T R O U B L E D C O M P A N Y R E P O R T E R L A T I N A M E R I C A Thursday, January 24, 2008, Vol. 8, Issue 17 Headlines A R G E N T I N A SECUPYME XXXI: Moody's Puts B1 Global Currency Rating NORTHWEST AIRLINES: Commences Merger Talks with Delta Air & UAL TELEFONICA DE ARGENTINA: Raising Rates to 14% Beginning March 15 TELECOM PERSONAL: Increasing Rates by 8% in Some Plans * ARGENTINA: Gets US$600-Million Loan for Investment Projects B A H A M A S BANK OF BARODA: United Forum of Bank Unions Calls 1-Day Strike B E R M U D A MGS MANAGED: Proofs of Claim Filing Deadline Is Jan. 30 SEA CONTAINERS: Wants SC Iberia & YMCL Guarantees Approved B O L I V I A * BOLIVIA: Atlas Must Cede Karachipampa Guarantee by Feb. 20 B R A Z I L ASPEN TECHNOLOGY: Deloitte Declines Re-Appointment as Accountant BANCO BRADESCO: Insurance Group Buys Mediservice for BRL84.9MM COMPANHIA SIDERURGICA: Okays Three-for-One Stock Split EMPRESA ENERGETICA: Moody's Confirms Ba2 Senior Unsec. Rating FURNAS CENTRAIS: Court Vetoes Subcontracted Workers Replacement JAPAN AIRLINES: Extends Flyer Programs with China Air & Mexicana JAPAN AIRLINES: To Adjust Domestic Fares in FY08 Due to Oil Hike KRATON POLYMERS: Hires Steve Temblay as VP & Chief Fin'l Officer PARANA BANCO: 4th Quarter 2007 Net Profits Increase to BRL36.1MM PROPEX INC: Wants Access to US$60 Million DIP Financing PROPEX INC: Wants Court Nod to Use BNP Paribas' Cash Collateral PROPEX INC: Wants to Employ King & Spalding as Lead Counsel PROPEX INC: Bankruptcy Filing Cues Moody's to Cut CFR to Ca PROPEX INC: Bankruptcy Filing Cues S&P To Cut Corp. Rating to D SANYO ELECTRIC: Hires Execs from Financial Firms to Head Units SANYO ELECTRIC: To Sell Mobile Phone Unit to Kyocera for JPY50BB SANYO ELECTRIC: Kyocera Buyout Won't Affect Ratings, S&P Says TELE NORTE: Offers Contax Share to GP in Exchange for Oi Shares UAL CORP: Commences Merger Talks w/ Delta Air & Northwest Air UAL CORP: Reports Highest Annual Pre-tax Income Since 1999 * BRAZIL: Petrobras Says Pre-Salt Layer Has Exploratory Success C A Y M A N I S L A N D S AAA 2006-1: Final Shareholders Meeting Is Today ACA CDS: Holding Final Shareholders Meeting Today ALBANY INTERNATIONAL: Final Shareholders Meeting Is Today ALLIANCE DHO: To Hold Final Shareholders Meeting Today ALLIANCE GLOBAL: To Hold Final Shareholders Meeting Today ARBOR I: Final Shareholders Meeting Is Today BALEARES LEASING: Holding Final Shareholders Meeting Today BAMBOO SHIPFINANCE: Final Shareholders Meeting Is Today BANK OF INDIA: Earns INR5.12 Bil. in Qtr. Ended Dec. 31, 2007 BLUE AND RED: Holding Final Shareholders Meeting Today BRAZIL REPACKAGED: To Hold Final Shareholders Meeting Today CHAMBERS STREET: Final Shareholders Meeting Is Today CMBSPOKE 2005-II: Holding Final Shareholders Meeting Today COMET ALPHA: To Hold Final Shareholders Meeting Today DUKE FUNDING II: Final Shareholders Meeting Is Today DUKE FUNDING III: Holding Final Shareholders Meeting Today EQUITY SPECIAL: Final Shareholders Meeting Is Today FY FUNDING: To Hold Final Shareholders Meeting Today GSCP GF: Final Shareholders Meeting Is Today HIGH RIDGE: Holding Final Shareholders Meeting Today KNIGHT II: Final Shareholders Meeting Is Today MARINER CDO: Holding Final Shareholders Meeting Today MASTR CI-3: To Hold Final Shareholders Meeting Today M.F. CAPITAL: Final Shareholders Meeting Is Today M.T. CAPITAL: Holding Final Shareholders Meeting Today PARMALAT SPA: Creditors Convert Warrants for 46,169 Shares PETRA CAPITAL: Final Shareholders Meeting Is Today PETRA CAPITAL II: Holding Final Shareholders Meeting Today PLATO INVESTMENT: Final Shareholders Meeting Is Today ROBECO CDO: To Hold Final Shareholders Meeting Today STUYVESANT CDO: Holding Final Shareholders Meeting Today TRIPLE ONE: Final Shareholders Meeting Is Today VENEZUELA INVESTMENTS: Holding Final Shareholders Meeting Today Y & M: Final Shareholders Meeting Is Today C O L O M B I A GENERAL MOTORS: Sales Up by 19% in LatAm, Africa & Middle East SOLUTIA INC: DuPont Demands Payment of US$1,394,718 Admin. Claim SOLUTIA INC: Files 2nd Supplement to Stock Offering Prospectus E C U A D O R * ECUADOR: Launching Trade Office in Iran Next Month E L S A L V A D O R ALCATEL-LUCENT: Names Andy Williams as Services Biz Chief G U A T E M A L A MILLICOM INTERNATIONAL: Redeems US$200 Mil. 4% Convertible Bonds H O N D U R A S * HONDURAS: Will Likely Join Petrocaribe M E X I C O BAUSCH & LOMB: Projects 4th Qtr. Revenues of Up to US$660 Mil. ENESCO GROUP: Amended Plan Confirmation Hearing Moved to Jan. 30 FEDERAL-MOGUL: 75 Chapter 11 Cases Dismissed Effective Dec. 27 JABIL CIRCUIT: Paying US$0.07 Per Share Dividend on March 3 GLOBAL POWER: Emerges from Chapter 11 Bankruptcy MOVIE GALLERY: Creditor Groups Ink Pact to Support Ch. 11 Plan U.S. STEEL: Enters Into Technical Exchange Deal with JFE Steel X-RITE INC: Names Lynn Lyall as EVP, CFO & Secretary P E R U QUEBECOR WORLD: Chapter 11 Filing Cues Moody's to Drop Ratings * PERU: To Complete Free-Trade Deal Talks with Canada P U E R T O R I C O SEARS HOLDINGS: Giving More Control to Units Under Reorg. Plan UNIVISION COMM: Appoints Monica Talan as Corp. Communications VP V E N E Z U E L A PETROLEOS DE VENEZUELA: Three Plants Have Refining Problems - - - - - ================= A R G E N T I N A ================= SECUPYME XXXI: Moody's Puts B1 Global Currency Rating ----------------------------------------------------- Moody's Latin America has assigned a rating of Aa3.ar (Argentine National Scale) and of B1 (Global Scale, Local Currency) to the debt securities of Fideicomiso Financiero SECUPYME XXXI issued by Banco de Valores S.A. -- acting solely in its capacity as Issuer and Trustee. The rated securities are backed by a pool of bills of exchange signed by agricultural producers in Argentina. The bills of exchange are guaranteed by Garantizar S.G.R., which is a financial guarantor in Argentina. Garantizar has a rating of Aa3.ar (Argentine National Scale) and of B1 (Global Scale, Local Currency). The rating assigned to this transaction is primarily based on the rating of Garantizar. Therefore, any future change in the rating of the guarantor may lead to a change in the rating assigned to this transaction. The rating addresses the payment of interest and principal on or before the legal final maturity date of the securities. Structure Banco de Valores S.A. (Issuer and Trustee) issued one class of debt securities denominated in US dollars. The rated securities will bear a 7.5% annual interest rate. The rated securities will be repaid from cash flow arising from the assets of the Trust, constituted by a pool of fixed rate bills of exchange denominated in US dollars signed by agricultural producers and guaranteed by Garantizar S.G.R. The bills of exchange will bear the same interest rate as the rated securities. Although the rated securities are denominated in US dollars, they are payable in Argentine pesos at the exchange rate published by Banco de la Nacion Argentina as of the day prior to the date that the funds are initially deposited into the Trust account. As a result, the dollar is used as a currency of reference and not as a mean of payment. For that reason, the transaction is considered to be denominated in local currency. If, eight days before the final maturity date, the funds on deposit in the trust account are not sufficient to make payments to investors, the Trustee is obligated to request Garantizar to make payment under the bills of exchange. Garantizar, in turn, will have five days to make this payment into the trust account. Under the terms of the transaction documents, the trustee has up to two days to distribute interest and principal payments to investors. Interest on the securities will accrue up to the date on which the funds are initially deposited by either Garantizar, the exporter, or the individual producers into the Trust account. Rating Action US$3,956,000 in Fixed Rate Debt Securities of "Fideicomiso Financiero SECUPYME XXXI", rated Aa3.ar (Argentine National Scale) and B1 (Global Scale, Local Currency) Issuer: Fideicomiso Financiero SECUPYME XXXI -- VRD, Assigned B1 NORTHWEST AIRLINES: Commences Merger Talks with Delta Air & UAL --------------------------------------------------------------- Northwest Airlines Corp. and UAL Corp. have engaged in formal merger talks with Delta Air Lines Inc., reports The Wall Street Journal. WSJ says Delta, which is in the early stages of discussions with both Northwest and UAL, hopes to reach an agreement with one of them over the next two weeks. Delta is anticipating a deal disclosure early as mid-February after Delta's board meeting scheduled early in the month, says the report. "A special committee of the board is working with management to explore strategic options, including potential consolidation transactions. However, we are not providing updates, while this process is ongoing," Delta spokeswoman Betsy Talton, said. Northwest and UAL declined to comment. A UAL-Delta or a Northwest-Delta merger, which would likely be a stock for stock transaction, would make Delta the largest airline in the world, according to reports. Experts in the airline industry, however, believe that a Northwest-Delta merger is more likely as Delta's Chief Executive Richard Anderson was previously CEO at Northwest, and is already well acquainted with Northwest's operations. Senator Johnny Isakson, a Georgia Republican, said that Mr. Anderson told him in December that if there's a merger or an acquisition, Delta would keep its name and Atlanta hub, Bloomberg News reports. About Northwest Airlines Northwest Airlines Corp. (NYSE: NWA) -- http://www.nwa.com/ -- is the world's fourth largest airline with hubs at Detroit, Minneapolis/St. Paul, Memphis, Tokyo and Amsterdam, and about 1,400 daily departures. Northwest is a member of SkyTeam, an airline alliance that offers customers one of the world's most extensive global networks. Northwest and its travel partners serve more than 1000 cities in excess of 160 countries on six continents. Northwest and its travel partners serve more than 1000 cities in excess of 160 countries on six continents, including Italy, Spain, Japan, China, Venezuela and Argentina. The company and 12 affiliates filed for chapter 11 protection on Sept. 14, 2005 (Bankr. S.D.N.Y. Lead Case No. 05-17930). Bruce R. Zirinsky, Esq., and Gregory M. Petrick, Esq., at Cadwalader, Wickersham & Taft LLP in New York, and Mark C. Ellenberg, Esq., at Cadwalader, Wickersham & Taft LLP in Washington represent the Debtors in their restructuring efforts. The Official Committee of Unsecured Creditors has retained Akin Gump Strauss Hauer & Feld LLP as its bankruptcy counsel in the Debtors' chapter 11 cases. When the Debtors filed for bankruptcy, they listed US$14.4 billion in total assets and US$17.9 billion in total debts. On Jan. 12, 2007 the Debtors filed with the Court their Chapter 11 Plan. On Feb. 15, 2007, they Debtors filed an Amended Plan & Disclosure Statement. The Court approved the adequacy of the Debtors' Disclosure Statement on March 26, 2007. On May 21, 2007, the Court confirmed the Debtors' Plan. The Plan took effect May 31, 2007. * * * Moody's Investor Services placed Northwest Airlines Corp.'s long-term corporate family and probability of default ratings at 'B1' in May 2007. The ratings still hold to date with a stable outlook. TELEFONICA DE ARGENTINA: Raising Rates to 14% Beginning March 15 ---------------------------------------------------------------- Telefonica de Argentina told Argentine news daily La Nacion that it will increase rates as much as 14% starting March 15 due to rising operational costs. Business News Americas relates that rates for Telefonica de Argentina's fixed line plan Linea Control 600 will increase ARS8 to ARS62.80 per month. Its budget mobile plan Ahorro de Movistar will increase 9.5% to ARS38.50 a month. According to BNamericas, the budget mobile plan will be replaced by the plan Ahorro Comunidad, which costs ARS45.00 a month. BNamericas notes that Telefonica de Argentina's marketing manager Cristian Magnalardo reportedly commented, "We raised the price, but we also raised consumer credit 9.5%. On the other hand, we have decided to stop with the ARS35 plan because 95% of the new contracts were Comunidad plans, which allows you to talk for 50% of the price with other Movistar users." "All of the changes are to allow people to be able to talk for longer," Mr. Magnalardo told BNamericas. Meanwhile, mobile telephony operator Telecom Personal would increase rates 8% in some of its plans, BNamericas states. Headquartered in Buenos Aires, Argentina, Telefonica de Argentina SA -- http://www.telefonica.com.ar/-- provides telecommunication services, which include telephony business both in Spain and Latin America, mobile communications businesses, directories and guides businesses, Internet, data and corporate services, audiovisual production and broadcasting, broadband and Business-to-Business e-commerce activities. * * * Telefonica de Argentina's foreign currency rating is rated B2 by Moody's Latin America with a positive outlook. TELECOM PERSONAL: Increasing Rates by 8% in Some Plans ------------------------------------------------------ Mobile telephony operator Telecom Personal would increase rates 8% in some of its plans, Business News Americas reports. Meanwhile, Telecom Personal parent Telefonica de Argentina told Argentine news daily La Nacion that it will increase rates as much as 14% starting March 15 due to rising operational costs. Rates for Telefonica de Argentina's fixed line plan Linea Control 600 will increase ARS8 to ARS62.80 per month. Its budget mobile plan Ahorro de Movistar will increase 9.5% to ARS38.50 a month. According to BNamericas, the budget mobile plan will be replaced by the plan Ahorro Comunidad, which costs ARS45.00 a month. BNamericas notes that Telefonica de Argentina's marketing manager Cristian Magnalardo reportedly commented, "We raised the price, but we also raised consumer credit 9.5%. On the other hand, we have decided to stop with the ARS35 plan because 95% of the new contracts were Comunidad plans, which allows you to talk for 50% of the price with other Movistar users." "All of the changes are to allow people to be able to talk for longer," Mr. Magnalardo told BNamericas. Telecom Personal is the wireless provider of Telecom Argentina SA, providing services in Argentina and Paraguay over a GSM network. The company has 7.7 million users, with an estimated 30% market share in Argentina and a customer mix of 66% prepaid and 34% postpaid as of June 30, 2006. * * * As reported in the Troubled Company Reporter-Latin America on Nov. 13, 2006, Fitch Ratings affirmed Telecom Personal SA's foreign and local currency Issuer Default Rating at 'B', and the senior unsecured at 'B/RR4', and revised the Rating Outlook of the international scale IDRs to Positive from Stable. Approximately US$200 million in debt is affected by the rating action. Fitch has also upgraded the national scale rating of Personal to 'A(arg)' from 'BBB+(arg)' with a stable rating outlook. * ARGENTINA: Gets US$600-Million Loan for Investment Projects ------------------------------------------------------------- The Inter-American Development Bank has approved a US$600 million conditional credit line for investment projects and a first US$200 million loan within this CCLIP to Argentina to support a provincial agricultural services program. The Ministry of Economy and Production of Argentina will carry out the program through the Agriculture, Livestock, Fisheries and Food Secretariat. The Secretariat's agricultural development policy is aimed at economic-productive consolidation and expansion of the sector in the different regions, seeking greater complementarity between public and private institutions. "The goal of the conditional credit line and the first operation is to contribute to the development of regional rural economies by making them more competitive and increasing their agricultural exports," said IDB team leader Gabriel Montes. "The purpose of the first individual loan operation is to foster a sustainable increase in the coverage and quality of the rural economic infrastructure for food and agriculture services and promote private investment," added Mr. Montes. "The CCLIP allows for effective support and long-term continuity in a key sector for development." This is the second phase of the Provincial Agricultural Services Program that was started by the national government in 1996 and has been designed to support the economic development of the rural economies of Argentina's provinces. The program covers two main areas: infrastructure and food and agriculture services, and rural food and agriculture businesses that will promote development initiatives for agricultural clusters and incentives to invest in food and agriculture supply chains. The loan is for a 25-year term with a four-year grace period, at an adjustable interest rate. Local counterpart funds for the loan total US$50 million. * * * As reported in the Troubled Company Reporter-Latin America on Dec. 26, 2007, Standard & Poor's Ratings Services assigned B+ long-term sovereign local and foreign currency ratings and B short-term sovereign local and foreign long-term ratings on Argentina. Standard & Poor's also placed 4 sovereign foreign currency recovery rating and a BB transfer and convertibility assessment rating. Standard & Poor's says the outlook for these ratings is stable. Fitch Ratings assigned these ratings on Argentina: Rating Rating Date ------ ----------- Country Ceiling B+ Aug. 1, 2006 Local Currency Long Term Issuer B Aug. 1, 2006 Short Term IDR B Dec. 14, 2005 Long Term IDR RD Dec. 14, 2005 ============= B A H A M A S ============= BANK OF BARODA: United Forum of Bank Unions Calls 1-Day Strike -------------------------------------------------------------- Bank of Baroda has informed the Bombay Stock Exchange that the United Forum of Bank Unions has served a notice informing the bank of its decision to go on a nationwide strike on Jan. 25, 2008. According to the bank, it is taking all the necessary steps for the smooth functioning of the bank's branches and offices to deal with the strike in the event it materializes on the indicated date. Headquartered in Vadodara, India, Bank of Baroda -- http://www.bankofbaroda.com/-- is a provider of banking services in India. Bank of Baroda has branches in the Bahamas, Belgium, the Fiji Islands, Mauritius, Republic of South Africa, Seychelles, Singapore, Sultanate of Oman, United Arab Emirates, the United Kingdom, and the United States of America. * * * On July 2007, Standard & Poor's assigned its 'BB' issue rating to Bank of Baroda's US$300 million upper Tier-II subordinated notes due 2022. Fitch Ratings, on May 9, 2007, assigned 'BB' ratings to Bank of Baroda's proposed unsecured subordinated Upper Tier 2 notes (expected size: US$250 million plus greenshoe option), as well as the hybrid Tier 1 debt to be issued under its USD1.5 billion medium-term notes program. Fitch said the outlook on all ratings is stable. ============= B E R M U D A ============= MGS MANAGED: Proofs of Claim Filing Deadline Is Jan. 30 ------------------------------------------------------- MGS Managed Futures Funds Limited's creditors are given until Jan. 30, 2008, to prove their claims to Beverly Mathias, the company's liquidator, or be excluded from receiving any distribution or payment. In their proofs of claim, creditors must indicate their full names, addresses, the full particulars of their debts or claims, and the names and addresses of their lawyers, if any. MGS Managed's shareholders decided on Jan. 14, 2008, to place the company into voluntary liquidation under Bermuda's Companies Act 1981. The liquidator can be reached at: Beverly Mathias c/o Argonaut Limited Argonaut House, 5 Park Road Hamilton HM O9, Bermuda SEA CONTAINERS: Wants SC Iberia & YMCL Guarantees Approved ---------------------------------------------------------- Sea Containers Ltd. and its debtor-affiliates seek authority from the U.S. Bankruptcy Court for the District of Delaware to enter into two Deed of Guarantees in favor its two wholly owned non-debtor subsidiaries, Sea Containers Iberia SA and Yorkshire Marine Containers Ltd., in connection with a potential settlement by SCL and certain of its subsidiaries, of intercompany claims asserted by GE SeaCo SRL and its subsidiaries. Sanjay Bhatnagar, Esq., at Young Conaway Stargatt & Taylor, LLP, in Wilmington, Delaware, relates that many of the GE SeaCo Entities' claims against the Debtors are currently under a pending arbitration proceeding. However, the Parties excluded certain claims from arbitration in an attempt to consensually resolve those claims. The excluded claims consist of more than US$90,000,000 in intercompany claims asserted by GE SeaCo out of ordinary course business transactions between the Parties. After extensive negotiations among the Parties, the Official Committee of Unsecured Creditors of Sea Containers Ltd. and the Official Committee of Unsecured Creditors of Sea Containers Services Ltd., reached a stipulation for the resolution of the Intercompany Claims, the terms of which are yet to be finalized. As a condition to their entry into the Stipulation, the directors of SC Iberia and YMCL have required that SCL provide certain guarantees in exchange for releasing their receivable balances against the GE SeaCo Entities, Mr. Bhatnagar discloses. Accordingly, SCL made arrangements to provide postpetition guarantees to SC Iberia and YMCL for the value of their receivables due from the GE SeaCo Entities, amounting to US$585,861 for YMCL and US$189,858 for SC Iberia. Each Guarantee is payable solely to the extent necessary to fund recoveries of sums owed to creditors of SC Iberia and YMCL, other than the SCL Entities, and only upon the occurrence of the earlier of: -- certain insolvency events with respect to SC Iberia and YMCL; or -- the Debtors' confirmation of a plan of reorganization that includes a final settlement of any of the Intercompany Claims. The Stipulation provides that as of June 30, 2007, the GE SeaCo Entities owe approximately US$4,300,000 to SCL and its subsidiaries on account of all Intercompany Claims. The amount would be adjusted based on certain payments made by and between the GE SeaCo Entities and the SCL Parties subsequent to June 30. Pursuant to the Stipulation, after accounting for the post-June 30 payments, the GE SeaCo Entities agree to set aside at least US$600,000 in a segregated account as the net balance owing to the SCL Parties. The funds would remain in the segregated account for SCL's benefit, pending resolution of all the GE SeaCo Entities' claims, including those subject to arbitration. In addition, the GE SeaCo Entities would have the ability to offset against the Segregated Account (i) allowed claims in the bankruptcy cases, and (ii) claims that would arise on account of certain avoidance actions against them. The Parties agree that the Stipulation is the full and final settlement of the Intercompany Claims, and upon its consummation, the Parties would exchange mutual releases. Mr. Bhatnagar contends that the Stipulation, if finalized, would maximize value for the bankruptcy estates, and that SCL's grant of the Guarantees is necessary to induce SC Iberia and YMCL to enter into the Stipulation. The Guarantees serve the Debtors' interests in helping to ensure that third-party claims against SC Iberia and YMCL are funded, thus, avoiding the need for the third-party claimants to resort to collection efforts, which may reach back to the bankruptcy estates, Mr. Bhatnagar explains. About Sea Containers Based in Hamilton, Bermuda, Sea Containers Ltd. -- http://www.seacontainers.com/-- provides passenger and freight transport and marine container leasing. Registered in Bermuda, the company has regional operating offices in London, Genoa, New York, Rio de Janeiro, Sydney, and Singapore. The company is owned almost entirely by United States shareholders and its primary listing is on the New York Stock Exchange (SCRA and SCRB) since 1974. On Oct. 3, the company's common shares and senior notes were suspended from trading on the NYSE and NYSE Arca after the company's failure to file its 2005 annual report on Form 10-K and its quarterly reports on Form 10-Q during 2006 with the U.S. Securities and Exchange Commission. Through its GNER subsidiary, Sea Containers Passenger Transport operates Britain's fastest railway, the Great North Eastern Railway, linking England and Scotland. It also conducts ferry operations, serving Finland and Estonia as well as a commuter service between New York and New Jersey in the U.S. Sea Containers Ltd. and two subsidiaries filed for chapter 11 protection on Oct. 15, 2006 (Bankr. D. Del. Case No. 06-11156). Edmon L. Morton, Esq., Edwin J. Harron, Esq., Robert S. Brady, Esq., Sean Matthew Beach, Esq., and Sean T. Greecher, Esq., at Young, Conaway, Stargatt & Taylor, represent the Debtors in their restructuring efforts. The Official Committee of Unsecured Creditors and the Financial Members Sub-Committee of the Official Committee of Unsecured Creditors of Sea Containers Ltd. is represented by William H. Sudell, Jr., Esq., and Thomas F. Driscoll, Esq., at Morris, Nichols, Arsht & Tunnell LLP. Sea Containers Services, Ltd.'s Official Committee of Unsecured Creditors is represented by attorneys at Willkie Farr & Gallagher LLP. In its schedules filed with the Court, Sea Containers disclosed total assets of US$62,400,718 and total liabilities of US$1,545,384,083. The Court gave the Debtors until Feb. 20, 2008 to file a plan of reorganization. (Sea Containers Bankruptcy News, Issue No. 34; Bankruptcy Creditors' Service, Inc., http://bankrupt.com/newsstand/or 215/945-7000). ============= B O L I V I A ============= * BOLIVIA: Atlas Must Cede Karachipampa Guarantee by Feb. 20 ------------------------------------------------------------ Bolivian state-run mining firm has extended to Feb. 20, 2008, Canadian firm Atlas Precious Metals' deadline to surrender a US$850,000 guarantee required to start a project to rehabilitate the Karachipampa smelter, state news service Agencia Boliviana de Informacion reports. Business News Americas relates that the initial deadline was Jan. 15. Comibol signed in June 2005a 35:65 joint venture accord with Atlas Precious to restore operations at the 51,000- ton-per-year Karachipampa plant to treat silver concentrates. The project needs a US$174 million total investment. Atlas Precious sent a letter to Comibol asking for the extension, as it also wants to sign the documents to transfer control of Karachipampa, news daily Opinion says, citing Comibol head Hugo Miranda. No further extensions will be made. Once Atlas Precious fails to meet all requirements by the new deadline Comibol could conduct the reactivation, Mr. Miranda told Agencia Boliviana. * * * As reported in the Troubled Company Reporter-Latin America on Dec. 26, 2007, Standard & Poor's Ratings Services has assigned B- long-term sovereign local and foreign currency ratings and C short-term sovereign local and foreign currency ratings on Bolivia. =========== B R A Z I L =========== ASPEN TECHNOLOGY: Deloitte Declines Re-Appointment as Accountant ---------------------------------------------------------------- Aspen Technology Inc. disclosed that its independent registered public accounting firm Deloitte & Touche LLP, is declining to stand for re-appointment for the fiscal 2008 audit. There is no disagreement between the company and Deloitte on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure. AspenTech's Audit Committee has begun the process of selecting a successor independent registered public accounting firm, and it will make an announcement when this process concludes. Deloitte's decision does not impact their engagement to complete the audit of AspenTech's financial statements as of June 30, 2006 and 2007 and for each of the three years in the period ended June 30, 2007. In addition, Deloitte has agreed to be engaged for the review of the company's interim consolidated financial statements included in its Quarterly Report on Form 10-Q for the quarter ended Sept. 30, 2007. While substantial progress has been made in these efforts, the company has requested from the Nasdaq Listings Qualification Panel an additional extension to February 8 to file the above financial statements and related reports with the SEC and comply with Nasdaq listing requirements. There can be no assurance that the Nasdaq Listing Qualifications panel will grant the company's request, and failure to grant the request would likely result in the company's securities being delisted from the Nasdaq Global Market. Brad Miller, Aspen's Chief Financial Officer, said "We believe we are in the final stages of completing our work on the accounting positions related to income taxes. Once completed, this would bring to close the previously disclosed detailed review of our financial accounting and put the company in a position to become current in its filings." About Aspen Technology Based in Cambridge, Massachusetts, Aspen Technology Inc. (Nasdaq: AZPN) -- http://www.aspentech.com/-- provides software and professional services that help process companies improve efficiency and profitability by enabling them to model, manage and control their operations. The company has operations in Brazil, Malaysia and France. * * * Aspen Technology carries Moody's B2 long-term corporate family rating and Caa1 equity linked rating. Moody's said the outlook is stable. The company carries Standard & Poor's B long-term foreign and local issuer credit ratings, with negative outlook. BANCO BRADESCO: Insurance Group Buys Mediservice for BRL84.9MM -------------------------------------------------------------- Banco Bradesco S.A. informed its stockholders, clients and to the market in general that Grupo Bradesco de Seguros e Previdencia (Bradesco Insurance and Private Pension Group) by means of Bradesco Seguros S.A., on Jan. 21, 2008, entered into a "Quotas Assignment Agreement" with Marsh Corretora de Seguros Ltda., parent company of Mediservice - Administradora de Planos de Saude Ltda., acquiring the control of the Mediservice for BRL84.9 million. Mediservice has been operating in Brazil for more than 20 years, with a solid participation in the development and implementation of corporate health care plans, with offices located in the cities of Sao Paulo, Rio de Janeiro and Salvador. About Mediservice, the bank pointed out: * the company has more than 300,000 users throughout Brazil; * Mediservice relies on a network of approximately 30,000 associate members, among physicians, dentists, laboratories, diagnosis centers, clinics, hospitals and emergency services; and * Mediservice is one of the major companies in the managed health care plans segment. The acquisition means an important strategic step to Grupo Bradesco de Seguros e Previdencia and enables the expansion of its client base within a very competitive segment, in addition to strengthening its positioning in the market of health group plan operators. Also, this acquisition will enable scale gains, adding value to the Group and consolidating its leadership position in the supplementary health market. The materialization of this operation is subject to the approval of appropriate authorities. Headquartered in Sao Paulo, Brazil, Banco Bradesco S.A. (NYSE: BBD) -- http://www.bradesco.com.br/-- prides itself on serving low-and medium-income individuals in Brazil since the 1960s. Bradesco is Brazil's largest private bank, with more than 3,000 banking branches, and also a leader in insurance and private pension management. Bradesco has branches throughout Brazil as well as one in New York, and Japan. Bradesco offers Internet banking, insurance, pension plans, annuities, credit card services (including football-club affinity cards for the soccer- mad population), and Internet access for customers. The bank also provides personal and commercial loans, along with leasing services. * * * As reported in the Troubled Company Reporter-Latin America on Nov. 27, 2006, Standard & Poor's Ratings Services maintained the 'BB+' ratings on both of Banco Bradesco SA's foreign and local currency counterparty credit rating, however it changed the ratings outlook to positive from stable on both ratings: -- Foreign currency counterparty credit rating * to BB+/Positive/B from BB+/Stable/B -- Local currency counterparty credit rating * to BB+/Positive/B from BB+/Stable/B -- Brazil national scale rating * to brAA+/Positive/brA-1 from brAA+/Stable/brA- COMPANHIA SIDERURGICA: Okays Three-for-One Stock Split ------------------------------------------------------ Companhia Siderurgica Nacional said in a filing with the Bovespa stock exchange that its shareholders have authorized during a meeting on Tuesday a three-for-one stock split. According to Companhia Siderurgica's filing, shareholders who attended the meeting represented 53.3% of the firm's voting capital. The filing says that the shareholders also approved the cancellation of four million shares in Companhia Siderurgica's treasury. Headquartered Sao Paolo, Brazil, Companhia Siderurgica Nacional S.A. -- http://www.csn.com.br/-- produces, sells, exports and distributes steel products, like hot-dip galvanized sheets, tin mill products and tinplate. The company also runs its own iron ore, manganese, limestone and dolomite mines and has strategic investments in railroad companies and power supply projects. The group also operates in Brazil, Portugal and the U.S. As reported in the Troubled Company Reporter-Latin America on Dec. 27, 2007, Standard & Poor's Ratings Services revised its outlook on Brazil-based steel maker Companhia Siderurgica Nacional and related entity National Steel S.A. to positive from stable. At the same time, Standard & Poor's affirmed its 'BB' corporate credit rating on CSN and its 'B+' rating on NatSteel. EMPRESA ENERGETICA: Moody's Confirms Ba2 Senior Unsec. Rating ------------------------------------------------------------- Moody's America Latina has confirmed Empresa Energetica de Mato Grosso do Sul S.A.'s senior unsecured issuer ratings of Ba2 and Aa3.br on the Brazil national scale. Also confirmed