Bondholders File US Involuntary Chapter 11 Petition against Argentina's Leading Bread Company.

NEW YORK & LONDON -- Steps were taken today by bondholders to place one of Argentina's leading bread-producing companies under Chapter 11 bankruptcy protection in the US, in a move highlighting deep tensions between international investors and Argentinian law.

The Chapter 11 petition against insolvent Argentine bread company Compania de Alimentos Fargo S.A. ('Fargo'), was filed today in the US Bankruptcy Court for the Southern District of New York, by a group of bondholders in the company in a bid to protect their interests as the largest creditor base. The filing follows the effective exclusion of the bondholders from earlier Concurso bankruptcy proceedings in Argentina, following an Argentine court decision in March 2005 to disallow bondholders from voting the principal amount of their claims. The Concurso ruling effectively enabled Fargo to ignore the bondholders, marking a dangerous development for international bond investors abroad.

The bondholders, Rainbow Global High Yield Fund, Argo Capital Investors Fund SPC, The Star Fund and The Rainmac Fund ('the Funds') hold in excess of 65% of the 13-1/4 Senior Notes due 2008, governed by New York law.

Concurrently, the bondholders have requested that the US Bankruptcy Court authorize examinations of, among others, Fargo and associated joint owners Grupo Bimbo Sociedad Anonima de Capital Variable S.A.('Bimbo') and Mr Fernando Chico Pardo, in connection with their activities in the Concurso. By initiating the proceedings, the Funds aim to preserve value for creditors and ultimately secure a fair restructuring of the company. Ian McCall of Rainbow Advisers said, "We believe Bimbo is attempting to control the industry and use any means necessary to get this business as cheap as they can. We want to be treated fairly and get priority treatment in the capital structure over equity."

Fargo entered into Concurso bankruptcy proceedings in Argentina in 2002. In response to a loan default, Deutsche Bank enforced its security and sold its equity interest in Fargo and a US$30 million loan to entities controlled by Mexican businessman Chico Pardo. In turn, Mr Pardo disposed of 30% of the Interests to Bimbo, Fargo's closest competitor in the Argentine bread market. These transactions have allowed control of the Concurso process to lie in the hands of Bimbo and Mr. Pardo to the detriment of the general creditor body.

In March 2005, in a decision which stunned the local and international financial community, an Argentine court agreed to prevent any bondholders from voting the principal face amount of their bonds in the Concurso proposal submitted by Fargo. "The ruling contravenes predominant Concurso case law in Argentina and goes against general principles of Argentine Concurso matters," commented Matias Zaefferer, legal counsel for the Funds in Argentina.

The Funds hope that the involuntary Chapter 11 filing will deter other non-US entities that have availed themselves of the US capital markets, from subsequently manipulating equity and secured debt positions in local insolvency proceedings in order to negate the rights of international bondholders. Mr. McCall of Rainbow Advisors added, "In Mexico, there have been similar problems for bondholders disenfranchised from bankruptcy processes. Mexican law favors equity holders and we believe the shareholders want the same result in Argentina."

David Eaton, partner at Kirkland & Ellis LLP and legal counsel to the Funds in the US, commented: "This unusual decision by the Argentine courts has disenfranchised 90% of the company's creditors from the restructuring process. It means a company could borrow an untold amount of money in the US capital markets and then file a Concurso proceeding in Argentina, and be able to pass through a restructuring that negatively impacts bondholders, without them being allowed to vote on it. It is a major adverse precedent for US bond investors and threatens the sanctity of the US capital markets."