Parmalat regains control of Brazilian unit
its Brazilain unit this week. Last month the group announced that
it is to sell around half of its assets as part of its
restructuring programme, however, it is unclear what the Italian
company has planned for its Brazilian arm, writes Danny
Vincent.
Although the company has regained control of the day to day running of the business, any decisions involving the sale of assets or transfer of funds will have to be approved by the Brazilian court.
This may mean that it could be difficult for the company to sell this asset if it sees the need to do so to "swap debt for equity", as the company said in it restructuring programme released last month.
Nelson Bastos, a local consultant, was chosen by shareholders to represent Parmalat's interests in Brazil as President of the board. He will remain at the company until new chief executives are chosen.
A Brazilian court took over the company's operations earlier in the year when it became clear that the unit was suffering as a result of the parent company's scandal in December.
On Tuesday a Sao Paulo court issued a ruling supporting the new management's plan of action for the unit, nevertheless, the subsidiary is still waiting for a decision from the court on bankrupt protection.
Parmalat was once proud of its world-wide business, but last week it was announced that the company will have to sell half of its assets to keep its Italian core afloat. Its global workforce will be cut from 32,000 to 17,000 once the restructuring plans are implemented, and it will cut 90 of its 120 brands.
The Brazilian unit is one of the company's largest overseas operations and the future of this arm may give an indication of how a new streamlined Parmalat would survive.
Since the scandal emerged, analysts have suggested that the company will have to rely on its Italian business in order to stay afloat. Its restructuring programme does support this claim but it is still unclear of how important the Brazilian arm will be in the company's future.
The Brazilian court said that the unit is now under "supervised administration" and not under "intervention". This supervision could hinder Parmalats plans to sell.
"Its still too early to talk about assets sales. There is a possibility that some segments are not lined up with the interests in Italy," Bastos stated in a news conference this week.
