Food group Parmalat was poised to file for bankruptcy protection Wednesday in an effort to survive a seven billion-euro ($8.7 billion) hole in its accounts which has turned into one of Europe's biggest corporate crises.

As two teams of investigators prepared to coordinate their fraud probes, Parmalat's rescue managers awaited publication of a new government decree introducing a fast-track procedure for big Italian companies seeking protection from creditors.

Talks to save Parmalat gathered pace December 21, 2003 as concern grew that a hole in the accounts of the global food group could be even bigger than feared, adding to a scandal that has been dubbed Europe's Enron. A van enters in the Parmalat milk and vegetables department store of Rome, Dec.19.  [Reuters]

Once published, the company will probably rush ahead and file for immediate protection, sources close to Parmalat said.

"The decree will provide the company with immediate protection while it assembles a plan to restructure the group and resolve its financial difficulties. That could happen as soon as tomorrow," one of the sources told Reuters.

Parmalat's long-brewing crisis erupted last week when it said Bank of America had dismissed as false a statement showing nearly four billion euros' worth of cash and investments attributed to a Cayman Islands unit of the group.

A judicial source said the hole in the Parmalat's accounts was now estimated at about seven billion euros, confirming media reports that previous management did not buy back 2.9 billion euros of Parmalat's bonds as stated in its accounts.

About 20 people have so far been named in the case including Parmalat's founder Calisto Tanzi, who opened his first milk plant in 1961 before building one of Italy's best-known multinationals which now employs 35,000 people in 30 countries.

Prosecutors said they were making swift progress in working out how a company which had 4.2 billion euros in liquidity on its balance sheet in fact was so short of cash it had run up a 120 million-euro bill for unpaid milk from Italian farmers.

"We have never seen a case as wrapped up as this one after only three days," an investigator said. Three investigating magistrates from Milan were to travel to Parma, near Parmalat's headquarters, Wednesday to coordinate their twin probes.

Among the people questioned some said any irregularities had been to protect the company and not for personal gain, a judicial source said.

Parmalat's new Chairman and CEO Enrico Bondi, a well known Italian turnaround specialist, was expected to be made a government-appointed commissioner once the decree was published.

He is respected by investors for his success in tackling the biggest corporate crisis in Italy in the 1990s, the breakup of the Ferruzzi family's business empire. Representatives of Parmalat bondholders have so far given him a cautious welcome.

"We're going to remain in contact with Bondi's team and remain constructive and cooperative," said Evan Flaschen, partner at U.S. bondholder advisors Bingham McCutchen.

"That is not to say that other bondholder creditors in countries like the Netherlands, the Cayman Islands, Canada and the U.S. may not now seek to protect their assets against local Parmalat operations. Things could move very quickly," he said.

Parmalat had a stock market value of 1.8 billion euros before the crisis broke, but its shares are now almost worthless and its bonds are trading at barely 20 per cent of face value.

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