Milan, Dec 20: Parmalat Finanziaria SpA said on Friday that Bank of America Corp. wasn't holding about 3.95 billion (USD4.91 billion) of its funds as the Italian dairy conglomerate had reported in September.

The acknowledgment deepened the crisis at the Italian dairy conglomerate and raised fears of possible bankruptcy. The company was holding an emergency board meeting on Friday. Parmalat said in a statement that Bank of America had disavowed the authenticity of a document saying that the dairy group's subsidiary, Bonlat Financing Corp., held 3.95 billion (USUSD4.91 billion) in cash and cash equivalents in an account there as of December 31, 2002.
It is unclear who prepared the alleged false document, or where the cash is located if it exists and is not at Bank of America. The announcement confirmed investors' fears that Parmalat, which nearly defaulted on an 150 million (USUSD186.5 million) bond last week, was in worse financial condition than stated on its September 30 balance sheet. It also fueled accusations by ratings agency Standard & Poor's that Parmalat had misled investors.
Late Friday, S&P downgraded Parmalat to D, its lowest rating, saying the company's failure to buy out minority shareholders in its Brazilian subsidiary by a Wednesday deadline represents a default under its criteria.
That could trigger a cross default on the company's 6 billion (USUSD7.3 billion) in gross debt, though market participants said the company won't officially be in default until a grace period passes on the missed payment.
Meanwhile, people familiar with the situation told Dow Jones Newswires on Friday that Bank of America had made an affidavit to the US Securities and Exchange Commission certifying that the letter held by accountants for Parmalat was false. It was a strong indication that the SEC had been brought into the matter. The news follows a major shakeup on the Parmalat board, including the appointment of Enrico Bondi as new chairman and chief executive Monday. Bondi replaced Calisto Tanzi, who had run the company since founding it in 1961.
Bondi was already racing against the clock to find cash to redeem the group's bonds and avoid a default. Bondi's task now becomes more difficult, and raises concerns that the company could be forced to declare bankruptcy.
Parmalat must make more than 100 million (USUSD124.4 million) in bond payments in January and February, as well as meet an 200 million (USUSD248.7 million) payment to a Brazilian subsidiary on December 22, according to the Italian press. Parmalat's total debt as of September 30 was around 6 billion (USUSD7.3 billion).
Parmalat's shares and bonds have tumbled since the company's admission earlier this month that it was in financial difficulties. Parmalat's shares didn't open on Friday, having fallen more than the exchange's allowed 10 percent Thursday on continuing worries about the company's future. Shares closed Thursday at 0.89 (USUSD1.09), down from 2.23 (€US2.74) before Parmalat's December 8 admission. Late on Friday, the Italian Stock Exchange announced that Parmalat would leave the blue-chip Mib30 index on Tuesday because its market capitalization had shrunk. Parmalat will be replaced by Italian restaurant chain Autogrill SpA.
The Parma-based Parmalat, which has an annual sales of around 7.5 billion (USUSD9.2 billion), produces and sells milk, yogurt, juice and other food products in Europe, the United States and around the world.
Bureau Report