Benettons Confront Italy's Populists Over Bridge Disaster

(Bloomberg) -- The Benetton family vowed to fight the Italian government’s seizure of its road-toll assets in the wake of a deadly bridge collapse, in a confrontation between one of the country’s preeminent industrial dynasties and populist politicians demanding justice for a disaster that killed at least 39 people.

Investors in Atlantia SpA, the infrastructure company controlled by the family, faced dramatic losses Thursday after the accident ignited a political firestorm and Italian officials started the process to revoke the company’s road concession. The company said it would protect shareholders and bondholders.

Benettons Confront Italy's Populists Over Bridge Disaster

The finger-pointing and harsh political response has thrown the Benettons into a fight to salvage their lucrative toll-road investment and protect their fortune amid rising anger in Italy. Atlantia said Thursday that government officials’ decision to start the revocation process came prematurely, “without any verification of the material causes of the accident.”

Atlantia shares lost 22 percent in Milan Thursday, their worst-ever decline. Some bonds of the company and the Autostrade per l’Italia division that operated the bridge in Genoa fell to record lows before recovering most of their losses.

Five Month Test

The government announced Thursday the creation of a technical committee that will perform a detailed inspection and report back within 30 days on the cause of the bridge collapse. The results of the study will be used to evaluate any eventual revocation of Autostrade’s road concession, the transport ministry said in a statement. The ministry also announced a broader review of the country’s road infrastructure.

The Italian government is weighing fines as one option to penalize the Italian company -- a measure less painful than outright seizure of Autostrade its license, according to some of the people, who asked not to be named as the matter is not public.

To revoke the license, the government must prove serious negligence in maintenance, “which is not going to be straightforward,” said Giorgio Ragazzi, a professor of public finance at Bergamo University.

Benettons Confront Italy's Populists Over Bridge Disaster

Atlantia said its contract requires Atlantia to be reimbursed if the concession is withdrawn, and said it will continue to support Autostrade “with the aim of protecting the interests of its shareholders and bondholders.”

Politicians in Italy have also called for the top management of Autostrade to resign, including Atlantia Chief Executive Officer Giovanni Castellucci. People familiar with the matter said he retains the family’s backing and has no plans to step down.

Atlantia’s 1 billion euros of bonds due in July 2027 plunged below 87 cents on the euro on Thursday, the lowest since they were issued, before bouncing back to 92 euro cents later in the day, according to data compiled by Bloomberg. The 700 million euros of notes due September 2029 issued by Autostrade touched 88 cents on the euro, earlier, also a record low, and were trading at 93 cents.

The cost of insuring Atlantia’s debt with credit-default swaps soared 84 basis points on Thursday to 258 at midday, the highest in almost six years, according to CMA. The Italian company has lost about 5.4 billion euros ($6.2 billion) in market value since the disaster happened around midday on Aug. 14.

Late Wednesday, Prime Minister Giuseppe Conte told reporters the government won’t wait for the outcome of a probe or trial to “start the procedure to revoke Autostrade’s license.” Deputy Prime Minister Luigi Di Maio, speaking to Radio 24, said Atlantia won’t be entitled to receive any compensation because it didn’t fulfill its duties with the highway.

“Di Maio can say what he wants about the state refusing to pay any indemnity for revoking the license, but judges would make sure that he does,” Carlo Alberto Carnevale Maffe, professor of business strategy at Milan’s Bocconi University, said in an interview. “There is rule of law in this country.”

Bond Payments

If the highway-operating license is revoked, the division’s creditors may have the option to accelerate repayment, Creditsights analysts wrote in a note on Wednesday, quoting the firm’s EMTN prospectus. The analysts changed their recommendation on the debt to “underperform.”

Morandi bridge, built in the 1960s, was part of a major artery connecting the Italian Riviera to the southern coast of France. It collapsed in a heavy rain on Tuesday, causing more than two dozen vehicles to drop to the railroad tracks about 150 feet below.

The disaster occurred during the height of Italy’s summer travel season. Most companies, including Atlantia, are shut down during the Ferragosto week. The bridge’s failure and accompanying loss of life has shocked Italians and led to questions about the safety of hundreds of aging bridges and tunnels.

The Autostrade unit will hold an emergency board meeting early next week to evaluate the impact of the bridge failure on its business and respond to government’s request, people familiar with the matter told Bloomberg News late Wednesday.

Edizione Srl, the Benetton family’s holding company, said it will do “everything in its power to discover the truth and the responsibilities” for the Genoa disaster, while extending condolences to the families of the victims.

Edizione said Autostrade has invested over 10 billion euros in the last 10 years to widen and modernize the Italian highway network.

©2018 Bloomberg L.P.