Parmalat to Slash Half Its Workforce

MILAN, Italy -- Parmalat will slash almost half its workforce as it sells or liquidates units in 20 countries in an effort to keep the insolvent food group afloat, a plan unveiled late last week showed.

At a first meeting with international creditors, the Italian-based firm's new managers asked banks and bondholders to work hand-in-hand to keep the scandal-hit group going.

Administrator Enrico Bondi told the representatives of 30 banks and 20 bondholder groups that Parmalat was in talks to sell U.S. dairy assets, and it planned to pull out of much of Latin America and Asia to focus on Europe, Canada and Australia.

Parmalat's worldwide workforce would plunge to under 17,000 from 32,000 as the axe was taken to its 30-nation empire -- once a point of pride at one of Italy's most global companies.

With many of the people who turned Parmalat into the nation's eighth-largest industrial group now in jail as investigations continue into the huge accounting scandal, Bondi has sought to win back investor confidence by saying he would work with creditors if they formed a committee.

Part of Bondi's plan is to swap much of Parmalat's debts of more than 14 billion euros ($17 billion) into equity, and he told Friday's closed-door meeting that different classes of creditors would be treated equally, one of the creditors at the meeting said.

"We want a debt-for-equity swap in principle, but the devil is in the details," the creditor said, adding it was unclear how creditors would rank or what role shareholders would have in the new company.

"Bondi did say the right things, but he's been saying the right things all along. We need action," another creditor said.

Many creditors had complained they had not been consulted on Parmalat's plan, as is possible under U.S. bankruptcy law.

Some foreign creditors still feared they would get no voice because Italian banks were reluctant to join a working group, unwilling to get involved in a process that could involve them being taken to court over their past dealings with the group.

Various banks are under investigation to see if they knew anything about its true financial state when they sold its bonds. Bondi is considering taking action against some banks to recover funds from deals for Parmalat's former managers.

"We've got one more chance and this [working group] is it," said one member of a group representing major creditors owed more than $6 billion. "The entire consultative process could fail because of the Italian banks."

People at the meeting said Bondi told them Parmalat had not drawn down anything from a 105 million euro credit line from a group of Italian banks, but he would need new finances at some stage.

Bondi also told creditors his restructuring would probably kick into gear in August or September -- later than a hoped-for June start -- and that he would leave Parmalat once the plan was finished and the new-look company was relisted on the bourse.

Parmalat shares were suspended indefinitely on the Milan bourse in December after the price plunged to 11 euro cents, from over 2 euros just before the scandal broke.

Parmalat's founder Calisto Tanzi and other former managers, accountants and consultants have been accused of hiding billions of euros of losses over the past decade, providing false information to the market and obstructing regulators.

Slimming Down

Parmalat aims to cut its workforce to fewer than 17,000 from 32,000 now as it remains in 10 countries from 30 now. Italy, where 4,000 workers are based, will see "strong integration" of current operating companies. The number of key product categories will be slashed to seven from 20 by 2006 and brands will fall to 30 by 2006 from more than 120 now. Six top global and international brands will generate 80 percent of total group net sales.

Assets to Unload

In the United States, the group said it had started a sale of dairy business Farmland Dairies LLC, its parent Parmalat USA Corp. and its subsidiary Milk Products of Alabama LLC, all three of which filed for bankruptcy protection in February.

Parmalat said it was in talks with a "stalking horse" bidder -- whose presence may attract others -- with a view to signing a preliminary sale deal soon.

Parmalat also said it had started asset disposals in Chile, was likely to start selling assets in Mexico and was considering sales in Paraguay. In Argentina, the Dominican Republic, Ecuador and Uruguay, Parmalat will also start selling loss-making units.

In Brazil, Parmalat's biggest operation in the region, capacity would be reduced by 25 percent on average.

In Europe, courts have ordered the liquidation of units in Hungary and Ireland, and the group agreed to sell British assets.

In Asia, Parmalat has said it will liquidate companies in Indonesia, Hong Kong and Vietnam, sell units in Thailand and sell or wind up units in China.
-- Reuters