latin america high yield & distressed intelligence...

List of Companies covered in this issue Acucar Guarani Agrenco AHMSA Arantes Alimentos Banco Hipotecario Bertin Group Cablevision Camuzzi Gas Pampeana Cap Cana Cemex Cia. Albertina Coltejer Comercial Mexicana Companhia Energetica de Minas Gerais Controladora Comercial Mexicana (Comerci) Corporacion Durango Cosan CPFL Energia CSN Desarrolladora Homex Desarrolladora Metropolitana (Demet) Edenor GOL Grupo Clarin Grupo Industrial Saltillo (GISSA) Grupo Kuo Grupo Posadas Grupo Senda Hipotecaria Su Casita HPDA Impsa Infinity Bio-Energy IRSA JBS Maxcom Metrogas Multicanal Net Servicos Nova America Parmalat Pemex Perdigao Petrobras Energia Province of Buenos Aires Republic of Argentina Republic of Ecuador Sabesp Sadia San Martinho Santelisa Vale Satmex Telecom Argentina Telefonica de Argentina Transportadora de Gas del Norte (TGN) Transtel Tricom Vitro YPF + plus others

Your Debtwire Team

Managing DirectorJonathan Reed

+ 1 212 686 5418 [email protected]

Editor - Latin AmericaGabriel DeSanctis+ 1 212 686 5412

[email protected]

SalesFlavia Cesar

+ 1 646 378 [email protected]

Katarina Homindova + 44 207 059 6205

[email protected]

Head of Latin America ResearchValeria Seifert


eeulatam.debtwire.com

Latin America High Yield & Distressed Intelligence Update 1 February - 28 February 2009

Contents

Introduction 4 Latin America – Debtwire Universe 5 Stressed Debt 9 Acucar Guarani S.A. 10 Cap Cana S.A. 12 Cemex S.A. de C.V. 13 Desarrolladora Metropolitana SA de CV; (Demet) 15 FertiNitro 17 Gol Linhas Aereas Inteligentes 18 Infinity Bio-Energy Limited 19 JBS S.A. 20 Expected Deals 22 Altos Hornos de Mexico, S.A. de C.V. (AHMSA) 23 Santelisa Vale Bioenergia / Cosan / Sao Martinho / Nova America / Infinity Bio-Energy Limited 24 Transportadora de Gas del Norte S.A. (TGN) 28 Transtel S.A. 30 Vitro S.A. de C.V. / Petroleos Mexicanos (PEMEX) 31 Live Deals 33 Agrenco Ltd. 34 Arantes Alimentos 36 Cablevision / Telefonica de Argentina / Republic of Argentina / Grupo Clarin / Telecom Argentina 40 Cia. Albertina 41 Comercial Mexicana S.A. de C.V. 42 Corporacion Durango, S.A. de C.V. 44 Tricom 46 Post Restructuring 47 Compania Colombiana de Tejidos S.A. (Coltejer) 48 Empresa Distribuidora y Comercializadora Norte S.A. 49 Grupo Iusacell S.A. de C.V. 50 Hidroelectrica Piedra del Aguila S.A. (HPDA) / Republic of Argentina 51 MetroGas S.A. / Republic of Argentina / Camuzzi Gas Pampeana S.A. 52 Parmalat Alimentos Brasil S.A. 53 Province of Buenos Aires 54 Republica Argentina 55 Satelites Mexicanos, S.A. de C.V. (Satmex) 57 High Yield 58 Banco Hipotecario S.A. / IRSA - Inversiones y Representaciones S.A. 59 Bertin Group 59 Companhia Siderurgica Nacional (CSN) / Kremikovtzi AD 62 Desarrolladora Homex S.A. de C.V. 64 Grupo Industrial Saltillo (GISSA) 64 Grupo Kuo SAB de C.V. / CIE DESC Automotive, S.A. de C.V. 65 Grupo Posadas S.A de C.V. 65 Grupo Senda 66 Hipotecaria Su Casita S.A. DE C.V. 66 Industrias Metalurgicas Pescarmona S.A. (Impsa) 67 IRSA - Inversiones y Representaciones S.A. / Alto Palermo S.A. 67 Itau Unibanco Banco Multiplo S.A. (Formerly Banco Itau Holding Financeira S.A.) 68 Maxcom Telecommunications S.A. de C.V. 69 NET Servicos de Comunicacao S.A. 69 Petrobras Energia Participaciones S.A. / TGS / Emgasud S.A. 70 Sadia S.A. / Perdigao S.A. 71 Telefonica Argentina / Multicanal / Grupo Clarin / Telecom Argentina / Cablevision / Rep Argentina 73 Issuance Pipeline 75 Emgasud 76 Others 78 AEI 79

BNDES 79 BNDES / Construtora Norberto Odebrecht S/A (CNO) / Republic of Ecuador 80 Electroingenieria S.A./ Grupo Clarin S.A. / Transener S.A. 80 Grupo Gigante S.A.B. de C.V. / Wal-Mart Stores Inc 81 Upcoming Events 82

Introduction

Debtwire Latin America provides actionable intelligence on high yield, distressed and restructuring situations, contributing to an increase in transparency in an otherwise opaque market, leveraging a presence on the ground and strong relationships with regional contacts. The Debtwire Latin America team presents ground-breaking news on debt restructurings and also offers capital markets coverage on sub-investment-grade-rated new issuance, local market and foreign currency refinancings and liability management exercises. The team also supplies information on high-yield issuance from corporates not otherwise covered by the market, providing value by tracking them from a financial and operational standpoint.

Beside the economic terms that surface throughout a debt restructuring, Debtwire Latin America provides subscribers with analysis of legal and regulatory issues associated with local companies, highlighting points that could affect valuations and expected recovery. The team also tracks disposals and potential M&A activity as well as operational issues (such as new business contracts) that could have an impact on a company's financial performance.

http://eeulatam.debtwire.com/ Disclaimer We have obtained the information provided on this report in good faith from sources which we consider to be reliable, but we do not independently verify the information. The information is not intended to provide tax, legal or investment advice. You should seek independent tax, legal and/or investment advice before acting on information obtained from this report. We shall not be liable for any mistakes, errors, inaccuracies or omissions in, or incompleteness of, any information contained in this report. All such liability is excluded to the fullest extent permitted by law. We make no representations or warranties in regard to the contents of and materials provided on this report and exclude all representations, conditions, and warranties, express or implied arising by operation of law or otherwise, to the fullest extent permitted by law. We shall not be liable in contract, tort (including negligence) or otherwise for any indirect, special, incidental or consequential losses or damages, or loss of profits, business revenue, goodwill or anticipated savings arising from use of this report or the information and materials contained in it. We shall not be liable under any circumstances for any trading, investment, or other losses which may be incurred as a result of use of or reliance on information provided in this report. All such liability is excluded to the fullest extent permitted by law. Nothing in this statement shall limit or exclude our liability for death or personal injury caused by our negligence. The information contained in this report is not intended for distribution to, or use by, any person or entity in any jurisdiction or country where such distribution or use would be contrary to law or regulation or which would subject us to any additional registration requirement within such jurisdiction or country.

For further information please contact: Debtwire, 895 Broadway # 4, New York, NY 10003 Tel: +1 (212) 686-5374 5

Latin American High Yield & Distressed Intelligence Update 1 February - 28 February 2009

Latin America – Debtwire Universe

Stressed Debt (19)

Expected Deals (12)

Live Deals (19)

Post Restructuring (25)

High Yield (103)

Acucar G Ahmsa Agrenco AES Dominicana Aerolineas Arg Gruma SA Aracruz BRA Transportes Aguas Argentinas Banco Santos AES Eletropaulo Grupo Clarin Ausol Braspelco Alpargatas Bombril do Brasil AES Itabo Estrella Blanca Cap Cana Frigorifico Margen Apex Silver Mines Brasil Ecodiesel AES Tiete GISSA Cemex Gradiente Arantes Camuzzi Gas Pamp Air Jamaica Grupo Kuo Crystallex Intelig Asarco Central Puerto Alestra Grupo Mexico Demet ITSA Cablevision Coltejer Alfa PIMSA Fertinitro Rep of Ecuador Compania Albertina Disco Alto Palermo Grupo Posadas GOL Santelisa Cia Fargo Edenor ALL Grupo Rede IEBA TGN Comercial Mexicana Edesur Ampla Grupo Senda Independencia Transtel Corp Durango Editora Abril Autopista del NE Grupo TMM Infinity Vitro Enka de Colombia Emcali Axtel Su Casita IUSA LP Display Endesa Costanera Banco Comafi Imcopa JBS Quatro Marcos Grupo Iusacell Banco Galicia Impsa Mastellone Parmalat Particip HPDA Banco Hipotecario Impsat Nova America Soc Com del Plata Kepler Weber BicBanco IRSA Sanluis Supercanal Light SA Banco Itau Holding ISA TV Band Tricom Metrogas Banco Macro Kansas City Unialco VASP Multicanal Bertin Group Localiza Rent a Car Parmalat Alimentos Brasil Telecom Marfrig Prov of BA Braskem Maxcom Rep. Argentina Cablemas Minerva Sancor Camargo Correa MRS Logistica Satmex Capex NET Servicos Sementes Cerveceria Nac D Newland Inter. Copel Oceonografia Ciudad de BA Pan American Energy Claredon Aluminia Petrobras Cemig PDVSA CESP Pemex CSN Prov. of Neuquen CNO SABESP Copamex Sadia SA CIE Santader Rio Cosan Sao Martinho CPFL Sul America Seguros Cydsa TAM Homex Telecom Argentina DASA Telefonica Arg. Digicel TIM Dominican Republic Tractebel Energia Elektro Transener EGE Haina TGI Emgasud TGS Energisa TV Azteca Escelsa Ultrapar Gerdau Unibanco GVT Urbi Gov. of Brasil Vivo Participacoes Gov. of Mexico Xignux Gov. of Peru YPF SA Gov. of Venezuela



Debtwire Universe: Number of Companies per CountryUniverse includes 178 companies

Brazil42%

Argentina25%

Mexico21%

Others0%

Colombia3%

Venezuela2% Dominican Republic

5% Panama1%

Peru1%

Chile0%

Debtwire Universe: Number of Companies per IndustryUniverse includes 178 companies

Utilit ies16%

T eleco m & C able10%

Industrial P ro ducts & Services

6%

Go vernment6%

C o nsumer6%F inancial Services

6%M edia

5%

T ranspo rtat io n7%

Leisure2%

Energy13%

F o o d8%

C o nstructio n4%

M anufacturing3%

T ext iles2%

C hemicals2%

C o nglo merate2%

M ining2%

Services (Other)1%



0 2 4 6 8 10 12 14

Transportation

Textiles

Telecom & Cable

Industrial Products & Services

Construction

Food

Financial Services

Consumer

Media

Government

Energy

Utilities

Argentina: Number of Companies per IndustryTotal Number of Companies: 44

0 2 4 6 8 10 12 14

Conglomerate

Government

Services (Other)

Chemicals

Construction

Energy

Media

Transportation

Consumer

Food


Telecom & Cable

Financial Services

Utilities

Brazil: Number of Companies per IndustryTotal Number of Companies: 73



0 0.5 1 1.5 2 2.5 3 3.5 4 4.5 5

Chemicals

Energy

Financial Services

Government

Conglomerate

Consumer

Leisure

Media

Mining

Construction

Transportation


Manufacturing

Telecom & Cable

Mexico: Number of Companies per IndustryTotal Number of Companies: 37



Stressed Debt



Acucar Guarani S.A. 05 Feb Tereos shareholders agree to shore up Acucar Guarani subsidiary with EUR 63m capital

injection Tereos shareholders have agreed to inject EUR 63m into the group to support a rights issue by

subsidiary Acucar Guarani (Guarani), investors, analysts and a company source told Debtwire. The French sugar group’s Brazilian subsidiary ended the September 2008 financial year with around EUR 220m of net debt, of which a substantial chunk matures in the coming 12 months. Guarani typically rolls over its short-term debts, but with higher financing costs in Brazil in the wake of the credit crisis, Tereos opted to shore up the finances of its Brazilian subsidiary, the investors, analysts and company source said. “Lending rates in Brazil are pretty high,” the analyst added. “Financial markets out there are dried up and unstable.” With Tereos - which owns 62% of Guarani - stumping up EUR 63m of capital, minority investors could provide up to EUR 38m of additional capital, implying around BRL 300m (EUR 100m) of potential new money through the rights issue. The French sugar group's EUR 63m contribution will be funded by the shareholders in Tereos and those in its holding company Berneuil Participation. Guarani was able to secure a new USD 20m three-year loan and a USD 35m five-year loan from two banks as a result of the rights issue, the company source explained. “That the bulk of the new financing came from Tereos shareholders is positive,” one of the investors said. This will result in lower overall debt at group level. “It’s also very good news for Guarani, which is getting cheap debt,” he added. Tereos provided its Brazilian subsidiary with a USD 220m inter-company loan using some of its own surplus liquidity last October, at a small margin over Libor, the investors and analysts said. In a worst-case scenario, which assumes Brazilian capital markets remain closed, the capital rights issue and new loans will provide Guarani with sufficient reserves to meet its refinancing needs for the next 24 months. However, Tereos expects the subsidiary to begin putting new credit facilities in place at more competitive rates in the coming months to start reimbursing the group, the company source said. Guarani also has significant sugar stocks for exports, which it could sell if it needs to increase liquidity, he added. Tereos provided an upbeat outlook for its 08/09 financial year, targeting EBITDA of EUR 415m-EUR 430m, an increase of 15% over the previous year, with the majority of growth outside of France, the investors and analysts said. The company expects net debt on a consolidated basis at year-end to be around EUR 1.55bn-EUR 1.58bn versus EUR 1.643bn at the end of September 2008, they added. Tereos resolved its production problems at its ethanol business, BNP Lillebonne, and raised output to 8,000 hectolitres per day, in line with its target of producing 2.6 million hectolitres per year. As a result, the company is forecasting around EUR 20m-EUR 25m EBITDA during the 08/09 year, compared with negative EUR 3m of EBITDA in the prior year. The business originally forecast EUR 40m of FY EBITDA in the medium-term. Unless oil prices recover, this figure is deemed an unlikely target, the company said. Tereos received a EUR 169m indemnity payment for quota cancellations from the European Union last year in return for shutting down 20% of its sugar production capacity in France, which involved the closure of three plants. After offsetting the cost of the closures and an asset write-down, the group was left with EUR 110m, which it booked as a non-recurring cash item under its profit and loss account, the investor said. Tereos plans to shut around a 1,000 tonnes of its annual isoglucose production this year in return for an additional EUR 40m indemnity payment, the investors and analysts noted. The European Union has now achieved 5.6 billion tonnes of cuts in sugar production out of a 6 billion tonne target, which will result in a drop in the level of European sugar stocks, the company said. “Tereos is expecting a significant positive impact from rising sugar prices this year,” the investor continued. Global sugar consumption has overtaken global production, he added. Tereos plans to spend EUR 180m on capex in FY08/09, of which EUR 140m is maintenance capex and EUR 40m is investment. The investment will largely go to Mozambique. Capex in 2010 and 2011 will likely sit around EUR 110m, the company said. “Tereos is cutting capex back pretty much to the bare bones as we had hoped,” the investor said. Working capital, which increased significantly last year as a result of the group’s Talfiie acquisition, is likely to grow modestly this year by around EUR 47m. “With better control of cash, support for subsidiaries, and organic growth, the company provided a positive outlook for the year,” the first investor said. Tereos’ outstanding 6.375% 2014s gained around two to three points following the call with quotes around 57/60, one of the investors said. By Robert Schach

17 Feb Acucar Guarani to carry USD 220m intercompany loan as long as required to refinance

other short-term debt



Acucar Guarani, a Brazilian sugar and ethanol producer, will carry a USD 220m intercompany loan for as long as necessary to refinance other obligations weighing on its balance sheet, CEO Jacyr Costa Filho and CFO Reynaldo Benitez said in a conference call Tuesday. Acucar Guarani received two intercompany loans totaling USD 220m from controller Tereos of France in the second half of last year. The facilities are recognized as short-term obligations but their actual maturities hinge on Acucar Guarani's ability to roll over other short-term lines. “This money came in a time of crisis when renewing our short-term debt was difficult,” the CEO said of the Tereos facilities. As Acucar Guarani succeeds in securing longer-dated loans, the Brazilians will have a clearer idea of when they can repay Tereos, he said. Refinancing debt and improving the overall liquidity of the company has not been easy under current market conditions, leading to new measures to capitalize Acucar Guarani that was announced in early-February. On top of the intercompany loans, Tereos recently reiterated its commitment to back 62.4% of the subsidiary's rights issue, as reported. The Brazilian sugarcane processor intends to raise a total of BRL 301.6m (USD 130m) from the rights issue by 5 March, according to CFO Benitez, who cited a recent regulatory filing. The commitment from Tereos has already borne fruit, according to Acucar Guarani’s earnings report. The company has been able to secure a USD 20m three-year export prepayment facility with Calyon and will disclose the renewal of other loans shortly, Reynaldo Benitez said. The capital raised in the rights issue and the renewal of certain lines are designed to provide sufficient reserves to meet Acucar Guarani’s refinancing needs for the next 24 months. The average interest on Acucar Guarani’s debt is 6%-7% per year and most of it is denominated in US dollars, Benitez said. Due to the depreciation of the real against the US currency Acucar Guarani posted a net loss of BRL 113m (USD 49m) during third quarter of fiscal 2009, as reported. By Ana Mano, in Sao Paulo



Cap Cana S.A. 02 Feb Cap Cana bond holders organize; in early stages of negotiations with company - sources Bond holders representing over 60% of Cap Cana’s USD 250m 9.625% notes have hired legal

advisor Chadbourne & Parke and are in dialog with the company, two sources familiar with the matter said. The company has issued no formal announcements regarding how it plans to respond to the organized creditor group. Indeed, no information was forthcoming on the success of a partial tender of up to USD 100m of the company’s bonds or the timing of an expected exchange offer, a source claiming knowledge of the situation said. Late last year, an entity related to the financial advisors of Cap Cana’s controlling shareholder group launched the partial tender at 33.4% of the nominal value of the notes, and are thought to have accepted first USD 50m, then USD 20m in bonds. A special purpose vehicle headquartered in Panama, also with a strong connection to the controlling shareholders, acquired a Cap Cana USD 100m bridge loan from its holders at a 40% discount. That debt was later retired after it was exchanged for real estate in the Cap Cana project, it was reported. The company was not immediately available to comment on the matter. According to the second source familiar, Cap Cana bond holders “want to be recognized as a group,” and are eager to expand the level of communication with the company. The company, apparently, is in a kind of quiet period as it generates an exchange offer for the outstanding bonds, the first source said. “There is value in the project and in the company’s proposal. It needs to be analyzed,” the first source said. By Georgina Gatsiopoulos



Cemex S.A. de C.V. 17 Feb Cemex is Mexico’s Citibank, too big to fail, sources say Cemex, a global cement player headquartered in Mexico, is likened to US financial institution

Citibank in that it is “too big to fail,” public and private sector sources said. Because of the exposure of prominent local and international financial institutions to Cemex, the global cement player has been able to secure government support and favorable terms from those banks “that understand how to play ball here. It is only a small leap of faith,” a government official with knowledge of the situation said regarding the international financial sector’s confidence in the Mexican government’s role in supporting Cemex. For its part, Citibank too has benefited from more than USD 50bn in US government support in the wake of a financial crisis that has already taken two prominent victims: Bear Stearns and Lehman Brothers. In Mexico, Cemex was the first corporate to receive partial guarantees from government-owned development banks for commercial paper and peso-denominated bond issuance when that market dried up last year. With the help of the Mexican government and concessions on the part of the company’s creditors, Cemex avoided defaulting on looming short-term maturities despite liquidity concerns (the company reports 2009 maturities of USD 4.9bn and a free cash flow projection of USD 1.6bn). At the same time, Vitro, a prominent Mexican glassmaker that employs over 25,000 Mexican workers was able to secure only USD 100m from the Mexican government in the weeks leading up to its 1 February default on over USD 1.4bn in financial debt. It is currently launching frontal negotiations with its creditors. Indeed, Cemex has maximized its political clout in Mexico in order to push out maturities, concessions and to gain market share, sources said. As an important debtor to banks significantly weaker now than one year ago, Cemex “has been quite arrogant,” an advisory source familiar with the situation said. The company is “overbanked and over-advised, and maybe underwhelmed,” a second advisory source said regarding Cemex’s stable of financial advisors that can also be considered future relationship banks. The advisors, like Cemex, claim to be veterans of financial crises and recognize that Cemex’s current liquidity crunch is “a problem for the Mexican government and for the banks, but it’s not a problem for Cemex,” the first advisory source said. The characterizations of arrogant or aloof in regards to Cemex’s negotiating techniques have resurfaced as details of the aggressive terms of restructuring talks have come to light, banking and advisory sources said. A spokesperson for Cemex was not immediately available to respond to comments on Cemex’s negotiation strategy. Banks are also calling into question Cemex’s commitment to paying down debt via the proceeds of asset sales (expected to top USD 2bn) and of cost cutting measures, the first advisory source said. Cemex “is not returning phone calls” regarding the sale of non-core assets at this time, the first advisory source said. Cemex’s announced asset sales are coming to market at the same time as those of peers Heidelberg Cement and Lafarge, according to a recent newswire report. “This is not a fire sale scenario,” the second advisory source said. Cemex is unlikely to put its assets on the block at this time and could postpone a rights offering until market conditions improve. “Cemex can afford to sell more equity, and it is the best medium-term option for the company, the first advisory source said. While Cemex is benefiting from government programs boosting infrastructure spending in its key markets of Mexico, the US and Spain, it is unlikely to follow through with lay-offs in those geographies, the same source said. Cemex has successfully “bought time” during an intense downward spiral in its business cycle by announcing more and significant asset sales than those already in the works before the financial crisis hit last summer. The company can’t, however, postpone a more profound solution to its leverage issues indefinitely, the first advisory source said. By Georgina Gatsiopoulos

20 Feb Cemex: Best case scenario implies debt forgiveness; process in the works as part of

negotiations with bank lenders, sources say



Cemex, a global cement player headquartered in Mexico, is expected to seek some debt forgiveness as a result of aggressive negotiations with bank lenders, one buy-side and one sell-side source said. Cemex continues to negotiate with its relationship banks even as the implications of a first wave of restructuring agreements are more clearly understood by the market. In December, Cemex announced it had postponed by one-year the maturities of USD 2.2bn in debt. The company said during a recent conference call it would consider a rights issue to increase liquidity only after other options had been exhausted. The company faces debt maturities topping USD 4bn in 2009. Cemex said it thought it could generate free cash flow this year of USD 1.8bn to USD 2.1bn and expected to secure asset sales of USD 2bn. "These numbers are considered far too aggressive considering current market conditions," the buysider said. A spokesperson from Cemex was not immediately available to comment on the matter of debt forgiveness or give color on the progress with negotiations with creditors. As of 31 December, 2008, Cemex reported that its largest lenders were an ING-led bank syndicate with USD 2.4bn in loans and a Barclays-led syndicate with USD 1.1bn. Cemex reported total debt of almost USD 23bn (including the company’s perpetual bonds). Cemex’s five-year CDS was indicated at 975bp at market close yesterday in the midst of increasing volatility in the Mexican peso, a sell-side source said. The company's perpetual notes or hybrids were indicated at market close yesterday at 39, the sell-sider said. By Georgina Gatsiopoulos

24 Feb Cemex deal announcement catches market off guard; roadshow begins this week Cemex, the Mexico-headquartered cement multinational, caught the market off guard today with

its announced senior unsecured bond issue, several buyside sources said. Today’s announcement of a bond with an intermediate tenor surprised the market and comes as Cemex attempts to refinance roughly USD 4bn in near-term bank loan maturities. The company said as recently as earlier this month that it intended to focus on debt reduction in light of poor economic conditions and faltering financial markets. Indeed, during a recent conference call Cemex trumpeted its expectation to pay down debt via USD 2bn in proceeds from asset sales and free cash flow generation of more than USD 1.9bn. The use of proceeds from the announced new debt issue will be to pay down existing debt, according to company information. The Reg S/144A bond is being led to market by Citigroup, BBVA, HSBC, RBS and Santander, and will roadshow in London tomorrow and Thursday before heading to New York Friday. Next week, marketing will take place on the West Coast of the US Monday and Boston Tuesday before ending up in the New York metropolitan area Wednesday. The leads are also offering a web presentation, a source familiar with the matter said. Following indications from the leads, the bond could price around the 15% area, the three buysiders said. A deal size of USD 500m is expected along with a tenor of five to seven years and a call option allowing the issuer to refinance once market conditions improve. However, with Cemex’s EUR denominated 2014 bonds trading over 20%, the source familiar admitted it was difficult to offer a comp, indicating a better idea of pricing would surface when the roadshow began. Despite the prospect of a juicy yield, the buysiders were reluctant to participate in the primary market and would likely wait to see how the bond performed in the secondary. With the exception of the Philippines, no new issue has traded over fixed reoffer in the secondary market this year and the timing of the issue “smells of desperation”, one of the buysiders said. “I would also have like to have seen [Cemex complete] some of the USD 2bn in asset sales before the deal came to market,” the same source said. The market backdrop is clearly not supportive for a new issue. Mexico sovereign CDS spreads were flirting with 500bps mark while Cemex default protection widened past 1000bps and were quoted at 1077bps mid-market, according to one of the buysiders. Given the current environment, the buysiders were also concerned about secondary market liquidity and whether the leads would make a market for the deal. One of them reported hearing speculation that if demand was weak, the banks would take on some of the new issue to refinance low-margin bank debt, selling “dribs and drabs” as time went on. The bond will be guaranteed by Cemex Mexico and New Sunward Holdings, the same guarantors for Cemex’s perpetual debentures. Proceeds will be used to refinance short-term debt, as reported. Cemex debt was downgraded by Fitch Ratings to BB from BB+ just yesterday. The agency cited challenges to Cemex’s stated strategy to sell assets and increase free cash flow. These include tight credit conditions and the high debt burdens of larger cement companies that would be the obvious buyers of Cemex assets as well as economic uncertainty in Cemex’s principle markets in the US and Spain. By Gabriel DeSanctis



