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No Concession

16 August 2018 by jbchevrel

Atlantia (ATLIM) was under pressure from the open, in the aftermath of Morandi bridge’s collapse. For reference, the Morandi bridge was operated and maintained by Atlantia’s 88%-owned OpCo Autostrade. Headwinds are multiple, going forward: restoration costs, safety upgrades (local press reported wide safety assessments on the network), litigation costs, and, importantly, the potential licence revocation. Since the bridge’s collapse, the 5y CDS is wider by c170bp, and the stock price has fallen by c27%, meaning that c€5.5B have been shaved off ATLIM’s market value. Given the limited information we have so far, an imminent downgrade seems less likely than a change of outlook, but it remains a real risk in the medium term. ATLIM is currently rated BBB/Baa2/BBB+, just few notches above junk... Additionally, key personnel changes could weigh on investor confidence, by bringing strategic uncertainty. ATLIM CDS trading was pretty active (c11% of Open Interest cleared at ICE Europe, according to OTCStreaming) and its widening largely contributed to Main underperformance (1bp+) in London AM. Elsewhere, credit was generally stronger, as news broke overnight that China would send its Vice Commerce Minister to the US for trade talks as soon as next week, according to the WSJ.