Alitalia creditor refuses to restructure debt in Etihad talks

Milan: One of Alitalia’s biggest creditors and shareholders Intesa Sanpaolo SpA (ISP. MI) has rejected the idea of restructuring the airline’s debt to facilitate an investment by Etihad Airways, highlighting the challenges in reaching a deal to save the Italian carrier from bankruptcy.

Abu Dhabi-based Etihad Airways is interested in buying up to 49 per cent of Alitalia, and it has been in talks with the struggling airline for weeks, performing the necessary due diligence.

“They [Etihad Airways] will ask to restructure [the debt] and we will say that we won’t restructure it,” Intesa Sanpaolo’s Chief Executive, Carlo Messino, told reporters on the sidelines of an event Wednesday, according to MF-Dow Jones.

Etihad Airways would use Alitalia to expand in Europe and the Americas, as well as draw more traffic to its hub in Abu Dhabi. For its part, Alitalia would get a partner to help it expand, as well as a capital infusion necessary to stay in business.

But the Italian airline’s debt has proved to be a major obstacle.

Air France-KLM allowed a dilution of its stake to 7 per cent in the last round of fund-raising in late 2013 because it didn’t want to invest more money in an airline without a restructuring of its debt. At the end of the third quarter last year, Alitalia’s net financial debt stood at €813 million ($1.12 billion, Dh4.11 billion).

Alitalia’s biggest creditors, Intesa Sanpaolo and UniCredit SpA (UCG. MI) took part in the fund-raising and opened more lines of credit to give the airline time to find another partner, potentially Etihad. But they have been loathe to consider restructuring the debt owed to them.

Since the last round of fund-raising, the banks have replaced Air France-KLM as Alitalia’s biggest shareholders. Intesa has a 20.59 per cent holding and UniCredit 12.99 per cent.

At a separate event in Milan on Wednesday, Alitalia Chief Executive Gabriele Del Torchio said he expected talks with Etihad Airways to reach their conclusion in three or four weeks.

“We’re in a delicate and crucial phase [of the talks],” he said without elaborating.

Del Torchio has overseen a restructuring of Alitalia to bring its costs under control and enable the airline to stay in business for the better part of the year until a potential deal with Etihad is reached.