January 3, 2020 / 6:37 AM / 14 days ago

Italy's Atlantia slips further into 'junk' status on concession risks

MILAN (Reuters) - Italian infrastructure group Atlantia on Friday suffered its second debt downgrade in a month, slipping further into junk territory, as the government considers revoking the group’s motorway concession following a deadly bridge collapse.

FILE PHOTO: A logo of the Atlantia Group is seen outside their headquarters in Rome, Italy August 31, 2018. REUTERS/Alessandro Bianchi

Controlled by Italy’s Benetton family and in charge of the country’s biggest motorway network, Atlantia SpA (ATL.MI) has been in the crosshairs since a concrete bridge operated by its Autostrade per l’Italia unit collapsed in the city of Genoa in August 2018, killing 43 people.

The Rome government is expected to discuss soon the possibility of revoking Autostrade’s license after recently passing measures to curb compensation owed for the early termination of a contract when the concession holder is in breach of its obligations.

Citing increasing political pressure on Atlantia and risks over the concession, credit rating agency Moody’s on Friday cut Atlantia’s debt by one notch to “Ba2” - a month after depriving the group of its investment grade status.

It also pushed Autostrade’s debt into “junk” by cutting its rating to “Ba1” from “Baa3,” following a downgrade a month ago.

The ratings remain under review for possible further cuts.

A source close to Autostrade last month told Reuters the loss of the concession without compensation could trigger a default on 16 billion euros ($18 billion) of debt at the company and parent Atlantia.

Financial sources said the latest measures, contained in a government decree that needs to go through parliament, are estimated to reduce Atlantia’s payout for the loss of the concession to around 8 billion euros from 23 billion euros previously.

“The government move exacerbates the confrontational stance toward Atlantia,” Moody’s said, flagging a rising likelihood of “detrimental actions” against Autostrade and of a prolonged legal battle.

An Atlantia representative was not immediately available for comment late on Friday.

Deputy Transport Minister Giancarlo Cancelleri, a member of the ruling 5-Star Movement that has led the charge against Atlantia, said in a newspaper interview on Friday that there were “no more alibis” for the company and that Rome would have to strip Autostrade of its contract.

The PD party, a partner in the government coalition, has held a more cautious stance on the issue, favoring a renegotiation of the terms of Autostrade’s concession.

However, negotiations between the group and the transport ministry have so far proved fruitless.

The ministry this week froze toll hikes for 2020 after calling an emergency meeting with Autostrade when parts of the roof to a highway tunnel managed by the company collapsed near Genoa on Dec. 30.

Adding to Atlantia’s woes, a legal probe into the safety of motorway viaducts following the bridge disaster has uncovered evidence of falsified safety reports for some viaducts operated by Autostrade, the police have said.

FILE PHOTO: General view of Morandi Bridge almost one year since a section of the viaduct collapsed killing 43 people, in Genoa, Italy. June 28, 2019. REUTERS/Massimo Pinca/File Photo

Autostrade has always denied any wrongdoing.

Moody’s said that, if proven valid, the allegations of falsified maintenance reports would highlight shortfalls in Autostrade’s check system and undermine its credibility.

($1 = 0.8970 euro)

Reporting by Valentina Za and Elvira Pollina in Milan; Additional reporting by Gianluca Semeraro in Milan and Stefano Bernabei and Giulia Segreti in Rome; Editing by Emelia Sithole-Matarise and Matthew Lewis

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