Fitch Takes Rtg Action On Argentine Corp & Structured Transactions.

Business Editors

CHICAGO--(BUSINESS WIRE)--Jan. 10, 2002

Fitch has downgraded several international scale local and foreign currency corporate and related structured credit ratings in Argentina. Several Argentine corporate ratings are unchanged and all ratings remain on Rating Watch Negative. Fitch views the recent announcements and expected actions to be taken by the Argentine government as detrimental to the financial health of most, if not all, of the Argentine corporates, creating significant uncertainty and possibly leading to payment defaults for some.

The effects of the government's action on Argentine corporate credit quality will result in a deterioration of financial flexibility and credit protection measures. Most of the Fitch publicly rated entities have tended to be the most financially sound, and thus will be in the best financial position to emerge successfully from the current crisis, although the outcome is highly uncertain at this time.

The ability of these entities to make timely payments on their debt service obligations is Fitch's most immediate concern. Acute lack of liquidity in the Argentine marketplace will limit these companies' ability to offset the adverse effect on cash flow and to meet near term debt service with new bank lines of credit -- even for the best credits in the market. For weaker credits, this issue is amplified.

Initial indications suggest a devaluation target of 29%, although it remains to be seen whether this level will be sustainable in the very short term. Additional measures include the conversion of public service tariffs and fees to pesos from U.S. dollars and effectively breach privatization concession contracts by prohibiting adjustment for the increasing costs associated with the devaluation. Price caps, i.e. controls, to be put in place by the authorities in an effort to ward off inflationary pressure, will force these companies to absorb the higher cost of devaluation.

Many Argentine companies are facing immediate liquidity and refinancing risk. As liquidity has dried up in the international capital markets over the past year or so, local and international bank markets afforded the necessary funding to meeting working capital and refinancing requirements, resulting in increased short-term debt levels. Entities with debt maturities over the ensuing 3 to 6 months are likely to have limited financing options. The rating actions below reflect each company's ability to withstand the liquidity crisis over the coming six months. Additional rating action may be taken as further measures are announced by the government.

Ratings Downgraded and remain on Rating Watch Negative:

Company Debt Rated To/From:

Aguas Argentinas S.A.
      --Local currency `CCC+' / `B+', Rating Watch Negative;
      --IDB `B' loan part. `CCC+' / `B', Rating Watch Negative.

Capex S.A.
      --Local currency `CC' / `B', Rating Watch Negative.

Edenor S.A.
      --Local currency `B-' / `B+', Rating Watch Negative;
      --GAIN trust notes `B-' / `B+', Rating Watch Negative.

Hidroelectrica Piedra del Aguila S.A.
      --Local currency `B-' / `B+', Rating Watch Negative.

MetroGas S.A.
      --Local currency `CCC+' / `B+', Rating Watch Negative.

Molinos Rio de la Plata S.A.
      --Local currency `B' / `B+', Rating Watch Negative;
      --Secured export notes `B' / `B+', Rating Watch Negative.

Pecom Energia S.A.
      --Local currency `B'/'BB-`, Rating Watch Negative;

Telecom Argentina S.A.
      --Local currency `B-' / `B+', Rating Watch Negative;

Transener S.A.
      --Local currency `CCC+' / `B+', Rating Watch Negative;

Transportadora de Gas del Norte S.A.
      --Local currency `B-' / `B+', Rating Watch Negative;
      --TGN CRIBs `B-' / `B+', Rating Watch Negative;
      --IFC `B' loan part. `B-' / `B', Rating Watch Negative.

Transportadora de Gas del Sur S.A.
      --Local currency `B-' / `B+', Rating Watch Negative;
      --IDB `B' loan part. `B-' / `B', Rating Watch Negative.

Ratings unchanged that remain on Rating Watch Negative:

Aguas Argentinas S.A.
      --Foreign Currency `CC', Rating Watch Negative.

Capex S.A.
      --Foreign Currency `CC', Rating Watch Negative.

Compania Mega S.A.
      --Sr. Project Debt `B+', Rating Watch Negative.

Edenor S.A.
      --Foreign Currency `CC', Rating Watch Negative.

Hidroelectrica Piedra del Aguila S.A.
      --Foreign Currency `CC', Rating Watch Negative.

Imagen Satelital S.A.
      --Foreign Currency `CC', Rating Watch Negative.

MetroGas S.A.
      --Foreign Currency `CC', Rating Watch Negative.

Telecom Argentina S.A.
      --Foreign Currency `CC', Rating Watch Negative.

Telefonica Holding de Argentina S.A.
      --Foreign Currency `CC', Rating Watch Negative.

Transener S.A.
      --Foreign Currency `CC', Rating Watch Negative.

Transportadora de Gas del Norte S.A.
      --Foreign Currency `CC', Rating Watch Negative.

Transportadora de Gas del Sur S.A.
      --Foreign Currency `CC', Rating Watch Negative.

Pecom Energia S.A.
      --Foreign Currency `B-', Rating Watch Negative.

Siderar S.A.
      --Foreign Currency `CC', Rating Watch Negative.