Parmalat investors to fight Italy’s bankruptcy law over debt repayment

A GROUP of investors in Parmalat, the troubled Italian dairy giant, are challenging Italy’s new bankruptcy law to ensure bondholders get a say in the company’s debt repayment.

The group of institutional investors, pension funds and private companies invested a combined €300 million in Parmalat bonds.

They filed a suit with a Rome administrative court to wrest influence from Industry Minister Antonio Marzano and Enrico Bondi, Parmalat’s government-appointed bankruptcy administrator, in favour of a bankruptcy court. The Italian government issued an emergency decree in December, changing the country’s bankruptcy laws to speed up Parmalat’s restructuring.

Bondholders have said the bankruptcy procedure, which is overseen by the industry ministry, gives excessive influence to the Government and creditor banks. Institutional investors own about e8 billion in Parmalat bonds, about twice the amount owed to banks, according to the Bank of Italy.

Lawyers for US creditors this month met with Mr Marzano and other government officials to push for a US-style creditor committee to be included in the bankruptcy proceedings.

Mr Marzano is setting up a nine-member committee that will include the four foreign and four Italian banks most at risk from Parmalat.

The ninth member will represent bondholders.

More than 75,000 Italian investors own Parmalat bonds.

Mr Marzano did not say whether creditors would have access to internal Parmalat documents and have a role in shaping any debt-repayment plan as they can in the US, or whether they would only be called on to advise Parmalat managers. Bondholder representatives including Evan Flaschen, a partner at US law firm Bingham McCutchen, which is representing a group of 160 bondholders who own $3.5 billion of Parmalat debt, said the committee didn’t sufficiently represent bondholders.

Mr Bondi will present by the end of this month details of his plan to reorganise the company to attempt to pay back debt and emerge from bankruptcy.

Parmalat filed for bankruptcy in December after disclosing that a $4.9 billion account at Bank of America did not exist.