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Parmalat Plans to Seek Bankruptcy Protection

December 24, 2003|From Reuters

Food group Parmalat was poised to file for bankruptcy protection today in an effort to survive an $8.7-billion hole in its accounts, which has turned into one of Europe's biggest corporate crises.

As two teams of investigators prepared to coordinate their fraud probes, Parmalat's rescue managers awaited publication of a new government decree introducing a fast-track procedure for big Italian companies seeking protection from creditors.

Once it is published, the company probably will file for immediate protection, sources close to Parmalat said.

"The decree will provide the company with immediate protection while it assembles a plan to restructure the group and resolve its financial difficulties," one of the sources said.

Parmalat's long-brewing crisis erupted last week when it said Bank of America had dismissed as false a statement showing $4.9 billion in cash and investments attributed to a Cayman Islands unit of the group.

A judicial source said the hole in Parmalat's accounts was estimated at about $8.7 billion, confirming reports that previous management did not buy back Parmalat's bonds as stated in its accounts.

About 20 people have been named in the investigations, including Parmalat founder Calisto Tanzi, who opened his first milk plant in 1961 before building one of Italy's best-known multinationals, which employs 35,000 people in 30 countries.

Prosecutors said they were making progress in figuring how a company that had $5.2 billion in liquidity on its balance sheet in fact was so short of cash it had run up a $148-million bill for unpaid milk from Italian farmers.

Parmalat's new chairman and chief executive, Enrico Bondi, a well-known Italian turnaround specialist, was expected to be made a government-appointed commissioner once the decree was published.

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