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Parmalat US Files For Protection
http://www.sina.com.cn 2004/02/27 12:34  Shanghai Daily

  Italian parent will sell the American operations to pay creditors

  Scandal-plagued Italian food producer Parmalat SpA put its US dairy operations under Chapter 11 bankruptcy protection on Tuesday, and said it will sell them to pay creditors.

  Its three US dairy units - Farmland Dairies LLC, its parent Parmalat USA Corp, and its subsidiary Milk Products of Alabama LLC - filed for protection with the US Bankruptcy Court in Manhattan after vendors and bank lenders balked at extending credit.

  The move follows Parma-based Parmalat's bankruptcy filings in Italy on December 24, and later in Brazil and the Netherlands, in one of Europe's worst financial scandals. The company's new managers recently said Parmalat underreported debt by about US$16 billion and inflated profit and revenue.

  The US filings are intended to help maintain value in the US businesses during the sales process. Parmalat said it has several potential buyers but did not name them.

  "This is a filing that contemplates the sale of the US dairy operations and won't have a major effect on creditor issues," said Marcia Goldstein, a partner for Weil Gotshal Manges LLP, which represents the dairy units. "This should not affect the international restructuring of Parmalat."

  Eighteen people, including founder Calisto Tanzi, have been arrested in connection with Parmalat's collapse.

  The SEC in December charged Parmalat with securities fraud over a US$1.5 billion bond sale. Bank of America Corp, Citigroup Inc and Morgan Stanley are among seven institutions being probed in Italy in connection with Parmalat, Italian news reports said.

  The US dairy operations mainly sell milk and dairy products in New York and the southeast under Farmland, Welsh Farms and other brand names.

  Farmland and Parmalat USA are based in Wallington, New Jersey, and Milk Products in Decatur, Alabama.

  A court filing shows the units lost US$12.5 million last year on sales of US$577.5 million. The units listed assets of US$414.4 million and US$316.4 million of debts, including a US$10.1 million claim from Comerica Inc.

  Citibank, UniCredito Italiano and other banks helped push the businesses into bankruptcy by refusing to extend credit, court filings show.

  Parmalat's US dairy business suffered as suppliers began demanding cash on delivery or prepayment, according to a court filing. About 500 dairy farms still provide milk, but 350 others stopped after January 18 because the debtors paid farmers late.

  The dairy units said Lazard Freres and Co will help them sell assets, and that they have received nonbinding letters of intent from interested parties.

  They also said they had secured up to US$35 million of debtor-in-possession financing from General Electric Co's General Electric Capital Corp unit, to keep operating while in bankruptcy.

  Parmalat said the filings should not directly affect other North American businesses, including its Archway cookie and Canadian businesses.

  "This is in line with (Parmalat administrator Enrico) Bondi's plan to have a single process and keep all the assets protected for the creditors as a whole," a person close to the matter said. "This leaves all the options open."

  (Reuters)




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