Desarrolladora Metropolitana SA de CV; (Demet) 05 Feb Demet options hinge on success of SanLuis restructuring talks, sources say The options being considered by the controlling shareholders of Demet will depend, in part, on

the success of SanLuis restructuring talks, sources claiming knowledge of the situation said. SanLuis, a prominent Mexican autoparts manufacturer, has inked a restructuring deal with the majority of its creditors that pushes out debt maturities for eight months, a source close to the situation said. Demet's next coupon payment is in May. The fact that SanLuis’ controlling shareholder Antonio Madero Bracho “got his deal” with creditors of the autoparts company, means that his son-in-law Bernardo Riojas, controlling shareholder of homebuilder Demet “can do what he needs to do,” should he have to negotiate aggressively with his creditors, one of the sources claiming knowledge of the situation said. Madero Bracho compelled Riojas to make a November payment despite the homebuilder's perilous liquidity situation in order to improve the autoparts company's chances of securing a deal with its creditors, two sources claiming knowledge of the situation said. Madero Bracho is a significant shareholder in Demet and has injected capital in the homebuilder at least once in order to maintain the viability of the company. A second source claiming knowledge of the SanLuis situation said the company will embark on all “commercially reasonable efforts” to get dividends out of the company’s Brazilian business in order to enhance the position of the majority of its creditors. A third source claiming knowledge of the situation said the capital structure of SanLuis’ brakes division had undergone some changes in the recent past that would facilitate the company’s current strategy, but the source would give no additional details. SanLuis reports USD 334m in debt (a sum that takes into account USD 115m in convertible debentures due in 2011). The company reported EBITDA for the first nine months of 2008 of USD 33.8m on net sales of USD 503.4m. While SanLuis could still be notified of a default by at least one creditor group, it has secured waivers and covenant changes that will allow it to postpone making debt payments for the time being, two sources claiming knowledge said. At the same time, Demet squeezed its liquidity position as much as it could in order to make its November coupon payment on the company’s USD 200m 10.875% notes. The company’s capacity to make its next USD 10.9m coupon payment due in May is in doubt, a source close to the situation said. The company’s capacity to secure sales depends on various factors including whether or not bridge loans to homebuilders will be available in a timely way, the source close said. Demet’s bonds are concentrated in few hands, and have seen few trades. They are indicated in the 8-13 range, a corporate trader said. By Georgina Gatsiopoulos

06 Feb Demet expected to report 1576 homes sold in 2008; sales top MXN 900m Demet, the Mexican homebuilder, is expected to report 1576 homes sold in 2008, a source

close to the situation said. The company expects to end the year with revenues of MXN 900m (USD 68m) - a figure that includes land bank sales - and EBITDA of MXN 90m (USD 6.5m). Gross margins, said the same source, grew from 10.9% in 2007 to 19.6% in 2008. At the same time, Demet reduced headcount by over 20% in light of a more difficult economic environment, the source said. Demet “sold more homes in the Mexico City area where homes are more expensive,” the source said. For 2009, Demet expects to sell over 2000 homes, most of which will be built and titled in the Mexico City area, while maintaining gross margins in the low 20s, the source said. The outlook for Demet depends in part on whether the Mexican government releases funds to non-bank banks (or Sofoles) which in turn release funds to developers in the form of bridge loans that fund construction, the source said. Going forward, Demet expects the majority of its sales to be made via Fovissste mortgages to government workers. “Nobody is expecting the government to lay off workers this year,” the source said. Demet's USD 200m 10.875% notes were indicated as of yesterday at the 8-13 range, a corporate trader said after market close on Thursday, 5 February. By Georgina Gatsiopoulos

12 Feb Demet bond holders strengthen negotiating position with company in context of

weakening business fundamentals



The holders of Demet’s USD 200m 10.875% notes could benefit from an improved negotiating position leading up to the company’s upcoming May coupon payment, a source claiming knowledge of the situation said. Demet has hired Jaime Guerra, principal of the Guerra Gonzalez y Asociados for possible litigation work, a second source familiar with the situation said. Demet bonds are concentrated in few hands with large holders “pretty much” organized, the same source said. Last week, the bonds were indicated in the 8-11 range, a corporate trader said. Demet’s bond holders could pressure the company to continue to make its payments under the existing bond indentures, by threatening to pull the plug on the company’s Sofol-related financing, the first source said. Should Demet default on its debt, it would be prohibited from tapping funding from Mexican non-bank banks including Hipotecaria Su Casita, the source said. Demet depends in large part on Sofoles to fund construction of its low-income housing projects, according to company information. In the past and because Demet’s limited assets are all in Mexico and not easily monetized, it was thought that the company “had bond holders over the barrel” as it continued to report operating and financial results far below expectations, the second source said. The company’s bond, led to the market by Dresdner, “might as well as be an orphan,” a buysider who analyzed Demet said. “There is very little information available and no support,” the buysider said. Demet said halfway through 2008 that it would sell 3000 homes, but titled slightly less than 1600, it was reported. The company needs to buy time and will be close to having the USD 10.75m on hand when its next bond coupon payment comes due should the political leaders in the two regions in which it operates speed up the green lighting of projects and related permits and licenses, the second source said. Marcelo Ebrard, the mayor of Mexico City and Enrique Peña Nieto, the governor of the State of Mexico are both presidential hopefuls in elections slated for 2012. In the past, electoral motivations have impacted which homebuilders and what projects get green lighted in the key voting entities of Mexico City metropolitan area, it has been widely reported. In a more positive light, Demet is expected to benefit from the Mexican government’s continued commitment to the homebuilding sector and to maintaining historically high levels of government-backed mortgages to federal employees, the second source said. Mexico City is the number one geographic concentration of federal employees, “and the one thing we can count on is that the Mexican federal government won’t be laying off people and adding to already high-unemployement figures,” the same source said. By Georgina Gatsiopoulos

23 Feb Demet: Significant percentage of sales coming from local government projects, sources

say Demet, a troubled Mexican homebuilder, could see a sales boost from government projects that

are less working capital intensive for the company, sources familiar with the matter said. Approximately 700 of the company’s total 1576 homes sold in 2008 were part of programs focused on Mexico City employees, two sources familiar said. One of the sources said the programs to build homes for city employees were less working capital intensive for Demet, which all but ensures that the struggling Mexican homebuilder will be able to make its next USD 10.87m coupon payment. Demet is also expected to compensate for weaker year-end numbers with stronger sales in early 2009, the same source said. The second source familiar said Demet expects a significant percentage of 2009 revenues to come from sales of housing projects geared toward city employees, which includes police officers. Mexican President Felipe Calderon recently announced the launch of government programs created to beef up internal demand with housing as one of the core pillars. Local Mexico City and State of Mexico leaders “are on the same page,” the second source said. By Georgina Gatsiopoulos



FertiNitro 20 Feb FertiNitro meets with bank and bond creditors to present 2009 budget FertiNitro, the Venezuelan nitrogen-based fertilizer project, met with creditors earlier this week,

two sources familiar with the situation said. After waiting more than a month, FertiNitro presented its 2009 budget to bank and bond creditors in two separate meetings held in New York Wednesday, 18 February. Much of FertiNitro's presentation was delivered by the project’s counsel. At the same time, the project introduced to its creditors fresh management, including a new treasurer and CFO, the sources said. According to the presentation, certain issues, such as past-due payments owed by Pequiven, were resolved by early February, while others, like forced sales to the local market, should continue throughout 2009. However, with 1.4m metric tons of production forecasted for 2009, both sources said they believe that FertiNitro will be able to service its debt and cover the costs of production this year. Prices for granular urea have recovered from the mid USD 250s/mt lows seen in November-December 2008 and are currently quoted around USD 300/mt. Venezuelan natural gas, the main input for nitrogen-based fertilizer production, remains a cheap input and at formula-determined prices of around USD 1/million btu, is below 25% of global prices. FertiNitro is still expected to supply 175,000 metric tons of granulated urea to the local market at the government mandated sub-market price of USD 72/mt, the two creditors said. The forced local market sales violate the 20-year offtake agreements with primary shareholders Koch and Pequiven, this news service has previously reported. The government's demand for FertiNitro output comes despite the fact that state-owned petrochemical company Pequiven has brought its Tablazo and Moron petrochemical complexes online to produce over 500,000 metric tons of urea per year. That's enough to supply previously reported local market demand of 450,000-500,000 metric tons per year. According to the presentation, the reasoning used to justify local sales has to do with the logistics of the Pequiven complexes, which the government argues are too isolated from FertiNitro by virtue of their locations in the western and north central areas of the country. FertiNitro is located in the eastern state of Anzoategui. Pequiven’s urea production capacity quoted to creditors was well within previously reported figures. In response to questions regarding reported production shortfalls and local fertilizer shortages, in August 2008, Pequiven president Jesus Lazo said that the company was producing 1.2m metric tons of urea per year, not 500,000 metric tons. Lazo did not return e-mails or calls seeking a clarification of this discrepancy. By Gabriel DeSanctis, New York



Gol Linhas Aereas Inteligentes 06 Feb Gol to rebuild fuel hedge positions in 2Q09, CFO says Gol Linhas Aereas, the Brazilian budget airline, is considering rebuilding its fuel hedge positions

next quarter, CFO Ana Cecilia Bettencourt said during the Raymond James – 2009 Airline Growth Conference. The company is not focusing on hedging its fuel consumption during 1Q09 as oil prices have continued to decrease, Bettencourt said. "Gol has already hedged 20% of its 2009 fuel consumption," she added, without elaborating. The airline forecasts an average oil price of USD 60 per barrel in 2009, Bettencourt said. The company has unwound its fuel hedge positions as of 30 September and reported BRL 48m (USD 21m) in losses, as reported. Gol also has hedging strategies to protect it from currency fluctuations and interest rate variations and currently has USD 700m exposed to dollar movements, the CFO said. As of 30 September, the company had hedged 25% of its dollar-denominated costs in 1Q09, according to the company's presentation. In relation to the 2009 outlook, Gol expects 6% growth in demand, Bettencourt said. "Brazil still is an untapped market," CEO Constantino de Oliveira Junior said in the same conference. Currently, 14m Brazilians travel on airplanes but the number of potential travelers can reach 25m people in the following years, Oliveira Junior added. However, due to an unstable economic environment, the company expects lower yields in 2009, the CEO said. The company plans to continue to increase its revenues growth through code-sharing agreements. Gol already has agreements with 16 international companies, including Delta Airlines, American Airlines, Korean Air, Alitalia, among others. "Gol is targeting new agreements during 1H09," Junior added. Gol will also maintain its focus on cost reduction throughout this year. The company will reduce its aircraft fleet age from an average of 6.8 years to 5.5 years in 2009. "It means the company will have lower maintenance and fuel costs," the CEO added. By Maria Fernanda Blaser in Sao Paulo



Infinity Bio-Energy Limited 03 Feb Infinity Bio-Energy denies talk it is on the verge of filing for bankruptcy protection Infinity Bio-Energy, the London-listed ethanol and sugar producer, is expected to file for

bankruptcy protection, two legal sources approached by creditors said. Creditors are in the midst of seeking legal representation in anticipation of the company's filing, one of the legal sources said. The London-listed biofuels producer, which retained Morgan Stanley as its financial advisor and owns five mills in Brazil, has not been answering calls seeking comments on its future. However, a press officer said Tuesday that the company did not intend to file for creditor protection. Infinity has USD 456m of debt, including USD 210.7m in long-term borrowings, USD 112.3m in short-term obligations and USD 133m of trade loans, based on figures released by the company on 24 December 2008. Its main creditors are Banco Bradesco and Banco Santander. Meanwhile, lenders said they believe Infinity will have a viable business if it receives a capital injection, the first source said citing a conversation with a creditor. However, other players in the sugar and ethanol sector disagree, the source said. A capital injection from either a third party or Infinity's existing shareholders would require a negotiation with banks, he added. At this point, however, it appears that creditors have not been engaged in any "structured" talks aimed at reorganizing the business, the source said. Infinity management will discuss the company's financial situation with the banks whether or not there is an equity deal in the pipeline, the first source said based on his conversation with one of Infinity's creditors. He added a capital injection from the existing shareholders of Infinity would be realistic only if lenders were prepared to accept a reduction on their claims. "Nothing is for free," he said. The financial situation of Infinity makes it more likely that the company seeks protection from creditors instead of attempting to negotiate directly with banks and without court supervision, the first source said. This is because a filing would buy the debtor time, he added. The 2005 Brazilian bankruptcy law foresees a six-month freeze on lawsuits to collect claims after granting court protection to a debtor in difficulty. The company seeking protection, in turn, has a 60-day deadline to present a reorganization plan to the court and submit the plan for approval of the lenders after the granting of protection. By Maria Fernanda Blaser and Ana Mano, in Sao Paulo



JBS S.A. (formerly Friboi Ltda.) 20 Feb JBS freezes acquisitions plans for 2009, CEO says JBS, the Brazilian meatpacker, is freezing its acquisitions plans for 2009, CEO Joesley Batista

said in a press conference today. Despite having USD 1bn in cash, the company is not discussing any acquisition at the moment and intends to "maintain a high cash position especially in this period of financial concern," Batista said. The company has decided to change its strategy following the global financial crisis, Batista acknowledged. JBS was planning to acquire in Mercosur countries this year, focusing on Brazil, as reported. JBS intends, instead, to increase its domestic sales throughout this year, the CEO said. The company plans to gain market share, as many Brazilian meatpackers are facing financial difficulties, he added. Margen, Quatro Marcos and Arantes are among companies which sought creditor protection due to the credit crunch, as reported. Despite typically targeting companies with management problems, JBS prefers to grow organically without spending too much cash, Batista said. "There are a lot of stagnant plants as the meatpackers are struggling to overcome financial problems," he said, noting that fundamentally the lack of interest in these stagnant operations relates to a lack of cattle to slaughter. The company continues, however, to look at its competitors and could find opportunities to acquire in the financial turmoil, Batista said. "Any company which survives a financial crisis will find great opportunities the day after," Bastista said. In the event the company decides to pursue an acquisition, it will seek targets in regions where JBS already operates, he added. In relation to the acquisition of National Beef Packing Company, LLC ("National Beef"), Batista revealed that the Department of Justice (DOJ) had pushed the company to pull back. "We would very much liked to have acquired National Beef, but the DOJ did not wanted a third player to compete with Cargill and Tyson," he added. The DOJ had imposed on JBS the sale of two plants in the US to complete the deal, Batista said. "The DOJ has prevented us from acquiring National Beef. It would be impossible to sell the plants. Companies do not have cash to buy anything," he added. The CEO did not offer further details, however, according to past reports on this news service, asset sales would be in the regions of Arizona and other parts of the Southwest US and/or in the High Plains region. JBS announced the acquisition of National Beef on 4 March 2008. The acquisition was challenged by the DOJ, which was facing strong pressure from US cattle producers. The proposed deal was valued at USD 970m and would have given JBS excessive market concentration, the DOJ said. JBS had planned to raise USD 800m to pay for National Beef, Batista said. The company decided to terminate the deal, the CEO added. In an official statement on Friday, JBS informed it will continue to pursue further efficiencies at all its other units within the US, which total eight cattle slaughter plants with a daily capacity of 28,100 head, three pork slaughter facilities with a daily capacity of 47,900 head, a case-ready plant and a lamb slaughter plant. The company also operates 11 cattle feed yards in six different US states. By Veronica Goyzueta and Maria Fernanda Blaser in Sao Paulo

26 Feb JBS will appoint in-house CFO for Brazil but financial decisions will be kept

decentralized, CEO and insider say JBS, the Brazil-based beef processor, will appoint an in-house CFO for its domestic operation,

CEO Joesley Batista said in a recent press conference. The company will make an announcement shortly but management does not intend “to make a big deal of it,” an insider said after the Carnaval break, which shortened the Brazilian work week. JBS is keen on a maintaining a decentralized management structure and each overseas subsidiary already has its own CFO, said the insider. The new CFO in Brazil will replace Sergio Longo, who resigned on 20 January and participated in the company’s IPO in March 2007. With Longo’s departure, JBS is doing away with the global CFO position. The only two global positions will be that of Jerry O’Callaghan, IR director, and Joesley Batista, CEO, the insider said. The Brazilian meatpacker has operations in the United States, Australia, Argentina and Italy. In each country, the CEO of JBS has appointed a Brazilian executive to be a part of the financial department. Andre Nogueira is CFO of the US-based operation and Luiz Firmino is CFO of the Argentine operation, Batista said in a recent press conference. JBS plans to deleverage in 2009, IR Director Jeremiah O'Callaghan said during the same press conference. Consolidated leverage is expected to drop to 1.5x from 1.96x by the end of the year, he said. The company considers it "essential" to cut debt to weather the global financial crisis. Due to the improved margins of the US operation over 2008, the company was able to reduce leverage to 1.96x from 3.7x in fiscal 2007, O'Callaghan added. The company had BRL 2.2bn (USD 936m) in short-term debt as of the fourth quarter of



2008 and expects to refinance “99% of it,” CEO Batista said. As the company dropped its bid for National Beef, the USD 400m financial package secured to finance part of the reported USD 970m deal would no longer be needed, said the CEO. Despite the credit crunch and the economic recession, JBS anticipates better operational results in 2009, CEO Batista said. In 2008, the company posted BRL 30.3bn (USD 12.9bn) in net revenues. "JBS can easily reach BRL 40bn [USD 17bn] in net revenues this year," Batista said. By Maria Fernanda Blaser and Ana Mano, in Sao Paulo



Expected Deals



Altos Hornos de Mexico, S.A. de C.V. (AHMSA) 24 Feb AHMSA restructuring in the ‘deep freeze’ until capital markets come back, sources

familiar say AHMSA is expected to reach the ten-year anniversary of its default on close to USD 2bn in debt

without completing a financial restructuring, sources familiar said. AHMSA’s restructuring is in the “deep freeze” said a source familiar with the situation. “Nothing is going to move,” until AHMSA has access to the capital markets, said the source. AHMSA’s principal creditors - Ashmore Investment Management, DE Shaw & Co and Black River Capital - are also in a wait-and-see stage. “There is nothing going on, and nothing has happened for months,” a second source familiar said. AHMSA’s historically flamboyant controlling shareholder Alonso Ancira has said he will scale back a USD 1bn Capex program, coined Fenix, in order to maximize liquidity while the company rides out the storm. “He knows nobody will lend to him at any price and we know he will not sell at any price,” the first source said. Steel prices have come down and domestic consumption along with it, according to commentary accompanying AHMSA’s year-end 2008 financial results. AHMSA’s fall-back export market has also shrunk, the company said. Mexican steel continues to bend under the weight of the sagging market and economic pressures that have translated into dramatic contractions in the auto and construction sectors. Steel service centers and smaller more focused players are expected to fail in the near term, the first source said. During the 2006-2008 period marked by a growing Chinese economy and a prolonged US construction boom, the outlook for steel and even AHMSA was bright. Indeed as recently as last year, it appeared that UBS, AHMSA’s financial advisor, was prepared to structure a billion-dollar deal in such a way that would allow the AHMSA operating company and its holding company GAN to conclude their Mexican court-supervised reorganization proceedings under the ‘Suspension de Pagos’, the bankruptcy regime that preceded the currently-in-use ‘Ley de concursos mercantiles’ bankruptcy code. Existing creditors would have been issued new debt with better guarantees. However, that deal, the first source said, is “long gone. Ancira has no incentive to exit now.” AHMSA bonds are indicated in the 9 – 11 range, a trader said. Bank of America, a significant AHMSA bank creditor, sold its debt in 2003 at prices similar to today’s levels. By Georgina Gatsiopoulos



Santelisa Vale Bioenergia S.A. / Cosan S.A. Industria e Comercio / Sao Martinho S.A. / Nova America S.A. / Infinity Bio-Energy Limited 11 Feb Creditors reject terms proposed by Santelisa Vale to repay USD 1.5bn of debt; M&A

action unlikely before March Santelisa Vale, a Brazil-based ethanol producer, has frustrated at least one creditor bank

involved in its USD 1.5bn debt renegotiation, a source claiming knowledge of the situation said. The source said Santelisa Vale, which hired Angra Partners to lead negotiations with creditors and potential bidders, offered to repay the debt in eight years with a 24-month grace period. The debtor also proposed paying a small spread on the CDI interbank deposit rate. "The creditors were very displeased with the proposal," the source said, citing a conversation with one of the banks which he refused to name. Santelisa Vale has more than USD 1.5bn of debt, a financial advisor to companies in the sugar and ethanol sector said. The exact figure is hard to pin down because the company is privately held. Banco Bradesco and Itau Unibanco, Brazil's two largest private-sector banks, hold about 60% of Santelisa Vale's debt but the list of the largest creditors of the company also includes Banco Votorantim, Banco Safra, ING and HSBC, as reported. The company is unlikely to announce any agreement with creditors and potential bidders until the company's new CEO takes charge in March, a company insider said. Santelisa announced Tuesday that it has just appointed Andre Mastrobuono as its new CEO. Mastrobuono, who is leaving the job of CEO at dairy producer Parmalat to join Santelisa Vale, is also former executive of cellular phone operators Telemig Celular and Amazonia Celular. Mastrobuno is also replacing Santelisa Vale’s main shareholder, Andre Biagi, who held the post of chairman and CEO since December. In January, Biagi handed the chairman post over to Luiz Kauffman. According to the insider, Santelisa has had talks with GP Investimentos, Brazil's leading private equity house, Cosan, the largest ethanol producer, Bunge, ETH, ADM, Louis Dreyfus and Sao Martinho. The sale of Santelisa is part of the effort to renegotiate its USD 1.5bn debt load. An agreement between Santelisa and the creditors, which may include the sale of the company, is expected shortly. "Santelisa has to do something soon; it can't go on like this forever," said a sector analyst, who sees Cosan and ETH, a unit of conglomerate Odebrecht, as the main local bidders. According to the financial advisor in the sugar and ethanol sector, the Brazilian Development Bank (BNDES), which owns almost 10% in Santelisa Vale, could inject capital into the company because it competes in a sector considered strategic for the government. Regarding the value of Santelisa, the advisor said the company has a negative market value of USD 780m. To arrive at that figure, the advisor considered the company's 18m tons of annual crushing capacity and multiplied that by USD 40, using market leader Cosan as a reference. The result was then subtracted from the USD 1.5bn of Santelisa’s debt. By Maria Fernanda Blaser, Priscilla Murphy and Ana Mano, in Sao Paulo

12 Feb Santelisa Vale reaches agreement to reprofile USD 1.5bn of debt; 40% of obligations to be

converted into equity – sources Santelisa Vale, the privately held Brazilian ethanol and sugar producer, has finally reached an

agreement with its creditors to reprofile USD 1.5bn of debt, a source familiar with the talks said. The banks agreed to convert 40% of the debt into share capital of Santelisa Vale. The remaining 60% will be paid in eight years with a 36-month grace period, the source said. More details on the terms of the agreement were not readily available. Banco Bradesco and Itau Unibanco, Brazil's two largest private-sector banks, hold about 60% of Santelisa Vale's debt but the list of the largest creditors of the company also includes Banco Votorantim, Banco Safra, ING and HSBC. Meanwhile, the company continues to negotiate a capital injection from a strategic investor, the company source confirmed. Santelisa has had talks with GP Investimentos, Brazil's leading private equity house, Cosan, the largest domestic ethanol producer with 40m tons of sugarcane crushing capacity, Bunge, ETH, ADM, Louis Dreyfus and Sao Martinho. "Cosan is out of the deal," the source said, explaining the Brazilian Development Bank (BNDES), a minority shareholder in the company, would not give support to the formation of an ethanol and sugar monopoly in Brazil. Another deterrent to a merger between Santelisa and Cosan is Bradesco's exposure to the two companies totalling about 42% of its sugar and ethanol loan portfolio, as reported. Santelisa Vale, which crushes 18m tons of sugarcane per year, plans to announce the name of a new equity partner after 15 March, when management and its financial advisor Angra Partners will have evaluated the proposals from all of the bidders, the source added. The company is more inclined to attract a capital injection from a private equity firm, a second source close to the company said without elaborating. The BNDES has already injected



BRL 150m (USD 65.5m) into Santelisa in January, according to the company's website. The investment bought it about 6.5% of Santelisa's shares, according to calculations made by a sellside analyst. The BNDES is also rumored to be mulling a BRL 500m (USD 218.3m) capital injection, according to previous Brazilian press reports. These rumors could not be verified. Goldman Sachs, the US-based investment bank, also became a minority shareholder in the company after paying BRL 400m (USD 174.6m) for a 15% stake in privately held Santelisa Vale. By Maria Fernanda Blaser and Ana Mano, in Sao Paulo

13 Feb Santelisa pushes Cosan to offer shared control; BNDES tends to back Sao Martinho as

bidder, insiders say * BNDES keen to step in and help national bidder win over foreigners, insider says

* Government-owned bank believes an acquisition by Cosan would be too much concentration, insiders say. Santelisa Vale, the private Brazil-based ethanol producer, expects to receive the best bid from its larger competitor Cosan once all the interested bidders make their offers for the company, said a Santelisa insider. The offer would allow Santelisa´s Biagi family to share the control of the company in equal parts with Cosan, said the Santelisa insider, following the example of the recent merger between banks Itau and Unibanco. Cosan, Brazil´s largest ethanol producer, has plans to make an offer for Santelisa, the second largest player, in stock and cash that would come from a loan from government-owned development bank BNDES, said a Cosan insider. The Santelisa insider said, however, both parties are still negotiating details of the proposal to be finalised by Cosan, including the role of the Biagi family in the company after an eventual acquisition. Meanwhile, “Santelisa is pushing for Cosan and the other interested bidders to present their final offers by 15 March, but some are asking for more time,” the insider said. For Rubens Ometto, Cosan’s main shareholder, buying Santelisa is “a matter of honor,” said the Cosan insider. Ometto made a failed attempt to acquire Vale do Rosario in 2007 before its merger with Santa Elisa, which formed Santelisa Vale. However, due to its leveraged acquisition of Exxon-Mobil’s gas station network and other assets last year, Cosan does not have cash to make any bid without new financing, said the insider. BNDES has expressed to Santelisa it is willing to make efforts to help a domestic player win the bid over international bidders, said the company insider. Meanwhile, Archer Daniel Midland (ADM), Bunge and Cargill are “very interested and have the cash to buy it,” said the Cosan insider. Louis Dreyfus and two investment banks are also looking at Santelisa, as reported. While Cosan is the most interested national bidder, Sao Martinho and ETH Bioenergia have also looked at the company, as reported. For BNDES, the problem with Cosan is that it would create an ethanol giant that would be almost a monopoly, said both the Cosan and the Santelisa insiders. “The decision will be political, and in this sense Cosan also has a disadvantage because Ometto is a bit polemic at politics,” said the Cosan insider, referring to his well-known outspoken manner. Sao Martinho would also be favored by Santelisa’s main creditor banks, which already have a large exposure to Cosan and would concentrate their risk in the company if Ometto won the bid, said the Cosan insider. However, “Sao Martinho is very conservative and probably has a lot of resistance in acquiring a company with BRL 3bn (USD 1.3bn) of debt,” said the Cosan insider. Santelisa has agreed on a debt renegotiation scheme with its largest creditors, as reported earlier by this news service. The Santelisa insider confirmed the information and said the deal to convert 40% of the debt into equity and renegotiate the debt is struck with Bradesco, Itau Unibanco, Santander and Votorantim, while the negotiations with smaller creditors are taking more time. Santelisa will probably manage to close a deal valuing it at the current market average price for sugar and ethanol plants of USD 70 per ton of sugarcane of annual capacity, or close to the total value of its debt, said the Cosan insider. “Though ethanol companies have currently a lot of financial problems because of the credit crunch and to bad managing decisions such as investments in exotic dollar derivatives, the sector is economically well and sugar prices are good,” the insider explained. Santelisa had losses of USD 300m with derivatives, he added. The Santelisa insider said the company is aware of its potential value for all the suitors, and is taking its time to make the most of the negotiation. By Priscilla Murphy in Sao Paulo

