The collapse of Italian food giant Parmalat, which has rocked the business world and is being compared to the massive accounting scandal that brought down United States energy trader Enron, is the result of 11 months of deepening financial problems.
The Italian government on Wednesday placed the company under the control of a special commission tasked with restructuring the debt-ridden firm, whose liabilities appear to increase by the day.
Investigating magistrates probing Parmalat’s murky finances have declared that up to €10-billion may have disappeared.
The alarm bells started ringing on the Milan stock exchange as long ago as February when a bond issue worth €300-million was greeted by the markets by a 9% fall in the company’s share price, forcing Parmalat to withdraw the issue.
The following month, the group suffered a setback when financial chief Fausto Tonna resigned but it was in September that things started to go badly wrong when credit rating agency Standard and Poor’s (S and P) alerted the financial community to a possible fall in Parmalat’s rating.
The following month, the Milan stock exchange governing body, Consob, asked the company for extra guarantees for debts falling due before the end of the year.
Things started to spiral out of control in November when accountants Deloitte Touche expressed reservations about investments in the Cayman Islands, an offshore financial haven, while S and P adjusted Parmalat’s credit rating downwards.
December has seen things go from bad to worse.
December
8: Doubts are expressed over whether Parmalat is able to repay a €150-million debt and trading in the company’s shares on the Milan stock exchange is suspended. The company admits it has been unable to recover $589,9-million from a fund called Epicurum, based in the Cayman Islands.
9: The board calls in Italian trouble-shooter Enrico Bondi as a consultant to prepare a restructuring package and save 36 000 jobs in 30 countries. S and P further downgrades the company’s credit rating to junk bond status.
10: S and P indicates the risk of Parmalat defaulting on bond payments. Tonna and two other board members resign and sever all links with the group.
11: Trading in the company’s shares resumes briefly but is suspended again when 55% is wiped off share prices.
12: Parmalat announces it has reimbursed the €150-million in bonds that had fallen due earlier in the week.
15: Calisto Tanzi, the group’s founder, chairperson and chief executive, resigns, handing absolute power to Bondi.
19: Bank of America denies the authenticity of a document certifying that Parmalat’s Cayman Islands unit, Bonlat Financing Corporation, had assets of €3,95-billion as of December 31 2002. Trading in company shares is again suspended after having plummeted 66%, representing a loss in value of €1,5-billion in two weeks.
20: Prime Minister Silvio Berlusconi pledges to use government resources to bail out Parmalat and save jobs.
21: Tonna denies rumours that he has gone to Venezuela, saying he never left his home near Parma.
22: Press reports indicate the hole in Parmalat finances could reach €10-billion euros as a deadline to pay out €400-million in connection with another financial arrangement with Bank of America falls due.
22: Tanzi, Tonna and several other executives are named in a criminal investigation by a Milan court.
23: Share trading is again suspended pending the company’s board meeting to discuss some form of special administration to shield it from creditors for at least two years. Tonna is questioned for several hours. Bank of America files a forgery suit against Parmalat with the Milan prosecutor’s office.
24: Parmalat files for protection from its creditors under an emergency government decree issued on Tuesday to help large, insolvent companies restructure. The government appoints Bondi as special administrator to take charge of the government-established commission to save Parmalat.
Press reports claim that millions of euros have been tracked from a Cayman Islands account to another in Luxembourg held by Tanzi, the money having been transferred from Epicurum to Satalux, a subsidiary of the Tanzi family’s Parma-based Sata company, set up in Luxembourg in December 2002.
Tanzi is said to be ”abroad”, possibly in Spain. Tonna will be questioned further. — Sapa-AFP