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Another Brick

01 July 2019 by jbchevrel

The Italian infrastructure group Atlantia SPA (ATLIM) was among European HY underperformers today, with the 5y CDS of this Baa3n/BBB-n rated credit going wider by c8bp, while in contrast, the fair value of the index came tighter by c8bp, against a rather general risk-on backdrop following the positive headlines out of Asia this weekend. This underperformance came after a report commissioned by the Ministry of Transport which concluded that ATLIM’s Autostrade per l'Italia was in “non-fulfilment of custody and maintenance obligations" and that "the grounds existed for a termination of the concession for a breach of duty by the concessionaire". The report has not been published in an official manner and only extracts have been shown to Reuters, however 5 Star Di Maio posted on Facebook that any compensation for concession revocation would not be “enormous.” For context, it is probably important to keep in mind that the source of the report is a ministry controlled by 5 Star, party which had been criticized for delaying the approval of maintenance work on the bridge. 5 Star seems to be trying to extract the maximum political capital to revive its attractiveness in the polls, at a juncture where the League seems opposed to concession revocation. For reference, 5 Star is now polling in mid 10s, to be compared with the third of votes they got in last general election’s popular vote, in March 2018.According to the Reuters’ piece, ATLIM then accused 5 Star officials of ‘selectively leaking’ information in a campaign to revoke the company’s concession. As far as the official investigation, it will probably be going on until at least 2020, and that will be the key in the assessment of whether ATLIM was at fault, and if so, what are the financial implications for the company. As far as the defective bridge, its remains got destroyed a few days ago.