18 Feb Sao Martinho confirms interest in Santelisa Vale acquisition; funding still uncertain, CFO

says



Sao Martinho, the Brazilian ethanol and sugar producer, is interested in acquiring rival Santelisa Vale, which is struggling to restructure USD 1.5bn of debt, CFO Joao do Val confirmed Tuesday. The bidder has had talks with Santelisa aimed at an acquisition and is evaluating the deal, Do Val said during a conference call to comment on 3Q09 results. Sao Martinho's M&A department may recommend this acquisition to the board of directors, IR Manager Felipe Vecchiato said in the same call. Nova America, another Brazilian ethanol and sugar producer facing financial difficulties, was also on the block “but we have refused [these deals]”, the CFO said. Sao Martinho's IR manager gave USD 60 per ton as price guidance for a possible M&A deal. The guidance provided is based on the estimated cost to build a new plant, Vecchiato said. The productivity of the plant and its co-generation potential are also taken into account to calculate its value, the executive explained. Lack of funding could be a deterrent for an M&A deal in the current market and it was “too soon to tell” if the Brazilian Development Bank (BNDES) could fund a transaction, Do Val and IR Manager Vecchiato said. Sao Martinho is already negotiating a BRL 100m (USD 43m)loan with the BNDES to expand the crushing capacity of the Usina Boa Vista plant to 3.4m tons from 2.2m tons, as reported. The company expects the cash to be released this year in order to complete the upgrade in time for the 2010/2011 crop. "We cannot wait too long. The company has signed energy co-generation contracts and must supply electricity by 2011. These contracts rely on the expansion of Boa Vista," the CFO added. The company plans to invest BRL 150m (USD 64.5m) mainly in maintenance and equipment throughout the 2009-2010 crop, Vecchiato said. In case the BNDES loan is approved, capex will be raised to BRL 250m (USD 107m), he added. As of the 3Q09, the company's net revenues grew 73% compared to the previous quarter. The growth is related to higher sugar and ethanol prices, the CFO said. Sao Martinho crushed 12m tons of sugarcane in the 2008-2009 harvest period, which officially ended in November but lasted through mid-December at some plants. In Brazil, companies follow the harvest calendar to report results and fiscal 2009 will be closed on 30 April. The December-March period is known as the inter-harvest months for producers based in the Southeast of Brazil. Sao Martinho produced 674,000 cubic meters of ethanol and 555,000 tons of sugar, according to its earnings release. In the 2009-2010 harvest, which will begin in April, the company expects to boost sugar production as the price of this commodity is on the rise, Do Val said. By Maria Fernanda Blaser in Sao Paulo

27 Feb European players seek to enter Brazil´s crisis-hit ethanol market before worldwide

deregulation, industry sources say * Tereos and Suedzucker are actively chasing opportunities, source says

* Potential targets include Cosan, Sao Martinho, Santelisa Vale, Nova America and Infinity Bio-Energy European players Tereos, Associated British Foods (ABF) and Suedzucker are set to target buys in Brazil´s sugar and ethanol sector, an industry source said. One of the drivers for chasing opportunities for growth is the expected deregulation across major markets, said the source. When this happens, opportunities beyond normal growth are expected, and so all players are positioning themselves in Brazil, the source added. While Germany-based Suedzucker has made public its interest in such acquisitions since 2001, it had been not aggressive to date, said the source. Other companies active in the space include ABF, sector bankers pointed out, as well as Tereos, with operations in Brazil. Suedzucker, ABF and Tereos declined to comment on the matter. France-based Tereos, which controls Brazil´s leading retail sugar producer Acucar Guarani, is expected to have Brazil as its priority, said the industry source. Late last year, it was rumored in press reports to be in a competition with Brazil´s leading ethanol producer Cosan, Brazil-based ETH, US-based Cargill and Bunge, to acquire a stake in Nova America, with which Tereos had an operational partnership since early 2008. Meanwhile ABF, parent to British Sugar Overseas, is likely to tread more cautiously after its EUR 385m acquisition of Azucarera Puleva late last year, and target acquisitive growth only in the mid-term, one of the industry bankers suggested. Suedzucker, he noted, was a better bet for more imminent moves in the ethanol space. Ethanol M&A movements were interrupted by the financial crisis, said the industry source. Fragmented into more than 200 companies, 90% of them family-run and many technologically outdated, the sector was struck particularly hard by the credit crunch, insiders say. Additionally, many ethanol companies were caught by Brazil´s 30% sudden currency devaluation after the collapse of Lehman Brothers holding dollar derivative instruments which multiplied their losses, said a sector executive. As a result, some companies have already requested bankruptcy protection, as reported. Santelisa Vale, Brazil´s second largest ethanol producer, is actively seeking to sell a stake, as reported. Pressed by creditors to sell assets as



part of the restructuring of its BRL 3bn (USD 1.3bn) debt, Santelisa is expected to announce a deal by 15 March, said a company insider. The company has been analyzed by Cosan, Sao Martinho, ETH, Archer Daniel Midland (ADM), Bunge and Cargill, the insider said. According to an earlier news report, Louis Dreyfus was also among the bidders for a stake in Santelisa. According to another news report, the privately-held French commodities group is also among the parties seeking a partnership with Nova America. Louis Dreyfus was unavailable for comment. Possibly the most desperate situation in the sector is Bermuda-based London-listed Infinity Bio-energy, said a banker familiar with the company. The industry source confirmed Infinity is “in real trouble”. While Infinity has made public it fears having to close down, as reported, a company spokesperson told this new service the company is currently in talks with a strategic partner, while declining to name it. While Cosan and Sao Martinho are generally seen as bidders in what is expected to be a huge potential sector consolidation, the industry source also said he considered them first-tier targets. Last year, Cosan, which leveraged its acquisition of Exxon Mobile gas stations and other assets in Brazil, was rumored to be targeted by Shell, as reported. Private equity firms and oil companies are also looking to position themselves in the sector, the industry source said. A sector banker, however, questioned the scope for industry-wide M&A. Given the distressed state of the sector, the sector banker said, the major industry players will examine troubled companies. Nonetheless, he questioned whether potential consolidators will have the ready access to cash required in the present credit-starved market. By Kasper Viio in London and Priscilla Murphy in Sao Paulo



Transportadora de Gas del Norte S.A. (TGN) 04 Feb TGN board members could be slapped with hefty fines by local SEC; concession

revocation could follow, sources say Transportadora de Gas del Norte, the listed Argentine natural gas transporter, could see its

individual board members fined up to USD 300,000 each by the Argentine financial market regulator, a source with knowledge of the situation said. The local SEC fine could be imposed this month after TGN responds to charges of irregularities related to the default announced last month in a filing with the Comision Nacional de Valores (CNV), the Argentine financial market regulator, the first source said. “The company has a few more days to reply to Resolution 16,060 [issued by the CVM] but no matter what the response, the regulators are already writing out the fines,” the source with knowledge of the situation said. The fine, according to the source and a second source close to the Argentine Planning Ministry, is the first step toward a process that could end with the revocation of the company's gas distribution concession, which is awarded by the government. As reported, the CNV found that TGN's late-December default on its amortization and interest payments was “invalid” saying that the company did not properly describe the board’s statement on that decision in its filing. Although an MBA Lazard study commissioned by TGN gave the company three options to deal with its financial predicament, the company chose the third, an outright default despite having the necessary funds to meet its debt obligations, the source said. An MBA Lazard source declined to confirm or deny the existence of the study while a spokesperson for the CNV was unavailable to take calls for comment. Planning Minister Julio de Vido’s deputy Roberto Baratta is personally handling the issue, according to a source close to Argentina’s Planning Ministry. Baratta has told his advisors that getting the concession pulled would be done by using regulators, both in gas and finance, and the judicial system. Local regulatory body Enargas is controlled by Planning Minister Julio De Vido and is the only regulatory body with the power to revoke the concession, a source close to TGN’s financial advisor said. Transportadora de Gas del Norte is also being investigated by local Judge Octavio Araoz de Lamadrid who raided the company's offices on 18 January with the police, as reported. Although the judge found documentation supporting the charges of irregularities with TGN's filing, a source close to the judge acknowledged that it was very likely that if any other company was similarly raided, "such irregularities would also be found”. If in fact the concession is pulled, TGN could end up as a debt-saddled shell company like Aguas Argentinas, the Suez-controlled Argentine water and sewage company. After months of acrimony, Aguas Argentinas’ 30-year concession was revoked in March 2006 with the authorities citing a lack of investment as the reason for the move. The assets were later transferred to AySA, a state-owned company created specifically for this purpose, leaving the debt with the empty shell company. However, the scenario that most expect is closer in line with what took place with AES’ and Edelap, a source close the company's financial advisor said. In that case, the electricity distribution company was subjected to government harassment which ended only when the US Embassy intervened. The source also wondered if perhaps the company’s shareholders were being targeted as a result of a political embarrassment dating back to 2006. At that time, local press reported that TGN had made unauthorized payments to government officials through a construction contract with Skanska. As reported, the alleged payments inflated TGN’s operating budget by 150% after Enargas authorized Skanska to receive a sum of ARS 28m (USD 9.3m) when only ARS 11 (USD 3.7m) had been officially allocated to the project by TGN. TGN has mandated Barclays to handle its USD 344m debt restructuring, as reported. The company is controlled by Techint through TecPetrol Internacional. TGN's main shareholders are Gasinvest S.A. (56.35%) and Blue Ridge Investments LLC (23.53%), while 20% floats on the local exchange. Gasivenst is owned by TecPetrol Internacional SL (27.2%), Transcogas Inversora S.A. (22.3%), Total Gas and Electricidad Argentina (20.6%), Petronas Argentina (18.3%), Total Gasandes (6.6%), and Compania General de Combustibles. (5%). By Pablo Gonzalez, Buenos Aires

25 Feb TGN could submit USD 344m restructuring proposal to creditors before the end of March,

source says



Transportadora de Gas del Norte (TGN), the listed Argentine natural gas transporter, could submit its USD 344m debt restructuring offer to creditors before the end of March, a source with knowledge of the situation said. The company has identified and begun a dialogue with 10 - 15 funds holding 85% of the company’s debt, the source said. It is understood that the remaining 15% of the debt is held by retail creditors, he added. The source said that the financial advisor is in the process of shaping the offer and could have it ready by mid-March or the third week of March at the latest. The source said the company’s intention is to seal a deal as soon as possible. For this reason, they have asked creditors not to constitute a committee and instead deal directly with financial advisor Barclays, he added. This strategy should limit government interference, the source said. As previously reported, the Argentine government, through gas industry regulator body Enargas, has appointed an auditor to supervise the company after it declared its default last December. The government is also threatening to fine board members through the local financial regulator which has already declared the board’s decision to postpone amortization and interest payments on its Series A and B notes as “irregular”. A company source declined to comment, only saying that TGN will report its 2008 figures next week. As reported, TGN is controlled by Techint through TecPetrol Internacional, whose main shareholders are Gasinvest (56.35%) and US fund Blue Ridge Investments (23.53%). Twenty percent floats on the local exchange. Gasinvest is owned by TecPetrol Internacional (27.2%), Transcogas Inversora S.A. (22.3%), Total Gas and Electricidad Argentina (20.6%), Petronas Argentina (18.3%), Total Gasandes (6.6%), and Compania General de Combustibles (5%). TGN bonds were indicated at market close yesterday at 20, a buyside source said. By Pablo Gonzalez, Buenos Aires



Transtel S.A. 10 Feb Transtel makes progress with bond holder negotiations; treatment of Morgan Stanley

facility could derail process, sources say Transtel, the Colombian full-service telecom, has made substantial progress with its debt

restructuring, two sources familiar with negotiations said. The progress made in the last week could lead to a deal that enjoys support from 95% of bond holders, one of the sources said. As reported, in December the company defaulted on its USD 170m 12.0% 2018 bonds and subsequently launched a private exchange offer on 23 December to exchange the outstanding bonds for new units that include a senior secured amortizing step-up note, warrants and a consent solicitation to delist the notes from Euro MTF and make amendments to existing documentation, as reported. The new notes reduce interest payments to 6.0% per annum, stepping up to 9.0% from 1 December 2010 until the 1 December 2016 maturity date. Last month, Guillermo Lopez, the company's largest single shareholder, was roundly criticized for not giving up more equity, Debtwire reported. Under the terms of the original deal, Lopez would see his current holdings decrease from 70% to an indirect interest of 57%. Although Lopez has sweetened the deal with more equity, he still retains his controlling interest in the company despite the default, one of the sources said. With lawyers now hammering away at the details (and the announcement of another deadline extension for the private exchange offer), Transtel’s treatment of a Morgan Stanley facility has come under scrutiny. As reported, after successfully placing the 12.0% 2018 notes, the bank purchased USD 20.5m of deferred customs duties from Transtel. The facilities were amended bringing rates down from more than 20% to 15.5% with monthly payments substituted for semi-annual payments. Transtel considers these to be senior obligations to the bonds and the loan has continued to perform. However, bond holders consider the facility to be a refinancing and believe that the seniority afforded to tax liabilities is not transferable under local law. Under this argument, the facility would be fair game for the restructuring and bond holders would expect Morgan Stanley to share the pain and take the same type of terms bond holders have agreed to. Without Morgan Stanley’s participation, the deal is off, the source said. As reported, in addition to its role as creditor, Morgan Stanley was also the underwriter and lead manager of the original bonds. The bank is also advising Transtel on its restructuring while White & Case is providing legal advice, Debtwire reported. Officials at Morgan Stanley and Transtel did not return several calls for comment. By Gabriel DeSanctis, New York



Vitro S.A. de C.V. / Petroleos Mexicanos (PEMEX) 04 Feb Vitro bondholders retain White & Case as legal advisor, sources say Bondholders representing USD 1.2bn in debt of Mexican glassmaker Vitro have retained White

& Case as their legal advisor, sources claiming knowledge of the situation said. The group made their decision earlier today regarding the legal advisory mandate but has yet to make a final decision on the financial advisory mandate, a source close to the situation said. The bondholders are eager to retain advisors and sign confidentiality agreements in order to have access to company information including an analysis developed by Vitro’s financial advisor Blackstone. Vitro defaulted on its dollar-denominated debt yesterday after the counterparties of its derivatives-related transactions accelerated on USD 293m in debt. By Georgina Gatsiopoulos

04 Feb Vitro bondholders steering committee to make a decision regarding advisors later today;

company has 30 days to secure standstill agreements, sources say A select group of Vitro bondholders will decide on financial and legal advisors later today, two

sources claiming knowledge of the situation said. After a two-day beauty pageant, the group, at least temporarily made up of five investment firms holding up of USD 50m in Vitro bonds each, will make a decision later today, the sources said. Coined “the big boy club” by smaller Vitro bondholders, the steering committee is thought to be made up of a West Coast-based dedicated emerging market fund, two Boston-based mutual funds, the asset management arm of a large commodity broker and two hedge funds. It is expected that the membership of the steering committee will change “pretty dramatically,” soon after the advisory mandates are formalized, a source close to the situation said. An older short list for financial advisors was comprised of Alvarez & Marsal, Perella Weinberg, Houlihan Lokey and Lazard, it was previously reported, although the firms that actually made pitches to the Vitro bondholder steering committee was different, the source close said. Candidates for legal advisors include Manatt, Phelps; Bingham McCutchen; White & Case; and Paul Weiss, it was reported. Vitro defaulted earlier this week on its dollar-denominated bond debt totaling USD 1.2bn after the counterparties of USD 293m in derivatives-related transactions accelerated their debt. The Mexican company is expected to default on USD 14m in peso-denominated certificado bursatil debt tomorrow, sources said. The company reports total debt of USD 1.45bn as of 30 September and EBITDA for the first nine months of 2008 of USD 371m. As soon as creditors have contractually engaged advisors, then Vitro and its advisors – Milbank Tweed and Blackstone – can forge ahead with negotiations, the source close said. A priority for the company during the next month is expected to be securing standstill and forbearance agreements with creditors in order to have some assurances that nobody will push it into bankruptcy. By Georgina Gatsiopoulos

10 Feb Vitro bondholders hire Perella Weinberg as financial advisors; legal advisor White & Case

solicits signatures on confidentiality agreements Vitro bondholders have hired Perella Weinberg as the group’s financial advisors, two sources

familiar with the situation said. Some conflict of interest issues needed to be sorted out before the mandate could be contractually engaged, one of the two sources said. The second source said that Vitro's largest bondholders will be asked by legal advisors White & Case to sign confidentiality agreements in order to facilitate the free flow of information between the company and its creditors. Bondholders of the troubled Mexican glassmaker are being advised that “swift and decisive” actions are called for because of the company's perilous operating, competitive and financial outlook, the second source said. Vitro bonds were indicated yesterday at 26.5 - 27.5, said a corporate trader. By Georgina Gatsiopoulos

20 Feb Vitro agrees to pay ad-hoc creditors’ advisors; stakeholders leave management 'out of

the loop' on restructuring, sources say



Vitro, a Mexican glassmaker, has formally notified its ad-hoc creditor group that it will pay advisory professionals retained by the group, a company source said. Professionals retained by the company’s bondholder group submitted a request for fee payments to the company last week, one of the sources familiar with the situation said. Vitro bondholders retained White & Case as their legal advisor and Perella Weinberg as their financial advisor earlier this month, it was reported. Vitro continues to use Blackstone as its financial advisor, though two sources familiar with the situation said the company is considering hiring a small team of Mexican restructuring professionals that would liaise among the controlling shareholder group led by Adrian Sada, Vitro management, the company’s financial advisor (be it Blackstone or an investment bank) and the company’s creditors. The company source said Vitro would not comment on whether or not it had hired restructuring professionals to lead negotiations among creditors, the company and its shareholders. Vitro’s controlling shareholder group has, in some ways “left management out of the loop,” regarding the direction of the company’s restructuring, one of the sources familiar said. Vitro bonds were indicated earlier today at around 26 with thin trading, a corporate trader said. By Georgina Gatsiopoulos

23 Feb Vitro refuses to acknowledge derivatives liabilities formally during meeting with banks;

no changes in bondholder situation, sources say Vitro, a Mexican glassmaker that defaulted on over USD 1.7bn in debt on 1 February, 2009, met

with counterparties regarding its derivatives-related liabilities last week, two sources familiar said. Despite four US-based lawsuits launched against the company for non-payment, Vitro appears to be eager to “contest everything until there is a deal with everyone,” a source familiar said. As a result of the company’s stance, no quick solution can be reached. “It’s going to be a long fight,” the source said. Vitro’s derivatives-related liabilities are thought to total USD 400m, according to information attributed to counterparties Credit Suisse, Barclays, Citibank and Deutsche Bank. The company has acknowledged its counterparties have funded USD 285m in losses on derivatives-related liabilities, and that the company has made cash deposits against the derivatives losses of USD 85m, it has been reported. For their part, Vitro’s bondholders have seen very little action in their camp, a source familiar said. The bondholder steering committee continues to plow through housekeeping tasks and is looking forward to an upcoming formal organizational meeting, a source familiar said. By Georgina Gatsiopoulos

27 Feb Vitro to hear advisory pitches as it focuses on financial restructuring, sources say; 2009

EBITDA expectations heard Vitro, a Mexican glassmaker, is expected to hear financial advisory pitches next week, as it

focuses on its financial restructuring, sources familiar with the situation said. The Mexican glassmaker is currently working with Blackstone, a firm that had once expressed an interest in injecting equity into the company. Vitro is seeking specialized financial advisory support as it prepares to enter into intense negotiations with two distinct creditor groups: holders of the company’s USD 1.2bn in notes and the counterparties on approximately USD 325m in derivatives related liabilities, sources said. Earlier this week, the company said it would be unable to submit its complete 4Q08 and full-year 2008 financial results before the deadline established by Mexican securities authorities. Earlier today, Vitro did release a statement regarding its 4Q08 earnings. The company said in the statement its Y-O-Y consolidated net sales for 4Q08 declined 17.7%, mostly affected by a 28.2% peso depreciation during the quarter. EBITDA decreased 41.6%. The consolidated EBITDA margin decreased to 10.9% from 15.3% in the same period last year, the company said in the statement. The weak performances of the auto and construction sectors negatively impacted Vitro’s flat glass division, while falling consumer purchasing power negatively impacted its glass container division, the company said. For 2009, with little to no visibility on the implications of volatile economic conditions, the market is “working with a base-case EBITDA number of USD 250m,” the buyside source said. After a handful of skirmishes with the companies counterparty bank creditors, Vitro is thought to be trending toward a more aggressive approach toward negotiations, the first two sources familiar with the situation said.



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Agrenco Ltd. 09 Feb Creditors to vote on Agrenco's debt restructuring plan on 3 March Agrenco, the Brazilian oilseed producer, is scheduled to submit its debt restructuring plan to

creditors on 3 March, according to court documents. Under the Brazilian bankruptcy code, the company could go into liquidation if the plan is rejected by creditors, which include Bradesco, Credit Suisse and HSH, as reported. The company has some BRL 1.4bn (USD 628m)in debt to restructure, an insider said. The company is rushing to conclude the plan in time to submit it to the creditors for a vote, another source close to the company said. Management is analyzing the best model to put Agrenco back in business, the second source added. Agrenco is also studying every possibility to avoid the rejection of the restructuring plan, the first source added. "The creditors which disagree with the plan could be pushed to sell their claims," said the source. The proposal to sell claims may be welcomed by the creditors, including Credit Suisse, a source close to the bank said. "It seems like a good idea, but who is going to buy?" he added. Agrenco has hired Integra Consultoria, a consultancy firm specialized in debt restructurings, to help work out the company's reorganization. As part of the plan, the company intends to lease or sell its units in the towns of Caarapo, Alto Araguaia and Marialva, as reported. Six companies have made offers to lease the company's units, also as reported. Louis Dreyfus Commodities, Noble Group, Bunge Alimentos and Archer Daniels Midland (ADM) are among companies interested in leasing Agrenco's biofuel and soy crushing units, as reported. Creditors and Agrenco management were displeased with the bids made by potential lessees, the first source said. Management expected to generate USD 25m per year, per leased plant, as reported. “The bidders offered no more than USD 15m per year," the insider said. By Maria Fernanda Blaser in Sao Paulo

17 Feb Agrenco creditors meeting likely to be postponed for a week as company tries to

complete reorganization plan Agrenco, the Brazilian oilseed processor, is unlikely to submit its debt restructuring plan to

creditors on 3 March as scheduled, three sources close to the situation said. The company has not managed to write a final version of its reorganization plan and its creditors will not have to time to analyze the document in its present form before the scheduled date, when they were expected to vote on it, a source close to a creditor, an insider and an advisor to a potential strategic investor said. The creditors' meeting could be postponed for at least a week because of this situation. Creditors of Agrenco are expected to approve on 3 March a motion to postpone the vote on the company’s reorganization plan to a date yet to be defined, the source close to one creditor said. This situation is risking the company’s immunity against banks as the 180 days of protection against suits to collect claims expires on 18 March, the source close to the creditor said. The company is having a hard time finalizing its reorganization plan, which was based on the leasing or selling of its three main Brazilian plants. After months of negotiations with prospect lessees, the idea of leasing the units may have to be abandoned, the source close to a potential investor said. Leasing the plants may no longer an option as bids received from prospective lessees were considered low, said the company insider and the source close to a potential investor. Agrenco planned to lease its plants in the towns of Alto Araguaia, Caarapo and Marialva for USD 25m per unit per year but bidders offered less than USD 15m per unit per year, as reported. The company, which was granted bankruptcy protection on 18 September, is currently developing a new reorganization strategy, said the source close to the investor and the insider. The new strategy consists of the company finding a partner to share the company's operation. The prospective partners will not be given a stake in Agrenco, the source close to the investor explained. Agrenco and its operational partner would share the revenues from the operation under the new plan, the same source said. Any company interested in participating in this scheme will need to provide cash and recruit and pay employees to put Agrenco's plants in business, the source close to the investor said. The companies willing to engage in such a partnership will likely demand a considerable percentage of the revenues, the same source added. There are at least four potential candidates that could jointly operate Agrenco's plants under the new format proposed, the source close to one of the prospective investors said, referring to Louis Dreyfus, Archer Daniels Midland, Bunge and Noble Group. These companies made formal proposals to lease Agrenco's plants in December 2008, as reported. Glencore International may also be interested in this new approach though the company was never keen on leasing any of Agrenco's units, the same source said. Prospect strategic partners will have until 18 February to manifest their interest in participating in the scheme, the same source



added. Another new aspect of the plan to save Agrenco, which has recognized debt of BRL 1.4bn (USD 619m) in document submitted to the court overseeing its reorganization, is the sale of the Marialva plant, in the state of Parana, the same source said. The asset has attracted biofuel bidders, confirmed the company insider. The sale of Marialva could be worth BRL 47m (USD 21m), according to a document submitted by the company to the Brazilian court in November 2008. The total value of Agrengo’s assets would be BRL 616m (USD 272.5m), as reported by this news service based on court documents. Proceeds from the sale of Marialva should be used as capex to conclude the construction of the Caarapo and Alto Araguaia plants, the first source said, adding that the amount will only cover part of what is needed to finish the works. Marialva itself needs to be completed. As reported, Agrenco needs at least BRL 70m (USD 31m) to finish construction of its three main plants. By Maria Fernanda Blaser in Sao Paulo

27 Feb Agrenco may fail to get a vote for its 5 March reorganization plan Agrenco, a Brazilian oilseed processor operating under bankruptcy protection, could fail to get a

vote on its reorganization plan on 5 March, a source close to two creditors said. Time is of the essence for Agrenco, the source close to the two creditors said. Agrenco has some BRL 1.4bn (USD 628m) in debt to restructure and immunity against banks trying to collect claims, which, under existing rules, lasts 180 days from the date court protection was granted and will end 18 March, as reported. Agrenco presented a plan last year to the court overseeing the company’s attempted turnaround. “This is the only plan that exists so there is nothing [new] to vote on.” For this reason, the creditor assembly in which the plan is scheduled to be voted on could be adjourned for about ten days, the source said. Agrenco has been negotiating modifications to the original plan, which was posted on the company’s website on 19 November, but changes that were supposed to be introduced are not yet available, a person close to Agrenco told this news service this week. The same source said the voting session was moved from 3 March to 5 March because there was a problem booking a venue to conduct the proceedings. Integra Consultoria, a consultancy firm specialized in debt restructurings, was hired to help work out the company's reorganization. As part of the plan, the company intends to lease or sell its units in the towns of Caarapo, Alto Araguaia and Marialva, as reported. Securing a US-style DIP facility to complete the construction of the three plants is also part of the plan, as reported. As of this moment, however, the source close to the two creditors said he had no notice that such a commitment had been secured from any of the banks involved. Credit Suisse Brazil Bahamas Ltd is Agrenco's largest unsecured creditor, with about USD 72m in claims. WestLB NY Bank is the largest secured creditor with USD 39m in claims, according to a list posted on Agrenco’s website. Six companies have made offers to lease the company's units, as reported. Louis Dreyfus Commodities, Noble Group, Bunge Alimentos and Archer Daniels Midland (ADM) are among the companies interested in leasing Agrenco's biofuel and soy crushing units. Creditors and Agrenco management were displeased with the bids made by potential lessees, as reported. Management expected to generate USD 25m per year, per leased plant. “The bidders offered no more than USD 15m per year," an insider told this news service. Given this scenario, leasing the plants may no longer be an option, the same source said. By Ana Mano and Maria Fernanda Blaser, in Sao Paulo



