PE Bid for Italy’s Fondiaria Hits Hurdle

A rival offer by private equity firms Palladio Finanziaria and Sator for Italy’s troubled motor insurer Fondiaria-SAI has hit a hurdle due to penalty clauses in an earlier bid from insurance company Unipol and debt restructuring issues, writes Reuters. At the end of January, Unipol to agreed to back Fondiaria in a four-way merger deal.

Reuters – A rival offer by two private equity funds for Italy’s troubled insurer Fondiaria-SAI has hit a hurdle due to penalty clauses in an earlier bid from insurance peer Unipol and debt restructuring issues, sources close to the matter said.

A meeting between the advisor of Fondiaria parent Premafin and top investment house Mediobanca on Friday discussed the difficulty of breaking off the deal with Unipol because of the penalty clauses that would ensue, one of the sources said.

“The Unipol deal is firewalled. Debt restructuring needs the nod of creditor banks and Premafin can’t get out of its contract with Unipol without facing legal charges,” the source said.

At the end of January, Mediobanca got Unipol to agree to save Italy’s No. 1 motor insurer Fondiaria in a four-way merger deal.

But private equity funds Palladio Finanziaria and Sator, owned by banker Matteo Arpe, then acquired 8 percent of the insurer and said they were ready to pump up to 450 million euros into Premafin to shore up capital.

Premafin, owned by the Ligresti family, signed a contract with Unipol on Jan. 29 to save the loss-making Fondiaria through a merger with Unipol, Premafin and Fondiaria unit Milano Assicurazioni.

“The contract is binding and Premafin can’t speak to others without triggering penalties,” the source said.

Milano Finanza newspaper said on Saturday the penalties would amount to 300 million euros ($403.89 million).

Premafin was not immediately available for a comment.

Family head Salvatore Ligresti, who has controlled Fondiaria since 2005, said on Thursday he was open to all proposals to bail out the insurer.

Fondiaria has seen its market capitalisation shrink under the management of the Ligresti family from 5 billion euros five years ago to 635 million euros. It is expected to post a loss of more than 1 billion euros in 2011.

DEBT RESTRUCTURING

The offer by Palladio and Sator, which expires on March 8, is conditional on a series of conditions being met, including the creditor banks agreeing to debt restructuring.

Premafin, which has a market worth of just 191 million euros, has debts of some 320 million euros, mainly towards UniCredit and Mediobanca.

“That means Mediobanca and UniCredit hold the key,” a second souce said.

Premafin’s chief creditor UniCredit, which owns also 6.9 percent of Fondiaria, has already said it continues to back the Unipol project. “We believe Unipol’s plan is the right one,” the bank’s Chief Executive Federico Ghizzoni said on Thursday.

Mediobanca, which engineered the Unipol rescue plan, has more than 1 billion euros of loan exposure to Fondiaria and around 70 million euro debt exposure to Premafin.

Sources said Premafin adviser Banca Leonardo is set to meet creditor banks on Monday.

Il Sole 24 Ore newspaper reported on Sunday Premafin would ask its creditors on Monday to turn 150 million euros in debt into a loan which converts into shares of the new insurance company that will be created by Unipol’s 4-way merger. ($1 = 0.7428 euros) (Additional reporting by Lisa Jucca and Valentina Za; Editing by Elaine Hardcastle)