Troubled Parmalat not telling truth, says S&P

Standard Poor's, the ratings agency, yesterday accused Parmalat of repeatedly giving misleading information about its liquidity and said there had been no useful contact with the dairy group since Friday.

S&P, in a highly unusual move, sharply downgraded Parmalat debt for the second time in 24 hours, to CC/C - two notches above default. On Tuesday it had slashed the rating four notches from an investment grade rating of BBB- to B+, or junk status. The action comes as Parmalat yesterday again failed to redeem a ?150m bond that matured Monday.

Parmalat has invoked a grace period of five working days to redeem the bond. It previously said it had already bought back ?110m of the issue, leaving investors wondering about how a company that claimed to have ?4.2bn ($5.1bn) in liquidity in September could fail to find ?40m. Hugues de la Presle, an analyst at S&P, said during a conference call: "We are now led to believe that most of Parmalat's statements regarding its liquidity appear to be misleading."

Parmalat told analysts last month that it had ?6bn in balance sheet debt and could use its liquidity to service that debt. S&P yesterday said it was no longer certain about the size of the group's off-balance sheet debt, which some credit analysts have estimated to be as high as ?2bn. Parmalat executives were not available for comment.

One of Parmalat's main creditor banks yesterday said it was ready to back any emergency plan drawn up by Enrico Bondi, a veteran corporate restructuring expert hired by Parmalat on Tuesday. Mr Bondi was given carte blanche to look at all of Parmalat's operations, but does not have executive powers, which remain in the hands of Calisto Tanzi, the company's founder, chairman and chief executive who owns 51 per cent of the company.

Parmalat's investments appear to have been used as underlying assets for various derivative products, and thus cannot easily be liquidated, one person familiar with the group's accounts said. Investors had been wary of Parmalat's growing indebtedness for the past year, but became alarmed only last month when Parmalat disclosed a ?496.5m investment in an obscure mutual fund in the Cayman Islands.

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