July 13, 2020 / 1:26 PM / a month ago

Breakingviews - Benettons face only bad options in Italy road row

The collapsed Morandi Bridge is seen in the Italian port city of Genoa, Italy August 16, 2018.

MILAN (Reuters Breakingviews) - The Benetton family has driven into a dead end. Italian Prime Minister Giuseppe Conte has rejected the Italian sweater-to-motorway clan’s offer to end a two-year long dispute prompted by the fatal collapse of a bridge managed by infrastructure group Atlantia. That leaves the 10 billion euro company with the unpalatable choice of either giving up its key motorway unit or risking the loss of its concession.

On Saturday, Atlantia, which is 30% owned by the Benettons, offered to cut its 88% stake in motorway operator Autostrade per l’Italia to less than 50% to make way for state-backed investors. The company also pledged to pay 3.4 billion euros in compensation, fund 14.5 billion euros of investment, and reduce tolls.

But Conte on Monday dismissed the proposal as a “joke”, saying the Italian state would not be a co-investor with the dynasty. This puts the Benettons in a bind. The Italian unit brought in about 30% of Atlantia’s EBITDA of just over 7 billion euros when a Genoa bridge collapse killed 43 people in 2018.

Selling out entirely would deprive Atlantia of that cash flow, making it harder for the company to service net debt of 35.5 billion euros, the result of its acquisition of Spanish rival Abertis. With the state as the most likely buyer, and motorway traffic depressed by the pandemic, any sale would probably be at a depressed price.

But refusing Conte’s demand for a complete sale could prompt the government to act on its threat to withdraw the company’s licence to manage nearly 3,000 kilometres of Italian toll roads. As Rome is offering just 7 billion euros of compensation, far below the more than 20 billion euros Atlantia believes it is owed, this would lead to a protracted legal battle. In the meantime, losing the licence would likely trigger a default on Autostrade per l’Italia’s 10 billion euros of debt, half of which is guaranteed by Atlantia.

Conte’s refusal to compromise may reflect fears that the anti-establishment 5-Star Movement could pull the plug on his coalition government if he cuts a deal with the Benettons. Atlantia shares, which fell 13% on Monday morning, have more than halved in value since the bridge collapsed. That reflects the fact that the Benettons face only bad options.

Breakingviews

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