Arantes Alimentos 03 Feb Arantes USD 478m bankruptcy case presided over by new judge Judge Wendell Simplicio has been replaced by Judge Roger Donega in the Arantes Alimentos

bankruptcy case, two sources familiar with the proceedings said. The replacement was effective from 2 February, 72 hours after Simplicio issued a decision in favor of Arantes and against two banks that sold derivatives contracts to the meatpacking company. The rulings against Deutsche Bank and HSBC Bank Brasil resulted in combined losses of roughly USD 30m for the lenders. Donega was on vacation but is the incumbent judge of Nova Monte Verde, state of Mato Grosso, where Arantes sought protection from creditors in January. Simplicio had been designated from the neighboring town of Contriguacu and is no longer on the case, the sources said, confirming earlier reports by this news service. Arantes Alimentos missed its first bond coupon payment on 19 December and subsequently filed for creditor protection in a jurisdiction thousands of miles away from its de facto headquarters in the state of Sao Paulo, as reported. The company is recognizing of BRL 1.1bn (USD 478m) of financial debt, according to a court filing. Its obligations are mainly trade finance loans and a USD 150m senior unsecured note, as reported. At this point, several creditor groups in and outside of Brazil are seeking legal representation and organizing a strategy to collect claims. Credit Suisse, which underwrote the USD 150m Arantes debut bond with Santander, is considering challenging the venue where the case is being argued, as reported. The bondholders too have considered a request to move proceedings to a more convenient location, a buysider and a source close to the investors said. Their strategy is being discussed in New York, where Bingham McCutchen has been counseling the group. In Brazil, law firm Machado Meyer is likely to get a mandate from the bondholders, the source close said. Bondholders with 55% of the notes outstanding held a second conference call last week to discuss ways of dealing with the Arantes default. Credit Suisse, which took part in the first bondholder call, was absent from the last one, the source close said. The 55% of holdings excludes any notes that the deal’s underwriter might still own, the buysider said. Bondholders in the last call mulled an agreement to formalize the group. Unity could be crucial as one buysider said dealing with the Arantes default was like “flying blind”. According to several sources, Arantes creditors are unsure of the reasons leading to the default, suspicious of the level of disclosure and uncertain of the recovery value of their claims. By Ana Mano and Maria Fernanda Blaser, in Sao Paulo

03 Feb Arantes: Brazilian judge orders Deutsche Bank, HSBC Bank Brasil to refund derivatives

losses Arantes Alimentos, the Brazilian meatpacker, convinced the judge overseeing its bankruptcy to

order Deutsche Bank and HSBC Bank Brasil to refund losses incurred as a result of derivatives contracts, according to court documents. The banks are expected to appeal the ruling, a source close to one of Arantes’ creditors said. Wendell Simplicio ordered Deutsche Bank to refund BRL 62.3m (USD 27m) in liquidated obligations related to these contracts and also ruled that HSBC should pay restitution in the amount of BRL 5.1m (USD 2.2m). The funds should be deposited in an Arantes Alimentos bank account in both cases, Simplicio said in his two separate decisions dated 30 January 2009. The Deutsche Bank contract was signed on 11 July 2008 and the HSBC contract was dated 3 July 2008, according to the documents. Total losses from the Deutsche Bank contract amounted to BRL 67.3m (USD 29m) while total losses from the HSBC contract were BRL 6.9m (USD 3m). The derivatives purchased by Arantes Alimentos limited potential gains but not its losses, the judge said, confirming earlier reports by this news service. The judge said Arantes management was “partially” informed of the risks inherent in these contracts. "In this case... there was a contractual imbalance resulting in enormous losses for the company after the sharp rise of the US currency," Judge Simplico said. The maximum gain the meatpacking company could derive in the Deutsche Bank contract was USD 2m. The cap for gains was BRL 800,000 (USD 248,000) in the HSBC contract. A source close to one of Arantes creditors said the banks may appeal Simplicio’s ruling, particularly because the judge ordered the two banks to return the money to the company’s bank account, and not to an escrow account. Arantes also purchased derivatives from Merrill Lynch, the same source said. By Maria Fernanda Blaser and Ana Mano, in Sao Paulo

11 Feb Arantes: judge approves change of proceedings venue requested by Santander and

Merril Lynch



Santander and Merril Lynch, two of the banks involved in the debt restructuring of Brazilian meatpacker Arantes Alimentos, convinced the judge overseeing the case to change the venue of proceedings. According to the press officer at Tozzini Freire law firm, which is representing Santander and Merril Lynch, the proceedings will be moved to Sao Jose do Rio Preto, where Arantes Alimentos is headquartered. “Creditors will no longer face difficulties to follow proceedings and will be granted greater access to the records of the case, which was not possible in Nova Monte Verde, a remote town,” Press Officer Christiano Bianco said in an emailed message to this news service. In a subsequent telephone conversation, Bianco said that Arantes may appeal the decision, which was announced on Tuesday. Arantes is attempting to restructure BRL 1.1bn (USD 486m) of debt, according to a document sent by the debtor to the Nova Monte Verde court. By Ana Mano and Maria Fernanda Blaser, in Sao Paulo

12 Feb Arantes strategy backfires as judge declares his Nova Monte Verde court 'incompetent' to

rule on its bankruptcy case The legal strategy of Brazilian meatpacker Arantes Alimentos to file for court protection in a

remote jurisdiction has backfired, Fabio Rosas, a lawyer representing Santander and Merrill Lynch, said in a telephone interview. The move proved a failure after Judge Roger Donega declared his jurisdiction “incompetent” to rule on the case and canceled all decisions related to the Arantes bankruptcy, Rosas said based on Donega’s decision, which was made public on Tuesday. Arantes is attempting to restructre BRL 1.1bn (USD 482m) of debt, including a USD 150m bond obligation led to market by Santander and Credit Suisse. The company was granted court protection on 12 January but Donega’s ruling risks the very immunity granted to Arantes against its creditors, Rosas said. At least three banks requested a change of proceedings venue, including Santander, Merrill Lynch and Safra, said Rosas and a lawyer based in Nova Monte Verde, state of Mato Grosso, where Arantes sought refuge from creditors. Judge Donega mentioned in his decision “several” requests to move proceedings to Sao Jose do Rio Preto, state of Sao Paulo, where the company is de facto headquartered, but did not name any of the banks. Arantes is likely to appeal Donega’s ruling and has a 10-day legal deadline to challenge the decision, Rosas said. The banks believe the company will insist on keeping the proceedings in Nova Monte Verde, where Arantes Alimentos owns a plant with capacity to slaughter 1,200 head of cattle per day. Donega’s ruling, a copy of which was obtained by this news service, is illustrated with a photograph of Arantes Alimentos’ head office in Sao Jose do Rio Preto, which the judge himself cut and pasted from the debtor’s website. Donega said the arguments contained in the requests to move the proceedings venue also revealed the company is managed from that location. “Saying the contrary would be incoherent and detrimental to those who are trying to collect their claims,” Donega wrote in his decision. The law requires the filing for bankruptcy protection to be made in the jurisdiction where the company’s main offices are based, Donega ruled. He wrote it is “evident” Sao Jose do Rio Preto is the center of Arantes’ decision-making process regardless of the location of any of its manufacturing plants. Under the Brazilian bankruptcy code, a company is protected against lawsuits to collect claims for 180 days after a judge offers court protection to a debtor. After the granting of court immunity, which is intented to give time for the company to reorganize, the debtor has 60 days to submit a recovery plan to the court and its banks. By Ana Mano and Maria Fernanda Blaser, in Sao Paulo

13 Feb Arantes Alimentos neglects to tell court it signed a Merrill Lynch USD 37m debt

confession Brazilian meatpacker Arantes Alimentos failed to inform the court overseeing its bankruptcy it

had signed a BRL 84.5m (USD 37m) debt confession with Merrill Lynch, Fernando Serec, the bank's legal advisor, said in a telephone interview. Arantes left off Merrill Lynch from a creditors list it submitted to the court of Nova Monte Verde, state of Mato Grosso, where the company filed for bankruptcy protection, Serec said. If Arantes neglected to include Merrill Lynch on that list, "other creditors could have suffered the same fate," the lawyer said. The USD 37m debt stemmed from losses the beef company incurred from a specific derivative instrument purchased by Arantes Alimentos on 15 April 2008 from Merrill Lynch, Serec said. After a long period of negotiations with the bank, the debt confession was signed in November last year by the brothers who own the privately held company, Aderbal and Danilo Arantes, the lawyer said. The debt was never repaid despite the confession, Serec said. On 19 December, Arantes Alimentos defaulted on an USD 8m bond coupon payment, the first after issuance of its 2013 senior unsecured note priced via Santander and Credit Suisse, as reported. The default was



followed by a filing for bankruptcy protection. Arantes Alimentos has recognized total debt of BRL 1.1bn (USD 484m). The outstanding principal of the bond is USD 150m. The court in Nova Monte Verde, where Arantes' main slaughterhouse is located but not its headquarters, granted the company refuge from creditors on 12 January. Since then, at least three banks, including Merrill, Santander and Safra, challenged the choice of venue proceedings and the case is suspended, as reported. All decisions related to Arantes' bankruptcy were declared void by Judge Roger Donega, who wrote on 10 February his court was "incompetent" to rule on the matter of Arantes' debt restructuring. The judge ordered the case to be sent to the court in Sao Jose do Rio Preto, state of Sao Paulo, where Arantes' head office is located. The company is expected to appeal the decision changing venue proceedings. Among the revoked decisions are two rulings against HSBC Bank Brasil and Deutsche Bank, from which Arantes also purchased derivatives, Serec and Fabio Rosas, the legal advisor to Santander, told this news service. In the rulings related to the derivatives that were announced on 30 January, the Nova Monte Verde court ordered Deutsche Bank and HSBC Bank Brasil to refund losses incurred as a result of Arantes' currency hedging contracts, as reported. It was Judge Wendell Simplicio, who handled the Arantes' case during Donega's vacation, who ruled in favor of the company and against HSBC and Deutsche Bank in the matter of the derivatives. The departed judge ordered Deutsche Bank to refund BRL 62.3m (USD 27m) in liquidated obligations related to the derivatives and also ruled HSBC should pay restitution in the amount of BRL 5.1m (USD 2.2m), as reported. The very immunity from creditors granted to Arantes Alimentos at the Nova Monte Verde court is threatened by the imminent transfer of proceedings venue, Serec and Rosas said. The two lawyers do not expect the company's appeal against the transfer of jurisdiction to be successful. By Ana Mano and Maria Fernanda Blaser, in Sao Paulo

16 Feb Arantes Alimentos appeals decision to move bankruptcy proceedings to state of Sao

Paulo – court documents Arantes Alimentos, the Brazilian meatpacker, appealed last Friday the decision of the Nova

Monte Verde judge to move bankruptcy proceedings to another venue, according to court documents retrieved online. The appeal comes within days of Judge Roger Donega’s decision to transfer the case to the court of Sao Jose do Rio Preto, state of Sao Paulo, where the debtor is de facto headquartered, as reported. The company's request to reverse the decision is being analyzed by Judge Donato Ojeda, who is a member of the appeals court in Cuiaba, capital of the state of Mato Grosso. In the event Ojeda decides in favor of Arantes Alimentos, the case will remain under the responsibility of the court in Nova Monte Verde, north of Mato Grosso state, where Arantes Alimentos’ main slaughterhouse is located. Fabio Rosas, legal advisor to Santander, and Fernando Serec, who is counselling Merrill Lynch, told this news service in two separate telephone interviews that they expected Arantes to appeal the decision to move venue proceedings. The pair does not believe, however, that Arantes’ appeal will be successful. The two lawyers also said that the very immunity granted to Arantes against creditors is in peril after Judge Donega ordered the change of venue proceedings. Judge Donega, who declared his court “incompetent” to rule on the Arantes bankruptcy, also cancelled all past decisions related to the case, both lawyers said. The Brazilian beef company was granted bankruptcy protection on 12 January in the Nova Monte Verde jurisdiction and the company recognizes BRL 1.1bn (USD 486m) of debt, as reported. Among its main obligations is a USD 150m outstanding bond due in 2013, currency derivatives and trade loans. Arantes Alimentos missed its very first bond coupon payment on 19 December and subsequently sought protection from creditors. By Maria Fernanda Blaser and Ana Mano, in Sao Paulo

20 Feb Arantes Alimentos wins bid to keep bankruptcy case in Nova Monte Verde



Arantes Alimentos, the Brazilian meatpacker, won a temporary court victory on 17 February, when an injunction prevented its bankruptcy case from being moved to Sao Jose do Rio Preto, state of Sao Paulo, where the company is based. The injunction was granted by Associate Justice Donato Ojeda, who ruled the case should stay in the town of Nova Monte Verde, state of Mato Grosso, until a final decision from the Superior Court of the State was issued, according to court documents. The final decision could take weeks or months and said pressure exerted by the creditors would not change timing, one lawyer with knowledge of proceedings said. The granting of the injunction “represents a small victory for Arantes,” a second lawyer said. He extolled the company’s ability to persuade the judge with its arguments and recalled the fact that the ruling “has bought Arantes some time.” The second lawyer estimated a final decision could be announced in three months in this particular case. On 11 February, Judge Roger Donega, who presides over the Nova Monte Verde court, declared his jurisdiction "incompetent" and was unable to rule on the Arantes bankruptcy and canceled all decisions related to the case. Donega said in his decision that Nova Monte Verde was not the company’s main place of business and ordered the case to be sent to Sao Jose do Rio Preto, where the meatpacker has de facto headquarters. Arantes challenged the decision at the Superior Court of Mato Grosso on 13 February, as reported. Arantes was granted protection from creditors on 12 January in Nova Monte Verde, where its main slaughterhouse is located. Legal advisors directly involved in the case told this news service that doing the filing in such remote jurisdiction was meant "to restrict creditors" access to the records of the case. The Brazilian beef company has BRL 1.1bn (USD 486m) in debt and among its main obligations is a USD 150m outstanding bond due in 2013, losses from currency derivatives and trade loans. Arantes Alimentos missed its very first semi-annual bond coupon payment on 19 December. Under the Brazilian bankruptcy code, a company is protected against lawsuits to collect claims for 180 days after a judge offers court protection to a debtor. After the granting of immunity, which is intended to give time for the company to reorganize, the debtor has 60 days to submit a plan of recovery to the court and its banks. By Maria Fernanda Blaser and Ana Mano, in Sao Paulo



Cablevision SA / Telefonica de Argentina S.A. / Supercanal / Republic of Argentina / Grupo Clarin SA / Telecom Argentina S.A. 23 Feb Cablevision/Supercanal: Argentine media regulator opens registration for new cable

operators; Telmex determined to get a foot in the 6m market - sources Cablevision and Supercanal, Argentina’s two largest cable TV operators, are facing an

unexpected challenge to their prepaid cable TV business. The Argentine government’s media regulator, known as the COMFER, has announced that it is ready to begin registration of new cable operators after having rejected new operating licenses for more than nine years. “We are determined to put an end to the current monopoly within the sector by allowing more parties to enter the cable market,” a government source with knowledge of the situation said. The government source said that registration forms will be sold to new operators beginning as early as next month. The new regulation will have a negative impact on Supercanal and Cablevision, according to a cable sector analyst. Both companies are currently seeking Court approval for their respective USD 526m and USD 792m debt restructurings. Telmex celebrated the news and will seek permission to register and thus become a legal cable TV operator within an Argentine market of more than 6m users, a source close to Telmex said. "For us it is great news,” said Adalberto Boccoli, president of the local cooperatives federation, Fecotel. Some 50 cooperatives that already offer electricity or telephone services will apply for cable operator licenses, Boccoli said. Cable operator registrations have been closed for smaller and independent operators as a result of the lobby exercised by Cablevisión-Multicanal, Telecentro and Supercanal, Boccoli said. Despite persistent rumors that Cordoba, Argentina-based energy company Electrongenieria will acquire a license, a company spokesperson denied these claims. The Government source declined to comment on whether it will reject or approve a merger between Cablevision and Multicanal, which still requires Comfer regulatory approval. As reported, Grupo Clarin, which owns both Cablevision and Multicanal, has 54% of the national Argentine cable market; the market share of both companies combined in major cities including Buenos Aires reaches as much as 80%. The government source was quick to point out that “it is not the job of the government to force divestments in order to avoid monopolies, but to create regulation favoring the arrival of new players in the market." The same source declined to comment further on the possibility of Telefonica and Telecom getting cable operator licenses. As reported, the Argentine law does not allow telecoms to become cable operators despite offering the chance to cable operators to offer phone services. Comfer’s decision to permit the issue of new cable TV operating licenses surfaces at the same time that Argentine President Cristina Kirchner’s led government is preparing a new media broadcasting regulation law to send to Congress, it has been reported. Sources close to Telefonica and Telecom declined to comment saying that they still need to analyze the changes in the regulatory framework. A Grupo Clarin spokesperson declined to comment. By Pablo Gonzalez and Gavin Sullivan, Buenos Aires



Cia. Albertina 19 Feb Companhia Albertina to miss deadline to secure USD 13m DIP facility – source and court

documents Companhia Albertina, a Brazilian sugarcane processor, is unlikely to secure a BRL 30m (USD

13m) debtor-in-possession facility by 28 February as foreseen in its reorganization plan, a source close to the matter said. “There is a consensus that this deadline will have to be postponed,” the source said. The closely held private company is currently reprofiling USD 120m-USD 130m of debt under court supervision. Its plan of reorganization will be voted on by creditors when they convene at a date yet to be defined, the source said. The new deadline for securing the DIP facility should be set at that creditor meeting, the source explained. The facility, which will have seniority to all other claims, is expected to be provided by existing Albertina creditors, especially those with security such as sugarcane pledged to existing debt, according to the company’s plan. Companhia Albertina is based in the town of Sertaozinho, state of São Paulo, one of Brazil’s most prolific sugarcane growing districts. The company crushes about 1.5m tons of sugarcane annually and is responsible for 1,539 direct jobs. The DIP facility is intended to provide Albertina with working capital to begin processing the sugarcane in the next crop year, which begins in April for producers based in the Southeast of Brazil. “If there is no credit or new money for working capital, there is a risk of deterioration, or even paralysis, of the company’s industrial activities,” according to its plan of reorganization. By Maria Fernanda Blaser and Ana Mano, in Sao Paulo



Comercial Mexicana S.A. de C.V. 06 Feb Controladora Comercial Mexicana process slows to a halt as a result of early missteps,

sources say The out-of-court reorganization of Controladora Comercial Mexicana (CCM) is slowing down to a

halt because of earlier missteps in the process, sources involved in the matter said. “It is moving slowly. Maybe too slowly,” a source involved in the matter said. The company’s creditors are seeking “hard financial data” on the company ahead of the Comerci’s upcoming creditor meeting in New York on Wednesday 11 February. Comerci’s operating outlook has been complicated by falling purchasing power and the increasing uncertainty surrounding Mexico’s economic outlook, which have had a knock-on impact on the retail sector. Comerci’s competitors and suppliers have been maximizing their advantages over the distressed Mexican retailer that saw its derivatives strategy blow up as the Mexican peso weakened dramatically against the US dollar, an industry source said. Comerci was among the companies that “gambled on the peso and lost a fortune”. Retailers that didn’t make those bets are intensely exploiting those who did by squeezing margins, the same source said. Comercial Mexicana’s controlling shareholder group, creditors agree, is “out of the money and in denial about it,” a different source involved in the process said. The Gonzalez Nova family has also been rebuked by the Finance Ministry and the National Banking and Securities Commission for gambling against the Mexican peso and putting at risk an enterprise that is a large employer of young people and senior citizens, it has been widely reported. Authorities are eager to understand whether the level of disclosure exhibited by Comercial Mexicana met new minimum transparency requirements established for listed Mexican corporates. Comerci has attempted three times to convince local judges to accept a petition seeking bankruptcy protections under the Mexican Ley de concursos mercantiles (LCM) without acknowledging that it is in default on derivatives-related liabilities in amounts over a legal threshold required by the law, it has been reported. Comerci “has received inconsistent advice and the strategy is not linear,” the second source participating in the situation said. The company’s current advisors “are taking baby steps” in the right direction “but its still a mess,” the source said. By Georgina Gatsiopoulos

09 Feb Comercial Mexicana creditors working toward generation of counter-proposal to

reorganization plan before 2 March Comercial Mexicana creditors will meet in New York this week as part of their efforts to generate

a counter-proposal to the company’s reorganization plan, two sources close to the situation said. The goal of creditors is to generate a counter-proposal before the 2 March conclusion of a standstill agreement agreed to last month by the distressed Mexican grocery retailer and the counterparties of its derivatives-related transactions as well as its relationship banks. At the same time, Comerci is responding to information requests by securities authorities regarding its derivatives transactions and its level of disclosure. “This has been an ongoing investigation and no conclusions have been reached. There has been no pressure from Finance Ministry officials” to prosecute the controlling shareholders of Comerci, one of the sources close to the situation said. The local press has reported in the past that local securities officials have been eager to find a scapegoat in the Gonzalez Nova family. “That is not the case. The Finance Ministry is only too aware of the global nature of this financial crisis,” the same source said. In the best-case scenario, Comerci will secure an out-of-court agreement with its creditors during 2H09, the same source said. On the table for creditors is new debt, equity and a simplified capital structure, the same source said. In response to an outpouring of lawsuits from counsel to the company’s peso-denominated bond issues that are not signed up to Comerci’s standstill agreement, the same source said: “it is too bad Mexican capital markets are so immature.” The company, its shareholders or an opportunistic investor could tender for the local bonds if the market were more liquid or if the counsel for the certificado bursatil holders had not sought a court order prohibiting trading on the notes. By Georgina Gatsiopoulos

25 Feb Comercial Mexicana stakeholders weighing strengths and weaknesses of legal and

financial strategies, sources say



The stakeholders of distressed Mexican grocery retailer Comercial Mexicana continue to weigh the strengths and weaknesses of their legal and financial strategies, days before a 2 March deadline is reached, a source familiar with the matter said. A second source familiar said creditors were more focused on their financial strategies for the time being, and were in a “haggling” stage among themselves and with the company regarding their claims. The 2 March deadline relates to an agreed-to end date for a standstill agreement with the majority of Comerci's creditors. The Mexican press, earlier today, reported that holders of the US-denominated bonds were preparing to lodge a suit against the company in the Mexican courts. Comerci continues to dispute a ruling by a second judge that denied its bankruptcy petition and still could file for bankruptcy protections under the Ley de concursos mercantiles (LCM) should a higher court toss the district court ruling, the second source familiar said. A first judge had asked for supplementary information on Comerci’s eligibility for protections. Comerci’s appeal of the ruling is still pending. Comerci is “definitely eligible” for LCM protections, the same source said. Under the LCM, Comerci would benefit from a recently amended Mexican bankruptcy regime that now allows for prepackaged reorganization plans to be submitted to the court as part of the company’s exit from bankruptcy. In the case of Comerci “there is still no number” that has been agreed to by the company and its creditors, and “ultimately,” the amount recognized by the retailer will depend on the strength of each claim, the first source familiar said. “Everybody is unsecured, but the different constituencies are weighed differently,” the source added. Comerci reports financial debt of USD 838m, while the derivatives related liability number has been heard to be as high as USD 3.5bn. For the first nine months of 2008, Comerci reported revenues of just under USD 1.3bn with an EBITDA margin of around 8%. Same store sales of grocery retailers have remained flat in this economic downturn while department store sales have reported double-digit decreases, according to local media reports. As in any restructuring, Comerci can sell significant non-core assets and sustain a certain level of debt as long as it is longer dated, the second source familiar said. Issues among the controlling shareholder group could hinder the execution of “any realistic plan,” an advisory source familiar with the matter said. By Georgina Gatsiopoulos



Corporacion Durango, S.A. de C.V. 04 Feb Corporacion Durango to present initial reorganization proposal on Friday, 6 February Corporacion Durango, a Mexican paper company, will present its initial reorganization proposal

to the company’s creditors on Friday, 6 February, two sources said. The company is eager to work with creditors in order to achieve consensual terms of an agreement that will allow the company the financial flexibility it needs in order to face the economic downturn that is playing havoc with the industry, the first source claiming knowledge of the situation said. Bondholders are expected to respond by early next week with their views on the proposal, a second source claiming knowledge of the situation said. A source close to bondholders said in the past that the company’s unrelated creditors expect the company to “treat differently” intercompany debt and bonds held by entities related to Corporacion Durango and its controlling shareholder group. “There are structures that can work,” the first source said, throwing out the examples of preferred shares, or other forms of equity. Few would dispute, the first source said, that Corporacion Durango is overlevered, and the ideal for the company would be to be debt free. The second source close to the situation agreed that “there is a way” to meet the needs of both creditors and the company via a “fair and equitable deal.” By Georgina Gatsiopoulos

10 Feb Corporacion Durango: Mexican bankruptcy law loopholes unlikely to be maximized in

current reorganization proceeding, sources say Corporacion Durango is unlikely to maximize loopholes in the local bankruptcy code in order to

push through a reorganization plan unfair to creditors, sources say. The Mexican paper company filed for protections under both Mexican and US bankruptcy codes on 6 October, 2008. “There is no intent to vote intercompany debt or bonds bought by related parties,” a source familiar with the matter said regarding a future vote on a reorganization plan that would allow the company to conclude its bankruptcy proceedings. Indeed, Corporacion Durango’s controlling shareholders – the Rincon family – are very sensitive to reputation concerns, the same source said. Among the loopholes that exist under the Mexican Ley de Concursos de Mercantiles (but non-issues under US Chapter 11) identified by a second source claiming knowledge of the situation are: equitable subordination; execution of prepackaged reorganization plans and when a claim can be voided. “There is nothing in Mexican bankruptcy law about equitable subordination, although there are possible remedies in the civil and even penal code,” the same source said. Under Mexican bankruptcy law, Corporacion Durango can seek the upper hand over holders of the majority of the company’s 10.5% notes due in 2017 by maintaining preferential treatment without any possibility of a sanction, the source said. Holders of the company’s bonds (unrelated to the company’s controlling shareholders) “would have to sue or enter the criminal courts,” the source said. “It isn’t as if the company has to exaggerate about the dire challenges faced by paper companies today,” the first source familiar said. The same source emphasized the highly leveraged capital structure of Corporacion Durango, intensified by falling EBITDA projections, and cited financial turmoil faced by the company’s global peers Weyerhaeuser and International Paper, both racing to cut costs and shutter capacity. By Georgina Gatsiopoulos and Gabriel de Sanctis

