Bankruptcy

Parmalat’s U.S. Operation Files for Bankruptcy

Prospective buyers for the three U.S. subsidiaries are preparing to bid.
Stephen TaubFebruary 25, 2004

The accounting scandal that soured Parmalat’s future has now resulted in a bankruptcy filing of the Italian food conglomerate’s U.S. dairy operations.

The bankruptcy filing came on Tuesday after the company was cut off by milk suppliers who had not been paid. Accordingly, officials at the parent company said the food giant plans to put its U.S. milk businesses up for sale, reports Reuters.

The three affiliates that filed for Chapter 11 protection were Farmland Dairies LLC; its parent, Parmalat USA Corp.; and its subsidiary, Milk Products of Alabama LLC.

The affiliates reportedly hired Lazard Freres and Co. to help sell assets, which company officials claimed is “required” to preserve value and benefit creditors. “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 entities. “This should not affect the international restructuring of Parmalat.”

According to the bankruptcy court filing, a number of prospective purchasers are proceeding with due diligence, and certain would-be buyers have executed non-binding letters of intent.

In other Parmalat news, officials at Ernst & Young, provisional liquidators of Bonlat, a Cayman Islands affiliate of Parmalat, late last week said Parmalat Capital Finance appears to have $378,279 in cash and owes more than $1 billion to other companies, according to Reuters.

A petition for liquidating Parmalat Capital is scheduled to be heard in the Grand Court of the Cayman Islands on February 27. The Grand Court placed Parmalat Capital, and two affiliates, in provisional liquidation on December 24, the same day the conglomerate filed for bankruptcy.

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