed
to support stronger and more diversified growth. Although the
ratio of investment to GDP has increased to 21% of GDP in 2005
from a low of 16% in 2003, it remains well below the 27%+ level
seen before the 2002-2003 national strike. Much of the national
investment is publicly driven, while anecdotal evidence suggests
that much of the private investment is speculative and short
term in nature.
Country Risk Remains High
The main elements of Venezuelan country risk include the
arbitrary and uncertain implementation of legislation and
regulations, as well as a centralized and personality-driven
political regime with increasing discretion over the country's
institutions and resource allocation. Other factors that impact
the country's business environment include the lack of an
independent judiciary, corruption, a concentrated economic
structure that is ever-more dependent upon the oil and gas
sector, and a weak domestic banking system.
Additionally, Venezuela has enormous social needs. Despite the
high economic growth over the past two years, an estimated 40%
of the population still lives in poverty, over 10% is
unemployed, and over 30% is underemployed.
The recently published Heritage Foundation 2006 Index of
Economic Freedom indicates that the business environment has
deteriorated sharply under the administration of President Hugo
Chavez. In 1999, the year he became president, Venezuela
ranked 99 out of 164 countries. In 2006, the country ranked
153-the lowest in Latin America, and even behind Cuba (150).
Some examples of Venezuela's country risk include the fact that
the government has threatened the outright expropriation of land
in some cases, unilateral changes in tax laws and royalties in
the oil and gas sector, and the demand for back taxes.
Government interference in the banking sector has also increased
with regard to setting interest rates and directed borrowing to
government-favored sectors.
Other forms of government interference include the politically
motivated application of foreign exchange controls, in place
since February 2003, and domestic price controls, which severely
limit company's pricing power.
Sovereign Intervention Poses Risk to Private Companies
There has been a growing concentration of executive power in
Venezuela, with supporters of President Chavez gaining control
of most of the country's major institutions-including the
judiciary, legislature, armed forces, and central bank. In the
gradual shift toward a more authoritarian bureaucracy, decisions
and actions affecting businesses have become less predictable
and resulted in increased bureaucratic interference. One key
example is the discretional application of foreign exchange
controls -- through the Comision de Administracion de Divisas
aka CADIVI.
The increasing authoritarianism of Venezuela's government is
true in many sectors of the economy, including the key energy
sector and others such as the consumer goods and media sectors.
Business-to-government relations have become more unpredictable
and difficult under the Chavez Administration due to the
combination of the increased concentration of executive power
and business community's historical animosity toward the
government.
Tensions between the government and the business community
culminated in a two-month strike and business lockout that began
in December 2002, shut down the oil industry, threw the economy
into a tailspin, and led to a sharp recession with a fall in GDP
of nearly 8%.
The business community remains unhappy with the negative impact
of both direct and indirect government policies, creating a poor
investment climate.
A weak court system, burdensome bureaucracies, and
nontransparent regulations result in poor protection of
ownership rights and in significant tax and regulatory risk.
The courts lack independence and are often influenced by
politicians. Regulations are often unpredictable and
politicized. Furthermore, corruption and political pressure on
Venezuelan courts and regulatory bodies remain a significant
risk.
The weakness of public institutions hampers development of small
and midsize enterprises in the nonresource sectors and impedes
economic diversification. The negative implications for larger
entities include politicized regulations, risk of back taxes, or
inconsistent application of the tax law. These factors hinder
disclosure and transparency.
Back Taxes and Changing Rules of the Game in Oil and Gas Sector
Venezuela's economy remains heavily dependent upon natural
resources, primarily oil and gas -- 80% of exports and 20% of
GDP in 2005. Despite recent strong growth in domestically
oriented industries, meaningful and sustainable diversification
requires a stronger institutional framework.
The key risk for oil and gas companies is that the high
interdependence between the sector and the government's
finances. For example, the government claims that numerous oil
companies owe back taxes; it also unilaterally changed the
royalty rate for oil companies operating on the country's extra-
heavy oil projects in the Orinoco belt to 16.7% from 1.0%.
Banks Have Become More Vulnerable and Profits Declining
The financial sector in Venezuela was subjected to a policy of
steadily intensifying control in 2005, not only with regard to
the allocation of credit but also in terms of the interest rates
banks may charge and must pay for their lending and deposit
activities. A larger government involvement in the sector,
monetary expansion, lower interest rate spreads, and lower
yields on government bonds are making banks less profitable and
more vulnerable to political decisions.
As noted, banks now operate under regulated interest rates and
commissions. They are also more dependent upon government
deposits, and their investments in government bonds continue to
grow. Investment in securities -- largely government bonds --
now amount to over 35% of total assets.
The yield on government bonds has been falling consistently, and
banks are therefore becoming less profitable.
Furthermore, the government created the Treasury Bank, a public
sector bank that will compete directly with private sector
domestic banks.
Direct Government Competition with Private Sector and Price
Controls
Direct government competition through state-owned Mercal -- a
grocery store chain -- has affected the profits of supermarkets
in the country.