25 Feb Corporacion Durango bondholders generate reorganization counterproposal, sources

say Corporacion Durango bondholders are putting together a counterproposal to a reorganization

plan submitted to them earlier this month, sources familiar said. The Mexican paper company will meet with its creditors on Tuesday, 3 March, in Mexico City, the first of two sources familiar said. Corporacion Durango based the economics of its reorganization plan on the lack demand for paper and packaging products in Mexico and the US, the second source familiar said. “The bondholders’ financial model,” said the same source, is "based on far more realistic assumptions than the ones chosen by Durango.” The company expects to make significant progress on its reorganization talks at the upcoming meeting, the first source said. Corporacion Durango sought bankruptcy protection in both Mexico and the US in October, 2008. The company's bonds are indicated at 14-18, a trader said earlier today. Corporacion Durango released its 4Q08 and full-year 2008 results earlier this week. The company reported EBITDA of USD 4m in 4Q08 compared to USD 16.4m in 4Q07. In terms of sales, the Mexican paper company reported paper sales of USD 72.4m in 4Q08 versus USD 92.7m in 4Q07 and packaging sales of USD 83.5m in the last three months of 2008 compared to USD 105.6m during the same period in 2007. In a statement that accompanied its results, Corporacion Durango CEO Miguel Rincón said: “We all



need to be aware of the short-term and medium-term challenges our industry is facing [both internationally and domestically] and the difficulties [in foreseeing] the expected recovery. The market situation is, to say the least, uncertain. Demand is weaker than expected. We are doing our best to improve our performance.” As of year-end 2008, Corporacion Durango reported cash of USD 28.3m and financial debt of USD 510.8m. By Georgina Gatsiopoulos

26 Feb Corporacion Durango: Mexican court overseeing bankruptcy approves appointment of

representative for US-based bondholders The Mexican court overseeing the reorganization of Corporacion Durango approved the

appointment of a representative or "interventor" for US-based bondholders, sources said. The creditor-appointed, court-approved representative will oversee the activities of both the company and the trustee in the Mexican paper company’s court-supervised reorganization under the Mexican bankruptcy code, known as the Ley de Concursos Mercantiles (LCM), a source familiar said. A second source familiar described the role of the bondholders’ "interventor" as the figure that acts as an intermediary between creditors and the court. “It is the method by which [creditors] can get their questions answered sooner rather than later,” the same source familiar said. According to information published by the court overseeing the Mexican paper company’s reorganization, the court has formally recognized all the debt as it was presented by Corporacion Durango and validated by the court-appointed trustee in the matter, Rebeca Castaños Castaños. According to the court documents, creditors dispute the objectivity of Castaños Castaños because she was a Corporacion Durango board member and, as such, has a close relationship with the company’s controlling shareholder group. Castaños Castaños was also the appointed trustee in Corporacion Durango’s 2005 court-supervised reorganization. Among the most pressing questions that creditors will put before the Mexican court is the role and handling of the over USD 1bn in inter-company debt that was recently validated, the second source familiar said. Another issue will be when the company will disclose and cancel its own and related entity bond purchases, the same source said. Despite the historic low prices on Corporacion Durango’s 10.5% notes due 2017 and noise to the contrary, the company and its shareholders “are not buying now,” said a third source close to the situation. Corporacion Durango bonds were indicated at 14 to 18 at market close yesterday, a trader said. By Georgina Gatsiopoulos



Tricom 16 Feb Tricom seeks to extend exclusivity; expects to file all-equity plan; time for negotiations

over, source says Tricom, a Dominican telecommunications company, seeks to extend its exclusive right to file a

reorganization plan, according to court documents filed last week. A hearing will take place on the matter on 24 February at the US Bankruptcy Court for the Southern District of New York, according to court documents. At a recent status conference, Tricom told the bankruptcy court overseeing its Chapter 11 case that it had reached an agreement in principle with one of the three banks that had recently submitted claims against the troubled telco. “We have reached an agreement in principle with Banco Multiple Leon on both the economic and non-economic terms of a settlement,” said counsel for Tricom during a hearing that took place last week. The claims of Banco Leon, Bancredito Panama and Bancredit Cayman were not considered in the prepackaged reorganization plan submitted by Tricom on 29 February, 2008, when it filed for bankruptcy protections. The company’s plan has the support of creditors affiliated with Tricom’s founder and controlling shareholder Manuel Arturo Pellerano as well as holders of the company’s USD 200m 11.375% notes, in default since 2003. According to the company’s counsel, Tricom “is unable to bridge the gaps with Bancredit Cayman and Bancredito Panama.” On the sidelines of the hearing, a source close to the matter said: “the time for negotiations is over. Tricom needs to exit bankruptcy asap.” The company’s lawyers told the court last week that it would modify the reorganization plan to an all equity plan. Under the former plan, Tricom was to have issued a new USD 105m note as well as the company’s equity to unsecured creditors. Under the new plan, the company will report only existing secured debt and will create a reserve account for Bancredito Panama and Bancredit Cayman, according to information filed with the court. Amzak Capital Management, a Florida-based investment company, continues to buy significant sums of the company’s unsecured debt, according to court filings. Amzak has acquired the debt previously held by Deutsche Bank, JP Morgan and Argo, according to the filings.

24 Feb Tricom hearing on exclusivity extension postponed to 31 March; more time given to

obtain agreements from Banco Leon, Bancredito Panama and Bancredit Cayman Tricom obtained an adjournment until 31 March 2009, of a hearing on its request for an

extension of its exclusive right to submit a reorganization plan in its bankruptcy proceeding. The adjournment effectively extends the distressed Dominican telecommunications company's exclusive period until the next hearing date. In a hearing that took placer earlier today, Tricom said it would know if it could reach an agreement with creditor Bancredito Panama by the end of the week. The Dominican telco told Judge Stuart Bernstein of the US Bankruptcy Court for the Southern District of New York it was in the documentation process detailing its agreement with Banco Leon. As for Bancredit Cayman, the sole Tricom creditor that objected to the company’s seeking of exclusivity, counsel for Tricom’s ad-hoc committee said the bank would have “one more window of opportunity” in the near term to support a consensual reorganization plan. Tricom defaulted on approximately USD 415m in debt in 2003. It filed for bankruptcy protections in the US on 29 February 2008. At that time, Tricom said creditors affiliated with the company's controlling shareholder, Manuel Arturo Pellerano, as well as an ad-hoc creditor committee that includes holders of the company’s USD 200m 11.375% notes, supported the company’s reorganization plan. During the last year, the company has told the court overseeing its reorganization process that it would modify the plan originally submitted that included debt and equity components into an all-equity plan. The new plan is expected to include considerations for claims from Bancredito Panama, Bancredit Cayman and Banco Leon, three Tricom creditors not originally contemplated in the company’s reorganization plan. The plan support agreement for the original reorganization plan expires by 1 March 2009, the company said in recent court filings. Tricom bonds are currently indicated in the low 20s, a trader of corporate bonds said. By Georgina Gatsiopoulos



Post Restructuring



Compania Colombiana de Tejidos S.A. (Coltejer) 10 Feb Coltejer in pursuit of capital injection; mulling potential options while looking for financial

advisors, CEO says Coltejer, a listed Colombia-based textile company, is in pursuit of a capital injection to help cover

USD 41.6m in outstanding debt and make new investments, said CEO Eugenio Munoz. The company is currently mulling capitalization options, but it has yet to bring on financial advisors, he added. The Medellin-based company reported a loss of USD 146.7m during 3Q09 - its largest in more than 101 years. Munoz, who was appointed president of the company in December 2008, said that despite the losses and the current uncertainty within international markets, he believes “the worst has passed and it is time for Coltejer to regroup, open up new markets, and grow the company.” To do this, Munoz said a capitalization of the company is necessary and is one of his top priorities. He said this could include bringing on strategic partners in exchange for a capital injection. However, he noted that he is still in a “transition period” at Coltejer, and still in the process of discerning the company’s immediate needs. According to Munoz, once these needs are better understood, the company will seek out the appropriate financial advisors to help in its capitalization process. In July 2008, the company sold a 60% stake to Mexican textile company Kaltex, in a deal valued at USD 108.2m. Despite this capital injection, which settled debt obligations owed to Coltejer workers and retiree groups, the company still holds USD 41.6m in debt, explained Munoz. The company needs to resolve its debt obligations and also secure investments to modernize its infrastructure. Once this is done, Coltejer will be in a position to recuperate market share lost in recent years, and reposition the company as a regional leader. Since the Kaltex sale, the company has undergone a profound restructuring process, and Munoz said he has high expectations for 2009. As part of Coltejer’s deal with Kaltex, the Organizacion Ardila Lulle (the principal shareholder in Coltejer prior to the sale) was given control of three Coltejer forestry subsidiary companies: Cipreses de Colombia, Industrias Forestales Doña María and Núcleos e Inversiones Forestales de Colombia. This was compensation for assuming the remaining USD 64.8m worth of pension payments owed by Coltejer. Coltejer is based in the city of Medellin, 200 miles northwest of the capital, Bogota. According to previous reports, Coltejer has 8% of the Colombian textile market (valued at some USD 1bn) while main competitor Fabricato controls 18%. Other Colombian firms produce approximately an additional 20% and the 54% remaining corresponds to imports. On denim production, a sub-market valued at some USD 195m, Coltejer has 26% of the market while Fabricato control some 29%, with the rest corresponding to imports as no other textile firms in Colombia produce denim. By Gavin Sullivan and Pablo Gonzalez, Buenos Aires



Empresa Distribuidora y Comercializadora Norte S.A. 27 Feb Edenor reduces outstanding debt to USD 202m, CFO says Edenor, the Argentine electricity distributor, has reduced its outstanding debt to USD 202m,

Chief Financial Officer Pablo Rogelio Pagano said Friday on the company’s 4Q08 earning call. Pagano also added that the company is directly or indirectly holding USD 43.2m in 2017 notes that could be canceled, reducing the outstanding debt to USD 158.8m. Pagano said that during February 2009, through different market transactions, Edenor repurchased and cancelled approximately USD 28.9m in principal amount of par notes due 2016. The company also repurchased and currently holds approximately USD 7.2m in principal amount of senior notes due 2017, he said. Additionally, he explained that the USD 202m outstanding amount of financial debt is comprised of the following: USD 18.6m in par notes due 2016, USD 12.7m in floating rates notes due 2019, and USD 170.8m in principal amount of senior notes due 2017. At the same time, he said that out of the USD 170.8m 2017 notes, the Edenor Trust, managed by Banco Macro, owns USD 24.5m, while the company itself holds USD 18.7m. He added that the company will discretionarily choose to either cancel or keep its notes as cash position. Edenor net sales increased 26.3% to ARS 604.8m (USD 175m) in 4Q08 from ARS 478.7m (USD 138m) in 4Q07, Pagano said. This increase was mainly due to a retroactive rate hike covering November 2007 to June 2008, rather than to an increase in the volume of energy sold by the company, which was only 6.2% higher compared to the same quarter in 2007. During the 4Q08, Edenor capital expenditures amounted to ARS 100.5m (USD 29.1m), making the annual total cumulative capital expenditures reach ARS 335.7m (USD 97.3m) compared to ARS 342.7 m (USD 99.1m)for 2007, he said. Pagano forecasted a total of ARS 350m (USD 101.3m) in capital expenditures for 2009. Pagano said the company is uncertain about the chance of beginning charging higher rates during this year as the Integral Tariff Revision (RTI), which was supposed to become effective this month, has been delayed. As reported, according to Resolution No. 865/2008 published by the Argentine Secretary of Energy, the new tariff structure resulting from the RTI was supposed to be implemented in February 2009 in three installments: February 2009, August 2009 and February 2010. However, the RTI has not yet been implemented and although Edenor is currently in discussions with the Argentine Government regarding the RTI, the company cannot predict when the RTI will be implemented or whether it will be instrumented this year. Lastly, Pagano said that the company does not expect a substantial growth in electricity demand for this year, estimating a rise of only up to 2%. “We are not foreseeing a strong demand growth in our area of concession for 2009,” he said after explaining that January 2009’s demand rose only 2% compared to the same year-ago month. Edenor is the largest electricity distribution company in Argentina in terms of number of customers and electricity sold. In a separate press release, Edenor said that it has sold 18,616 GWh of energy during 2008, with net sales of approximately ARS 2bn (USD 579.2m) and a net income of ARS 123.1 m (USD 35.6m). Through a concession, Edenor distributes electricity exclusively to the northwestern zone of the greater Buenos Aires metropolitan area and the northern part of the city of Buenos Aires, which has a population of approximately 7m people and an area of 4,637 sq. km.



Grupo Iusacell SA de C.V. 19 Feb Iusacell to experience working capital constraints as business gains new customers, a

result of number portability, sources say Iusacell, a Mexican wireless telecommunications company, is expecting to experience working

capital constraints as its business continues to grow, a source familiar with the situation said. Iusacell increased the number of subscribers by 18% since the beginning of 2008, and will continue to focus on high-revenue generating upper-income niche customers, according to company information. As the company grows its customer base, it will continue to subsidize handsets for new customers, a cost that has cut into free cash flow and puts in jeopardy the company’s capacity to make its next coupon payment, the source familiar said. As of 30 September, Iusacell reported USD 35m in cash, USD 186m in short-term debt and total debt of USD 975m that carries, on average, interest rates of around 10%, according to company information. The company is expected to continue to report operating losses, although it does not report any derivatives-related losses on its books, according to the same source. By Georgina Gatsiopoulos



Hidroelectrica Piedra del Aguila S.A. (HPDA) / Republic of Argentina 24 Feb Argentine government mulling cancelation of combined cycle generators affecting HPDA,

sources say The Argentine government is mulling the cancelation of the completion of the natural gas

generators projects Belgrano and San Martin, a government source said. The projects entail adding a third turbine able to produce some MW600 that would complement two existing turbines that generate 1000 MW. The impossibility of raising USD 250m in debt to complete the project could be the main reason for the cancellation of the project, according to the same source. If cancelled, hydro-electric generator HPDA could be affected negatively as it has an undetermined share in the ongoing project. HPDA’s estimated stake, once the project is completed is 11%, according to research on the matter. As reported, the Belgrano and San Martin combined cycle power plant projects, valued at a total USD 1.2bn, began to be built after government policy shifted, forcing all local generators to chip in to an investment fund called FONINVEMEM. The fund comprises compulsory retentions of all local generators’ sales from January 2004 to March 2006. According to a government decree, the companies participating in the scheme would receive stakes at the Belgrano and San Martin projects in exchange. At the same time, with the sales of the electricity produced, the government would repay the money owed to the generators in 120 installments at an interest rate of Libor + 1.5%. A potential new debt issue of USD 250m could keep the project rolling, the government source said. Private-sector companies involved in the project are reluctant to offer warrants that would facilitate the deal, the source said. Should the project’s stakeholders hinder the launch of the new debt, they may be liable to be fined by Siemens. The builder of the turbine has already received some cash upfront for the turbine, a second government source said. An HPDA spokesperson was not available to take calls. However a source close to the company said that HPDA will not endorse new issuance under any circumstances. Indeed, the government should contribute capital to the project, as the local generators forced to become investors have already put in some USD 600m of a total investment estimated to be USD1.2bn and should not responsible for the additional USD 250m required, the source close to HPDA said.. It is understood that HPDA will be affected if the project is cancelled as there will be insufficient funds to pay down debts owed by the Argentine government to the generators, the source close to HPDA said. An extension of the 120 installments is preferred to endorsing a bond for a project run by the government, the same source said. HPDA reports outstanding debt totaling USD 164m, comprising two bonds: the 9% Series I bond maturing in 2017 and the 9.25% Series V bond maturing in 2012. By Pablo Gonzalez, Buenos Aires



MetroGas S.A. / Republic of Argentina / Camuzzi Gas Pampeana S.A. 09 Feb Metrogas/Camuzzi: Argentine ombudsman will ask court to suspend rate increases,

source says Metrogas and Camuzzi, two Argentine gas distributors, could face delays collecting their long-

awaited tariff increases, sources close to the companies said. The Argentine ombudsman, Eduardo Mondino, will ask local courts to suspend the last gas rate increase that is currently affecting consumers, a source close to him said. Metrogas and Camuzzi have received the green light from the government to start collecting their first hike in tariffs in the last six years. However according to Mondino’s advisors, the ombudsman office is receiving several complaints from consumers getting billed with increases of up to 200%. The increase is retroactive to 1 November 2008 and is meant to eliminate official subsidies. According to a previous story, the cash-strapped government will save almost ARS 1.4bn (USD 415m) with the elimination of these subsidies. Aware of the ombudsman move and trying to avoid an unfavorable court ruling, Camuzzi and Metrogras, along with Gas Ban, another distributor that received the hike, are in the joint process of publishing an ad explaining to the population the strategic importance of the hike, a source close to Metrogas said. A second source close to Camuzzi confirmed that they will publish the ad noting that the hike will only affect less than 36% of residential users in the country. As reported, the hike will be levied on consumers who demand more than 1001 cubic meters of natural gas annually. The ad will also point out that the money obtained will be used to expand the gas distribution network. According to figures that will be disclosed in the campaign, 3.5m houses out of 10m in Argentina still do not have access to the gas distribution network, the sources said. A government source disregarded the effect of the ombudsman’s move, saying that it could delay the rate increase for a couple of days. He also stressed that the government will implement the hike. Metrogas posted a net profit of ARS 14.4m (USD 4.3m) while Camuzzi reported a ARS 34.5m (USD 10.4m) net profit for 3Q08, according to information filed with the local SEC.



Parmalat Alimentos Brasil S.A. 19 Feb Parmalat Alimentos to use proceeds from asset sales to boost cash position, company

source says Parmalat Alimentos, the Brazilian dairy producer selling milk under the Parmalat brand, intents

to use proceeds from the sale of its Garanhuns plant, in Pernambuco state to boost its cash position, a company source said. Parmalat sold Garanhuns to Laticinios Bom Gosto on 3 February for BRL 31m (USD 13.5m), as reported. As of 30 September, listed Parmalat's cash position was BRL 7.2m (USD 3m), according to a regulatory filing. The company's management could also consider using proceeds to reduce short-term debt or as working capital, the company source added. The company continues to seek bidders for its Santal juice and Duchen biscuits divisions, as reported. Assets related to these brands as well as a milk plant in Santa Helena, Goias state, will also be sold. The company plans to raise BRL 250m (USD 108m), as reported. The amount expected from the sales may be overestimated, a former advisor to Parmalat Alimentos said. "Garanhuns was Parmalat's best plant," the source said. The price of BRL 31m (USD 13.5m) paid for this asset was described as "cheap" by the source, who added Parmalat was unlikely to raise the total of BRL 250m from the combined sale of its assets. Parmalat Alimentos is controlled by Laep Ltd, a Bermuda-based holding company. The controlling shareholder is also planning to sell assets at subsidiaries other than Parmalat Alimentos to raise cash, the company source said referring to Integralat and Gloria. In addition to the sale of the assets, Parmalat and Laep remain focused on cost reductions and are negotiating with banks to refinance short-term debt, the first source added. "The conversations are tough because market conditions are unfavorable," he said. Banco Safra, Banco BBM and Banco ABC are among the company’s relationship banks, according to its earnings release. Laep applied for a loan with the Brazilian Development Bank (BNDES) in June 2008 but has not been successful getting approval, the company source said. The company is "disappointed" at the BNDES for failing to approve a loan, the company source said, declining to specify the size of the facility requested. On 16 February, Parmalat Alimentos said in a regulatory filing that legal director Rodrigo Cunha will take on the role of managing director and investor relations director at the company. He will perform these duties "cumulatively" but no further clarifications were provided. By Maria Fernanda Blaser in Sao Paulo



Province of Buenos Aires 27 Feb Buenos Aires Province growing deficit could end in default in three years, sources say The fiscal deficit for the Province of Buenos Aires is growing to dangerous levels, and a default

in three years is an expectable scenario if the national government does not provide assistance, sources close to the local authorities said. The sources, who are involved in the daily provincial economic management for Buenos Aires, the wealthiest Argentine region, said that if a 15% raise for teachers were to be approved, the situation could become unmanageable. The teachers are asking for a monthly pay raise of ARS 200 (USD 58) and the provincial government is offering only ARS 55 (USD 17), according to local press reports. The teachers are threatening to strike if their demands are not met. The Argentine public school year begins this coming Monday. If the request made by the teachers’ union were to go through, the wage increase would have a tremendous economic impact on the province’s economy, as the same raise could instantly be demanded by all public employees, one source said. “Local regulations give the other 275,000 employees the right to ask for the same raise, and this could end up costing the Province close to USD 500m per year,” the source said. The situation is so dramatic that the Buenos Aires provincial governor, Daniel Scioli, has already begun cutting expenses, according to a government decree issued this week. Among other things, the governor has forbidden the hiring of new employees in the administration and the renting of any new office space for government use. Scioli has also restricted daily spending by disallowing air travel by officials below the sub-secretary level, according to the government decree. In 2008, the province’s fiscal deficit was around ARS 2.85bn (USD 814m) and the sources said they expect a 20% increase for this year. Adding to the stress, the province was unable to issue a largely announced USD 500m bond last year due to the financial turmoil and it is now dependent on funds from the national government. The second source said the situation could become even more problematic as former Argentine president and Buenos Aires province leader Eduardo Duhalde is arguing for the the national government, as well as the province, to maintain spending. In a public speech delivered this week, Duhalde urged Argentine President Cristina Kirchner not to repay the Paris Club some USD 6.3bn of defaulted debt. Instead, the national government should continue providing funds to the provinces, Duhalde suggested. Buenos Aires has the largest provincial debt in the country and it must pay USD 93.1m in interest this year plus USD 181m in capital amortization, it was reported. The second source said that without the national government’s financial aid, the province would indeed be forced into default in two or three years. “We are safe so far thanks to our strong ties with the Kirchner administration, but they will not be there forever,” he concluded. By Pablo Gonzalez, in Buenos Aires



Republica Argentina 10 Feb Argentine Supreme Court determined to limit layoffs, sources say The Argentine Supreme Court is determined to reshape the Argentine labor sector by strongly

regulating layoffs, several sources close to the seven-member judicial body said. Until now, companies have been allowed to layoff workers at their discretion, providing a severance package plus an additional premium (referred to as a fine) if it was without reason. However, according to the sources, the Supreme Court will soon rule that companies will not be allowed to fire without strong, valid reasons. Otherwise, the firing becomes discriminatory, the sources said. The Supreme Court ruling, which is expected to be passed soon, will be in line with two recent speeches given by the former Argentine president and current Peronist party leader Nestor Kirchner, in which he addressed a message to the companies: "Do not touch a single job position". The sources close to the Supreme Court said that the seven judges will call public hearings on three cases where employees were reportedly fired without justifiable cause. In the three cases, the fired employees were described either as activists trying to establish a union or affiliated union members. They all lacked the safety net that comes with being a union delegate, the sources said. Under Argentine law, a union delegate cannot be fired within two years of its delegate membership expiration. The calling of public hearings to rule in specific cases and the subpoena of qualified NGO’s as “amicus curiae” is an unusual procedure that the Supreme Court only uses when it wants to send a clear message, one of the sources explained. The first case to be examined will be the one that involves María Mabel Pellejero, an employee fired from Banco Hipotecario Río Negro. Back in 2005, the Rio Negro Provincial Supreme Court ruled that she had been fired just for being the wife of a union member and ordered the bank to review the termination of her employment. However, the bank appealed to the Supreme Court saying that the firing was not discriminatory. A Banco Hipotecario spokesperson did not reply to several calls seeking comments. Labor lawyers consulted by this news service said that if the Supreme Court succeeds at limiting layoffs, companies will have to employ people on a life-time basis and this could be uneconomical. One of the legal experts contacted for this article said the Supreme Court could limit layoffs given the current financial turmoil. A second lawyer suggested that the unions could lobby against a ruling limiting layoffs because they are at risk of losing privileges that only union delegates currently enjoy. A Supreme Court spokesperson was not available to take calls. By Pablo Gonzalez, Buenos Aires

18 Feb Argentine government criticized by private sector for using pension fund financing for

political aims - sources The Argentine government is being criticized by the private sector for using pension fund

financing for political aims, starving corporates in the process, several sources said. In November 2008, the Argentine Congress approved the nationalization of the private pension fund system created in 1994 (known locally through the ANSES acronym), creating a new integrated system controlled by the government. The move allowed the government to take over a USD 28.7bn in crossborder and local sovereign and corporate assets and has allowed the government to manage some ARS 1.4bn (USD 408m) per month in contributions from 9.5m workers. The sources were frustrated by the lack of guidelines to seek financing and also criticized the use of the funds for political aims. “Many companies consulted with Anses [for financing] but have been told to stand-by,” a private sector source said. “The government is sitting on money that will indeed be used for political goals,” a source from the Anses stated, adding that the previous private pension managers also had a political agenda. However, the source declined to provide a timeframe or amounts for corporate lending this year and refused to clarify the fund management policy. Two corporate sources seeking Anses support for potential bond issues expressed their frustration at having to deal with state officials unaware of the codes of dealing with the private sector. Potential local debt issuers are also concerned with a shortage of financing that will be put to work for future issuance. Under the previous system, 95% of bonds issued by the private sector were placed with ANSES. Now, sources from the entity managing the funds have informed potential issuers that up to 60% will be purchased by the new pension system. “Provincial banks also are sitting on cash, but hardly enough to cover the gap,” a third source said. Since the nationalization, only two Argentine issuers have been able to place bonds: a minor ARS 70m bond for cement producer Minetti (ARS 70m) and a USD-enominated bond (USD 101m) for local gas transporter Emgasud. Both saw 60% participation from the recently nationalized pension fund system. Looking for long-term capital outside of Argentina has been fruitless. “Outside investors have more attractive instruments to



buy other than a new local bond paying almost half the yield,” one of the sources said offering as examples a sovereign bond like BODEN 2012 cited at 28%, or well-managed private companies like Edenor, Pampa, Transener, Transportadora de Gas del Sur, Banco Hipotecario, all of them with yields in the neighborhood of 40%. “How can we seduce foreign investors with a 14% yield in dollars when they can get double if the sovereign does not default?” The sources also criticized the lack of transparency in the system. Currently, the government does not disclose how the USD 28.7bn portfolio is being managed or how the monthly cashflow from pensioners is being used. There is a general fear that most of the monthly cashflow will be used to subsidize automobile purchases and cheap mortgages to influence the middle class vote ahead of the upcoming national elections in October. A Banco Hipotecario source confirmed as much and said that in March the bank will begin using Anses funds to market a national plan to provide subsidized fixed rate mortgages. A source from the national car sellers association said that before then the government will subsidize the purchase of some 20,000 cars with the possibility to expand the program for up to 100,000 vehicles. The same is also being considered for kitchen equipment and heaters, the second source said. Given the pending orgy of subsidies, it is still unclear how much financing could reach the private sector, the sources said. Companies preparing to test the market in the near term include Emgasud (which still needs to finance USD 20m for its electricity generation program) and Aeropuertos Argentinas 2000 which had a USD 400m shelf that was recently approved by the local SEC, the sources said. Both companies have close ties with the Kirchner administration, this news service has previously reported. By Pablo Gonzalez, Buenos Aires

