The proactive involvement of the Italian government in the Parmalat insolvency proceedings may prove to be beneficial for those holding onto the company's bank debt claims, at the expense of bondholders. The majority of the company's bank debt is held by Italian banks, whereas Parmalat's bonds are increasingly falling into the hands of U.S. distressed debt investors. It is possible that the lender claims will be deemed senior and bondholder claims will be subordinated to keep the company in Italian hands, said Duncan Yin , a principal at CRT Capital Group . "The government's objective is to protect Italian interests," explained Yin. The Italian government has become very involved in Parmalat's insolvency case and has even appealed to the European Commission to declare the situation a crisis. Indeed, the Italian cabinet recently passed legislation to revise the procedure for commencing bankruptcy specifically for Parmalat, explained Yin. Parmalat Spa filed with the Minister of Productive Activities and the Court of Parma for admission to the extraordinary administration procedure on Dec. 24. But prior to the company's filing, the Italian cabinet passed a legislative decree that allows a government appointed commissioner to direct the reorganization of the company. Enrico Bondi , who was reportedly brought to Parmalat to appeal to the company's banks, was appointed to the role of Extraordinary Commissioner of the company in accordance with that decree.
Parmalat is believed to have roughly E 111 million of bank debt at its Parmalat Finanziaria level, about a E 1 billion at the Parmalat Spa level and another E 1 billion at various operating entities including Dalmata Srl . Prior to the fraud revelation, a few pieces of Parmalat bank debt were said to have traded. Market sources claimed that bank debt at the Parmalat Spa level as well as bank debt linked to a Brazilian entity changed hands in the high 40s to low 50s and the low 70s, respectively. One trader has also said that the bank debt at the Parmalat Spa level was unsecured and would likely be pari passu with the company's bonds (LMW, 12/22).
Last week no bank debt was offered in the market, but one European buysider attributed that to the holiday period. The bonds were quoted in the 16-18 range, he said. Although it is too early to tell how Parmalat's reorganization will be played out, Yin predicted at the end of the day it is likely that bondholders will not be happy. Parmalat officials could not be reached.