were the ratings for the company's senior unsecured local currency debentures, also at Ba2 and Aa3.br. The rating outlook is now stable. This action concludes the review for possible downgrade that Moody's initiated on Sept. 6, 2007, following industry regulator ANEEL's decision to reduce the company's Regulatory Asset Base on a retroactive basis. On Dec. 5, 2007, after reviewing the appeal filed by the Empresa Energetica, ANEEL published its final decision to reduce the company's Net Regulatory Asset Base by BRL125 million and Gross Regulatory Asset Base by BRL265 million, effective retroactively to April 2003. These amounts are lower than those in ANEEL's original August 2007 decision, which were reductions of BRL185 million and BRL383 million, respectively. As a result of the Regulatory Asset Base reduction, ANEEL required that the company reduce its average tariffs by 6.6% starting in December 2007 for the period through April 2008. After April 2008, tariffs are subject to the second periodic tariff review. Because the reduction was retroactive to 2003, the company's tariffs will be further cut by an amount estimated to result in lost revenues of approximately BRL183 million over the next five years, partly offset by pending tariff adjustments of about BRL43 million, resulting in an estimated annual cash flow impact of BRL28 million. The recent 6.6% tariff reduction, along with an additional tariff reduction in April 2008, when the second periodic tariff review will take place, is expected to be partly offset in 2008 by extraordinary revenues for the reimbursement of investments on behalf of the federal government's "Luz para Todos" program, which aims to provide electricity service to low income rural residents. The amount to be reimbursed will be discussed with the regulator during the tariff review process. Thus, the expected drop in revenues brought on by the Regulatory Asset Base reduction and resulting lower tariffs should be partially offset by other pending tariff increases, therefore allowing the company to maintain credit metrics in line with its rating category. However, in spite of incurring just a one-month cash effect from the tariff reduction in fiscal 2007, Empresa Energetica is obligated to recognize the full BRL183 million expected loss in its fourth quarter 2007 financial statements. This is likely to cause a breach in the debenture's Debt to EBITDA financial covenant of 3.5, which could cause early acceleration when the company files its first quarter financial statements in April 2008. However, given the strategic importance of the company and the group's track record in Brazil, Moody's expects it to receive support from EDP Energias do Brasil (EDB; Ba2, Aa3.br/STA), either through negotiations with the debenture holders or by providing financial resources or guarantees. EDB Energias had approximately BRL600 million of cash as of Sept. 30, 2007. Empresa Energetica de Mato Grosso do Sul SA (aka Enersul), headquartered in Campo Grande, Brazil, is an electricity distribution utility serving approximately 695,000 clients in the agrarian state of Mato Grosso do Sul. In the last twelve months ending on Sept. 30, 2007, the company reported net revenues of BRL823 million. FURNAS CENTRAIS: Court Vetoes Subcontracted Workers Replacement --------------------------------------------------------------- The Brazilian federal labor court has disallowed the replacement of 4,300 subcontracted workers with 4,000 full-time employees at federal power firm Furnas Centrais Eletricas, overturning a state court ruling, Business News Americas reports. Labor court judge Rider de Brito explained to BNamericas that the state court decision could cause severe disruption of public order, security and the economy. BNamericas relates that Furnas Centrais' subcontracted employees launched a one-day protest against replacement plans. However, the strike didn't affect power generation and transmission operations. The workers had scheduled another strike on Jan. 22, 23, 29 and 31. The labor court told BNamericas that about 45% of Furnas Centrais' workforce is outsourced. According to BNamericas, the labor also objected the timeframe stipulated to replace the subcontracted employees. "Thirty days to replace all subcontracted workers are not enough due to the large number of professionals working under this status and due to internal measures that certainly need to be taken into consideration," Judge de Brito told BNamericas. Headquartered in Rio de Janeiro, Furnas is one of Brazil's largest electricity generation and transmission utility companies. Furnas is closely held, with 99.5% of its shares owned by Eletrobras, the Brazilian Federal Government's holding company that controls about 39% of the country's installed power generation capacity and approximately 56% of high voltage energy transmission countrywide. Furnas operates 10 hydro-power plants representing some 92% of its total installed capacity of 9,458 megawatts (8% is represented by 2 thermal power plants). The company also owns about 19,278 kilometers of transmission lines, mainly in the southeast and mid-west regions of Brazil. These assets include the transmission line connecting the Itaipu power plant, which supplies energy consumption to the most industrialized region of the country. Furnas is also responsible for trading the nuclear energy generated by Eletronuclear (99.8% Eletrobras), hich represents about 23% of energy sales volume. In 2006, Furnas reported net earnings of BRL364 million (about US$165 million) on BRL5,325 million (US$2,416 million) net revenues. As reported ion the Troubled Company Reporter-Latin America on Aug. 20, 2007, Moody's America Latina Ltda. affirmed its Ba1 global local currency issuer rating for Furnas Centrais Eletricas S.A. JAPAN AIRLINES: Extends Flyer Programs with China Air & Mexicana ---------------------------------------------------------------- From Feb. 1, 2008, Japan Airlines International Co., Ltd., will inaugurate reciprocal frequent flyer program agreements with China Eastern Airlines and Mexicana Airlines. The agreement will enable members of the JAL Mileage Bank, JAL's frequent flyer program, to accumulate mileage on China Eastern Airlines' and Mexicana's air networks and redeem flight mileage on China Eastern Airlines and Mexicana international and domestic award tickets. China Eastern Airlines and Mexicana frequent flyer programs members will also be able to accumulate and redeem mileage on JAL's network. The two new bilateral agreements increase JAL's total number of frequent flyer program partner airlines to 13, further extending and enhancing the network and benefits available to JMB members. JAL already has frequent flyer tie-ups with Air France, Emirates as well as oneworld member airlines American Airlines, British Airways, Cathay Pacific Airways (including affiliate Dragonair), Finnair, Iberia, LAN, Malev, Qantas, and Royal Jordanian. JAL Mileage Bank members will be able to accumulate JMB mileage when traveling on China Eastern Airlines or Mexicana flights from Feb. 1, 2008, excluding China Eastern Airlines's flights serving between China and Japan. JMB award tickets can be redeemed on both international and domestic China Eastern Airlines and Mexicana Airlines flights. For China Eastern Airlines' flights, award applications can be made by JMB members from Feb. 1, 2008, departing on and after Feb. 8, 2008. For Mexicana flights, award applications can be made by JMB members from Jan. 22, 2008, departing on and after Feb. 1, 2008. JAL Mileage Bank's more than 20.69 million members can accumulate mileage not only by flying with JAL Group and its JMB partner airlines, but also by staying at JMB partner hotels and by using the services of various other JMB partner companies. Members can exchange mileage for a choice of awards, including flights, ticket upgrades, and JAL Coupons. Japan Airlines, Asia's biggest airline group, serves some 213 airports in 33 countries and territories worldwide. The group network extends over 235 international passenger, 39 international cargo, and 160 domestic routes, making a total of over 1,200 flights a day and carrying on average over 58 million passengers per year. About China Eastern Established in June 1988, China Eastern Airlines is one of the biggest airlines of China. Based in Shanghai, China Eastern Airlines operates over 350 domestic routes in China, and serves a total of 41 destinations worldwide including cities in Australia, Europe, Korea, Japan, North America and Southeast Asia. About Mexicana Airlines Mexicana Airlines, one of the largest airlines in Mexico, began its operations more than 85 years ago. In addition to comprehensive network coverage of Mexico, the airline has the most extensive international network out of Mexico City connecting more than 50 destinations in North America, Central and South America, and the Caribbean. About Japan Airlines Tokyo-based Japan Airlines International Company, Limited -- http://www.jal.com/en/-- was created as a result of the merger of Japan Airlines and Japan Air Systems to boost domestic coverage. Japan Airlines flies to the United States, Brazil and France. * * * As reported on Feb. 9, 2007, that Standard & Poor's Ratings Services affirmed its 'B+' long-term corporate credit and issue ratings on Japan Airlines Corp. (B+/Negative/--) following the company's announcement of its new medium-term management plan. S&P said the outlook on the long-term corporate credit rating is negative. As reported on Oct. 10, 2006, that Moody's Investors Service affirmed its Ba3 long-term debt ratings and issuer ratings for both Japan Airlines International Co., Ltd and Japan Airlines Domestic Co., Ltd. The rating affirmation is in response to the planned restructuring of the Japan Airlines Corporation group on Oct. 1, 2006 with the completion of the merger of JAL's two operating subsidiaries, JAL International and Japan Airlines Domestic. JAL International will be the surviving company. Moody's said the rating outlook is stable. Fitch Ratings Tokyo analyst Satoru Aoyama said that the company's debt obligations and expenses for new aircraft have placed it in an unfavorable financial position. Fitch assigned a BB- rating on the company, which is three notches lower than investment grade. JAPAN AIRLINES: To Adjust Domestic Fares in FY08 Due to Oil Hike ---------------------------------------------------------------- Japan Airlines International Co., Ltd., submitted an application with the Japanese Ministry of Land Infrastructure, and Transport requesting a revision of domestic normal economy fares and round-trip discount economy fares for flight departures in the 1st half of FY2008, the period from April 1 to Sept. 30, 2008. Fuel prices have remained high with the price of Singapore kerosene-type jet fuel having risen above US$100 dollars per barrel. The company has been conducting a wide range of countermeasures to limit the full impact of the price increase including fuel hedging, fuel consumption reductions, and the introduction of more fuel-efficient small and medium-sized aircraft to its fleet. Despite these measures, the company is reluctantly obliged to ask its domestic passengers to bear part of the burden caused by the unprecedented increase in the price of fuel over the past few years. As a result, the JAL Group has decided to increase just Japan domestic normal economy fares and