27 Feb Argentine government reaches deal with Lockheed Martin to regain control of FMA;

settles with Brazil’s Embraer for future JV - sources The Argentine Government has reached a deal with Lockheed Martin (LM) to buy back the

Military Aircraft Factory (FMA in Spanish) for an undisclosed figure, a government insider said. The Cordoba-based airplane manufacturer was originally privatized in 1995 when LM was awarded a 25-year concession to manage the factory. However, according to the insider, the Cristina Kirchner-led government has sealed a deal with LM Friday afternoon to regain managerial control of FMA. He noted that the deal will be announced on 17 March by the president herself during a trip to Cordoba. LM did not respond to repeated attempts for comment. The government insider said the deal was reached on amicable terms. However, a second source close to the situation said the Argentine government approached LM demanding that it sell FMA. The alternative was having its 25-year operating concession revoked on grounds that LM failed to fulfill production requirements laid out in the concession contract, said the second source. The same person said LM decided to take the undisclosed offer rather than challenge the government’s stance, which would force it to file a case at the World Bank’s International Centre for Settlement of Investment Disputes (ICSID). France’s Suez resorted to the ICSID when the Argentine government nationalized Aguas Argentinas, it was reported. The government insider declined to comment on the negotiation leading to the deal. The Argentine government has also sought a replacement for FMA’s management. “We have arrived at an agreement with Brazilian airplane manufacturer Embraer for a joint venture that in the long term will build aircraft for Aerolineas Argentinas,” the insider said. The government insider was unsure of the financial details, but said a deal had been struck and that Embraer would replace LM and manage FMA operations. An Embraer spokesperson was not available for comment. FMA was founded in 1927 and has produced over 1,300 aircraft of 30 different types. LM employs approximately 1,200 people at FMA and operates the factory as part of the Lockheed Martin Aeronautics business area, according to the company’s website. By Pablo Gonzalez and Gavin Sullivan, Buenos Aires



Satelites Mexicanos, S.A. de C.V. (Satmex) 04 Feb Satmex first-lien holders to begin to organize in light of weakening economic

fundamentals, sources say The senior secured creditors of Mexican satellite company Satmex are tentatively beginning to

organize, sources claiming knowledge of the situation said. Satmex gave an operations and financial results presentation last month via conference call that was “less than impressive”, a bondholder said earlier today. Far beyond some disruptive elements that were part of the call, the company has not been forthcoming about whether it is in compliance with covenants of its senior secured debt, one of the sources said. “It is safe to say that the company is not in compliance and needs to secure waivers in the very near term in order to continue with its current strategy,” the same source said. The company's CEO and CFO were not immediately available to comment on the matter. The holders of what were known as Satmex’s FRNs could be the only creditor group that is "in the money" a second source claiming knowledge of the situation said. And yet a solution to Satmex’s leverage problems “can only happen if creditors build a consensus”. Troubling to Satmex’s already challenged economic fundamentals is the rocky relationship current management has forged with the Mexican government. The federal government – specifically the underministry of Communications – has been eager to maximize its reserve capacity on the company’s three satellites at the same time Satmex wants to be free of restraints and capable of repricing its capacity to increase revenues. The relationship between Satmex and the underministry of communications has been vulnerable to shake-ups at the Communications and Transport Ministry (Secretaria de Comunicaciones y Transportes or SCT). Three bureaucrats have filled the post of underminister of communications since 2006, when Satmex concluded its bankruptcy proceedings. By Georgina Gatsiopoulos



High Yield



Banco Hipotecario S.A. / IRSA - Inversiones y Representaciones S.A. 16 Feb Banco Hipotecario determined to preserve liquidity; USD 160m 2010 bond debt not to be

refinanced or repurchased, CFO says Banco Hipotecario, a state-owned Argentine bank, said its main concern is to keep high levels of

liquidity, according to CFO Gabriel Saidon, who hosted an earnings call on Monday to discuss fourth quarter results. Currently, Banco Hipotecario has ARS 1.2bn (USD 349m) in liquid assets and the CFO added that the bank will gladly “pay the opportunity cost” that comes with sitting on cash. The CFO added that the bank is not considering any potential transactions to refinance its USD 160m 2010 outstanding bonds. Nor does the bank intend to buy back any of its bond debt for two main reasons. The first is that the bank must protect its cash position and the second is that the government has restricted the purchase of USD on the domestic currency market. As reported, companies in Argentina are not allowed to buy more than USD 2m per month if they do not face debt maturities. The forex restrictions could result in hard times for Banco Hipotecario, as the CFO predicts a 14% devaluation of the ARS peso against the USD dollar for this year, he said in the call. Despite being 64% stated-owned, Banco Hipotecario is managed by minority shareholder and real estate company Irsa. According to Saidon, the bank will soon return to the mortgage business and is expected to draw funds from the nationalized pension system to reenter this market. As reported earlier, Banco Hipotecario will auction social security funds to finance mortgages at a subsidized rate of 12%. Banco Hipotecario is listed in Argentina and in 2008 the bank posted a loss of ARS 23m (USD 6.6m), compared to a gain of USD 23m in 2007. By Pablo Gonzalez, in Buenos Aires

Bertin Group 05 Feb Bertin raises slaughtering capacity amidst Brazil beef sector crisis Bertin, one of Brazil’s biggest beef producers, will inaugurate a new slaughtering plant ahead of

schedule in a demonstration the company can thrive where competitors are struggling, IR Director Monica Molina said in an exclusive interview. Molina said the inauguration of the Diamantina plant in the state of Mato Grosso was brought forward from the third quarter to 5 May. Bertin is emphasizing projects that can generate cash in the short term and will increase capacity by 3,000 head per day when Diamantina goes on-stream. “The cycle of buying, killing and de-boning is short. We are trying to anticipate the return on our investment and this is revenue injected directly in the vein,” Molina said. The start-up of the plant will allow Bertin to take advantage of falling cattle prices as a result of players going out of business. Though the general shortage of animals persists, there have been improvements since privately held meatpackers with operations in the state of Mato Grosso, including Margen and Quatro Marcos, filed for bankruptcy protection. “After successive company failures, the supply of cattle improved in favor,” Molina said. All of the companies which sought court protection had a strong local market presence but not Bertin, which has scale and competitive export market advantage. Their demise opens up opportunities on the cost side given less pressure on raw material prices and also presents the potential for domestic market share gains. While the global economic slowdown is threatening demand for protein, Bertin is generally upbeat. Though Bertin admits to facing commercial pressure on the export market as a result of the strength of the dollar against the real, it knows how to use the forex to its advantage. “With the strong dollar, we have a buffer to reduce prices without losing revenue,” Molina said. Additionally, in Brazil the so-called C and D class consumer now has a higher purchasing power thanks to the federal government’s social programs. This is expected to stop beef substitution and will increase consumption of yogurt and cream cheese that the lower classes could not afford to buy in recent years. “There are a lot of synergies yet to be captured from the Vigor acquisition,” said Molina about the 90-year-old dairy brand acquired by Bertin in November 2007. By Ana Mano and Maria Fernanda Blaser, in Sao Paulo

05 Feb Bertin selective on acquisitions; earmarks up to USD 391m for investments this year



Bertin, the Brazilian beef concern, had expected to continue expanding through acquisitions when it sold almost a third of the business to the Brazilian Development bank (BNDES) in May last year, Flavia Mouco, the company’s new financial director, said in an exclusive interview. “The initial idea was using the money to finance possible acquisitions, but after the global crisis, the BNDES funds became more a mechanism for strengthening our own capital than a means for new investments,” Mouco said. Bertin received BRL 2.5bn (USD 1.08bn) from the BNDES in exchange for a 27% stake. The bank, which has been acting as a private equity vehicle in the domestic beef sector, also bought shares in rivals JBS, Marfrig and Independencia. In Bertin’s case, the BNDES investment boosted the company’s cash position to BRL 2bn (USD 870m) at the end of the third quarter, when the financial crisis hit and the company began rethinking growth plans. For example, the Lehman Brothers debacle led Bertin to shelve plans to start its own bank, as did JBS, Mouco said. Bertin has earmarked BRL 1.8bn (USD 782m) for investments in 2008-2009 and is being selective with projects, IR director Monica Molina who participated in the same interview said. She forecasts the company will invest up to BRL 900m (USD 391m) in 2009 and said priority will be given to projects that can generate revenue in the short run. With small incremental capex, Bertin is primarily interested in upgrading its Campo Grande slaughtering and de-boning plant. Bertin intends to start processing beef at that location, Molina said, adding margins are higher in the industrialized meat segment. Bertin is also accelerating investments in Diamantina, a plant located in Mato Grosso, to take advantage of the vacuum left by meatpacking competitors who filed for bankruptcy protection in recent weeks. This vacancy has helped reduce cattle prices as there are fewer buyers in certain regions, not to mention the opportunities for growth in the domestic market, Molina said. Bertin will remain conservative in terms of spending but it might pursue bolt-on acquisitions to improve its product portfolio. While buying out companies remains a part of the strategy, Bertin says it is not taking any big leaps. Bertin is currently protecting its cash position but will consider transformational acquisitions when the crisis subsides, Molina said. In 2007, Bertin took over dairy company Vigor and today this acquisition represents 13% of Bertin’s business, the IR officer said to illustrate her point. Unlike Brazil-based rivals JBS and Marfrig, Bertin will not immediately diversify protein risk, Molina said. She admitted, however, that pork and poultry production could at a later stage reinforce the company's food service strategy. Also differently from JBS and Marfrig, Bertin is expected to keep the slaughtering base in the Southern Hemisphere, where production costs tend to be lower. Regarding target locations, Argentina would be a key place to look, Molina said. Both Marfrig and JBS have bought assets in Argentina. By Ana Mano and Maria Fernanda Blaser, in Sao Paulo

06 Feb Bertin against reducing dollar debt as did Independencia; derivatives expert now heads

financial department Bertin does not intend to reduce its dollar-denominated debt despite the sharp rise of the

greenback against the Brazilian real, financial director Flavia Mouco said in an exclusive interview. Bertin is one of Brazil's largest beef producers. Mouco has been leading the company's financial department since December and was hired from the financial sector where she amassed 13 years of experience trading derivatives. She joined the company about six months ago to help Bertin start its own bank. The initiative was shelved amid the financial crisis, Mouco said. Except for Bertin's outstanding USD 350m bond, the company's dollar denominated debt "is not a problem" as it is mostly tied to export revenues, the new financial director said. Bertin's strategy contrasts with that of Independencia, a rival Brazilian meatpacker, who this month elected to replace part of its bond debt, approximately USD 130m, with a BRL-denominated facility due in three years, as reported. Bertin uses long-term trade credit such as advance on forex contracts (ACCs) and export pre-payment facilities. About 50% of its obligations were denominated in foreign currency as of the third quarter, while exports corresponded to some 44% of revenues in the first nine months of 2008. Despite the imminent liquidity crunch, the company secured "a beautiful" USD 75m trade facility maturing in seven years last September, Mouco said. According to its third quarter report, Bertin has about BRL 1.7bn (USD 745m) due in the short term. However, the refinancing environment has become more challenging, said Mouco and IR director Monica Molina, who participated in the same interview. The pair said Bertin has been rolling over loans normally but banks are demanding higher rates and giving shorter maturities. Under these circumstances, Bertin may dispose of cash and cancel some debt if refinancing costs are deemed prohibitive, the IR director said. In general, Bertin is acting defensively to weather a crisis "which may last longer than expected," the IR director said. After an equity injection from the Brazilian Development Bank (BNDES) in



May of last year, Bertin had BRL 2bn (USD 877m) on hand as of the third quarter, according to a company presentation. Molina declined to forecast Bertin's cash position in the coming 12 months, saying the company does not provide this type of guidance. Besides relying on the BNDES as an equity partner and project finance agent, Banco do Brasil and ING are among the company's relationship banks, Mouco and Molina said. Additionally, Morgan Stanley and Credit Suisse were the joint lead managers and bookrunners of Bertin’s 10.25% 2016 bond, which the company does not plan to buy back and cancel, as Independencia is doing. The only motivation for repurchasing Bertin bonds would be the discount at which the debt has been trading, Mouco conceded. She declined to reveal whether management had effectively bought back any quantity of bonds but explained "there would be an enormous yield to capture." Recently, bondholders have granted privately held Bertin Ltda the authorization to formalize Bertin SA, a public company not yet listed on the stock market, as the issuer of its bond debt and with an unconditional guarantee from Bracol Holding. The company had planned to withdraw Bracol's guarantees in 1Q09 but the crisis postponed the plans, Molina said In relation to company's hedging strategy, management is conservative though not prejudiced against innovative instruments, Mouco said. Bertin's hedging policy is submitted to the board of directors and strictly followed but use of complex derivatives is not forbidden. "The problem is not the tool used to hedge, but how it is used,” Mouco said. By Maria Fernanda Blaser and Ana Mano, in Sao Paulo

06 Feb Bertin's capital structure adequate for the medium term; IPO distant after BNDES

investment Bertin, the Brazilian beef and leather producer, considers its capital structure adequate for the

business at least for the medium term, IR director Monica Molina said in an exclusive interview. "We are ready to do an IPO and we are ready for a more sophisticated reprofiling of the debt if we see the debt market open up. Today we have a capital structure which is good enough to execute our plans on a medium-term basis," Molina said. When the capital markets were generous and successive Brazilian beef companies raised debt and sold equity, Bertin, a family-run enterprise, kept a conservative stance and waited. Shortly after issuing a USD 150m note due in 2016 and upsizing the deal to USD 350m, Leandro Gomes, the now departed financial director of Bertin, told this news service that selling shares at that time "would be like leaving money on the table." According to Molina, his comments were possibly motivated by the issue of price as the market was willing to pay less for an asset which Bertin thought to be worth more. "We would not do an IPO unless we knew this would be economically attractive for the shareholders," the IR officer said. The prospect of an IPO became even more distant after May 2008 when the Brazilian Development Bank (BNDES) acquired almost 27% of Bertin for BRL 2.5bn (USD 1.09bn). "Any additional funds would have to come with a premium and we have enough cash to support our next planned investments," Molina said. By Ana Mano and Maria Fernanda Blaser, in Sao Paulo



Companhia Siderurgica Nacional (CSN) / Kremikovtzi AD 03 Feb Kremikovtzi bondholders seek higher recoveries in bid process Holders of Bulgarian steelmaker Kremikovtzi’s EUR 325m 12% 2013 bonds are seeking higher

recoveries from two bidders pitching to acquire the mill, said three bondholders. Two of the steel mill's largest creditors - one of which is the Bulgarian government - have submitted “a very attractive offer” to the bidders, CSN and Smart Holding, and await a reply later this week, according to a source close to the ad hoc bondholder committee. Brazilian steel group CSN and Kiev-based industrial group Smart Holding are both bidding to acquire Kremikovtzi. Holders of the 2013s will aim to recover around 80% of their notes, according to one bondholder. “We were willing to take a 19% haircut half a year ago when ArcelorMittal was negotiating control over Kremikovtzi.” The group of secured creditors are determined to achieve maximum recovery value on the paper, the second bondholder continued. “There is a deal on the table and there is a way of increasing it [value] significantly,” he commented. Kremikovtzi’s two major creditors, York Capital Management and QVT Financial, will influence the final decision on noteholder recoveries, one bondholder noted. During a conference call with CSN in mid-January, secured creditors were willing to take a higher reduction in recoveries, according to an insider close to the bidding process. Holders of the 2013s would accept a haircut north of 60% on their notes, he added. In the event that a deal with CSN materialises, other unsecured Kremikovtzi creditors could be expected to take a 95% haircut on their outstanding debt, the insider said. Kiev-based industrial group Smart Holding issued its proposed restructuring plan to Kremikovtzi bondholders two weeks ago, according to a Smart Holding spokesperson. The group is in talks with the bondholder ad hoc committee representing a large amount of creditors and individual funds holding the bonds. Ukrainian bidder Smart is drafting a memorandum of understanding to be signed by Smart Holding, bondholders and the Bulgarian government, the Smart spokesperson said. At a meeting with the government on 22 January, Smart pledged to sign the memorandum within two weeks. Kremikovtzi was ruled insolvent by a Sofia court in August 2008, as reported. A court-appointed receiver has to submit a preliminary reorganisation plan for the mill this month, according to the insider close to the bidding process. It is possible the deadline could be extended, the same source added. Any agreement to save Kremikovtzi will need to be backed by bondholders, the Bulgarian government and the steel mill's labour union, he added. By Alesia Sidliarevich and Ana Mano

10 Feb Kremikovtzi bondholders offered EUR 80m plus shares by bidder Smart Group Kiev-based industrial company Smart Group has offered to pay Kremikovtzi bondholders EUR

80m over four years. Under Smart’s proposal, the remainder of the Bulgarian steel mill’s EUR 325m bond would be converted into shares in a new company based on Kremikovtzi assets, said a person familiar with the matter and a source close to the situation. Kremikovtzi’s other debts would also be restructured and repaid within four years, the person said, adding that the plant’s largest creditors would get a stake in the company. Bondholders have already rejected the offer, said the source close to the situation. The initial proposal was unacceptable but negotiations between noteholders and Smart Group continue and the offer may be revised, he added. Smart Group has submitted the restructuring proposal to bondholders, Kremikovtzi’s court-appointed administrator and the Bulgarian government, which holds around a 25% stake in the mill, said the person familiar with the matter. The Ukrainian company has pledged to invest around EUR 220m into the mill over the next five years and supply iron ore, coking coal and slabs up to a value of USD 60m to restart operations, the person continued. Kremikovtzi would be working at full capacity by 2010, producing 2.2 million tonnes of rolled products a year, he claimed. Kremikovtzi bondholders are also negotiating with the other company interested in taking over the mill, the Brazilian steel group CSN, said the source. During a conference call with CSN in mid-January, the noteholders were willing to accept a haircut north of 60% on their notes, an insider close to the bidding process said previously. Bondholders are aiming higher, as reported. They want to recover around 80% of their notes’ value, according to one bondholder. Kremikovtzi’s EUR 325m 12% bond due 2013 was quoted today at 5/11, according to a market participant. By Alesia Sidliarevich

25 Feb Kremikovtzi bidder Smart Group pulls out of negotiations to manage mill; fails to reach

deal with bondholders



Kiev-based industrial company Smart Group has pulled out of negotiations to take over the running of Bulgarian steel mill Kremikovtzi. Smart was unable to win the support of bondholders for its management proposal and has decided not to proceed, said a person familiar with the situation. Smart Group sent a letter yesterday (24 February) to the Bulgarian government, Kremikovtzi’s court-appointed administrator and bondholders informing them of its decision, the person said. Kremikovtzi’s EUR 325m 12% bond is due in 2013. A trade union source said he expected to receive written confirmation of Smart’s withdrawal later today. Smart Group said in the letter that negotiations over a management contract have become protracted. Representatives of the ad hoc committee representing Kremikovtzi bondholders could not be reached for comment. Smart Group offered to pay Kremikovtzi bondholders EUR 80m over four years, as reported. Under its proposal, the remainder of the Bulgarian steel mill’s EUR 325m bond would have been converted into shares in a new company based on Kremikovtzi assets. Smart Group's offer, as well as one from Kremikovtzi's second bidder, Brazilian steel company CSN, were still on the table on Monday, said three sources close to the ad hoc bondholder committee yesterday. Both companies were considering bondholders’ demands, said two of the sources. The third said holders want to recover 80% of the value of their notes. Ukraine-based Smart Group pledged to invest around EUR 220m into the mill over the next five years and supply iron ore, coking coal and slabs up to a value of USD 60m to restart operations, as reported. Kremikovtzi would be working at full capacity by 2010, producing 2.2 million tonnes of rolled products a year, Smart said. Another Ukrainian company, Vorskla Steel, still holds around a quarter of Kremikovtzi’s EUR 325m bond, said a source close to Vorskla Steel. One of the sources close to the ad hoc bondholder committee disputed this, however. Vorskla Steel representatives did not attend a recent bondholder meeting, he added. Vorskla is controlled by Ukrainian businessman Konstantin Zhevago. It bought Kremikovtzi bonds notes on the secondary market during a series of trades last year, the same source said previously. Vorskla Steel was interested in taking over Kremikovtzi last year and signed a tolling agreement to supply raw materials, but this was later cancelled, as reported. As of this week, neither Smart Group nor CSN have been able to match creditors’ demands, said the source close to Vorskla Steel. He declined to comment on whether Vorskla has been in talks with either of the two bidders. Vorskla is still waiting to be repaid for the resources it committed to Kremikovtzi operations last year, said the same source. Vorskla Steel Bulgaria has filed a claim against Kremikovtzi in a Sofia city court, as reported. The source close to Vorskla Steel claimed previously that Kremikovtzi owes it more than EUR 5m and 28,000 tonnes of hot rolled coils. The Sofia court confirmed Vorskla Steel delivered more than 60,000 tonnes of raw materials, he said. Kremikovtzi is currently producing around 6,000 tonnes of hot-rolled coils each month, around 20 times less than its capacity, said a Kremikovtzi spokesperson. By Alesia Sidliarevich



Desarrolladora Homex S.A. de C.V. 19 Feb Homex results to be negatively impacted by layoffs in industry-heavy regions and new

accounting measures, sources say Homex, a leading Mexican homebuilder, will be negatively impacted by significant layoffs in the

regions where it has major projects, sources claiming knowledge of the situation said. Though geographic diversification has been a priority for the homebuilder, the states in which most of its sales have historically been concentrated – Baja California, Estado de Mexico and Jalisco – are expected to be especially hard hit because of the type of industries that generate the lion's share of employment there, the sources said. Urbi, a Homex peer, may be less vulnerable because of its commitment to creative programs that have allowed it to increase sales to poorer workers in service industries, an industry source said. Both companies are expected to discuss full-year 2008 and 4Q08 results on 23 February. A banking source claiming knowledge of the Homex situation said that when Homex implements new accounting practices that will allow it to book sales only once homes are titled and not before, the company's EBITDA metric and capitalization ratios will suffer. The company and its investors have "already taken changes into account," the banking source said. Homex "has become addicted to EBITDA margins in the 20s, and the new number won't be there," the source said. By Georgina Gatsiopoulos

Grupo Industrial Saltillo (GISSA) 12 Feb Grupo Industrial Saltillo: Derivatives losses, shrinking business and environmental

concerns partially offset by positive developments, sources say Grupo Industrial Saltillo may have successfully postponed its peso-denominated bond

maturities, but whether the good news may be sufficient to compensate for negatives remains a question, sources say. A sector source and an advisory source familiar with the situation of the Mexican conglomerate said that negative pressures on the company’s balance sheet include a shrinking market for autoparts and construction materials. Core businesses for GIS are autoparts for diesel engines, a foundry autoparts business, and a construction materials division that encompasses ceramic tiles and water heaters. The company also has a small housewares division that has been slated for sale since 2006. The company’s cash position topping USD 45m was virtually wiped out by the company’s losses related to its derivatives strategy, according to company information published last October. One of the two sources said that environmental costs associated with the company’s aging production facilities may also negatively impact its cost structure going forward. On the other hand, both sources agreed that GIS could maximize opportunities from increased infrastructure spending in the US, where GIS partner Caterpillar is expected to benefit, as well as in Mexico. Beyond a boost in infrastructure spending across the country, the Mexican Economy Ministry said recently it will target the auto industry for special fiscal and input related subsidies. The administration led by Mexican President Felipe Calderon has also said recently it would subsidize the purchase of solar powered water heaters for Mexican homes. GIS is the number one manufacturer of solar-powered water heaters in the country, according to company information. “The recent restructuring of the certificado bursatiles is an important step,” the sector source said in reference to the company’s recent announcement that it had secured a three-year grace period from its bondholders, who also agreed to push out their bonds’ maturities for ten years. But, “The company is still in the woods,” the source said. As of 3Q08, the company reported bond debt totaling USD 122m of total debt of USD 230m. The advisory source said the company is focused on survival in the near term and a sale of significant assets when market conditions improve. By Georgina Gatsiopoulos



Grupo Kuo SAB de CV / CIE DESC Automotive, S.A. de C.V. 18 Feb Grupo Kuo has yet to be advised by Grupo CIE regarding USD 100m call option on joint

venture, company source says Grupo Kuo, a Mexican conglomerate, has not been advised by its partner in an autoparts

business whether Grupo CIE Automotive will exercise its put option valued at USD 100m, a company source said. Grupo Kuo expects to sell its 50% stake in the autoparts JV for approximately USD 100m by 30 March, 2009 or during 1Q10, the source said. Should Grupo CIE Automotive choose to exercise the call option, Kuo will be advised within the next 40 days, the company source said. The use of proceeds from the sale of the autoparts business will be primarily to fund capex and then to pay down debt, according to the company. Grupo Kuo announced unaudited 4Q08 and full-year 2008 results earlier today. During a conference call, the company said it had posted a 20% increase to USD 2bn, while EBITDA expanded by 17% year-over-year to total USD 148m. Nevertheless, the company’s best-case scenario for 2009 is flat or slightly below results posted for 2008, the company source said. The company’s autoparts division is particularly vulnerable to the global economic slowdown, the source said. The automotive division represents 26% of total sales during 2008, helped in the last quarter by improved sales into the spare parts market. In terms of EBITDA full-year 2008, Kuo’s auto division represents 36%; in 4Q08, the auto division EBITDA represented 43% of the total, according to a company press release that accompanied the company’s results release. Kuo management said during the call today it spent USD 30m in capex during 4Q08, with one portion of the funds spent on increasing capacity of a plant producing transmission parts for GM and Chrysler’s "Challenger" and "Camaro" platforms. By Georgina Gatsiopoulos

Grupo Posadas S.A de C.V. 19 Feb Grupo Posadas to seek Brazilian development bank financing for growth plans in Brazil,

source says Grupo Posadas, a Mexican hotel company, will seek funding from BNDES for growth

opportunities in the local market, a source familiar with the situation said. Grupo Posadas is eager to secure financing for growth in the Brazilian market denominated in the local currency and from local sources as a natural hedge against foreign exchange volatility, the source said. Grupo Posadas ended 2007 with 10 hotels in Brazil branded Caesar Park and Caesar Business, according to company information. In Mexico, Grupo Posadas has successfully tapped local development bank funding for a critical loan last year guaranteed by a number of the company’s owned hotels in response to losses experienced in the hotel chain’s derivatives strategy, it was reported. After opening its first Caesar Business Hotel in Sao Paulo, Brazil in 2001, Grupo Posadas now is expected to focus on the Brazilian market for growth and in terms of portfolio diversification, the source familiar said. Grupo Posadas will have very little covenant heavy debt left on the company’s books after amortizations slated for this year, according to company information. The company is “very optimistic’ that BNDES will fund Grupo Posadas’ growth in Brazil, the source said. By Georgina Gatsiopoulos

