Parmalat gyrates on "found" money tale; Werner bonds up on conference call

By Paul Deckelman and Sara Rosenberg

New York, Jan. 8 - Parmalat Finanziaria SpA's bankruptcy case took another strange turn on Thursday when lawyers for a group of bondholders and shareholders challenged the insolvency filing - claiming that a private investigator has uncovered €7.03 billion missing from the company's accounts. That caused the crippled Italian dairy products giant's bonds to initially jump, although the issues were heard to have fallen back later in the session after Parmalat denied that any such "found" funds existed.

Domestically, Werner Holding Co. held a conference call with bondholders to discuss the ladder-maker's recent problems regarding loss of its biggest account, Home Depot, and what it intends to do operationally to compensate for the loss of those sales. While the company's bank debt was seen all over the lot in response, its bonds were quoted solidly higher.

Parmalat's strange saga grew curiouser and curiouser, with the claims of the lawyers that much of the estimated €10 billion "hole" in the company's finances caused by misappropriated or even non-existent money may have been found.

According to a document shown to the media in Milan by the lawyers, the money - in the form of $7.7 billion in U.S. Treasury bonds - is sitting in an account at Bank of America. Some news reports say the account was maintained by a company controlled by the company's founder and ousted chairman/chief executive officer, Calisto Tanzi, currently under arrest and undergoing extensive questioning in Milan.

According to the document, the investigator also found in the account $510 million extracted from the Epicurum Fund, a Parmalat investment; Parmalat's inability to recover money allegedly in its Epicurum investment started a chain of events last month that ultimately sent the Italian dairy products giant spinning into bankruptcy

But while the lawyers for the investors claimed the money had been located, Bank of America declined comment on lawyers' assertions, while Parmalat itself - now under new management - said it was unaware of any account holding $7.7 billion in U.S. government bonds on its behalf.

Parmalat's bonds, such as its dollar-denominated 6 5/8% notes due 2008 and its various euro-denominated bonds were heard quoted in some quarters as high as 27 bid during the day, well up from their prior levels in the 20-22 range, although they were heard to have given up most or all of those gains later in the session as the story came in for critical scrutiny.

A distressed-debt trader, who noted that the bonds had moved up, called the $7 billion rumor "totally ridiculous."

He said that the rumor and a technical short in the 2010 bonds had pushed them as high as 24-25 for a while. But he added that there was "not a lot of volume, it was still pretty technical."

The 2010s, he said, "hung in there because of the technical short, but the other bonds faded toward the end of the day."

Werner bonds firm 5 to 6 points

Regarding Werner, he said that the conference call "must have been good, because the bonds started the day around 62 bid, and ended around 68 bid."

A market source elsewhere also noted that the Werner 10% notes due 2007 had already firmed about five or six points, to the 62 level, in Wednesday's dealings.

On the bank debt front, it was hard to find an accurate quote on Werner, as various traders quoted it anywhere from 90 to 93.5 bid following the conference call.

According to one trader, the paper was seen at 90 bid, 92 offered, softer on the day, while a second trader placed the paper at 93.5 bid, 95.5 offered, up from an opening level of 92 bid, 93 offered. However, a third trader said "90 bid is too low and 93.5 bid is too high", and placed the paper at 92 bid, 93 offered, up from an opening level of 91 bid, 93 offered.

During the call company officials stated that they're analyzing an operational restructuring to reduce costs in order to align with reduced sales volume that will result from the terminated Home Depot contract.

To meet this goal the Pennsylvania-based ladder company is looking to reduce manufacturing and distribution capacity and downsize the overhead expense structure in the near term.

Elsewhere, Reliant Resources Inc.'s bank debt softened a little on Thursday after a strong start to the week in which the paper moved up by about two points over the course of two days.

The paper was quoted at 98.25 bid, 98.75 offered, down from "a couple of low 99 prints [Wednesday]," according to one trader.

A second trader placed the bid for the Houston energy and electricity company's paper slightly higher at 98.5, but agreed with the 98.75 offered level. "There's a lot of it out there," the trader said in explanation of the dip. "It was really hot - then things cooled off a little bit".

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