round-trip discount economy fares. JAL will increase these fares by on average 9% during the first half of FY2008, the 6 month period starting April 1, 2008. The increase will also affect other fares linked to normal adult fares such as normal child fares. Such discounted fares as bargain, special flight discount, and "Otomo de Mile" fares will not be affected by this increase. Supplements payable for domestic travel in First Class or Class J will not be increased. About Japan Airlines Tokyo-based Japan Airlines International Company, Limited -- http://www.jal.com/en/-- was created as a result of the merger of Japan Airlines and Japan Air Systems to boost domestic coverage. Japan Airlines flies to the United States, Brazil and France. * * * As reported on Feb. 9, 2007, that Standard & Poor's Ratings Services affirmed its 'B+' long-term corporate credit and issue ratings on Japan Airlines Corp. (B+/Negative/--) following the company's announcement of its new medium-term management plan. S&P said the outlook on the long-term corporate credit rating is negative. As reported on Oct. 10, 2006, that Moody's Investors Service affirmed its Ba3 long-term debt ratings and issuer ratings for both Japan Airlines International Co., Ltd and Japan Airlines Domestic Co., Ltd. The rating affirmation is in response to the planned restructuring of the Japan Airlines Corporation group on Oct. 1, 2006 with the completion of the merger of JAL's two operating subsidiaries, JAL International and Japan Airlines Domestic. JAL International will be the surviving company. Moody's said the rating outlook is stable. Fitch Ratings Tokyo analyst Satoru Aoyama said that the company's debt obligations and expenses for new aircraft have placed it in an unfavorable financial position. Fitch assigned a BB- rating on the company, which is three notches lower than investment grade. KRATON POLYMERS: Hires Steve Temblay as VP & Chief Fin'l Officer ---------------------------------------------------------------- Kraton Polymers LLC has appointed Stephen (Steve) E. Tremblay, as Vice President and Chief Financial Officer effective Jan. 21, 2008. He replaced Nicholas G. Dekker, who has been serving as Chief Financial Officer since October 2006. Mr. Dekker will remain with Kraton through April 1, 2008, to ensure a seamless transition period. In his role, Mr. Tremblay will be responsible for managing Kraton's finance and accounting functions. He will report to Kevin M. Fogarty, President and Chief Executive Officer. Mr. Tremblay brings to Kraton extensive senior management experience at Vertis, Inc., where he worked since 1997 in various financial positions, including Chief Financial Officer. Vertis provides direct mail, printing services, media and technology capabilities through a network of facilities across the United States. Previously, Mr. Tremblay worked at Wellman, Inc., and began his career in 1983 with Ernst and Young in the accounting and auditing practice. "Steve brings with him a wealth of experience and knowledge in leading international finance teams, interactions with capital markets, and working closely with operational management to drive fundamental improvement. We are very pleased to have Steve join our leadership team at Kraton," said Mr. Fogarty. "On behalf of the entire Kraton team, we additionally want to thank Nick for his dedication and contributions to Kraton since first joining the company in 2000, and most recently, in his capacity as Chief Financial Officer," said Mr. Fogarty. Mr. Tremblay graduated with a Bachelor of Science in Business Administration from Bryant University, and is a Certified Public Accountant. Based in Houston, Texas, Kraton Polymers LLC -- http://www.kraton.com/-- produces styrenic block copolymers. SBCs are highly-engineered thermoplastic elastomers, which enhance the performance of numerous products by delivering a variety of attributes, including greater flexibility, resilience, strength, durability and processability. Kraton polymers are used in a wide range of applications including adhesives, coatings, consumer and personal care products, sealants, lubricants, medical, packaging, automotive, paving, roofing, and footwear products. Kraton has the leading position in nearly all of its core markets and is the only producer of SBCs with global manufacturing capability. Its production facilities are located in the United States, Germany, France, The Netherlands, Brazil, and Japan. * * * As reported in the Troubled Company Reporter-Latin America on Nov. 21, 2007, Moody's Investors Service has affirmed Kraton Polymers LLC's B1 corporate family rating but revised the company's outlook to negative as Moody's expects continued margin weakness, due to delays in passing on the full extent of raw material cost increases to Kraton customers, which will diminish free cash flow from operations over the next 12 to 18 months. PARANA BANCO: 4th Quarter 2007 Net Profits Increase to BRL36.1MM ---------------------------------------------------------------- Parana Banco told Business News Americas that its net profits increased 169% to BRL36.1 million in the fourth quarter 2007, compared to fourth quarter 2006. BNamericas relates that Parana Banco's earnings grew 117% to BRL113 million in 2007, from 2006. Parana Banco's return on equity dropped to 18.6% in the fourth quarter 2007, from 26.2% in the same quarter 2006, BNamericas says. Meanwhile, its return on equity declined to 18.2% in 2007, from 27.6% in 2006. According to BNamericas, Parana Banco's loan portfolio rose 88.1% to BRL1.17 billion in 2007, compared to 2006. It handed out BRL1.01 billion in new loans for 2007, about 48.5% higher than 2006. New loans increased 89.7% to BRL365 million in the fourth quarter 2007, from the same period last year. The report says that Parana Banco's revenue from loan operations rose 51.2% to BRL80.0 million in the fourth quarter 2007, compared to the same period in 2006, and increased 29.5% to BRL275 million for the entire 2007. BNamericas notes that the concentration on payroll loans let Parana Banco improve its non-performing loan ratio to 1.70% from 2.20%. Parana Banco's net assets increased to BRL1.88 billion in 2007, compared to 2006, BNamericas states. Parana Banco is a niche bank in the segment of payroll discount lending, primarily to public-sector employees. The bank's adjusted total assets of US$375 million as of June 2006 represented less than 1% of total assets in the Brazilian banking industry. The bank is a relevant part of a broader conglomerate (J. Malucelli), with operations in different sectors and concentrated in the South of Brazil. Standard & Poor's does not assign ratings to any company in the J. Malucelli group, and the ratings assigned to the bank do not incorporate potential support from shareholders. * * * As reported in the Troubled Company Reporter-Latin America on June 26, 2007, Standard & Poor's Ratings Services raised its long-term counterparty credit rating and senior unsecured debt rating on Parana Banco S.A. to 'B+' from 'B'. The ratings were removed from CreditWatch Positive where they were placed June 11, 2007. At the same time, S&P affirmed the 'B' short- term counterparty credit rating on the bank. S&P said the outlook is stable. PROPEX INC: Wants Access to US$60 Million DIP Financing ------------------------------------------------------- Propex Inc. and its debtor-affiliates seek authority from the U.S. Bankruptcy Court for the Eastern District of Tennessee, on an interim and final basis, to obtain postpetition secured loans, advances, and other financial accommodations of up to $60 million, subject to the terms and conditions of a credit agreement and related loan documents between the Debtors and BNP Paribas, as administrative agent for certain financial institutions. Henry J. Kaim, Esq., at King & Spalding, LLP, in Houston, Texas, proposed lead counsel of the Debtors, relates that the Debtors do not have sufficient available sources of working capital to operate their businesses in the ordinary course without postpetition financing. The Debtors believe that the DIP financing with BNP Paribas presents the best option available to them and would enable them to preserve their value as a going concern. The salient terms of the proposed DIP Facility are: Borrower. Propex, Inc. Guarantors. Propex Holdings, Inc., Propex Concrete Systems Corporation, Propex Fabrics International Holdings I Inc., Propex Fabrics International Holdings II Inc., and all other existing and future subsidiaries of Propex, except for foreign subsidiaries under certain conditions. Lenders. A syndicate of financial institutions arranged by BNP Paribas Securities Corp., which includes BNP Paribas and Black Diamond Commercial Finance, L.L.C. BNP Paribas will serve as administrative agent under the DIP Facility. Commitment & Availability. The Credit Agreement provides for a revolving credit facility of US$60 million in the aggregate, of which up to US$20 million may be used for the issuance of letters of credit. Availability. Up to US$10 million of the DIP Facility will be available for draw on the Closing Date, and thereafter will be available, subject to a budget approved by the Administrative Agent, on a revolving basis during the period commencing the day after the Closing Date and ending on the earlier of: (i) the one year anniversary of the Closing Date, (ii) the date of substantial consummation of a plan of reorganization which pays all obligations under the DIP Facility in full in cash, and (iii) the date on which an unmatured default or event of default under the DIP Facility occurs. In the event that a hearing on confirmation of a plan of reorganization begins in the Chapter 11 cases on or before the Maturity Date, that date will be extended for an additional 90 days; provided, however, that only US$20,000,000 may be borrowed prior to the entry of a Final Order. Purpose. The DIP Facility will be used to (i) pay fees and expenses associated with the financings and (ii) provide for the working capital requirements and other general corporate purposes of Propex, Propex Holdings and their subsidiaries during the Debtors' Chapter 11 cases. Priority and Liens. All obligations under the DIP Facility will, at all times: * be entitled to super-priority claim status in the Chapter 11 cases; provided that those claims will not be paid from the proceeds of avoidance actions; * be secured by a perfected first priority lien on all unencumbered property and assets of the Debtors, with the exception of proceeds of avoidance actions; * be secured by a perfected junior lien on all property and assets of the Debtors that are subject to valid and perfected liens in existence at the time of the commencement of the Chapter 11 cases or to valid liens in existence at the time of the commencement; and * be secured by a perfected first priority, senior priming lien on all the property of the Debtors of any kind, senior to (a) the liens that secure the obligations of the Debtors under the $360,000,000 Prepetition Credit Facility and (b) any liens to which the liens are senior. Carve-Out. The Primed Liens and liens and rights granted to the DIP Agent and DIP Lenders are subject in each case only to (i) in the event of an occurrence and during the continuance of an Event of Default, the payment of allowed and unpaid professional fees and disbursements incurred after the Event of Default by the Debtors