27 Feb Grupo Posadas releases 2008 results; derivatives-related losses climb; company

depletes cash to cover liabilities, source says Grupo Posadas released full-year 2008 and fourth quarter 2008 results earlier this week in

which it disclosed that its derivatives related losses have climbed past USD 80m. The company has complied with its margin calls related to its hedging strategy, and has covered the calls by depleting its cash position by half from approximately USD 120m to just over USD 60m, a source familiar said. Grupo Posadas could firm up a liability management strategy during 1H09, the same source said. Grupo Posadas reported net debt of USD 361m and a net debt to EBITDA metric of 3.2x. The company disclosed in a statement that it had drawn down on a USD 23.4m facility with Mexican government owned development bank Bancomext. The company also tapped a USD 7.8m facility with an existing relationship bank as well as Mexican-peso denominated lines for MXN 189m. The use of proceeds of all the new borrowings is to replenish the company’s cash position, the source familiar said. In a statement filed with the Mexican stock exchange, the Mexican hotel company, company said net sales for the final three months of 2008 increased 15% to MXN 1.8bn (USD 132m) compared to the same period in 2007. Grupo Posadas reported an EBITDA increase in 4Q08 of 23% to MXN 418m (USD 30.6m) compared to the same period in 2007. The company disclosed it had discounted receivables in its time share business, known as Vacation Club, by MXN 421m (USD 30m). Grupo Posadas expects to slow



down growth in its Vacation Club business in 2009 by shearing Capex. After ten years of seeking financing from the local and international debt markets, the company also expects to retap the International Finance Corporation for financing, the source familiar said. Mexican development banks are also important sources of financing for Grupo Posadas going forward, the same source said. Early indications show that Grupo Posadas will continue to show a decoupling with its US-based hotel industry peers, the majority of which have seen above 20% dips in revenues and occupancy, the same source said. By Georgina Gatsiopoulos

Grupo Senda 17 Feb Grupo Senda to benefit from cap on diesel hikes; personnel business resisting layoffs on

border, source says Grupo Senda, a Mexican bus company, will benefit from a cap on hikes in diesel prices, a

source claiming knowledge of the situation said. Last year, a 24% increase in the price of diesel hurt margins, the source said. This year, the Mexican federal government’s focus on anti-inflationary measures may have helped establish the price caps on diesel, months after the government announced caps on gasoline prices. As of 30 September, Grupo Senda reported a 15% increase in fuel prices. For 2009, a best-case scenario is that the company’s cost structure and margins will closely resemble 2008 figures, the source claiming knowledge said. At the same time, Grupo Senda continues to squeeze cash out of its operations and will maintain its focus on cash management and liquidity. The company has successfully rolled over revolving debt with Banorte during the last three months, the source said. Grupo Senda’s personnel moving business continues to be resistant, though large-scale layoffs have been occurring in ever larger numbers on the US-Mexican border, the source claiming knowledge said. At 12% of total revenue, the division is not expected to have a large impact on 2009 results, the source said. In a worst-case scenario, Grupo Senda could shift a percentage of the company’s personnel moving buses into shorter distance routes of no more than 100km, the source said. Grupo Senda continues to remain committed to its discount ticket price strategy, though the response from competitors has been uneven and at times “illogical,” the source said. Competing with companies organized around the "hombre camion" or co-op model makes implementing an efficient pricing plan complicated because “it is every man against Senda,” the source said. Grupo Senda will report its 4Q08 and full-year 2008 numbers on 26 February and will follow up with a conference call on 27 February, the source said. By Georgina Gatsiopoulos

Hipotecaria Su Casita S.A. DE C.V. 10 Feb Hipotecaria Su Casita shareholders inject USD 35m this month; consolidation in sector

expected in context of Metrofinanciera weakness, sources say Existing shareholders of Hipotecaria Su Casita injected USD 50m in capital into the Mexican

mortgage administrator this month, two sources claiming knowledge of the situation said. At least half of the capital injection from Mexican and Spanish shareholders has already been deposited, while the remainder is expected to be deposited later this month. The company announced the plan to increase its equity when a sale transaction to shareholder Caja Madrid fell through last year. Assembled shareholders voted to approve the deal last week, according to a company statement. Caja Madrid and Mexican controlling shareholders participated in the equity injection transaction, both sources said. The outlook for Mexican mortgage administrators is positive in terms of the continued commitment by the Mexican government to make mortgages available to lower-income Mexican families, according to government data. However, the sector has been a victim of increased skepticism as Mexican unemployment climbs and as international institutional investors continue to shy away from “any security that has anything to do with real estate,” a US-based investor said during a recent conference on the Mexican housing sector. In Mexico, the sector has been vulnerable to bad news surrounding Metrofinanciera. Metrofinanciera was a large issuer of mortgages and bridge loans that is currently the focus of a government investigation. At the same time, mortgage authorities are attempting to shore up “what appears to be a very large hole in the company’s books,” an industry source said. On 30 January, Standard & Poor’s downgraded Metrofinanciera debt to CCC- due to liquidity concerns. “The last thing the Mexican mortgage sector needs is for Metrofinanciera to go under,” the industry source said. According to the S&P report, Mexico’s mortgage authority SHF stepped in to guarantee a portion of the mortgage administrator’s assets after a sale transaction fell through. “Cash is king and the entire sector is for sale right now,” the industry source said. By Georgina Gatsiopoulos



Industrias Metalurgicas Pescarmona S.A. (Impsa) 20 Feb IMPSA CFO trumpets imminent S&P ratings upgrade; company to puncture the sovereign

ceiling, source says Impsa, the Argentina-based alternative energy company, will be upgraded one notch by S&P.

The CFO sent an e-mail to shareholders and top management and said that it had convinced the agency that the Mendoza based company merited a rating higher than the single-B sovereign ceiling. Most of Impsa’s net sales take place overseas, meaning that its exposure to the Argentine sovereign is lower than other local corporates. S&P currently rates Impsa at “B”, negative outlook. An Impsa company source confirmed the authenticity of the email and added that the new rating will help the company with its refinancing efforts. As reported, Impsa’s 2009 maturities include a USD 65m one-year maturing on 4 June and USD 102m in other obligations. The company source declined to elaborate further on which financing alternatives are being explored but lamented the fact that the company was being penalized for its Argentine zip code. According to in house projections, Impsa estimates that the USD 49m in financing costs that it faces this year for its USD 526m total debt would be only USD 27m if it were a Brazilian company relying on cheap loans from the BNDES, the Brazilian state development bank. The BNDES, which already has more assets than the Inter-American Development Bank and the World Bank put together, will continue expanding its presence through the South American region but will still favor local companies, the source said. The current price of oil concerns the company as it could push countries to back away from developing hydro and alternative energy projects, Impsa’s core business. However, Enrique Pescarmona, 51% majority owner, is convinced that Vietnam will bolster Impsa’s profits like Malaysia did in the nineties, the source said. As reported, last October Impsa sealed an agreement with PetroVietnam, the Vietnamese state-owned oil and gas group, to jointly develop hydroelectric and wind projects. IMPSA will own a 71% stake in the joint venture dedicated to the manufacturing of equipment and generators and a 49% stake in the joint venture dedicated to the wind generation projects. It is unlikely that this project will be delayed given the highly stable political situation, the source said. Standard & Poors did not reply to calls seeking comment. By Pablo Gonzalez, Buenos Aires

IRSA - Inversiones y Representaciones S.A. / Alto Palermo S.A. 13 Feb IRSA continues scouting bidders for troubled Tarshop, CFO says IRSA, the NYSE-listed real estate company based in Argentina, continues trying to find bidders

for its consumer finance division Tarjeta Shopping, CFO Gabriel Blassi said during the company’s conference call Friday. Tarshop, which has used some ARS 165m (USD 48.1m) of the company’s cash during the last six months, has been described, along with Banco Hipotecario, as the main party responsible for IRSA’s poor results during the second half of 2008. As reported, IRSA announced a net loss of ARS 99m (USD 28.3m) for the six-month period ended on 31 December 2008. The loss resulted in a 3% EBITDA margin drop to 27% YoY. IRSA's overall revenues rose by 9.0% during the first six months of the current fiscal year thanks to the real estate division. The increase in net revenues was driven mainly by the building and rental of offices and other properties, which increased 55.7% to ARS 69.8m (USD 20.3m). The consumer finance figures from BH and Tarshop led to a decrease of 11.7% in revenue to ARS 123.6m (USD 36m). Tarshop's problems are mainly systemic and a new mechanism to fund the business must be created, the managers said, stressing that the trustee system currently in place generates a 50% loss because bill collections often run late and are eaten up by inflation. IRSA will continue pouring cash into Tarshop until a solution – i.e., a bidder or partner – is found, but it is unclear when and at what price it can be sold, managers said. Until now, the company has closed some of its branches, reduced expenses, and is trying to get a syndicated loan to mitigate the impact of an increasing delinquency rate currently at 8%. During the last three months of 2008, the second quarter of the fiscal 2009, IRSA provided financial assistance to its subsidiary amounting to ARS 105m, under an approved plan of up to ARS 120m, in addition to the ARS 60m capitalized in September 2008. Managers added that leverage of the Tarshop portfolio of 16x was decreased to 6x, and they hope that the worst period for the company has passed. The Tarshop and Hipotecario losses can be mitigated by the strong pace of IRSA’s real estate division, which has remained healthy showing good cash generation levels. IRSA’s hotels and offices all have high occupancy rates, and the company expects to open its new shopping center in Buenos Aires before the end of this quarter. In terms of debt, the peso depreciation affected the company’s debt stock. According to managers, the 43% peso devaluation impacted the debt by ARS 84.1m (USD 24.5m). Managers believe that other than restrictive covenants from its three outstanding notes, the main risk for IRSA is a



severe peso devaluation. Managers estimate that the yearend exchange rate will be ARS 3.90 per US dollar. Should there be a window of opportunity, IRSA may consider a debt repurchase program. But first the company would need to find a way around severe controls on the currency market, which restricts the purchase of the US currency in Argentina, the CFO added. The way Banco Hipotecario accounts for its bond debt differs from Tarshop, managers said. At Hipotecario, bonds are recognized in the balance sheet at 100% of face value to comply with Argentine Central Bank (BCRA) regulations. In the case of Tarshop, its bonds are accounted for at their current market value. By Pablo Gonzalez, in Buenos Aires

20 Feb IRSA to indirectly benefit from Argentine government’s electoral strategy, sources say IRSA, the NYSE-listed Argentine real estate company, will indirectly benefit from the upcoming

October congressional elections, a company insider said. Given the pending October congressional elections, the Argentine government is using all means available to influence support from the middle class. This includes providing subsidized mortgages, car loans and white good financing for purchases of kitchen appliances and heaters, this news service reported. Under the proposed plan, a gross amount of mortgages between ARS 1bn (USD 291m) - ARS 1.5bn (USD 437m) will be discretionarily managed by IRSA through its management control of Banco Hipotecario (BH), according to a source familiar with the government's plans and insiders at IRSA and Banco Hipotecario. Cabinet Chief Sergio Massa informed IRSA’s president and majority owner Eduardo Elsztain of the government’s plans earlier this week. The recently nationalized pension fund system will provide cheap financing for the program in March at the latest, and Massa intends to have the national program in place and working before April. Javier Bossio, the recently state-appointed 29-year-old member of BH’s board, is already working with IRSA-appointed BH CFO Gabriel Saidon on the final draft of a national plan for Argentines buying their first home, the source and insiders said. The recently nationalized pension fund system would provide financing to BH at an annual rate of 9% while the bank would in turn originate 20-year fixed-rate mortgages of up to USD 85,000 each. The source said the proposal targets mortgages held by middle class borrowers earning between USD 11,000-USD 20,000 per year, a demographic that does not strongly support the government. The capital injection comes as a blessing for BH, which posted a loss of USD 6.6m in 2008, compared to a profit of USD 23m in 2007. BH also suffered a 383% YoY increase in its high insolvency risk portfolio. However, the main party that stands to benefit will be IRSA, as it will have the last word regarding the placement of the funds, the source and insiders said. “The people the government is seeking to ‘seduce’ are the same ones we want to have as clients to buy homes near our main businesses,” the source said. IRSA is a real estate developer with interests in shopping malls and residential developments. The move comes as a surprise after recent local reports that the Argentine government was close to reclaiming management of BH from IRSA. The bank is 64% owned by the state, but according to a law passed last decade, minority-owner IRSA manages the institution. Chamber of Construction head Gregorio Chodos lobbied the government to reclaim control of BH and provide cheap financing for real estate. Although Chodos had succeeded getting his son Sergio Chodos, former finance secretary, appointed as manager of the recently nationalized pension fund system, he was unable to pry BH away from IRSA’s control. Former president Nestor Kirchner has a good relationship with IRSA and was a key factor in maintaining the current management structure, the source and insiders said. As a result of this plan, BH will become the main mortgage originator and provider of subsidized financing for other banks lending mortgages in this crucial electoral year for the Kirchner administration. The ties between IRSA, BH and the government have been criticized, particularly after the corruption case involving Felisa Miceli, Nestor Kirchner’s former economic minister. In June 2006, USD 64,000 in cash was found hidden in her personal toilet at the Ministry. Miceli resigned shortly thereafter and two BH board directors were eventually sacked, one of which was the last person who entered Miceli´s office before the cash was found, as previously reported. IRSA president Eduardo Elstzain also provided former president Nestor Kirchner with a rent-free office in the chic Puerto Madero area after he transferred power to his wife, current President Cristina Fernandez de Kirchner, as previously reported. By Pablo Gonzalez, Buenos Aires

Itau Unibanco Banco Multiplo S.A. (Formerly Banco Itau Holding Financeira S.A.) 13 Feb Itau Unibanco sees no available acquisition opportunities, CEO says



Itau Unibanco (Bovespa: ITAU; UBBR), the Brazil-based bank, sees no available acquisition opportunities at this time, said Chief Executive Officer Roberto Setubal. In an interview to this news service on the sidelines of an event in Sao Paulo, Setubal said that even in Mexico - where it has denied rumors it is in talks to acquire a stake in Citigroup´s Banamex - the bank sees no opportunities. “It will depend on finishing this cycle and on having opportunities,” he said. “It is no use to want something if that something is not available.” After the merger last November between Itau and Unibanco, which created Brazil´s largest bank with about BRL 575bn (USD 255bn) in assets, Setubal said the bank´s priority is the Brazil market, and moving ahead with the merger process. When Itau and Unibanco announced the merger, which was negotiated in absolute secrecy by the shareholders´ families, Setubal said one of the main motivations of the deal was to become an international bank. At the announcement, he mentioned Mexico, Colombia and Peru as markets of interest, what later helped to fuel the Banamex rumor. By Priscilla Murphy

Maxcom Telecommunications S.A. de C.V. 27 Feb Maxcom reports fourth quarter and full-year 2008 results; bad debt reserves increase as

churn increases, management says Maxcom, a Mexican telecommunications company, reported fourth quarter and full-year 2008

results on 26 February. Management discussed results during a call held earlier today. According to a statement that accompanied Maxcom’s results, the company reported a 14% in revenues year over year to USD 196.65m. For 4Q08, Maxcom reported revenues of USD 49.2m or 9% over the 4Q07 figure. Maxcom reported full-year 2008 EBITDA of USD 54.4m, a 15% increase over the 2007 figure. In 4Q08, the company reported EBITDA of USD 9.2m, a 21% increase over the 4Q07 number. In terms of the company’s EBITDA margin, Maxcom management said during a conference call earlier today that the 26% to 19% drop can, in part, be attributed to a weakening Mexican peso relative to the US dollar. According to management, Maxcom’s foreign exchange exposure translates into a 1% decrease in EBITDA margin for every 10% that the Mexican peso weakens versus the US dollar. The company’s exposure to US dollar-denominated costs is felt in the cost of its network, including handsets and hardware and its office and computer leases. As part of its operating highlights, Maxcom reported that its total company customer base increased by 4% as of 31 December, 2008 to 224,612 and that its churn rate increased due to a faltering macroeconomic outlook for Mexico. Maxcom saw an important number of both commercial and residential clients drop Maxcom as a service provider; residential clients, management said, were not going to competitors but rather trying to lower their household expenses. There was a surprising 15% drop in voice-related revenues per customer (ARPU) during 4Q, in what are usually call-traffic heavy months, management said. Regarding commercial customers, Maxcom management said a significant number of its commercial clients are call centers. Of these, many of its call-center clients work for Mexican banks selling credit cards, and those businesses unable to switch to collections were shuttering. Maxcom reported a cash position at the end of 2008 of USD 118m. Management said during the call that it would strive to preserve cash and expected to be able to make debt payments from its internally generated cash. Maxcom reported total debt of USD 200m, in the form of a bond issued in 2006 and currently indicated around 77.5. According to the company’s management, all but USD 50m of the USD 200m bond is hedged at MXN 11.4 per 1 USD. The USD 50m that was not hedged contributed to higher finance costs in 4Q08, management said. Maxcom management said during the call it would slash projected Capex in 2009 to half or USD 65m and could shrink the number even more if the economic conditions in Mexico worsened. By Georgina Gatsiopoulos

NET Servicos de Comunicacao S.A. 17 Feb Net Servicos to invest USD 431m in 2009; remains committed to growing through

acquisitions, CFO says



Net Servicos, the listed Brazil-based subscription TV operator, plans to invest approximately BRL 1bn (USD 431m) throughout 2009, CFO Joao Elek said on the sidelines of a meeting with analysts and investors in Sao Paulo Tuesday. The operator remains committed to growing through acquisitions as there are Brazilian regions where Net is not present yet, the CFO explained during the meeting. "We will intensively pursue acquisitions," he added, without elaborating. The company intends to continue expanding its client base this year and the investment will be used for that purpose, Elek said. Net's share of the subscription TV market in Brazil is about 46%, according to data posted on its website. The capex guidance does not include possible investments to buy new cable TV licenses, Elek said. The company is still waiting for regulator Anatel to call an auction of these licenses and this could open up the possibility of expansion through greenfield projects, he said. The Brazilian regulator has not released any new information about the upcoming auction of the licenses, Elek added. The company's capex was BRL 993m (USD 428m) last year and included the acquisitions of BigTV and ESC 90, according to Net’s earnings release. In 4Q08, the company closed the acquisition of BigTV for BRL 208m (USD 89m), as reported. The company's cash position dropped about 26% as Net drew cash to pay for BigTV in the fourth quarter, the CFO confirmed. During the last quarter of 2008, Net's results were also affected by the depreciation of the Brazilian real, Elek said. The cable TV operator reported BRL 155.6m (USD 67m) in financial losses, according to its earnings release. The company buys currency swaps and non-deliverable forwards to hedge against forex movements that may affect its dollar-denominated debt, Elek said. The company also uses currency hedges because it is an importer of telecommunications equipment, the CFO explained. Net's hedging strategy is very conservative. The amounts hedged take into consideration cash flow projections for the next 24 months, he said without elaborating further. The hedging policy must be approved by the board of directors, he said. At the moment, the company's management does not rule out the possibility of buying debt back in order to mitigate its forex exposure, Elek said. The company is always analyzing every possibility, he said, declining to be more specific. By Veronica Goyzueta and Maria Fernanda Blaser, Sao Paulo

Petrobras Energia Participaciones S.A. / TGS / Emgasud S.A. 05 Feb Petrobras aims to scupper Emgasud’s plans to exert management control of TGS TGS, the larger of Argentina’s two main gas transportation companies, is witnessing a battle

between its two main shareholders, Brazil’s Petrobras and Argentina’s Emgasud, several sources close to the company said. By June, Emgasud expects to at least exert management control of TGS “pari passu” with Petrobras, Jan Emgasud company source said today. Emgasud could even look to acquire part of Petrobras' stake and as a result take full control of TGS, a second source close to Emgasud said. The Emgasud source disclosed that TGS’ future ownership structure will become clearer once the local gas regulatory body Enargas approves a deal between Emgasud and Ashmore. Ashmore Energy International, the energy arm of the Ashmore fund, recently acquired a 33% stake in Emgasud for USD 25m. Ashmore has the option to increase its stake to 60% if the Argentine regulatory body Enargas approves a deal that allows the transfer of all of CIESA’s debt and shares currently under Ashmore’s current control to Emgasud. CIESA is TGS’ holding company and holds a 55.3% stake in TGS while the remainder floats. The holding company is owned 50% by Petrobras Energia and another Petrobras subsidiary and 50% by CIESA creditor AEI. Once the deal is done, Emgasud and the 50% stake in TGS holding company CIESA will be controlled by a new holding company 60% owned by AEI and 40% by Alejandro Ivanisevich, Emgasud’s current owner, the Emgasud source said. Ivanisevich will also manage the company and will be chairman for at least five years. “Ashmore is aware that Ivanisevich is a key resource for the company given [his close relationship to] the current Kirchner administration,” the source said. The transfer should receive fast regulatory approval. Emgasud, a gas distributor from the Patagonia, is a company close to the Kirchner administration which has broadly promoted the acquisition of strategic companies by locals in a process referred to as "Argentinazation". However, a source close to Brazil’s Petrobras said that the Brazilian company is determined to avoid sharing management control of TGS. Although the source declined to comment on whether Petrobras was willing to sell its stake or give up control, he admitted that “at the end this situation will be settled between [presidents] Kirchner and Lula.” As a measure to avoid a power sharing agreement, TGS recently renewed a management fee with Petrobras and the company asked TGS board member Gustavo Viramonte to resign due to a conflict of interest. Viramonte is an Emgasud legal advisor in the jurisdiction of Cordoba and resigned on 7 January. On 2 February, Petrobras also changed TGS’ CEO. As reported, Carlos Seijo, who has been working with the Petrobras for almost 10



years, was put in charge of managing relations with the Argentine Energy Secretary and the expected new shareholder AEI. TGS has USD 405m in outstanding bonds which mature in 2017. Argentina’s recently nationalized pension fund system disclosed that it held a 23% stake in TGS while Fintech has an 8.9% stake, according to an SEC filing. The company is expected to file its 4Q08 results after the market close today. By Pablo Gonzalez, Buenos Aires

Sadia S.A. / Perdigao S.A. 09 Feb BNDES to rescue companies with derivatives losses; Sadia rumored to be one The Brazilian Development Bank (BNDES), the main long-term corporate lender in local

currency, may rescue companies which had derivatives losses, President Luciano Coutinho said in a press conference last week. Coutinho did not name any candidates but said that it intended to help companies recover the ability to make new investments and compete. Recently, big Brazilian corporations such as food processor Sadia and pulp and paper producer Aracruz faced derivatives losses related to the weakening of the Brazilian real. The rescue initiative will only be put in place after the companies conduct private negotiations with their bankers. "The BNDES will only provide funding to those companies after they have [negotiated] their derivative-related debt with banks,” Coutinho explained. The BNDES, meanwhile, will continue to finance greenfield projects and will encourage consolidation in certain sectors of the economy. "The objective is to improve Brazilian companies' competiveness," Coutinho said. The BNDES will continue to invest in companies through equity as well, Coutinho added. The BNDES has already played a key role in Aracruz's merger with Votorantim Celulose e Papel (VCP), which was announced last month. The combined entity will be the largest pulp and paper producer in the world. Aracruz incurred massive derivatives-related debt and made an agreement with more than 10 banks to repay its USD 2bn derivatives-related losses in nine years, as reported. Sadia, the Brazilian poultry, pork and beef producer, has also reported derivatives losses and is rumored to be on the verge of receiving at least BRL 1bn (USD 448m) from the BNDES. Coutinho would not comment on the possibility of the equity investment in Sadia. Sadia has increased its leverage to 5x, an analyst who follows the company said. As of September, leverage was 3.4x, according to its earnings release. "The company needs cash to diminish leverage and pay its short-term debt," a source close to one of the controllers' family said. The company's preferred choice would be to receive an equity injection from the BNDES. The main reason is that the controlling families "have totally ruled out a merger with Perdigao," the same source said. The company has run down its cash during 4Q08 in response to bank-related margin calls, the analyst said referring to Sadia’s outstanding derivatives contracts. "The company needs to be rescued through debt and equity," the analyst said. Sadia could change its capital structure and then the BNDES could fund its capex, the analyst said, adding Sadia is expected to invest BRL 500m (USD 224m) in 2009. The company may also sell non-core assets such as forestland and its own headquarters, located in the city of Sao Paulo, to raise cash, as reported. By Maria Fernanda Blaser and Veronica Goyzueta in Sao Paulo

12 Feb Perdigao hostile bid for Sadia rumor 'is true,' source says A reported rumor that Brazilian food processor Perdigao will make a hostile bid for rival Sadia “is

true,” a source claiming knowledge of the companies’ plans told this news service. The rumor appeared in Thursday’s edition of Gazeta Mercantil, a Sao Paulo-based business daily newspaper. Evidence the rumor is valid comes by way of both companies are seeking consultants to advise on a possible deal, the source said. Alvarez & Marsal, which is not interested in a mandate, has been contacted for an advisory role in this process, the source said. “Making a valuation will be challenging in this case,” the source said alluding to Alvarez’s rejection of the mandate offered. Sadia and Perdigao are listed on the Sao Paulo Stock Exchange and refused comment on the hostile takeover rumor. The companies did not return calls and emails seeking clarification on the involvement of Alvarez & Marsal or other potential financial advisors. In July 2006, Sadia made a BRL 3.7bn (USD 1.6bn) hostile bid for Perdigao



which was resisted by the-then smaller entity, as reported. But according to the Gazeta report, Perdigao may be in a position to make a hostile bid for Sadia as its market capitalization is now twice what it was at the time of Sadia's hostile bid. Sadia, which has faced currency derivatives losses after the sharp drop of the Brazlian real against the US dollar in the third quarter of last year, confirmed in a regulatory filing that it is studying the possible sale of noncore assets as a way to capitalize the company. In the same filing, Sadia said the company has hired a consultant to prospect partners for its financial arm. Asked to name the consultant, Sadia’s IR department declined to disclose that information. By Ana Mano and Maria Fernanda Blaser, in Sao Paulo

