Hope for Parmalat Hungary

- Last updated on GMT

Related tags: Hungary, Milk

Parmalat Hungary has reported that its production is now starting
to increase, a sign that it is over the worst, perhaps. News that
the group has secured a $128 million US loan might also give the
division further backing.

This week the Hungarian division of the troubled Italian food giant reported that its production had started to increase for the first time since financial troubles sent jitters through its global operations. Currently the group is being investigated for financial misdealings estimated at around €14 billion.

At the Hungarian division's EGM, held earlier this week, company spokeswoman Katalin Szikra said that a credit line from the group had enabled it to pay farmers for milk supplies, which in turn had led to an increase in production.

At the end of last week, the division announced that it would like to find a buyer at the earliest possible moment, but in the meantime the company would continue to do business as normal. The company also said that it would do everything it could to avoid liquidation of the division.

The announcement that the group has secured the 21-bank syndicated $128 million lifeline is likely to go some way to avoiding liquidation, with funds likely to be distributed wherever they are most needed. Liquidation procedures would not be in the best interests of the group, so it is likely that some of the newly acquired funds might be made available to avoid this scenario.

Meanwhile, the Hungarian division is still assessing bids from potential buyers after auditing took place at the end of last month. The company has said that bids must meet eight criteria based around quality, reconstruction and employment guarantees. So far a handful of foreign and local companies have expressed interest in bidding, the division said. Two significant dairy players on the market - Mizo and Danone - have said they are not interested in buying the division.

The spokeswoman also said that some suppliers had already filed for bankruptcy against it and that in response Parmalat Hungary had filed for protection against such a procedure in an effort to preserve the firms structure and improve bidding potential.

Currently dairy companies buy a total of around 1.2 billion litres of milk yearly in Hungary for the domestic dairy market. Friesland buys the most, at nearly 400 million litres, Sole 300 million litres and Mizo purchases a yearly 200 million litres. Behind them is the Tolna Tej and the Bograin group which buy over 100 million litres of milk yearly for domestic sales, Parmalat buys around 100 million litres and Danone buys about 60 million litres yearly.

Related topics: Market Trends

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