Telecom Italia Is Said to Seek $3.3 Billion State-Backed Loan
Telecom Italia Is Said to Seek $3.3 Billion State-Backed Loan
(Bloomberg) -- Telecom Italia SpA is in talks to get a guarantee on a new credit line from Italy’s trade insurer as it seeks to bolster its balance sheet after reporting a record loss, according to people familiar with the matter.
The former phone monopolist is in negotiations with a pool of banks for a facility totaling around 3 billion euros ($3.3 billion), the people said, asking not to be named because they aren’t authorized to speak about it.
Discussions with state-owned credit insurer Sace SpA are ongoing for a guarantee over at least part of the amount, and there’s no certainty the parties will reach an agreement on the financing, they said.
A Rome-based spokesman for Telecom Italia declined to comment. A spokesman for Sace wasn’t immediately available for comment.
A new loan backed by Sace would help Telecom Italia boost its reserves after it booked an 8.6 billion-euro fourth-quarter loss because of impairments and avoid possible future downgrades. The company has been struggling for years from high indebtedness amid fierce competition in Italy’s telecoms sector.
Debt Pile
Sace traditionally provides loans to Italian exporters, but has stepped in to prop some of the country’s largest companies throughout the pandemic. The new loan could be one of the biggest credit guarantees provided by the credit insurer since it backed a 6.3 billion-euro loan for the Italian unit of Fiat Chrysler Automobiles NV in 2020.
Telecom Italia has 33 billion euros of debt in total, with 8.2 billion euros coming due before the end of 2023. A change in ownership and structure of the company -- currently under discussion after KKR & CO. walked away from a full takeover bid -- could also have an impact on the debt quantity and ratings.
Telecom Italia’s new Chief Executive Officer Pietro Labriola, a 54-year-old industry veteran, has drawn up a new business plan in a bid to shake up the company by separating the landline network. The plan would also see all commercial services spun off into a separate unit called ServCo.
In March, Fitch Ratings and Moody’s Investors Services downgraded Telecom Italia’s debt deeper into non-investment grade territory, threatening to further lower the rating as they expect leverage to increase.
“We remain cautious on Telecom Italia, as it’s uncertain how the company will look a year from now,” wrote Jan Frederik Slijkerman, an analyst at ING Bank NV, in a note. “A potential partial sale of the network would be negative for bondholders.”
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