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ROME - Parmalat Finanziaria SpA executives are engaged in a desperate effort to rescue the foundering dairy products giant in the wake of press reports that it could be facing a hole in its accounts of as much as 10 billion euros (U.S.$12.5 billion), AFP reports.
As financial and legal pressure grows, chairman and c.e.o. Enrico Biondi, a corporate rescue specialist brought in earlier this month to replace company founder Calisto Tanzi, is scheduled to meet with Industry Minister Antonio Marzano later today in Rome, while Carlo Prevedini, Parmalat Italia's director general, meets with union leaders in Parma, the northern Italian city where the company is based, according to Associated Press WorldStream. Officials said that the union wants reassurances on job security, production levels, and bankruptcy protection. In the near future Parmalat is expected to call a board meeting to protect itself from creditors by declaring bankruptcy.
According to the Italian daily Corriere della Sera, the Milan prosecutor's office has now launched a probe into the affair to find out if the reported losses originate with the company's debts or from the possible diversion of funds into other accounts. Associated Press Worldstream reports that on Saturday police raided the Milan offices of Parmalat auditor Grant Thornton, carrying away boxes of documents.
Italian prime minister Silvio Berlusconi said the government would ultimately intervene to preserve jobs at the troubled company, and the cabinet was expected to debate rescue proposals tomorrow.
To be placed under legal stewardship, Parmalat will have to persuade a court that the company can overcome its current woes. The company was already trying to cover debts estimated at six billion euros when the shortfall in its accounts was revealed.
The Bank of America has denied the authenticity of a document certifying that Parmalat's Cayman Islands unit, Bonlat Financing Corp., possessed 3.950 billion euros (U.S. $4.9 billion dollars) of liquidity as of Dec. 31, 2002. Parmalat subsequently admitted that it doesn't have the money. The company also faces a deadline to pay 400 million euros in relation to another financial arrangement with the bank.
Even though Italian banks hold less than 100 million euros of the 7 billion euros in bonds issued by the company, constant demands from creditors for repayment could cause a further decline in Parmalat's credit rating by Standard and Poor's.
In further news, Swiss food and beverage company Nestle SA announced today that it had no interest in taking over all or part of Parmalat, although a Swiss newspaper report had described Nestle as a potential bidder for parts of the embattled company.
Parmalat, with yearly sales of about U.S.$9.2 billion and a work force of more than 30,000 in 30 countries, produces and sells milk, yogurt, juice, and other food products worldwide. The company's name is a combination of the city of Parma and latte, the Italian word for milk.