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Capital Increase Going Bad

09 November 2017 by lberuti

On the 6th November, ASTIM ( Astaldi Spa ) - the Italian company which mainly designs, develops and operates public infrastructure and large scale civil engineering works – announced without further details that they were delaying the meeting of the board of directors for the approval of their 2017 nine months results by a week to the 14th of November. Uncertainty is not markets’ best friend and since then ASTIM’s stock dropped almost 20% and its 5-year risk premium raised 150bps to more than 1000bps. Confusion grew even more this morning when the company said it is considering a capital increase of approximately €200mln. Many people questioned its rationale. Could it be a sign that ASTIM is struggling with its refinancing plan? Is it less confident in its ability to get asset disposal away? Is its exposure to Venezuela catching up with the company? Credit investors did not wait until next week to get further details and sent ASTIM’s 5-year risk premium 13pts higher - you now have to pay 31.5pts upfront plus 500bps annually to insure ASTIM’s debt for a 5-year period -. More worryingly for the company, its 1-year risk premium was even more impacted. It ended 15pts wider at 20.5pts upfront plus 500bps running, implying a 40% probability of default over the next 12 months. ASTIM is now the second most distressed name in iTraxx Crossover, right after NewLook.