Astaldi, the Italian multinational construction company, filed on Friday (28 September) for concordato in bianco. This is an in-court restructuring proceeding under the Italian Bankruptcy Law, which imposes a standstill period for up to six months. Astaldi’s reference to certain provisions in the Bankruptcy Law indicates that it intends to use the standstill period to prepare for a concordato preventivo filing. Astaldi again delayed publication of its 30 June 2018 financial report, and said that it would voluntarily migrate from the “Star” segment of the Borsa Italiana to the general MTA segment. The full text of the announcement is available here.

Astaldi’s €620m RCF matures in 2019, and its €750m bonds mature in 2020. Astaldi had previously announced a €300m capital raise plan, conditioned on the sale of its stake in the Third Bosphorus Bridge. This plan stalled after the sale was delayed amidst the recent economic uncertainty in Turkey. Astaldi announced that its new preliminary restructuring proposal contemplates a lease of its business units to two new Astaldi SPVs, new super senior funding and a capital raise.

In this report, we will discuss:

  • Key takeaways for bondholders;
  • Concordato in bianco; and
  • Concordato preventivo.

Key takeaways for bondholders

Court-supervised standstill period: Under the court-supervised concordato in bianco proceeding, there is a standstill period for up to a maximum of six months. Management remains in place, but is under the supervision of a judicial commissioner. The standstill grants the debtor breathing space to negotiate its restructuring plan.

Bondholders can be bound in to the plan: Astaldi has announced it intends, ultimately, to file for concordato preventivo. This court-supervised process will take much longer to finalise than a debt restructuring agreement would have taken. But the concordato preventivo permits Astaldi to bind bondholders into the restructuring. This would not have been possible under the debt restructuring agreement provisions of the Bankruptcy Law. It can be seen as a sign that the company intends to include bondholders in its plan and deal with the €750m bond maturity in 2020.

Bondholder cram-down and priming risk: A concordato preventivo may be approved by a majority of the classes of creditors. Thus bondholders could be placed in a separate class, with the plan approved without their class’s specific consent. In a separate class, bondholders could face adverse outcomes under the company’s plan. The company’s plan only has to exceed bondholder recoveries in liquidation for it to be approved by the court. Bondholders may also be primed by super senior financing, in addition to existing basket capacity.

How effective is the moratorium outside of Italy? The filing for concordato in bianco may trigger events of default in the Group’s key operating contracts. Concordato in bianco does provide a moratorium on enforcement. However, it remains to be seen whether this moratorium could be recognised and enforced on non-Italian counter-parties, outside of Italy, in the many jurisdictions in which Astaldi operates. Piecemeal enforcement could result in value destruction for creditors.

Concordato in bianco

Concordato in bianco is an interim procedure under Article 161(6) of the Bankruptcy Law. It grants the debtor a standstill period, set by the judge, which may range from an initial period of 60 to 120 days. The judge may extend this period by a further 60 days in certain circumstances, meaning that the standstill period may last a maximum of six months. During the standstill period, there is a moratorium on creditor action and the debtor has the opportunity to negotiate a restructuring plan with creditors. The debtor can access new financing on a super senior basis, provided either an independent expert confirms this will improve recoveries for creditors, or if the business would suffer imminent and irreparable harm without the financing. At the end of the standstill period, the debtor is required to either file a debt restructuring agreement under Article 182 bis, or enter into concordato preventivo.

Concordato preventivo

According to the Astaldi announcement, in due course it intends to switch from concordato in bianco, to concordato preventivo in continuità aziendale (in business continuity). Concordato preventivo is a court-supervised pre-bankruptcy creditor composition. Given the role of the court, it is expected to take substantially longer to finalise than a debt restructuring agreement under the Bankruptcy Law. Management remains in place, but is under the supervision of a judicial commissioner. Any plan must be approved by a simple majority of the voting creditors. The plan may separate creditors into different classes, with different outcomes for different classes. Unlike an English scheme of arrangement, the plan does not have to be approved by every class, but only a majority of classes. The approved plan binds all creditors (including bondholders).

Any dissenting creditor has the right to contest the plan on grounds of breach of law, or proceeding violation. Valuation can only be disputed by (i) a creditor from a dissenting class, or (ii) by dissenting creditors representing 20% or more of the liabilities. In either case, the court may still confirm the plan if it is established that dissenting creditors would not have received more under the available alternatives (e.g. liquidation). If the composition plan presented by the debtor (in business continuity) does not provide for payment of at least 30% of the total sum owed to unsecured creditors, then creditors holding 10% can present a competing plan to the court (proposte concorrenti). As with concordato in bianco, super senior rescue financing is available as part of a concordato preventivo, subject to certain conditions. It is also possible for the plan to include a sale of the debtor’s business, but these are subject to competing offers (offerte concorrenti) in accordance with court-approved bidding and auction procedures. A concordato preventivo plan may be recognised as a foreign main proceeding pursuant to Chapter 15 of the US Bankruptcy Code, subject to the requirements of Chapter 15 being met.