By PAUL PANCKHURST and REUTERS
Ripples from the financial crisis of the world's biggest milk product company, Parmalat, reached the New Zealand stock exchange yesterday.
The problems of the Italian company could lead to credit rating downgrades for two investment products listed on the exchange's debt market.
In July and August,
investors put $145 million into series one and series two of "HY-FIs" in a public offer arranged by investment bank ABN.
HY-FIs - short for high-yield, fixed-interest securities - are listed on the debt market.
One of their selling points is investment grade credit ratings.
Series one is rated AA- by global rating agency Standard & Poor's and series two is rated BBB.
Both are "collateralised debt obligation" (CDO) products, offering quarterly interest payments linked to the credit performance of a portfolio of 70 global companies - including Parmalat.
Standard & Poor's slashed Parmalat's credit rating twice this week, the second time to CC, one step short of a default rating.
S&P said Parmalat seemed to have misled investors and was in danger of defaulting on debt after failing to repay bonds due on Monday.
HY-FI Securities said yesterday S&P had downgraded the credit rating for Parmalat's senior unsecured debt from BBB- to B+.
In CDO structures, investors' principal sums can be lost if a series of defaults takes place. Parmalat is not yet in default.
Parmalat's problems emerged just in time for sharebroker Forsyth Barr, which yesterday announced the allotment of $120 million worth of Global Credit Notes, a similar product.
In that case, Parmalat has been pulled from the portfolio.
