In a bid to stem one of Europe's biggest ever corporate crises, the cabinet approved a decree setting out new rules for rescuing big firms.

 

Details of the new procedure were not immediately available but were expected to be published by Wednesday morning.

   

"The goal of the decree is not to save the controlling shareholder or managers, but small savers, ... suppliers, the integrity and the Italian nature of the firm," Industry Minister Antonio Marzano told reporters in Milan on Tuesday.

 

Board meeting

   

Parmalat's Chairman and Chief Executive Enrico Bondi, a veteran turnaround expert brought in last week to rescue the group, will be made government-appointed commissioner of the company by Christmas Day, a farmers group said.

   

Parmalat's board began meeting on Tuesday evening and was widely expected to announce it would file for protection from creditors under the new rules.

   

"The goal of the decree is not to save the controlling shareholder or managers, but small savers, ... suppliers, the integrity and the Italian nature of the firm"

Antonio Marzano,
Industry Minister, Italy

Italy's eighth-biggest industrial group had been teetering on the brink of a default on its bonds for weeks before last week's bombshell announcement of accounting irregularities, which raised fears it might collapse.

   

Parmalat's crisis exploded when it said that Bank of America had rejected as false a document purporting to certify that a Cayman Islands unit of the group, Bonlat Financing Corp, held $4.89 billion of securities and cash.

 

Hole

 

That hole is now estimated at about $8.7 billion, a judicial source said on Tuesday, confirming media reports that the group's previous management apparently did not buy back $3.59 billion of Parmalat's own bonds as stated in its accounts.

   

Parmalat officials could not be reached for comment.

   

Newspapers have said the accounting hole could turn out to be as big as $12.39 billion.

 

Under the existing administrative procedure, Bondi and his team would have had up to two years protection from creditors, who are owed at least $7.4 billion by the food group.

   

Parmalat has 35,000 employees in 30 countries and buys up 8% of Italy's milk production.