Three U.S. affiliates of scandal-ridden Italian milk company Parmalat SpA filed for Chapter 11 bankruptcy protection on Tuesday, court filings show.
The affiliates, Parmalat USA Corp., Farmland Dairies LLC and Milk Products of Alabama LLC, said they have received nonbinding letters of intent from parties interested in buying their assets.
They said these parties have signed confidentiality agreements, and that a sale of their businesses is "required" to preserve value and benefit creditors. The affiliates said they hired Lazard Freres and Co. to help sell assets.
The U.S. entities filed for protection from creditors with the U.S. Bankruptcy Court for the Southern District of New York. They listed $414.4 million of assets and $316.5 million of debts. The filings had been anticipated for some time.
Parmalat, which had food operations in 30 countries, faces a multibillion-euro accounting scandal after revealing in December a 3.95 billion euro (roughly $5 billion) hole in its accounts. Investigators are examining how Parmalat concealed debt through shell companies, and what it did with billions of euros it raised through bond issues.
In Italy, a person close to the matter said Parmalat administrator Enrico Bondi decided the entities should file Chapter 11 voluntarily, and had not reacted to creditors threatening to seize assets.
"This is in line with Bondi's plan to have a single process and keep all the assets protected for the creditors as a whole," the person said. "This leaves all the options open."
Parmalat, Farmland and Milk Products are also seeking court approval for up to $35 million of debtor-in-possession financing from General Electric Co.'s General Electric Capital Corp. unit. Such financing helps companies operate as they reorganize.
The debtors said they lost $12.5 million in the 12 months ending Dec. 27, 2003, on revenue of $577.5 million.
They said they employ about 1,272 people, of whom 567 are union members. They said about 500 dairy farms, mostly family-owned and operated, provide milk, but an additional 350 stopped providing milk after Jan. 18 because the debtors paid farmers one or two days late.
