Fitch Assigns 'A-' Rating to ENAMI Syndicated Loan.

Business Editors

CHICAGO--(BUSINESS WIRE)--Dec. 6, 2002

Fitch Ratings has assigned an 'A-' foreign currency rating to the proposed USD220 million three-year syndicated bank loan of Empresa Nacional de Mineria (ENAMI). This loan, which is expected to close by year-end 2002, will have a full and unconditional guarantee from the Republic of Chile whose long-term foreign and local currency obligations are also rated 'A-' and 'AA-', respectively.

In addition, Fitch has affirmed the senior unsecured foreign currency rating of 'A-' and the senior unsecured local currency rating of 'AA-' of ENAMI. Unlike the issue specific rating assigned to the syndicated loan, these latter two ratings represent the credit quality of all debt at ENAMI, including debt that does not carry an explicit government guarantee.

Fitch does not differentiate between the debt with and without the explicit government guarantee due to a letter from the government to the unsecured lenders, in which the government expresses its intent to support these loans and states that it does not consider them subordinate to the syndicated loan. Fitch believes that the Chilean government will honor this implicit commitment to ENAMI's lenders due to the negative externality (e.g., significantly higher borrowing costs for Chile) that would likely result from a default by ENAMI.

The Rating Outlook for the syndicated loan and the foreign and local currency ratings is Stable.

ENAMI, an industrial enterprise that is wholly owned by the Chilean government, provides copper smelting and refining services to small to midsized mining operations. In addition, it supports these companies by providing price-stabilization programs, loans, and technical and marketing assistance. By performing these functions for companies, ENAMI helps to create thousands of jobs in areas of Chile where unemployment would otherwise be high.

Since 1994, ENAMI's total debt (including non-interest bearing debt) has grown from about USD250 million to nearly USD500 million, mainly as a result of the capital expenditures made to adhere to stricter environmental standards and the cumulative, dividend-like advances on earnings made to the Chilean government of approximately USD164 million.

For the first nine months of 2002, the company's leverage, as measured by total debt-to-EBITDA, was 11.3 times (x) and its interest coverage ratio was 2.2x.

Credit ratios are not expected to improve until debt is reduced by way of a capital infusion or from the sale of assets, such as the smelting and refining facilities at Ventanas. The Ventanas assets could generate approximately USD350 million in proceeds. In addition, the potential exists for ENAMI to form a joint-venture with a partner such as government-owned Codelco, the world's largest copper producer. Such an alliance could allow for synergies between the two state companies and may help strengthen the credit fundamentals of ENAMI if the proceeds from the full or partial sale of the Ventanas assets are used to reduce ENAMI's debt. ENAMI's interests in several Chilean copper mines as well as numerous mineral prospects could be sold and the proceeds used to reduce debt.

ENAMI's liquidity is tight, with just USD6 million in cash. The company's total bank debt was about USD390 million at Sept. 30, 2002. In addition, ENAMI has about USD94 million in non-interest bearing bank debt raised by assigning export contracts to the banks. Long-term debt maturities in 2003 and 2004 total approximately USD130 million and USD73 million, respectively. The proceeds of the proposed three-year USD220 million syndicated bank loan would be used to repay two of ENAMI's largest bank loans for USD150 million and USD70 million. ENAMI expects other banks to rollover its remaining credit lines of about USD170 million as well as non-interest bearing bank debt.