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Parmalat Restructuring Shortlisted for Coveted Prize

Parmalat’s restructuring in Brazil has been selected as one of the top three deals in its Brazilian category in LATINLAWYER’s 2006 Deal of the Year. Felsberg e Associados has acted as legal counsel throughout the project. The financial restructuring of Parmalat Brasil S/A – Indústria de Alimentos was successfully concluded in June, 2006, with the approval by the relevant court of the City of São Paulo of the decisions taken by the creditors of Parmalat during an assembly held in May of the same year. The principal decisions included: (i) the election of the equity fund Latin America Equity Partners (LAEP) as Parmalat Brazil’s new controller and (ii) changes to Parmalat’s original Judicial Restructuring Plan (approved in December 2005) so that it reflected the new payment terms negotiated with LAEP. Pursuant to the amended Judicial Restructuring Plan, the creditor banks of Parmalat accepted to receive at sight payment of the total of their credits against Parmalat with a discount of approximately 80%. The amount necessary for such payment (R$ 120 million) was made with the proceeds arising from part (R$ 19 million out of a total of R$ 20 million) of the amount paid by LAEP for the subscription of the capital equity issued by Parmalat in accordance with its restructuring plan. The balance of R$ 101 million was paid with the proceeds originated from the sale of the equity participation (51%) of Parmalat in Batávia (a dairy products located in Brazil) to Perdigão (a major Brazilian food stuff company). The above mentioned sum received by the creditor banks of Parmalat is in addition to the amount of R$ 35 million paid to them as a result of the sale of the vegetables unit of Parmalat (Etti) to the Assolan group, which took place in March 2006. The operational creditors of Parmalat (such as milk and package producers) were granted the option to receive their credits in equal monthly installments in a four-year term or at sight, under the same discount terms accepted by the creditor banks under the amended Judicial Restructuring Plan. The approval of the amended Judicial Restructuring Plan of Parmalat by its creditors finalizes a process that began in early 2004 when Parmalat Brazil was negatively affected by the insolvency of Parmalat Italy. Parmalat Brazil filed for its concordata (arrangement with creditors) which was later substituted for a judicial restructuring regime under the terms of the then recently enacted Brazilian Restructuring of Companies law (Law No. 11,101/05). Under such law, the original Judicial Restructuring Plan of Parmalat was approved in December, 2005, whereby a new investor was to be selected as the new controller of Parmalat with the assistance of an investment bank (which ended up being Pactual Corporate Services Ltda.) appointed by Parmalat and approved by the creditor banks. The Parmalat case is the first case of a Brazilian company being successfully restructured under the terms of the Brazilian Restructuring Law and is considered the leading restructuring case in Brazil. It provides important guidelines for a number of issues pertaining to the Brazilian Restructuring Law as well as introduces case law related to such new legislation. Thomas Felsberg, Joel Thomaz Bastos, Renato Sampaio Brígido, Bruno Gagliardi and Bruno Kurzweil from Felsberg, Pedretti, Mannrich e Aidar Advogados e Consultores Legais (Brazil) and Mario Garibaldi from Garibaldi Giani Associati (Italy) acted as legal advisers to Parmalat from January 2004 until completion of the process.

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