Parmalat, the Italian dairy company that has rattled investors in recent months with disclosures about its accounting and the resignation of its chief financial officer, has not recovered a $589.9million payment from an offshore investment that it expected last week.
The missing payment equal to about a quarter of the company’s market value adds to the swirl of questions around Parmalat and its mounting debt. On Monday, when Parmalat announced that the payment had not been made, it was also due to repay a bond of 150 million, or $183.4 million
Parmalat should have received the payment Thursday for the sale of its stake in Epicurum, a hedge fund based in the Cayman Islands. The company said it did not know when it would receive the payment and had not decided on its next move. Parmalat executives were not immediately available for comment.
Companies generally have several days after a bond comes due before they must make the payment. Still, the disclosure adds to investor concern over whether Parmalat will be able to repay its more than 6 billion in debt.
The Italian stock exchange suspended Parmalat’s shares and bonds from trading in expectation that the company would issue a statement after holding an extraordinary board meeting on Tuesday. Parmalat is expected to try to sell its bakery business in the United States, including Archway cookies and Mother’s Cake, and was due to announce further steps. Parmalat, whose name comes from Parma, its home, and latte, the Italian word for milk, sells milk and food in 30 countries.
Aside from the bond that came due on Monday, Parmalat has about 1 billion in debt that must be paid back in the next year and 4.05 billion that comes due four years after that.
What is unusual is that while Parmalat owes 6.04 billion, it had 4.22 billion in available cash at the end of September. Some investors and analysts have questioned why the company periodically issues new debt despite having so much available cash.
Parmalat, which has increased sales tenfold in the past decade, chiefly because of acquisitions, has said the liquidity gives it financial flexibility.
But Standard & Poor’s, the financial rating agency, put Parmalat, which already has a credit rating at the lowest investment grade, on alert last month for a possible downgrading of its debt to junk status.
And the company unnerved investors by putting so much money in an offshore investment. Parmalat has also disclosed that a Citigroup subsidiary, Buconero or black hole in Italian had invested in a Parmalat unit that then lent the money to other parts of the company.
On Monday, Parmalat said Epicurum had been unable to make the payment because the majority of other investors had decided to liquidate their holdings after Parmalat decided to sell its stake.
That in turn pushed Epicurum’s managers to decide to liquidate the entire fund, a move that could not be made in time to pay Parmalat its $589.9 million
