Hedge Funds Lose Millions in Parmalat Debacle

Hedge Funds Lose Millions in Parmalat Debacle: "

By Elif Kaban and Gerard Wynn

LONDON (Reuters) - Hedge funds trading convertible bonds had significant exposure to the troubled Italian food group Parmalat and have lost millions of dollars in the fall-out, industry sources said on Friday.

The losses have hit hedge fund returns both in the United States and Europe, but industry sources said the market was seen weathering the storm because most losses were manageable.

Many were hurt after being caught out by the slump in the value of Parmalat convertible bonds since the start of December.

'We had a good December but that's almost completely been wiped out by Parmalat,' said one London-based fund manager. 'A lot of hedge funds had Parmalat exposure and the smoke hasn't cleared yet. Many people are just keeping quiet.'

Parmalat had 6.8 billion euros of declared publicly and privately traded bonds yet to mature when the crisis broke on Dec. 19 when a 3.95 billion euro account held by a Cayman Islands unit with Bank of America was declared false.

About 40 percent of the bonds were convertibles and some industry sources estimated that 80 percent of these were held by hedge funds.

Such figures are hard to verify in a secretive offshore industry where hedge fund managers have no disclosure requirements and are not regulated by any watchdog."