Sidor Cuts $1.88 Billion Debt to Banks, State in Half (Update2)

June 23 (<a href=quote.bloomberg.com>Bloomberg) -- Siderurgica del Orinoco CA, Venezuela's biggest steelmaker, said it reached an agreement with creditor banks and the government to reduce $1.88 billion of debt by half in a bid to return to profitability after five years of losses.

Thirty international and domestic banks, including Citigroup Inc. and Deutsche Bank AG, agreed on the accord, which cuts the company's debt to about $791 million. The Venezuelan government, which sold a majority stake in the company to private investors in 1997, will increase its holding to 40 percent from 30 percent, the steelmaker, based in Puerto Ordaz, Venezuela, said in a statement.

Sidor, a producer of steel slabs used to build cars and appliances, is restructuring debt for the second time in three years after a two-month national strike curbed revenue and state restrictions on the sale of dollars complicated Sidor's ability to get foreign currency. President Hugo Chavez made the survival of the former state company, which employs 5,000, a priority.

``The government made a concerted effort to resolve this problem,'' said Robert Bottome, an analyst with research company Veneconomy in Caracas.

Citigroup spokeswoman Danielle Romero-Apsilos declined to comment.

As part of the debt agreement, some of the company's shareholders, excluding the government, agreed to invest $133.5 million in Sidor. The company had been in negotiations with creditors for 18 months, following the company's missed interest payment of $31.3 million in December 2001.

Sidor produces steel slabs that can be rolled into plate or sheet. The company's output is about 3.5 million tons a year.

Before the agreement, Sidor was 70 percent-owned by Argentina's Siderar SAIC, Mexico's Hylsamex SA de CV, Tubos de Acero de Mexico SA, Brazil's Usinas Siderurgica de Minas Gerais and Venezuela's Siderurgica Venezolana Sivensa SA. The Venezuelan government owned the remainder.