Alitalia bondholders face positive scenario

Implications: Alitalia bondholders face a positive scenario, although the regulatory risk is still high. The new rules issued by the government for the new special administration procedure are brand new, and they are probably going to change in the next 60 days.

Analysis: The Italian government decided not to proceed with the previous plan to reimburse partially the shareholders and bondholders of Alitalia by attributing them shares of the newco through warrants or equity swap. However the situation of the bondholders seems to be improving.

On one hand, for the small savers, law-by-decree n. 134/2008 approved yesterday states at article 3 that 'the small shareholders or small bondholders' will be bailed-out with government money. There is no definition of what 'small' means, the details will be specified in a government decree to be issued in the next weeks. This decision to allow a special help to small creditors may be unconstitutional, since it violates the principle of equal treatment of all creditors (so-called par condicio creditorum).

On the other hand, for the institutional investors is still valid law n. 111/2008, approved on June 23, which includes a provision (art. 2-quater) meaning that the €300m credit that the Italian government has towards Alitalia in the case of a special administration procedure will be reimbursed as the last one, only after all the other creditors will be paid in full.

The law-by-decree with the new rules for special administration must be converted into law by the Parliament within 60 days, that is before October 27th. Senate Industry committee will start its debate on the bill at the end of the current week, and it's expected to introduce major changes which are going to have a strong impact on the creditors' and bondholders' expectations.