Venezuela's Sidor cuts debt with restructuring

Reuters, 06.20.03, 6:45 PM ET

CARACAS, Venezuela, June 20 (Reuters) - Venezuela's Siderurgica del Orinoco (Sidor), the largest steel maker in the Andean region, cut its debt by half to $700 million with a restructuring deal signed Friday with the government and private banks.

The Sidor deal increases the state's share in the steel maker from 30 percent to 40.3 percent to capitalize more than half of its debt with the government. The firm was privatized in 1997 and acquired by the Amazonia Consortium.

Under the agreement, the consortium -- including Mexico's Hylsamex <HYLSAMXB.MX> and Tamsa <TAMSA.MX>, Argentina's Siderar <SID.BA>, Usiminas <USIM3.SA> of Brazil and Venezuela's Sivensa <SVS.CR> -- reduced its share from 70 percent to 59.79 percent, state and Sidor officials said.

"Changes were made on the financing side to restructure the debt around 54 percent to $700 million and... also to reform the state's participation," Francisco Rangel, president of the state mining consortium Corporacion Venezolana de Guayana (CVG), told Reuters.

"This is manageable debt, debt that brings guarantees for shareholders, but that also allows for better technology, and allows for investment," he said.

Completing the debt restructuring for Venezuela's largest private exporter took 11 months from the signing of the deal in July 2002 between Amazonia Consortium, Venezuela's development bank, CVG, Citibank, Deutsche Bank and four local banks.

The president of Sidor board of directors Maritza Izaguirre told Reuters that the government capitalized half of Sidor debt with the state and refinanced the other half over 15 years with a interest rate Libor plus 1.75 points.

Izaguirre said banks had pooled Sidor debt and bought at a discount another $133.5 million in the company.

The state's participation will diminish later with the completion of the transfer of 20 percent of Sidor shares to employees as laid out in the privatization process.

Sidor's financing difficulties worsened with the slide in global demand and prices in steel and also the impact of the deep domestic recession. Venezuela's economy contracted by a record 8.9 percent last year.

The firm produces on average about 3.5 million tonnes of liquid steel every year and manufactures finished goods from pellets to sheet and long materials.