and any statutory committees appointed in the Chapter 11 cases in an aggregate amount to be agreed upon, (ii) allowed and unpaid Professional Fees incurred prior to notice of an Event of Default; and (iii) the payment of the fees pursuant to Section 1930 of the Judicial and Judiciary Procedures Code. Interest. All amounts outstanding under the Senior Credit Facilities will bear interest, at the option of Propex, at the Base Rate or at the reserve adjusted LIBOR Rate plus, in each case, an applicable margin of 4%. Events of Default. Events of Default include, among other things, failure to pay amounts due under the DIP Facility. In addition, it will be an event of default if Propex has not: (i) delivered to the Lenders a comprehensive five-year business plan and projections on or before the six-month anniversary of the Petition Date; (ii) delivered to the DIP Lenders a proposed reorganization plan on or before the eight-month anniversary of the Petition Date; and (iii) filed with the Bankruptcy Court a proposed reorganization plan and accompanying disclosure statement on or before the nine-month anniversary of the Petition Date. Fees and Expenses. * An aggregate closing fee equal to 2% of the commitments in respect of the DIP Facility earned and payable on the Closing Date * An unused Commitment Fee equal to 0.75% of the average unused facility amount * A prepayment fee equal to 2% of the Revolving Loan Commitment Amount in the event of a voluntary termination of the DIP Facility. Indemnification The Credit Agreement provides for full indemnification rights in favor of the Agent and DIP Lenders except for liability resulting solely from their gross negligence or willful misconduct. The Debtors, on Jan. 18, 2008, submitted a copy of the most recent draft of the Credit Agreement. A full-text copy of the draft is available for free at: http://bankrupt.com/misc/Propex_Draft_DIPAccord.pdf Mr. Kaim notes that the Credit Agreement has not been executed by the parties due to time constraints and is still subject to final negotiations. About Propex Headquartered in Chattanooga, Tennessee, Propex Inc. -- http://www.propexinc.com/-- produces geosynthetic, concrete, furnishing, and industrial fabrics and fiber. It is produces primary and secondary carpet backing. Propex operates in North America, Europe, and Brazil. The company and its debtor-affiliates filed for Chapter 11 protection on Jan. 18, 2008 (Bankr. E.D. Tenn. Case No. 08- 10249). The debtors' has selected Edward L. Ripley, Esq., Henry J. Kaim, Esq., and Mark W. Wege, Esq. at King & Spalding, in Houston, Texas, to represent them. As of Sept. 30, 2007, the debtors' balance sheet showed total assets of US$585,700,000 and total debts of US$527,400,000. (Propex Bankruptcy News, Issue No. 2; Bankruptcy Creditors' Service Inc., http://bankrupt.com/newsstand/or 215/945-7000) PROPEX INC: Wants Court Nod to Use BNP Paribas' Cash Collateral --------------------------------------------------------------- Propex Inc. and its debtor-affiliates seek authority from the U.S. Bankruptcy Court for the Eastern District of Tennessee to use BNP Paribas Securities Corp.'s cash collateral. Prior to Jan. 18, 2008, the working capital needs of the Debtors were met primarily by a US$360 million senior credit facility. Pursuant to the terms and conditions of a prepetition credit agreement and related documents, a syndicate of financial institutions arranged by BNP Paribas Securities Corp., which serves as administrative agent for the lender, agreed to provide the senior credit facility, comprised of a US$260 million term loan, a US$50 million revolving facility and a US$50 million bridge loan facility. The Prepetition Credit Facility was secured by perfected, valid, binding and non-avoidable first priority security interests and liens upon substantially all of the assets of the Debtors. In April 2006, the Debtors used the estimated after-tax proceeds from the sale of one of their plants to repay the US$50 million bridge loan and to pay US$11.5 million of the term loan. In January 2007, the Prepetition Lenders waived, among other things, the Debtors' compliance with certain financial covenants, and required the Debtors to pay US$20 million in debt related to the credit facility from cash-on-hand. In September 2007, the Debtors were in default under the Prepetition Credit Agreement. They were unable to refinance the facility. As of the Petition Date, the Debtors were indebted in the aggregate principal of about US$230 million to the Prepetition Lenders. Substantially all of the cash generated by the Debtors' businesses as of the Petition Date constitutes "cash collateral," as the term is defined in Section 363(a) of the Bankruptcy Code, and is subject to the interest of the Prepetition Lenders. The financial lenders under a postpetition credit agreement, under which (i) BNP Paribas also serves as administrative agent and (ii) the the lenders have agreed to provide a US$60 million loan in favor of the Debtors, will also hold an interest in the Debtors' cash. The DIP Documents provide that the Debtors' obligations under the DIP Facility will be secured by, among other things, (i) a perfected first priority, senior priming lien on all the property of the Debtors of any kind, senior to the liens that secure the obligations of the Debtors, under the Prepetition Loan Documents; (ii) first priority lien on all unencumbered property and assets of the Debtors. The Debtors intend to use the Cash Collateral of the Prepetition Lenders and of the DIP Lenders, pursuant to the terms of a monthly budget and cash forecast approved by BNP Paribas. Pursuant to an agreement with BNP Paribas, the Debtors may use the Cash Collateral during the period commencing immediately following the entry of an interim order granting approval of the DIP Financing through the date that is 10 days after the occurrence of an event of default under the DIP Facility. Pursuant to Section 364 of the Bankruptcy Code, the Prepetition Lenders as holders of the Primed Liens will receive adequate protection to the extent of any diminution in value of their collateral in the form of: (i) replacement liens on all assets of the Debtors' estates, junior to the liens securing the DIP Facility and a superpriority claim junior to the superpriority claim granted to the DIP Lenders; provided that neither the superpriority claim or liens will be paid from or attach to the proceeds of avoidance actions; and (ii) subject to the rights of all parties under Section 506(b) of the Bankruptcy Code, the payment of reasonable fees and expenses of the agent under the Prepetition Loan Documents, and, subject to the rights of all parties under Section 506(b) of the Bankruptcy Code, the payment of interest at the respective contractual non-default rates set forth in the Prepetition Loan Documents. Henry J. Kaim, Esq., at King & Spalding, LLP, in Houston, Texas, proposed lead counsel of the Debtors, relates that the Debtors require the immediate use of the Cash Collateral and financing for, among other things, the purchase of their inventory, maintenance of their facilities, and other working capital needs. About Propex Headquartered in Chattanooga, Tennessee, Propex Inc. -- http://www.propexinc.com/-- produces geosynthetic, concrete, furnishing, and industrial fabrics and fiber. It is produces primary and secondary carpet backing. Propex operates in North America, Europe, and Brazil. The company and its debtor-affiliates filed for Chapter 11 protection on Jan. 18, 2008 (Bankr. E.D. Tenn. Case No. 08- 10249). The debtors' has selected Edward L. Ripley, Esq., Henry J. Kaim, Esq., and Mark W. Wege, Esq. at King & Spalding, in Houston, Texas, to represent them. As of Sept. 30, 2007, the debtors' balance sheet showed total assets of US$585,700,000 and total debts of US$527,400,000. (Propex Bankruptcy News, Issue No. 2; Bankruptcy Creditors' Service Inc., http://bankrupt.com/newsstand/or 215/945-7000) PROPEX INC: Wants to Employ King & Spalding as Lead Counsel ----------------------------------------------------------- Propex Inc. and its debtor-affiliates ask authority of the U.S. Bankruptcy Court for the Eastern District of Tennessee to employ King & Spalding LLP, as their lead counsel in their Chapter 11 cases. Lee McCarter, executive vice president and chief financial officer of Propex, Inc., relates that the Debtors selected King & Spalding because of the firm's extensive experience and expertise in business reorganizations and bankruptcy proceedings. Mr. McCarter asserts that King & Spalding has the necessary legal background to deal effectively with many of the potential legal issues and problems that may arise in the context of the Debtors' bankruptcy cases. As the Debtors' lead counsel, King & Spalding will: * advise the Debtors on their powers and duties as debtors- in-possession in the continued management and operation of their business; * take all necessary action to protect and preserve the estates of the Debtors, including the prosecution of actions on the Debtors' behalf, the defense of any actions commenced against the Debtors, the negotiation of disputes in which the Debtors are involved, and the preparation of objections to claims filed against the Debtors' estates; * prepare on behalf of the Debtors all necessary motions, applications, answers, orders, reports, and other papers in connection with the administration of the Debtors' estates; * negotiate and prepare a plan of reorganization, a disclosure statement, documents relating to the disposition of assets, and other related documents on behalf of the Debtors; * advise the Debtors on federal and state regulatory matters; * advise the Debtors on finance, and finance-related matters and transactions, as well as matters relating to the sale of the Debtors' assets; and * perform other legal services for the Debtors as may be necessary and appropriate. In exchange for the contemplated legal services, the Debtors will pay King & Spalding based on the firm's applicable hourly rates: Professional Hourly Rate ------------ ----------- Attorneys US$275 to US$800 Clerks/Legal Assistants US$120 to US$255 The Debtors will also reimburse the firm for expenses it may incur, including travel costs and temporary employment of additional staff, relating to any work undertaken. King & Spalding has done, has been paid fees and expenses for, intellectual property work for the Debtors. As a result, King & Spalding received a US$200,000 retainer from the Debtors on Jan. 3, 2008. Furthermore, prior to the Petition Date, the firm received payments, aggregating US$69,918, from the Debtors, in contemplation or in connection with the Chapter 11 cases. Henry J. Kaim, Esq., a partner of King & Spalding, assures the Court that his firm is a "disinterested person," as the term is defined in Section 101(14) of the Bankruptcy Code. Mr. Kaim notes that as of the Petition Date, King & Spalding had an outstanding balance of more than US$70,000 for its services and expenses incurred. If the Court approves payment of the fees, King & Spalding will write off the amounts and and will not assert an unsecured claim for the amounts against the Debtors. The firm will also write off approximately US$250,000 of fees and expenses for non-reorganization work incurred prepetition, and will not assert a claim for the amounts. About Propex Headquartered in Chattanooga, Tennessee, Propex