Parmalat shares at record low on Citigroup case

MILAN (Reuters) - Parmalat (PLT.MI) shares slid to a record low after a U.S. court unexpectedly said it should not get damages from Citigroup (C.N) over its 2003 collapse, raising doubts for investors over pay-outs in two more cases.

The New Jersey state court jury instead awarded Citigroup $364.2 million in damages after voting six-to-one that dairy group Parmalat committed fraud, negligent misrepresentation and conversion, also known as theft.

"This adverse decision of the damage claim ... is clearly bad news for Parmalat, since expectations were pointing to a possible payment to Parmalat," Cheuvreux analysts wrote in a research note.

At 1021 GMT, Parmalat's stock was down 14.13 percent at 1.367 euros after earlier being halted from trade. It briefly touched 1.274 euros, its lowest point since the group relisted in 2005. Milan's leading shares .SPMIB were up 0.71 percent.

Parmalat collapsed in 2003 under 14 billion euros of debt after finding a 4 billion euro hole in its accounts.

Chief Executive Enrico Bondi, hired to restructure the group, has filed dozens of lawsuits against former bankers and auditors.

Parmalat had sought $2.2 billion in damages from Citigroup, accusing the biggest U.S. bank of actions that contributed to the group's collapse. Citigroup called itself a victim of Parmalat's fraud, however, and countersued. The jury awarded the bank the maximum amount of monetary damages it had sought.

DILUTION OF ABOUT 1 PCT

Parmalat said the damages award must be presented in the Bankruptcy Court in Parma, Italy, for review and any payment should be paid in Parmalat stock.

The payment would likely total about 18.8 million Parmalat shares based on prior agreements in the bankruptcy court on how to treat Parmalat's creditors, a spokeswoman said.

Cheuvreux said that would be a dilution of about 1.13 percent if issued in new shares.

"Applying this outcome to the other 2 damage claims (against Bank of America and Grant Thornton) would result in a total negative impact for Parmalat of about 5 percent in terms of dilution," Cheuvreux said.

The cases against Bank of America (BAC.N) and Grant Thornton should be addressed in 2009.

Parmalat said it planned to seek to have the verdict in the Citigroup case set aside. If that fails, Parmalat said it would appeal against both the verdict and an earlier court ruling that narrowed the scope of its claims against Citigroup.

Bondi has so far recovered 2 billion euros in settlements related to damages and revocatory claims, according to the group's public relations firm.

Cheuvreux analysts said they were keeping their forecast of 12 euro cents in further cash flow from legal cases, as this figure was mostly tied to revocatory actions in Italy -- which allow a company in some cases to claw back money paid to banks in the run-up to insolvency.

Cheuvreux has an "Outperform" rating on the stock given a sum-of-the-parts valuation, at worst, of 2.15 euros.

There has been sporadic speculation in Italian dailies that Parmalat could become a bid target, given it has around 1 billion euros in cash and a market value of under 2.7 billion euros.

(Additional reporting by Jo Winterbottom; editing by Quentin Bryar and Simon Jessop)