Italy: Small Parmalat bondholders oppose company's debt-to-equity swap

Parmalat SpA said Friday that a group of its smaller former bondholders is contesting the swap ratios at which the dairy company's debt was converted into new shares at a fraction of the nominal value.

At issue is this month's decision by Parmalat's creditors to pave the way for the company's relisting on the stock exchange by approving ratios at which to swap the group's Ђ20 billion (US$24 billion) debt for new shares.

The new shares went to bondholders, banks and suppliers. Under the deal approved by a court in Parma, the ratio at which the debt was converted into shares varied according to the seniority of the debt and its issuer.

The appeal was filed by 129 small bondholders who were seeking compensation on top of Parmalat's new shares they received in exchange for the distressed bonds, a Parmalat spokesman said.

The court's Oct. 1 ruling was the final regulatory step that Parmalat needed to return to the market. If the ruling were deemed invalid it could endanger the whole relisting process.

Parmalat shares were relisted Oct. 6 after two years under the government-appointed administration of Enrico Bondi. Parmalat's old shares had been de-listed December 2003 after the discovery of a fraud that left it with a Ђ14 billion hole in its accounts.

By law, Parmalat creditors had 15 days from the publication of the Parma court's ruling to appeal against the formalization of the creditor vote's outcome. However, the swap ratios were approved by such a large majority that Parmalat's shares were relisted on the stock market a mere four days after the court ruling, AP reports.

A.M.