Inc. -- http://www.propexinc.com/-- produces geosynthetic, concrete, furnishing, and industrial fabrics and fiber. It is produces primary and secondary carpet backing. Propex operates in North America, Europe, and Brazil. The company and its debtor-affiliates filed for Chapter 11 protection on Jan. 18, 2008 (Bankr. E.D. Tenn. Case No. 08- 10249). The debtors' has selected Edward L. Ripley, Esq., Henry J. Kaim, Esq., and Mark W. Wege, Esq. at King & Spalding, in Houston, Texas, to represent them. As of Sept. 30, 2007, the debtors' balance sheet showed total assets of us$585,700,000 and total debts of us$527,400,000. (Propex Bankruptcy News, Issue No. 1; Bankruptcy Creditors' Service Inc., http://bankrupt.com/newsstand/or 215/945-7000) PROPEX INC: Bankruptcy Filing Cues Moody's to Cut CFR to Ca ----------------------------------------------------------- Moody's Investors Service has downgraded its debt ratings of Propex, Inc. -- corporate family to Ca from Caa2, probability of default to D from Caa2, senior secured to Caa2 from B3 and senior unsecured to C from Caa3. The downgrades follow the company's Jan. 18, 2008 announcement that it filed for Chapter 11 protection in United States Bankruptcy Court in Chattanooga, Tennessee. Its speculative grade liquidity rating remains SGL-4. The outlook is stable. Moody's also will withdraw all of its debt ratings of the company because of the bankruptcy filing. The probability of default rating of D reflects that timely payments of interest and principal amortization are not likely to occur because of the bankruptcy filing. Moody's used a fundamental EBITDA multiple to estimate the enterprise value of Propex Inc. and the family level loss-given-default rate because of the company's weakened financial condition. Moody's believes that the expected family recovery rate is not materially different from the standard 50% assumption of its Loss Given Default Rating Methodology. An assumed EBITDA multiple of four times supports Moody's belief of about a 50% expected family recovery rate. The LGD-2 Loss Given Default Assessment of the senior secured credit facility implies that the potential exists for lenders to receive less than a full recovery. The LGD-5 Loss Given Default Assessment of the senior unsecured notes implies a significant loss on these notes. The previous rating action for the company was on Jan. 14, 2008, when Moody's downgraded the company's ratings; corporate family rating to Caa2 from Caa1 because of its inability to timely secure relief from the covenant breach of the senior secured credit agreement, first disclosed on Oct. 26, 2007. Downgrades: -- Probability of Default Rating, Downgraded to D from Caa2 -- Corporate Family Rating, Downgraded to Ca from Caa2 -- Senior Secured Bank Credit Facility, Downgraded to Caa2 from B3 -- Senior Unsecured Regular Bond/Debenture, Downgraded to C from Caa3 Outlook Actions: -- Outlook, Changed To Stable From Rating Under Review -- Outlook, to be Changed To Rating Withdrawn From Stable Loss Given Default Assessments: -- Senior Secured Bank Credit Facility, Changed to 27 - LGD2 from 28 - LGD2 -- Senior Unsecured Regular Bond/Debenture, Changed to 80 - LGD5 from 81 - LGD5 Ratings to be Withdrawn: -- Probability of Default Rating, previously rated D -- Corporate Family Rating, previously rated Ca -- Senior Secured Bank Credit Facility, previoualy rated Caa2, 27-LGD2 -- Senior Unsecured Regular Bond/Debenture, previously rated C, 80-LGD5 Propex Inc. -- http://www.propexinc.com/-- manufactures primary and secondary carpet backing. The company also manufactures and markets woven and non-woven polypropylene fabrics and fibers used in geosynthetic and a variety of other industrial applications. The company has manufacturing operations in North America, Europe and Brazil. The company disclosed a net loss of US$60.7 million in three months ended Sept. 30, 2007, compared to a net loss of US$6.5 million in the same period in 2006. At Sept. 30, 2007, the company's balance sheet showed total assets of US$585.7 million and total liabilities of US$527.4 million, resulting in a US$58.3 million stockholders' equity. PROPEX INC: Bankruptcy Filing Cues S&P To Cut Corp. Rating to D --------------------------------------------------------------- Standard & Poor's Ratings Services has lowered its corporate credit rating on Propex Inc. to 'D' from 'CCC'. In addition, S&P lowered the senior secured and senior unsecured ratings to 'D'. "The downgrades follow Propex's announcement that it has filed for protection under Chapter 11 of the U.S. Bankruptcy Code," said S&P's credit analyst Henry Fukuchi. The company will continue to operate its facilities and offices in the ordinary course of business while it restructures its balance sheet. It has arranged a US$60 million credit facility for which it is seeking Court approval. S&P removed the ratings from CreditWatch with negative implications, where they were placed on Oct. 8, 2007, on concerns that the company's leveraged financial profile and liquidity would continue to deteriorate in the current challenging environment. Operating results have been weak at Propex Inc. due to low residential construction activity and declines in the domestic housing markets, which have caused earnings, cash flow, and the financial profile to deteriorate to subpar levels. Propex Inc. -- http://www.propexinc.com/-- manufactures primary and secondary carpet backing. The company also manufactures and markets woven and non-woven polypropylene fabrics and fibers used in geosynthetic and a variety of other industrial applications. The company has manufacturing operations in North America, Europe and Brazil. The company disclosed a net loss of US$60.7 million in three months ended Sept. 30, 2007, compared to a net loss of US$6.5 million in the same period in 2006. At Sept. 30, 2007, the company's balance sheet showed total assets of US$585.7 million and total liabilities of US$527.4 million, resulting in a US$58.3 million stockholders' equity. SANYO ELECTRIC: Hires Execs from Financial Firms to Head Units ---------------------------------------------------------------- Sanyo Electric Co. appoints executives from financial firms to head its main units in a management reshuffle scheduled to take effect April 1, reports Jiji Press. According to the report, the appointed officers transferred from Sanyo's shareholder firms in the financial industry. The report states that Sanyo will appoint Vice President Koichi Maeda, formally at Sumitomo Mitsui Banking Corp., to head its semiconductor business. Sumitomo Mitsui is a major shareholder of Sanyo, relates Jiji Press. Kazuhiko Suruta, from Daiwa Securities SMBC Co., will head the solar cell business, while Kentaro Yamagishi, from Goldman Sachs Group Inc., will spearhead Sanyo's business strategy division, notes Jiji Press. Sanyo Electric Headquartered in Osaka, Japan, Sanyo Electric Co., Ltd. -- http://www.sanyo.com/-- is one of the world's leading manufacturers of consumer electronics products. The company has global operations in Brazil, Germany, India, Ireland, Spain, the United States and the United Kingdom, among others. * * * In March 2, 2007, Fitch Ratings placed SANYO Electric Co. Ltd.'s BB+ long-term foreign and local currency issuer default and senior unsecured ratings on rating watch negative. The company also carries Standard & Poor's 'BB-' long-term corporate credit rating. SANYO ELECTRIC: To Sell Mobile Phone Unit to Kyocera for JPY50BB ---------------------------------------------------------------- Sanyo Electric Co. said it will sell its mobile phone operations to Kyocera Corp., Associated Press reports. According to the report, the deal, which has yet to be set on paper, will be cost Kyocera about JPY40-50 billion. The deal is scheduled to be completed by April 1. Reuters relates that according to a Sanyo spokesman, the final selling price of Sanyo's mobile phone unit will be set by September. Under the agreement, about 2,000 employees in Sanyo's mobile phone operation will be transferred to Kyocera, which will continue to use the Sanyo brand on handsets at home and overseas, relates AP. AP notes that, in a statement, Sanyo said that with the "intensified competition from rival companies," and "in order to meet the best interest of the business and its stockholders, Sanyo has. . .concluded that a transfer of the business to Kyocera would be the ideal situation." About Sanyo Electric Headquartered in Osaka, Japan, Sanyo Electric Co., Ltd. -- http://www.sanyo.com/-- is one of the world's leading manufacturers of consumer electronics products. The company has global operations in Brazil, Germany, India, Ireland, Spain, the United States and the United Kingdom, among others. * * * In March 2, 2007, Fitch Ratings placed SANYO Electric Co. Ltd.'s BB+ long-term foreign and local currency issuer default and senior unsecured ratings on rating watch negative. SANYO ELECTRIC: Kyocera Buyout Won't Affect Ratings, S&P Says ------------------------------------------------------------- Standard & Poor's Ratings Services said that its ratings on Sanyo Electric Co. Ltd. (BB-/Stable/--) would not be affected by the company's final agreement to sell its mobile telephone business to Kyocera Corp. The effective date of sale is scheduled for April 1, 2008. The business value has been agreed upon by both companies at JPY50 billion, although the final amount is subject to adjustments related to the amount of outstanding debt and the amount of cash and deposits to be transferred on the effective date. Standard & Poor's considers the sale of the mobile telephone business, which is characterized by fierce competition and volatile profitability, to be a positive factor for Sanyo allowing it to enhance its business franchise and concentrate its management resources on its core businesses, particularly rechargeable batteries and solar cells. The final agreement, however, is largely consistent with the basic agreement reached in October 2007, while the effect of the sale on Sanyo's credit quality is likely to be such that it remains within the range of the current rating. An upgrade will depend on Sanyo's steady progress in enhancing the competitiveness of its core businesses, as laid down in the current medium-term management plan, and improving cash flow generation and financial stability. Meanwhile, continued close attention must be paid to any change in support from the financial institutions, which are Sanyo's major shareholders, as well as to any judgment passed down by the Tokyo Stock Exchange, which placed Sanyo's shares on the supervising post after it recently voluntarily restated its earnings reports. Sanyo Electric Headquartered in Osaka, Japan, Sanyo Electric Co., Ltd. -- http://www.sanyo.com/-- is one of the world's leading manufacturers of consumer electronics products. The company has global operations in Brazil, Germany, India, Ireland, Spain, the United States and the United Kingdom, among others. * * * In March 2, 2007, Fitch Ratings placed SANYO Electric Co. Ltd.'s BB+ long-term foreign and local currency issuer default and senior unsecured ratings on rating watch negative. The company also carries Standard & Poor's 'BB-' long-term corporate credit rating. TELE NORTE: Offers Contax Share to GP in Exchange for Oi Shares --------------------------------------------------------------- News daily Valor Economico reports that Brazil's investment