Parmalat files for U.S. protection
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Parmalat filed for bankruptcy in Italy in late December.
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NEW YORK (Reuters) -- Scandal-plagued Italian food producer Parmalat SpA has put its U.S. dairy operations under Chapter 11 bankruptcy protection and says it will sell them to pay creditors.
Its three U.S. dairy units -- Farmland Dairies LLC, its parent Parmalat USA Corp., and its subsidiary Milk Products of Alabama LLC -- filed for protection with the U.S. Bankruptcy Court in Manhattan Tuesday after vendors and bank lenders balked at extending credit.
The move followed 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 have said Parmalat under-reported debt by about $16 billion and inflated profit and revenue.
The U.S. filings are intended to help maintain value in the U.S. 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 U.S. 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.
Eleven U.S. representatives, including five Securities and Exchange Commission inspectors and others from the offices of the Justice Department and Manhattan District Attorney Robert Morgenthau, were in Parma on Tuesday to meet Italian prosecutors, people familiar with the matter said.
The U.S. Securities and Exchange Commission in December charged Parmalat with securities fraud over a $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 U.S. dairy operations, with about 1,272 employees, mainly sell their 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 $12.5 million last year on sales of $577.5 million. The units listed assets of $414.4 million and $316.4 million of debts, including a $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 U.S. 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 they were paid late.
Copyright 2004
Reuters. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.