19 Feb Brazilian government encouraging a Perdigao-Sadia merger, source says The Brazilian government is supporting the merger of Perdigao and Sadia, two of the country's

largest food processors, a presidential aide said. The possible deal could be funded by the Brazilian Development Bank (BNDES), the source said, echoing recent remarks by Luciano Coutinho, president of the BNDES. Coutinho had previously told this news service that the bank will encourage consolidation in certain sectors of the economy, as reported. The Brazilian government wishes to create a giant domestic player which will compete with global companies such as Bunge and Cargill, the source said. Sadia, which is facing a short-term liquidity squeeze due to derivatives losses reported in the third quarter, has also received international bids, the source added, declining to name any suitors. Brazilian President Luiz Inacio Lula da Silva is travelling to China in May to sign a commercial agreement allowing Brazilian companies to export poultry to the Asian country, the aide said. "The government expects that a national merger would benefit from the trade agreement to be closed with the Chinese government," the same source said. Perdigao and Sadia have a long-standing rivalry. In July 2006, Sadia made a BRL 3.7bn (USD 1.5bn) hostile bid for Perdigao which was resisted by the-then smaller entity, as reported. After reporting BRL 777.4m (USD 331m) in forex derivatives losses in the third quarter, however, Sadia became vulnerable to a Perdigao bid, as reported. Since the third quarter, Sadia's leverage blew out to 5.5x from 3.4x, a sellside analyst said. Sadia and Perdigao have yet to publish results for the fourth quarter. Gazeta Mercantil, a Sao Paulo-based business daily newspaper, reported last week that Perdigao will make a hostile bid for rival Sadia. A source claiming knowledge of the situation said on the day of the publication that the rumor "is true," as reported. Perdigao and Sadia declined to comment. The challenge for this deal is to come up with a valuation, the sellside analyst who follows both companies said. Sadia currently has a net debt of BRL 6bn (USD 2.5bn) and its market cap has been dropping since the third quarter of last year, he said. The analyst estimates that Sadia has BRL 8bn (USD 3.4bn) of economic value. The figure considers potential business that the company could generate in the next few years, explained the source. Perdigao's economic value is BRL 9bn (USD 3.8bn), the analyst calculated. Perdigao's bid would have to be of at least BRL 2bn (USD 851m) considering Sadia's net debt, the analyst said. Both companies are expected to generate BRL 3bn (USD 1.27bn) in synergies, the analyst said. This amount could add BRL 1bn (USD 425m) to the bid, he said, adding that a Perdigao insider confirmed to him that "the company's intention is to make an offer for its rival". President Lula considers the food industry a strategic sector for the Brazilian economy, the aide said. Using the equity arm of the BNDES, millions of dollars have been invested to buy share capital in the likes of JBS, Marfrig, Bertin and Independencia, four of Brazil's main meat producers, as reported. A merger with Perdigao is being resisted by Sadia, the presidential aide said. Luiz Fernando Furlan, Sadia's chairman and former Brazilian Industry, Foreign Trade and Development Minister, is leading the talks but is reluctant to give up control, the government source said. Furlan is the grandson of Atilio Fontana, Sadia's founder. "The families [which control Sadia] will try everything to avoid the merger with Perdigao," a source close to Furlan said. The listed company is controlled and run by the Fontana and Furlan families. Perdigao's main shareholders are Previ and Petros, two state-run pension funds with a combined 26% of the voting stock. Previ does not own many voting shares in Sadia but has 8.6% of the company's total stock through a 13.5% preferred share stake. Sadia's preferred choice is to weather the liquidity crunch and continue as an independent business, the source close to Furlan said. Still, Sadia has spoken with other bidders; the same source said declining to provide more specific details. By Veronica Goyzueta and Maria Fernanda Blaser, in Sao Paulo



Telefonica Argentina S.A./ Multicanal S.A. / Grupo Clarin S.A. / Telecom Argentina S.A. / Cablevision S.A. / Supercanal / Republic of Argentina 13 Feb Kirchner administration said to have given permission for Telefonica to keep control of

Telecom Argentina; pushes new media bill through Congress Argentine President Cristina Kirchner has granted Spanish telecom Telefonica the regulatory

permission necessary to retain control of Telecom Argentina through Telecom Italia, said a member of the Argentine Congress. The congressman said that during Cristina Kirchner’s latest diplomatic trip to Spain, she met with top executives from Telefonica and assured them that the Argentine antitrust agency, CNDC, would withhold divestment requirements for its Argentina-based operations. Another source close to Telecom Italia in Argentina said he had heard talk about an agreement being reached between the government and the company. This source said he was unaware of any details surrounding the agreement. As reported, the local antitrust body is investigating whether to fine Telefonica for failing to inform local authorities about the acquisition of a controlling stake in Telecom Italia. Under current rules regarding notification on these matters, the companies have 45 days to inform antitrust authorities and then the competition watchdog has an undetermined period of time to pass a ruling. The president’s spokesperson did not reply to several calls seeking comment and Telefonica executives were not available. As already reported, Italy’s Pirelli sold Olimpia, the holding company that controls 17.99% of Telecom Italia, to Spanish group Telefonica, which, in turn, owns Argentina-based Telefonica de Argentina. While Telecom Italia was acquired in Italy by Spain’s Telefonica, Argentine media groups such as Clarin lobbied for divestments saying that a monopoly was being established. Despite the lobbying from local groups, the congressman said that an agreement has been reached between the Kirchner administration and Telefonica, paving the way for it to keep control of Telecom Argentina. As part of the deal, the source claimed that the Kirchner administration will receive favorable media treatment during the 2009 electoral year through the Argentina-based television broadcasting company Telefe, which Telefonica owns. In terms of ratings, Telefe is Argentina’s largest television channel, and was the only one granted a live and exclusive interview with President Cristina Kirchner during this week’s visit to Madrid. Telefonica has agreed to invest ARS 1.7bn (USD 486m) in 2009 to expand broadband services throughout the country, as reported Thursday. The congressional source also added that former President Nestor Kirchner, who is currently leader of the Argentine Peronist party, is asking party members within congress to be prepared to vote in favor of a new media broadcasting law, which would replace existing regulations in place since they were originally enacted under the Argentine military dictatorship that ruled the country from 1976 to 1983. The source declined to say whether the current legislative bill will include a new regulatory framework allowing telecom companies to broadcast digital video through triple-play packages, which has long been an aspiration of Telefonica. As reported, Telefonica de Argentina and Telecom Argentina would only benefit from a new broadcasting law if the bill allowed them to offer pay-cable television services. The congressional source claimed not having seen the bill, but agreed to say that the Kirchner administration’s aim is to curb the influence of the Clarin group. Clarin would be required to divest assets in its cable division as the law would limit players’ market share to only 35%, the source said. As reported, Grupo Clarin's cable division, comprised of Cablevision and Multicanal, has an estimated national market share of 54%. The agreement with Telefonica comes at a time when local business leaders aligned with former President Nestor Kirchner are attempting to expand their control of local media. According to a report published by weekly magazine Urgente 24, a longtime Kirchner confidant, entrepreneur Sergio Spolsky is making a cash offer to Mexican group CIE for control of the local radio broadcasting company, Radio America. Since Nestor Kirchner’s rise to power in 2002, Spolsky has come to control local newspapers Semanario XXIII, the Buenos Aires Herald, BAE, El Argentino, Diagonales and El Atlantico. Another controversial aspect of the new Kirchner-inspired media broadcasting legislation is a provision that would forbid local media network owners from participating in elections. One congressional source said a potential target of this provision of the new legislation is the opposition’s rising political star, Francisco De Narvaez, who happens to also hold a controlling stake in the Argentine television broadcasting company, America TV. If the new legislation passes, De Narvaez would have to choose between selling America TV or abandoning his career in politics. De Narvaez is currently serving a term in congress. De Narvaez did not reply to several requests made by this news service for comment on the new legislation. He did, however, make a public appearance on Wednesday with political opposition leaders, including Mauricio Macri, mayor of Buenos Aires, and Felipe Sola, a congressman formerly aligned with Kirchner. Local political analyst Rosendo Fraga argued in an article



published in La Nacion that the meeting between Macri, Sola and De Narvaez sent a strong political message. The message is that the unified opposition will pose a real threat to the dominance of Kirchner’s ruling party in the October 2009 legislative elections, Fraga said. By Pablo Gonzalez and Gavin Sullivan, Buenos Aires



Issuance Pipeline


Emgasud 05 Feb Emgasud releases 14.5% price guidance for its USD 150m three-year bond Emgasud, the Argentine energy company and a recent shareholder of TGS, is testing local

market waters with a USD 150m amortizing 2011 bond. Led by ABN Amro and Banco Macro, price guidance of 14.5% was released ahead of a subscription deadline of 9 February The bond will amortize 20% every December and March beginning December 2009 until maturity. The deal is expected to be sold to local insurance companies with a lion’s share going to the recently created SIP, the government entity that manages the recently nationalized pension funds (Anses). “We are marketing outside the country but the lion’s share of the bonds has been promised to the Anses,” a source said, explaining that the bond’s obligations will be paid in ARS using the previous day’s exchange rate rather than USD. The bonds will be guaranteed by a trust collecting payments to be made by Compañía Administradora del Mercado Mayorista Eléctrico (CAMMESA) to Emgasud. CAMMESA is a private company in charge of overseeing the spot market. The issuer will also guarantee the bond with its shares and by pledging two 20MW mobile generators that can be seized by creditors, as they are built on moving 18-wheel trailers. Fitch rated the bond with a local A+ and expects the company to generate around USD 130m in EBITDA this year. A source close to Emgasud said that the company could surpass that figure by another USD 30m. Proceeds from the issue will be used to finance completion of Emgasud’s gas network in the south as well as to repay a USD 68m loan extended by Macro and ABN Amro for this project. The source added that the recent deal between Emgasud and Ashmore Energy International is also a guarantee itself. With this deal, Emgasud has received a USD 25m capital injection from AEI, who has received a 33% stake in the company in exchange. by Pablo Gonzalez, Buenos Aires

18 Feb Emgasud prices USD 101m 2011 amortizing bond to yield 14%, sources say Emgasud priced a USD 101.5m 2011 amortizing bond to yield 14%, sources close to the

situation said. The issuer is seen as a potential co-controlling shareholder of Argentine gas transporter TGS, this news service previously reported. The local energy company close to the Kirchner administration was trying to raise some USD 150m in financing but scaled down the size of the deal due to higher pricing, the sources said. The bond will amortize 20% every December and March beginning December 2009 until maturity. The deal was mainly placed with local accounts. Total book size amounted to USD 155m with 95% going to locals, including the recently nationalized pension system Anses, which took the lion’s share at 62% of total, local provincial banks (19%) and insurances companies. The remaining 5% of the new issue was sold to crossborder private banking, a second source said. Led to market by ABN Amro and Banco Macro, proceeds from the deal will be used to repay a USD 65m facility extended by the banks that was used for an electricity generation project. The reminder will be used to finish the project. The bonds will be guaranteed by a trust collecting payments by Campania Administradora del Mercado Mayorista Electrico (CAMMESA), the private company in charge of overseeing the spot market to Emgasud. The company will also back the bonds, an appealing prospect as Ashmore Energy investment (AEI) now has a 33% stake in the company with the option to double it once the government approves Emgasud’s reported entrance into TGS. As reported, in December Emgasud reached an agreement to buy a stake in CIESA, TGS' holding company, from AEI (Ashmore International), Petrobras’ counterpart in TGS. The deal is still awaiting regulatory approval and in a note sent yesterday to the local stock market, TGS declared that it is still unaware of Emgasud presence as a shareholder. Sources close to Emgasud said that the regulatory green light will be given before July. By Pablo Gonzalez, Buenos Aires

Company Sectors CurrencyExpected Issue Size

(m)

Expected Pricing Date Lead Managers Notes

Cemex S.A. de C.V. Construction, Mining USD 500 9 March 2009

HSBC, Santander Global Banking and Markets,

Greenwich Capital Markets Inc. (RBS

Greenwich Capital), Banco Bilbao Vizcaya Argentaria SA (BBVA),

Citigroup Inc

At least USD 500m Reg S 144a bond of "intermediate maturity" (5-7 years)seen. Proceeds will be used to refinance short-term bank debt. Unofficialprice guidance of mid-15% heard. On roadshow in the US the week of 2March and being led to market by joint bookrunners Citigroup, BBVA,HSBC, RBS and Santander.

AEI Energy, Financial Services USD 250 4Q09

Credit Suisse (formerly Credit Suisse First Boston

[CSFB])

USD 250m 10-year non-call five on hold due to market volatility. Had beenmarketed by bookrunner Credit Suisse/co-managers JP Morgan andLehman with price guidance of 10.25% before its postponement in early-July 2008.

Ciudad de Buenos Aires Government USD 500 4Q09

Citibank, Barclays Capital, Banco Macro (Former Banco Macro Bansud

S.A.)

USD 500m bond via joint lead managers Citibank, Barclays and BancoMacro. Yield limit of 13.5% set by legislature with maturities ranging fromthree to 15 years. On hold due to mkt conditions but city could end upturning to the government/local pension funds for financing.

Companhia Energetica de Minas Gerais Energy USD 4Q09

Could finance acquisitions with local and international bond issues but hascash available. Interested in Light, Gas Brasiliano and Celesc's powergeneration assets. Company wants 20% market share in distribution,generation and transmission, IR director says.

Cyrela Brazil Realty S.A. Construction, Financial Services USD 250 4Q09

Credit Suisse (formerly Credit Suisse First Boston

[CSFB]), Merrill Lynch

Was exploring an up to USD 250m 10-year or perpetual non-call five viajoint bookrunners Credit Suisse and Merrill Lynch. Debentures or an equityissue were also seen as a possibility.

Global Village Telecom (GVT Holding) Telecommunications: Carriers USD 4Q09 ABN AMRO

Looking for ways to finance USD 867m 2008-2010 capex program.Awaiting BNDES approval for USD 314m loan (expected in 1Q09).Remainder could be financed with debt.

Petroleos de Venezuela S.A. Energy USD 7,000 4Q09 Company heard exploring multi-billion dollar deal in 2008. Will have to turnto market to help finance operations this year. Structure uncertain.

Latin America - High Yield Issue Pipeline


Others


AEI 09 Feb AEI looking to sell an equity stake to Gulf investors, company sources say Ashmore Energy International (AEI) is looking to raise USD 600m to facilitate its expansion

plans, two company sources told this news service. The sources said AEI was looking to finance its business plan for the next three years and would also look at raising debt. Gulf investors have been approached to take on an equity stake in AEI, one of the sources said. AEI is approaching investment funds for a stake sale because the company was interested in financial rather than strategic investors. The company had focused on approaching potential investors in Dubai and Abu Dhabi, judging these areas better for capital raising because they were considered to be “more open” and liquid. AEI had approached Abu Dhabi National Energy Company (TAQA), the source said. However, according to previous reports, TAQA was not interested in Latin America and was focused on acquiring stakes in Asian energy companies. AEI will use the expected proceeds to finance a coal-fired power generation facility in Guatemala, some of which has been financed by multilateral agencies, according to another company source. The company also intends to finance a USD 314m project to expand distribution in Peru over the next five years, the same source said. AEI is a company that owns and manages energy infrastructure in emerging markets. Present in power generation and distribution, retail fuel and natural gas transportation and services, AEI owns 39 operating companies and is present in 20 emerging market countries. For the year to September 2008, AEI reported net income of USD 163m and EBITDA of USD 1bn, according to company results.

BNDES 06 Feb BNDES to secure financing from several multilaterals; tapping capital markets remains an

option, president says The Brazilian Development Bank (BNDES) is looking to raise funds from several multilateral

sources worldwide, President Luciano Coutinho said in a press conference today. Throughout this year, the BNDES, has three priority areas to finance: the infrastructure, greenfield and technological innovation projects. The bank is the main long-term lender in local currency. The BNDES is already in talks with the World Bank, KfW, the German Development Bank, and the China Development Bank to secure loans, Coutinho said. "The BNDES will continue its efforts this year to raise cash through multilateral entities. The World Bank, for example, is willing to provide a considerable amount of funding," he added. The BNDES is close to receiving the last installment of a USD 3bn loan from the Inter-American Development Bank (IDB) secured in 2004, Coutinho also said. The Brazilian Senate has already approved the remittance of the USD 1bn installment from IDB and the contract will be signed soon, he said. The Brazilian development bank also announced in January a USD 250m loan from the Japan Bank of International Cooperation (JBIC). "The bank is working with JBIC to increase that amount," Coutinho revealed. The bank also secured in January a BRL 100bn (USD 44bn) loan from the Brazilian Treasury to finance Brazilian companies in 2009 and 2010, Coutinho said. "The bank will have enough cash to fulfill its role in this financial crisis, as we've been saying since last year," he added. However, as the economic environment continues to be uncertain, the BNDES has "an obligation" to seek as much funding as it can, Coutinho added. "The bank is just not willing to raise expensive cash," he said. The BNDES will consider tapping the capital market as soon as it reopens, Coutinho said. "The BNDES has an excellent rating. The bank has access to international markets, but now, it’s too expensive," he added. The bank will not "rush" to raise cash abroad but this remains an option, Coutinho said. In March, the BNDES will start a series of non-deal road shows to raise cash from international pension funds and sovereign funds. The first stop is in New York City. "The BNDES plans to create and manage a variety of investment funds with cash raised internationally. The intention is to provide equity to Brazilian sectors which need a capital injection such as sugar and ethanol," Coutinho said. The investment funds will be managed by the BNDES and will serve as private equity vehicles. The BNDES estimates Brazilian companies are facing a USD 10bn funding shortage. The new strategy will help diminish this gap, Coutinho said. By Maria Fernanda Blaser in Sao Paulo


BNDES / Construtora Norberto Odebrecht S/A (CNO) / Republic of Ecuador 10 Feb BNDES: Funding for Ecuadorian projects conditioned 'on high levels of diplomatic

understandings,' president says The Brazilian Development Bank (BNDES) may fund new infrastructure projects in Ecuador

provided Brasilia and Quito return to "high levels of diplomatic understanding," President Luciano Coutinho said in a press conference."The BNDES depends on better political conditions to lend cash to Ecuadorian projects," Coutinho said, adding differences between the Brazilian and Ecuadorian governments may be overcome. The BNDES and the Ecuadorian government are in a legal dispute at the Paris-based Commission of Arbitration of the International Chamber of Commerce, as reported by this news service. The diplomatic stress began after Ecuador decided to challenge the legality of the USD 243m BNDES loan in early November following a year-long audit of the country's USD 10bn foreign debt, as reported. "The BNDES considers essential to preserve its low levels of default in loans to fund projects abroad," Coutinho said. The disputed loan was contracted to finance the construction of the San Francisco hydroelectric plant by Brazilian heavy construction group Construtora Norberto Odebrecht. The company was expelled from Ecuador and forced to abandon some USD 600m in projects, as reported. The wrangle with the Ecuadorian government will not affect funding for projects in other South American countries, the BNDES president said. "The bank is willing to defend more vulnerable economies from the credit crunch," Coutinho added. The BNDES is concerned about how the world financial crisis will impact Latin American infrastructure projects, Coutinho said. The bank has already received notice of infrastructure projects that have been suspended in the region. Coutinho did not cite the countries most vulnerable to credit shortages. The BNDES intends to discuss the consequences of the financial crisis in Latin America with other nations that form the G-20, Coutinho said. "It is the BNDES’ obligation to continue supporting infrastructure projects in the region," he added. By Maria Fernanda Blaser in Sao Paulo

Electroingenieria S.A./ Grupo Clarin S.A. / Transener S.A. 06 Feb Radiodifusora controlling shareholder denies rumor Electroingeneria has made a USD

35m offer; Grupo Clarin also interested, source says Electroingeneria, an Argentina-based construction company with a large stake in Transener, has

made a USD 35m offer for the Argentine radio broadcasting company, Radiodifusora del Centro, said several people claiming knowledge of the situation. Radiodifusora del Centro’s controlling shareholder, Gustavo Defilippi issued a statement denying the rumors. However a person at one of Radiodifusora's radio stations said that Electroingeneria made the USD 35m sale offer and that Defilippi in fact countered with a USD 45m bid. An Electroingenieria spokesperson also denied the company has made an offer to buy Radiodifusora. On Monday, popular journalist and Radio del Plata radio host, Nelson Castro, accepted a severance package from Electroingenieria, and left the radio broadcasting company. He mentioned political reasons and lack of freedom of speech. On Tuesday, Castro said in an interview with Victor Hugo Morales on Radio Continental that “Electroingeneria is close to acquiring Cadena 3 (one of Radiodifusora's stations), the most important radio station in Cordoba.” Electroingenieria, which has been scrutinized in the past for its close ties to former Argentine President Nestor Kirchner, made its first move into the Argentine media sector with the USD 8m acquisition of the Buenos Aires-based Radio del Plata from Ideas del Sur in November 2008. A second person at Radiodifusora said that following the acquisition of Radio del Plata, the Cordoba-based construction firm set its eyes on Radiodifusora del Centro and its Cadena 3 radio programs, which the source described as some of the most important and widely listened to programs in the interior regions of the country. Radiodifusora del Centro is based in Cordoba. Buenos Aires-based media conglomerate Grupo Clarin has also expressed interest in Radiodifusora by way of its subsidiary, Radio Mitre, according to a person at Radiodifusora del Centro. The person said Clarin said in the call to Radiodifusora, “if it is really up for sale, they want to bid.” However, Clarin said in the call though that the USD 45m sale offer was unrealistic and did not reflect the value of the local radio market, the source noted. Grupo Clarin declined to comment on the alleged offer when contacted by this news service. Local press speculation has centered on the motivations behind Electroingeneria’s media plays and the company’s close ties to ex-President Nestor Kirchner and current President Cristina Fernandez Kirchner. Electroingenieria came under national attention in 2006 when the government blocked US fund Eton Park from acquiring a stake in Transener appointing Electroingeneria as the sole acquirer in partnership with state owned Enarsa. As reported, the Kirchner administration has instructed local private


equity groups to acquire stakes in strategic energy companies (Edenor, TGS with the soon to be disclosed Emgasud entrance, etc) and media companies. By Gavin Sullivan and Pablo Gonzalez, Buenos Aires

Grupo Gigante S.A.B. de C.V. / Wal-Mart Stores Inc 24 Feb PriceSmart an attractive target for multinational retailers, private equity, industry sources

say PriceSmart, a listed San Diego, California-based retailer with club warehouses across Central

America and the Caribbean, is an attractive target for US and international retailers and private equity, according to industry sources. PriceSmart has been growing rapidly, and could be attractive to Costco, Wal-Mart, BJ's Wholesale Club and overseas retailers looking to increase their presence in Central America, as well as private equity firms, said a retail banker based in the US. PriceSmart CEO and founder Robert Price refused to comment for this story. PriceSmart would be an attractive target for the right, complementary retailer, said Zygmunt Brett, a partner at the El Salvador office of law firm Arias & Munoz, who has worked with Wal-Mart in the past. Brett said he is not familiar with Wal-Mart’s thinking on PriceSmart specifically, but noted Wal-Mart’s Sam’s Club chain does not have a presence in the countries where PriceSmart has stores. Wal-Mart is already the biggest retailer in Central America, according to the company's website. It owns several different formats from supermarkets to discount stores like Pali and Mas x Menos in Costa Rica or Despensa Familiar in Guatemala, Honduras and El Salvador. According to a managing director in the Mexico City office of a global private equity firm with investments across Latin America, the club warehouse niche of the retail segment is indeed one private equity would look at, provided it had interesting scale. There are few independent warehouse chains, the director noted, and despite being a low-margin, high-volume business, it can be profitable if managed properly. An US-based industry executive said the warehouse space should be attractive to private equity and strategics. Given the economic downturn, the next couple of years should see an increase in savings retailer activity, he explained. A Wal-Mart analyst disputed the idea that Wal-Mart would be interested in PriceSmart, noting that Wal-Mart is trying to fix its own club retailer, Sam’s Club, and therefore is an unlikely suitor. A Wal-Mart spokesperson declined comment. Richard Galanti, CFO of Costco, declined comment on whether the company is interested in PriceSmart, but noted that the company has never made an acquisition and has instead chosen to grow organically. PriceSmart’s founder Sol Price had merged the company with Costco in 1993, and subsequently separated out in 1997. PriceSmart’s US stores were converted to the Costco brand during the union of the two companies. PriceSmart owns 25 club warehouses in 11 Central American and Caribbean countries. The company said in its latest annual report that after a period of rapid store expansion it is focusing on improving its existing operations. Founder Sol Price’s family owns more than 30% of the company’s stock, and Mexican retailer Grupo Gigante owns a 5% stake. PriceSmart is more likely to be a target for a regional Latin American player, rather than any US-based player, said the Wal-Mart analyst. Ricardo Salinas Pliego, controlling shareholder of the Elektra retail chain in Mexico, Central and South America, as well as private equity firm Advant International, were identified as potential interested buyers by a Mexico-based investment banker. Advent is not afraid of doing retail deals even in an economic downturn, the Mexico-based banker noted. A Colombia-based analyst, said he is not familiar with PriceSmart, but that France's Groupe Casino, which bought Supermarcados Exito in Colombia, could be looking for buys in Central America. Grupo Gigante could be interested in buying PriceSmart as its controlling shareholder Angel Losada is thought to be attracted to real-estate heavy assets outside Mexico, according to the investment banker based in Mexico. PriceSmart and Gigante owned three stores in Mexico in a joint venture, which was shuttered in 2005 by Grupo Gigante after it acquired 100% of the JV. Those three stores were not profitable, according to Grupo Gigante. Indeed, Grupo Gigante itself sold its most profitable division - its grocery retail business - to rival Soriana in 2007. PriceSmart’s revenues have more than doubled in recent years from USD 530m in 2004 to USD 1.09bn in 2008, generating USD 48m in operating income in 2008 vs a loss of USD 6.7m in 2004. By Soma Biswas, Oliver Hill and Georgina Gatsiopoulos


Upcoming Events

Breakfast Seminar on Wednesday March 4, 2009

The Banking & Capital Markets Committee cordially invites you to

a special breakfast presentation on

Enforcing Security Interests in Brazil

Wednesday, March 4, 2009

8:00 – 8:30 AM Registration, Breakfast and Networking

8:30 – 9:30 AM Panel discussion, Question & Answer

Decelerating growth and liquidity-constrained financial markets

have prompted lenders and borrowers alike to reconsider their

collateral packages in loans to Brazilian companies. In addition,

the prospect of a bankruptcy or a Chapter 11-style debt

restructuring (a recuperação judicial) focuses the mind on

understanding the rights of secured lenders.

The panel will discuss key business and legal issues arising in

enforcing various kinds of security interests by international and

domestic lenders. In particular, the panel will consider issues

such as:

(1) To what degree can each kind of security interests be readily

enforced against Brazilian borrowers? What are the rights of

secured lenders against borrowers that have commenced debt

restructurings or bankruptcy proceedings?

(2) In a consensual debt restructuring, how much bargaining

leverage is held by the secured lenders as opposed to the

unsecured lenders?

(3) When can a lender seek additional collateral from a struggling borrower?

Associated with: Hosted By:

www.mattosfilho.com.br

To Register: Go to www.brazilcham.com to register online, or call 212-751-4691.

Special Note: This event is free for members in good standing for 2009.

Membership renewals may be paid prior to the event, at the event or online.

Speakers

Welcoming Remarks

Paulo Vieira da Cunha Tandem Global Partners

(New York)

Program Moderator

Antonio N. Piccirillo Proskauer Rose LLP

(São Paulo)

Speakers

Vincenzo Paparo

Proskauer Rose LLP

(New York)

José E. Carneiro Queiroz Mattos Filho Advogados

(São Paulo)

Marina Anselmo Schneider

Mattos Filho Advogados

(São Paulo)

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Head of Latin America ResearchValeria Seifert


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