group GP Investimentos has received an offer to increase its shares in call center company Contax Participacoes in return for its shares in Oi, fka Tele Norte Leste Participacoes. Business News Americas relates that once GP Investimentos accepts the offer, it would leave the telephony sector but would boost its share in Contax Participacoes. According to BNamericas, Tele Norte and Contax main controllers La Fonte and Andrade Gutierrez are considering delivering to GP Investimentos a share of Contax Participacoes' stocks as their part in the deal. BNamericas notes that the shares to be possibly acquired by GP Investimentos would increase in their original value. Contax Participacoes could be responsible for the call center services of Brasil Telecom, which would be acquired by Tele Norte. Meanwhile, pension funds would unload part of their shares in Tele Norte to make the merger with Brasil Telecom possible, BNamericas says. They questioned the transparency of including Contax Participacoes in the talks with GP Investimentos. Possible forms of payment are being revised due to pension funds discontent, BNamericas states. About Contax Participacoes Contax Participacoes S.A. is engaged in the provision of outsourcing contact center services to commercial and civil companies and its only controlled company, TNL Contax S.A. in Brazil. Contax Participacoes specializes in designing, implementing, and operating complex contact centers, aiming at helping its clients to improve their customer relationships and maximize the value they provide to them. The company offers a variety of channels of communication to interact with customers, including voice, web, e-mail, mail and fax services. Among Contax Participacoes' clients are many of Brazil's large-scale companies of the telecommunications, financial services, utilities and Internet sectors, among others. By the end of 2006, the company had 49,132 employees and operated 22,407 workstations distributed throughout 16 contact centers in eight Brazilian states. The Company is part of the Telemar Group. About GP Investimentos GP Investimentos Ltda. is the investment firm created in 1993 by the controlling shareholders of Lojas Americanas S.A., Companhia Cervejaria Brahma (currently Ambev) and Banco de Investimentos Garantia S.A. (currently CSFB Garantia). GP Investimentos undertakes principal transactions on behalf of the Partners and third-party investors. About Brasil Telecom Headquartered in Brasilia, Brazil, Brasil Telecom Participacoes SA -- http://www.brasiltelecom.com.br-- is a holding company that conducts substantially all of its operations through its wholly owned subsidiary, Brasil Telecom SA. The fixed-line telecommunications services offered to the company's customers include local services, including all calls that originate and terminate within a single local area in the region, as well as installation, monthly subscription, measured services, public telephones and supplemental local services; intra-regional long- distance services, which include intrastate and interstate calls; interregional and international long-distance services; network services, including interconnection and leasing; data transmission services; wireless services, and other services. About Telemar Norte Headquartered in Rio de Janeiro, Brazil, Tele Norte Leste Participacoes SA -- http://www.telemar.com.br-- is a provider of fixed-line telecommunications services in South America. The company markets its services under its Telemar brand name. Tele Norte's subsidiaries include Telemar Norte Leste SA; TNL PCS SA; Telemar Internet Ltda.; and Companhia AIX Participacoes SA. As reported on April 27, 2007, Standard & Poor's placed on CreditWatch with negative implications the 'BB+' corporate credit rating on Tele Norte Leste Participacoes S.A. The creditwatch resulted from TmarPart's decision to buy out its holding company's preferred shares. UAL CORP: Commences Merger Talks w/ Delta Air & Northwest Air ------------------------------------------------------------- UAL Corp. and Northwest Airlines Corp. have engaged in formal merger talks with Delta Air Lines Inc., reports The Wall Street Journal. WSJ says Delta, which is in the early stages of discussions with both Northwest and UAL, hopes to reach an agreement with one of them over the next two weeks. Delta is anticipating a deal disclosure early as mid-February after Delta's board meeting scheduled early in the month, says the report. "A special committee of the board is working with management to explore strategic options, including potential consolidation transactions. However, we are not providing updates, while this process is ongoing," Delta spokeswoman Betsy Talton, said. Northwest and UAL declined to comment. A UAL-Delta or a Northwest-Delta merger, which would likely be a stock for stock transaction, would make Delta the largest airline in the world, according to reports. Experts in the airline industry, however, believe that a Northwest-Delta merger is more likely as Delta's Chief Executive Richard Anderson was previously CEO at Northwest, and is already well acquainted with Northwest's operations. Senator Johnny Isakson, a Georgia Republican, said that Mr. Anderson told him in December that if there's a merger or an acquisition, Delta would keep its name and Atlanta hub, Bloomberg News reports. About UAL Corp. Based in Chicago, Illinois, UAL Corporation (NASDAQ: UAUA) -- http://www.united.com/-- is the holding company for United Airlines, Inc. United Airlines is the world's second largest air carrier. The airline flies to Brazil, Korea and Germany. The company filed for chapter 11 protection on Dec. 9, 2002 (Bankr. N.D. Ill. Case No. 02-48191). James H.M. Sprayregen, Esq., Marc Kieselstein, Esq., David R. Seligman, Esq., and Steven R. Kotarba, Esq., at Kirkland & Ellis, represented the Debtors in their restructuring efforts. Fruman Jacobson, Esq., at Sonnenschein Nath & Rosenthal LLP represented the Official Committee of Unsecured Creditors before the Committee was dissolved when the Debtors emerged from bankruptcy. Judge Wedoff confirmed the Debtors' Second Amended Plan on Jan. 20, 2006. The company emerged from bankruptcy protection on Feb. 1, 2006. * * * Fitch Ratings, on May 2007, affirmed the Issuer Default Ratings of UAL Corp. and its principal operating subsidiary United Airlines Inc. at B-. UAL CORP: Reports Highest Annual Pre-tax Income Since 1999 ---------------------------------------------------------- UAL Corporation reported on Jan. 22, 2008, pre-tax income of US$695 million for 2007, the highest since 1999. Pre-tax income excluding special items and severance was US$606 million, US$665 million higher than 2006. The company: -- Reported annual diluted earnings per share (EPS) of US$2.79, despite a basic loss per share of US$0.47 in the fourth quarter. -- Increased annual mainline passenger unit revenue (or PRASM) by 7.1 percent year-over-year, excluding special items, through continued capacity discipline and revenue execution, with fourth quarter mainline PRASM increasing 13.1 percent year-over-year. -- Continued its focus on controlling costs, with 2007 annual operating expenses increasing 1.1 percent versus 2006. -- Generated operating cash flow of US$2.1 billion in 2007, a 37 percent increase from 2006. -- Strengthened its balance sheet in 2007 by reducing on and off balance sheet debt by US$2.3 billion, including a reduction of nearly US$700 million in the fourth quarter. The company ended the year with an unrestricted cash and short-term investments balance of US$3.6 billion as of Dec. 31, 2007, and restricted cash of US$0.8 billion. -- Announced a special distribution of US$2.15 per share of UAL common stock, or approximately US$250 million, to holders of record as of Jan. 9, 2008. -- Reported that employees had earned about US$170 million of cash payments related to 2007 performance, composed of approximately US$110 million in profit-sharing, US$40 million in Success Sharing incentives and US$20 million from the special distribution. 2007 Earnings Growth Driven By Strong Revenue Performance The company generated net income of US$403 million in 2007, the first full-year profit since 2000, excluding reorganization items. Excluding special and reorganization items and severance, 2007 net income of US$352 million was US$417 million higher than 2006. On a full-year basis, the company reported pre-tax income of US$695 million, or US$606 million excluding special items and severance, resulting in a pre-tax margin of 3.0 percent compared to a negative 0.3 percent for full-year 2006. The company generated US$1.0 billion of operating income for the year, or US$948 million excluding special items and severance, US$515 million or nearly 120 percent higher than 2006, more than doubling operating margin to 4.7 percent. The company's fourth quarter results were negatively affected by the sharp rise in the price of fuel. While the company reported passenger unit revenue growth that was among the best in the industry, consolidated fuel expense increased US$359 million as fuel prices rose more than 25 percent versus last year. As a result, the company reported an operating loss of US$64 million for the fourth quarter of 2007, a pre-tax loss of US$98 million and a net loss of US$53 million, US$8 million better than the fourth quarter of 2006. "Our employees and management team made real progress in 2007 to strengthen the core airline and provide a return to shareholders, delivering the highest annual profit since 1999," said Glenn Tilton, United chairman, president and CEO. "We will continue to improve in 2008, as we add breadth to our leadership team in areas critical to the success of our strategy such as strategic sourcing and information technology, that we will leverage to reduce our costs, improve our operation and strengthen the infrastructure we use to deliver enhanced services for our customers." Annual operating expenses increased 1.1 percent versus 2006, while full-year 2007 mainline CASM, excluding fuel, special items and severance, was up 3.1 percent. Fourth quarter operating expenses increased by US$531 million or approximately 11.6 percent year-over-year primarily due to the US$359 million increase in consolidated fuel expense. Fourth quarter mainline CASM, excluding fuel and special items, of 8.28 cents was up 9.2 percent year-over-year driven mainly by lower capacity, higher heavy maintenance volumes, increased purchased services expense for information technology deployment and efficiency and revenue improvement initiatives, as well as higher profit-sharing expense. Additionally, the severe winter storms that took place in Chicago and Denver in December increased staffing, glycol and other related costs for the quarter. The company's consolidated passenger revenue for the fourth quarter includes approximately US$55 million of non-cash revenue relating to the quarterly amortization of the benefit from the change to the expiration period for inactive Mileage Plus accounts announced in January 2007. In addition, at year-end when miles expired for the first time under the new policy, the company recorded mileage expiration that was higher than it had estimated in previous quarters. As a result, the company recognized approximately US$66 million of incremental non-cash revenue, bringing the total impact of the change in the policy to US$121 million for the fourth quarter.