Parmalat, the financially stricken dairy company, has had its first draft of its recovery plan accepted by the Italian Agriculture minister.
The company's turnaround expert Enrico Bondi presented a proposal which attempts to swap debt for equity to save the fallen giant from possible liquidation. The group plans to sell its non-core assets to recover the multi-billion euro hole found in the company's accounts in late December.
It is expected that Bond and executives with draw up a final version of the plan in May of June, which will require full government approval. With the government approval of the preliminary plan it is likely that the fall plan will also be accepted. But pessimists are eager to point out that the company could fall into liquidation if the government are unhappy with Bondi's proposals.
Last year fellow Italian food group Cirio were forced into this situation following the governments rejection of its recovery proposal.
Nevertheless, Gianni Alemanno, Italy's Agricultural Minister believes at present "it looks like an interesting, valid and positive plan", adding "there is nothing that needs changing".
Parmalat proposes to become a leaner and more competitive business. The group said that it plans to focus now on its 30 top brands which include health foods. Like many dairy companies, Parmalat wishes to move into to added value products. The health food market is growing rapidly and this is the sector that the company must exploit in the long run.
Its strongest brands however are in local areas. The Italian business is becoming increasingly important and this will be a focus point for the group, yet Bondi has said that quick fire sales of its assets is unlikely.
Some industry observers predict that Parmalat's assets once sold will not be able to cover the debt that it owes. Analysts predict that only €1.5 billion could be produced from the disposal of sections of its business. If this is the case then the debt to equity plan may prove to be ineffective.
Calisto Tanzi and other former executives is expected to be requested for trail this week. Currently prosecutors are set to request indictments of around 30 people for financial crimes.
For more information on how the Parmalat scandal came to be and past developments of the case dubbed as Europe's Enron click on Dairyreporter's recently published articles section (above right).