Parmalat chief meets creditors; Air Canada seeks more time

By Paul Deckelman and Sara Rosenberg

New York, March 26 - Parmalat Finanziaria SpA's Italian government-appointed turnaround chief, Enrico Bondi, met with representatives of the company's bank creditors and bondholders in Milan Friday to brief them on the bankrupt Italian dairy products producer's plans to turn itself around.

Its dollar-denominated 6 5/8% notes due 2008 as well as its various issues of euro-denominated bonds were all in what a trader in distressed bonds called an 11-13 context after having been mixed but firmer on Thursday, when the dollar bonds moved up to around 11.5 bid from prior levels at 10, while the other issues fluctuated in a range of nine to 11 cents on the dollar.

Parmalat, which collapsed into insolvency late last year when it was determined that billions of dollars of assets the company supposedly had were bogus, is estimated to have over $17 billion of outstanding debt, including about $11 billion of bond debt.

According to the presentation laid out to the creditors Friday, a key ingredient in restructuring plan calls for consolidating all of the group of companies' debt into one entity. Creditors would receive equity in a reorganized Parmalat in exchange for their debt, although the level of their return has not been determined yet.

An Italian newspaper reported Thursday that they could get back as much as 25% to one-third of their investment, although the company later denied this. Italian press reports on Friday speculated about a lower estimated recovery of between 15% and 20% percent.

If the turnaround plan is approved, the shares will begin trading on an exchange. Shareholders would then be able to cash in their shares or hold on to them for possible capital appreciation.

While Bondi had held numerous meetings with the company's Italian creditor banks since taking the reins from ousted chairman Calisto Tanzi, the company's founder, earlier this year, Friday's informational session was the first to also bring the international bank creditors and the bondholders into the loop.

Parmalat is currently negotiating the sale of all or part of its U.S. dairy operations, which filed for Chapter 11 protection on Feb. 24.

Air Canada unchanged

Elsewhere, Air Canada bonds were not seen having moved on the bankrupt Canadian air carrier's assertion that it needs more time under the protection of the bankruptcy courts there while it tries to sort out an increasingly messy and acrimonious dispute between its unions and its prospective financial savior, and at the same time satisfy renewed calls from regulators to protect its pension plans.

The bonds were quoted Friday in a 33-36 bid context, "pretty much unchanged," said a trader, even as airline issues in general firmed Friday on the prospect of lower oil prices.

Traders said that the company's 10% notes due 2006 have recently been circling as high as the 36.5 bid level, while its 9% notes due 2006 have hovered at 32.5 and its 7¼% notes due 2004 at 30.5.

Air Canada, which made an emergency landing in the Canadian equivalent of Chapter 11 back on April 1, 2003, Thursday asked the Ontario provincial court overseeing its reorganization under the Companies' Creditors Arrangement Act to extend its bankruptcy protection for another month to April 30.

The company needs the time to try to calm the tensions which have developed between its unions and investor Victor Li's Trinity Time Investments, which has said it will invest C$650 million in the airline to help bring it out of bankruptcy in return for an equity stake of up to 31% - but which has conditioned that investment on the unions agreeing to changes in the pension plan structure in order to cut the airline's pension obligation burden. Li's offer has an April 30 deadline.

So far, the unions representing 85% of the company's 35,000 employees have refused, saying the changes Li wants would expose their members to greater financial risks, since the size of their members' pension payouts would be tied to market fluctuations. Li has threatened to walk away from Air Canada if the issue is not resolved, prompting the judge overseeing the reorganization to warn that such a development could ground the whole reorganization process. If that were to happen, the company might have to be liquidated instead of restructured.

More pressure to resolve the problem was put on Air Canada on Friday, as the government body that oversees pension plans, the Office of the Superintendent of Financial Institutions, called on the airline to come up with a revised plan to rescue its underfunded pension plans; the plans are currently only funded at 87%, meaning that were the airline to fail, employees would suffer a cut in their retirement benefits.

The regulators also want the carrier to guarantee that part of the pension liabilities will rank ahead of other creditor claims if the airline goes belly up.

Foamex bonds lower

Foamex International Inc.'s bonds were quoted lower on Friday, although there was no fresh news out on the Linwood, Pa.-based maker of foam padding for the automotive and bedding industries. Its 10¾% notes due 2009 and 13½% notes due 2005 were both seen having moved down to 87 bid from prior levels at 91, while its defaulted 9 7/8% subordinated notes due 2007 were pegged at 60 bid, down from recent levels in the mid 60s.

At another desk, a trader saw the 10¾% and 13½% notes offered at 89, with the 9 7/8s offered in the lower 60s.

Fibermark Inc.'s bonds were being quoted at 50 bid, 53 offered, up from Thursday's levels at 49.5 bid, 51.5 offered; earlier in the week the bonds had been seen around 47 bid, 49 offered.

There was no news out on the Brattleboro, Vt.-based manufacturer of specialty fiber materials for industry. Lately, there has been some speculation that the bonds would soon begin trading flat, or without accrued interest, although nothing definitive has emerged.

"Stay tuned," a trader said. "It's happening. It's going to happen." He said the talk was that the company "was working on lining up a DIP [debtor-in-possession financing] - but it hasn't happened yet."

In the market for distressed bank loans, Choice One Communications Inc.'s debt held steady at lower levels on Friday after a considerable drop earlier in the week. The Rochester, N.Y. -based integrated communications provider's the paper was quoted at 66 bid, 68 offered by one trader and a wide 65 bid, 70 offered by a second.

It had been quoted at around 75 bid, 77 offered just a couple of days ago, the first trader added.

"I think they had bad numbers that they revealed on a lender call this week," the second trader said in explanation of the bank debt's fall.

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