Italian food giant on the brink

Shares in Italian food and drinks giant Parmalat have nearly halved after analysts said it was close to default.

Parmalat's shares have been suspended since Monday, and when trading resumed they fell 47.4% to close at 1.18 euros on Thursday.

Credit-rating agency Standard & Poor's has downgraded Parmalat twice in the past two days, and now rates the company just above insolvency.

Some investors hope that banks may be putting together a rescue deal.

Money worries

Shares in Parmalat, one of Italy's best-known companies, have been under pressure for some time over concern about its adventurous investment policy.

A series of acquisitions has piled up some 6bn euros (£4.2bn; $7.3bn) of debt.

On Friday, those concerns became acute after the company revealed that it had funds marooned in offshore bank accounts - funds that were intended for payment to its bond-holders.

Since then, Fausto Tonna, a former finance director and now a board member and head of the family holding company that controls Parmalat has resigned.

And Italian newspapers reported that the firm has secured emergency cash from four banks to help it pay wages and service its most urgent debts.

Exposure

Parmalat's troubles have enormous implications for the Italian financial sector. Many Italian banks hold its bonds, and those with particularly close involvement have seen their shares hit this week.

The scale of the exposure to Parmalat makes it likely that some form of rescue deal will be agreed, analysts said.

According to media reports, creditor banks are demanding that Parmalat's current management, dominated by the Tanzi family, relinquish control of the group.

The result is likely to be some sort of sell-off of Parmalat's extensive international assets, which include operations in nine European countries.