Citigroup has had to give details of all its dealings with Parmalat over the past 15 years to rival banks concerned about the US bank representing then in restructuring negotiations. Citigroup is this week expected to be confirmed as the main representative of the 25-plus international lenders to Parmalat. It will sit on the steering committee being organised by Enrico Bondi, the administrator in charge of the Italian milk group. However, several of the banks had expressed concerns to Citigroup that its dealings with Parmalat were so numerous and complex that their interests would not be aligned, especially if Citigroup became the subject of litigation. The US bank’s role, for which it will not be paid, will be to seek a consensus among lenders and creditors during the restructuring process. Citigroup has lent Parmalat money, handled its bond issues, put together structured financings, advised it on acquisitions and provided currency services. The bank’s exposure is estimated at Euro 500m ($620m) to Euro 1bn before hedging, although the group is likely to give some details with its fourth-quarter results tomorrow. However, a source of close to Parmalat said: “Citigroup offered to disclose to the banks the extend of its exposure of the past 15 years of transactions. “They have opened up their books to the banks to show they have a very clean relationship with Parmalat, aside perhaps from Bucanero.” Bucanero- which translates from Italian as “black hole” – is a Delaware registered subsidiary of Citigroup that is believed to have been used by Parmalat as a vehicle to book debt as equity. The bank has subsequently said it regrets the choice of name. A New York class-action lawsuit led by a US investor alleges the Bucanero structure was a manipulative device and contrivance designed to artificially inflate Parmalat’s financial statements”. Citigroup has said the Bucanero structure was appropriate. Investigators in Milan are also looking at the role Citigroup executives may have played in helping Calisto Tanzi, Parmalat’s founder, divert hundreds of millions of euros from the dairy group to family-controlled companies. Part of the scheme involved the use of a Citigroup vehicle called Eureka Securitization Inc. People close to Citibank says it is considering suing Parmalat, having been made aware “it may be a victim of potential fraud relating to invoicing” over Eureka. One lender to Parmalat said: “We are very happy to have Citigroup on board and we have been very impressed by their professionalism.” Of the Euro 10bn – 13bn that is missing
at Parmalat, about one-third is owed to banks, and the balance to bondholders.
The bondholders have also organised themselves into the groups. |