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Revocation vs Review

09 September 2019 by jbchevrel

The Italian infrastructure group Atlantia SPA (ticker: ATLIM -- Baa3nw/BBB-nw) was amongst strong performers in iTraxx Xover s31 Friday with its 5y CDS tighter by -16bp, before reaching 107bp mid at today’s close. In an interview with La Stampa on Friday, the new Transport Minister of Italy (De Micheli) has explicitly ruled out revoking ATLIM’s ASPI’s concession. But she also confirmed that the new government would undertake a broad review of the entire concession framework. That is not exclusively but includes ATLIM’s. the aim there is to stimulate investment and security and to reduce users’ costs. Cash rallied last Friday on the back of those news. 5 7/8 24s gained +1.5c, 1 7/8 29s gained +3c. No precise time frame was given yet, but it sounds like a long process. Meanwhile, the question will be whether / how the rating agencies will react. For context, the higher odds of concession revocation earlier this summer (under the previous coalition – back then, a report commissioned by the Ministry of Transport had concluded ATLIM’s ASPI was in “non-fulfilment of custody and maintenance obligations" and "grounds existed for a termination of the concession for a breach of duty by the concessionaire") was supposedly the main reason for moving to Negative Watch. The review in itself is unlikely to be positive for ATLIM, given dis symmetry about the outcome, but with an outright revocation now off the table, the risks of downgrade for ATLIM have gone lower. Elsewhere, the index was tighter by -6bp, outperforming all other indices, since our London close of last Friday (Main +0.6 CDX HY +1).