Parmalat paper wavers at wildly different levels for second day; CEO resigns

By Carlise Newman

Chicago, Dec. 15 - Parmalat Finanziaria SpA bonds had a rocky session Monday, reacting to various reports, including the knowledge that another deadline is looming. Parmalat must either pay $400 million by Wednesday to minority shareholders of its Brazilian unit, or renegotiate the deal that requires this payment.

However, late in the day, the bonds brightened after chairman and chief executive officer Calisto Tanzi stepped aside in favor of turnaround expert Enrico Bondi.

Earlier in the session, the bonds slid to levels in the mid-50s, but the bonds appeared to steady at levels around 62 bid, 64 offered by the close. The bonds also had a wild day Friday when they fell to the low 50s, recovered to levels around 70 bid, and then fell back from peaks to levels around 61 bid.

The bonds were "looking for levels" during that session after the company belatedly paid a €150 million bond that matured last Monday.

"In these situations often investors freak out when the turnaround guy is brought in, when actually it's good news for the company," a trader said of Monday's action.

Parmalat also said it will be using Lazard & Co. Ltd. and Mediobanca "to provide assistance to review the group's economic and financial situation on the basis of information to be provided to them, and also in support of the group's eventual financial restructuring plan."

Goodyear Tire & Rubber Co. bonds recovered in Monday's session after a few days of losses on the news that it had discovered more accounting problems, forcing it to postpone a planned debt sale until next year and possibly unleashing additional labor problems.

The company said it identified possible improper accounting issues in Europe as part of an ongoing internal investigation.

Goodyear's 7 7/8% notes due 2011 were up ½ point at 88½ bid, 90½ offered, according to a trader. Last Thursday the bonds had dropped 4 points early in the day from previous levels of 92¼ bid, 93¼ offered.

"For the most part a lot of the issues are back to trading near par after a big drop last week. Today the 7 7/8s were flying off the desks," he said.

The company plans to delay filing an amended 2002 10-K with the Securities and Exchange Commission until its review of the European accounting issues is complete.

As a result, it will not be able to sell $250 million in debt and $75 million of equity by year-end, as required by its labor agreement with the United Steelworkers of America. The union has the right, but not the obligation, to strike if the conditions aren't met.

Meanwhile, Levi Strauss & Co. bonds were down about ½ point on Monday from levels last seen on Thursday. Its 7% notes due 2006 were seen at 66 bid, 68 offered, while its 11 5/8% notes due 2008 were seen at 65½ bid, 67½ offered, according to traders. Both issues had experienced a steep drop earlier when news of the ouster of its chief financial officer was released.

Levi Strauss named Jim Fogarty interim chief financial officer, replacing Bill Chiasson.

The maker of jeans and sportswear also hired management consulting firm Alvarez & Marsal to assist with the company's financial turnaround. Fogarty is a managing director of Alvarez & Marsal.

Levi Strauss has sought to reverse a steady slide in sales since recording peak sales of $7.1 billion in 1996.

"The bonds really jumped around last week. They seem to be slowing down now," a trader added.

In other news, WorldCom Inc.'s 7½% notes due 2011 got a small boost to 36 bid. The bonds had been trading at around 35 bid for several weeks.

After the market close Monday, WorldCom said that during the month of October, it recorded $1.977 billion in revenue, essentially flat with September's revenue of $1.951 billion. The company had a net loss in October of $194 million.

The net loss reflects a $102 million increase in miscellaneous expense primarily from prior period transactions, as well as a decline in the company's operating income.

In October, WorldCom reported an operating loss of $35 million.

"It's that no-news-is-good-news adage. This wasn't a big deal but there isn't much to trade on this week, so we may see an impact on WorldCom bonds tomorrow," one trader commented.

Elsewhere, Fleming Cos. Inc. debt was slightly higher. Fleming's 10 1/8% notes due 2008 ended the session at 23¾ bid, 1 point higher than Friday. On Thursday, the bonds had jumped 3 points, according to a trader.

On Friday Fleming filed its reorganization plan with the U.S. Bankruptcy Court in Wilmington, Del.

Under the plan, the company will be reorganized around its convenience business, Core-Mark International Inc., providing the emerging company with a capital structure that can be supported by cash flows from this operation, absent an offer for the convenience division that would provide greater value for the company's creditors.

Unsecured creditors will be paid with stock, becoming the principal owners of the restructured company. Bank lenders will be paid in full.

Cosmetics maker Revlon Inc. regained lost ground Monday. Its 8 5/8% notes due 2008 were up 2 points to 44½ bid after dropping 1½ points on Friday.

Sbarro Inc.'s 11% notes due 2009 were off 2 points, according to a source, at 79¼ bid.

In late November, the bonds slid into the upper 70s from prior levels just below 90, after the Melville, N.Y.-based operator of a chain of cafeteria-style pizza and Italian food restaurants reported its results for the latest financial period to the Securities and Exchange Commission; the company lost $23.656 million versus a year-earlier profit of $2.888 million.

Finova Group was slightly better, although traders did not know the reason. Its 7½% notes due 2009 were seen at 58 bid, up from 56½ bid, 57 offered. The bonds have been trading at levels in the mid-50s for several weeks. Earlier in November, they jumped from the low-50s when the company's 10-Q said it bought back $100 million of senior notes during the quarter.

(Paul Deckelman contributed to this report)

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