Italian Minister Meeting Parmalat Boss
ROME (AP) _ Executives at Parmalat Finanziaria SpA were scrambling Monday to save the Italian dairy company, which is teetering on the edge of default.
The company’s chairman and chief executive, Enrico Biondi, was to meet with Industry Minister Antonio Marzano later in the day in Rome. Meanwhile, Parmalat Italia’s director general, Carlo Prevedini, was meeting with union representatives in Parma, the northern city where the embattled company is based.
The union representatives were seeking reassurances on job security, production levels and bankruptcy protection, officials said.
Late last week, Premier Silvio Berlusconi said the government would intervene to bail out the company. ``The situation is very serious,″ he said Saturday.
Details of the plan the government is drawing up have not been released, but Berlusconi said it would be discussed at a Cabinet meeting Tuesday.
Parmalat is expected to call a board meeting in the next few days to seek protection from creditors by declaring bankruptcy.
The company made international headlines Friday when it stated that the Bank of America Corp. was not holding about euro3.95 billion, roughly $4.91 billion, of its funds that the Italian company had reported in September. The letter guaranteeing the funds was fake, the bank said.
Bondi, who was brought in by company founder Calisto Tanzi earlier this month when the dairy group’s financial problems worsened dramatically, held a round of meetings Sunday with lawyers, accountants and advisers.
Under Italian law, companies can apply for two types of protection from creditors.
The board late Friday gave Bondi the authority to ask judges to give him time to come up with a plan of action for the company before considering any legal proceedings. Parmalat is working with Milan magistrates probing possible accounting fraud.
Prosecutors are investigating whether a crime may have been committed in the case, and on Saturday police raided the Milan offices of Parmalat auditor Grant Thornton and carted off boxes of documents Saturday.
The Italian banking system has been hit by the Argentinian default and, more recently, by the crisis of another food company, Cirio Finanziaria, which defaulted on euro1.1 billion, roughly $1.3 billion, in bonds, leaving 30,000 Italians with worthless paper and calling into question the efficiency of existing regulators.
Berlusconi said Saturday that the government will reform the national regulatory framework.
Friday’s Parmalat announcement confirmed investors’ fears that the company, which nearly defaulted on a euro150 million, or $186.5 million, bond last week, was in worse financial condition than stated on its Sept. 30 balance sheet. It also fueled accusations by ratings agency Standard & Poor’s that Parmalat had misled investors.
Late Friday, S&P downgraded Parmalat to D, its lowest rating, saying the company’s failure to buy out minority shareholders in its Brazilian subsidiary by a Wednesday deadline represents a default under its criteria.
That could trigger a cross default on the company’s euro6 billion ($7.3 billion) in gross debt, though market participants said the company won’t officially be in default until a grace period passes on the missed payment.
Parmalat must make more than euro100 million ($124.4 million) in bond payments in January and February, as well as meet a euro200 million ($248.7 million) payment to a Brazilian subsidiary on Monday, according to the Italian press. Parmalat’s total debt as of Sept. 30 was around euro6 billion ($7.3 billion).
Parmalat, which has an annual sales of around euro7.5 billion ($9.2 billion), produces and sells milk, yogurt, juice and other food products in Europe, the United States and around the world.