The government has introduced numerous price controls on basic
foods and medicines, and gasoline remains heavily subsidized.
The list of regulated basic consumer goods is 12% of the CPI and
includes rice, oatmeal, wheat flour, pasta, wheat bread, beef,
turkey, pork, beans, sugar, coffee, and salt.
Public Sector Entities Facing Conflicting Pressures: The Case of
PDVSA
PDVSA has increased its expenditure on social projects markedly,
transferring money not only to a fund called the Fondo para el
Desarrollo Economico y Social, but also spending directly on so-
called missions or government community projects in areas such
as education and healthcare. Total expenditure amounted to over
US$4 billion in 2005, and is expected to reach a similar level
in 2006. This expenditure is directly at odds with PDVSA's own
investment strategy that would entail capital investments of
over US$8 billion per annum over the next five years.
The ratings on PDVSA reflected the foreign currency rating on
Venezuela, its lone shareholder. The ratings on PDVSA and
Venezuela will likely remain equalized because of their ties of
ownership and economic interests, and due to ongoing concerns
regarding PDVSA's ability to finance both sustaining capital
expenditure and growth initiatives.
However, the continued absence of timely information needed to
maintain adequate surveillance could lead to a downward outlook
revision or the withdrawal of the issuer's corporate credit
rating. Although less likely, a distinction between the ratings
of the issuer and sovereign going forward -- as is the case with
other state oil monopolies in the region -- is also possible,
and could lead to an affirmation or downgrade.
Country Risk Dominates, as Rating on EDC Indicates
On Feb. 8, 2006, S&P affirmed its 'B' rating on C.A. La
Electricidad de Caracas aka EDC, and its 'B' rating on
Electricidad de Caracas Finance B.V. EDC is a vertically
integrated Venezuelan utility whose operations include
electricity distribution, transmission, and generation in the
capital city of Caracas and its metropolitan area.
EDC is the largest private electric utility in the country, and
is owned by US-based AES Corp. (B+). S&P does not expect
support from the parent company to be a meaningful credit factor
for EDC.
The key elements of Venezuelan country risk that could impact
EDC include high political risk, politically motivated
application of foreign exchange controls -- through CADIVI --
domestic price controls, and currency devaluation risk.
Combined with Venezuela's huge government bureaucracies, these
key elements place heavy administrative burdens on business.
Additionally, the ratings on EDC and its related entities are
constrained by a still-incomplete and untested regulatory regime
with historical resistance to rate adjustments, and by EDC's
reliance on a single natural gas and fuel oil supplier --
government-owned PDVSA -- to meet the fuel needs of its
generation assets. These factors are partially mitigated by
EDC's strong operations in its service area -- with a customer
mix basically composed of residential and commercial clients,
together representing about 70% of sales; high coverage ratios
and low leverage for its rating category, and the fact that it
is the most efficient operator among Venezuela's electric
utilities. EDC has not faced any serious delay in accessing
resources since CADIVI's inception, as it has effectively
managed the formal procedures necessary to access foreign
currency.
The 46.8% funds-from-operations-to-total debt ratio for the 12
months ended September 2005 represents considerable improvement
from the levels reported by the company in recent years,
reflecting EDC's efforts in reducing costs, and decreasing
energy losses, and lowering debt levels.
EDC has also been able to maintain its profit margin at adequate
levels, averaging above 46% over the last five years and about
50% for the 12 months ended September 2005. This is down from
56% for the same period in 2004, reflecting higher operating
expenses and the lag in tariff adjustments with respect to the
country's inflation.
The stable outlook reflects the expectation that EDC will
continue to avoid delays in CADIVI's formal procedures to have
timely access to foreign currency and perform scheduled debt
repayments. The ratings could be pressured downward if the
company's financial profile deteriorates considerably and if its
current business strength suffers from potential changes in
Venezuela's economic and political situation. In contrast, an
upgrade would require a sharp improvement in the political and
regulatory environment.
In the End, Country Risk Dominates Outlook for Business Sector
The risk to ownership rights is perceived as high by investors,
especially foreign investors. This affects investments,
including those in the key resource sectors, exactly when the
growth potential provided by previously underutilized capacities
has been already largely utilized. This causes a slowdown in
growth and investments, somewhat masked at present by high oil
prices. However, S&P believes that Venezuela will be able to
sustain still-healthy annual economic growth rates of about 4%
over the medium term, absent any further deterioration in the
political climate.
In the end, the mid- to long-term outlook for Venezuela's
private sector-and, ultimately, the economic underpinnings of
the country-will be determined by indirect sovereign factors.
This includes the country's progress -- or lack thereof -- in
establishing robust and independent legal and regulatory
institutions, developing healthy corporate governance practices,
making the relationships between the government and the
corporate sector more predictable, and reducing the bureaucratic
burden on business. These indirect factors will be more
important for the corporate sector in Venezuela than the
sovereign's fiscal performance, and no less significant for the
country's overall macroeconomic environment.
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