MILAN — Shares in IT Holding SpA spiked nearly 32 percent Wednesday after the Italian fashion group confirmed it may open its capital to private equity to help boost its finances.
IT Holding, which owns the Gianfranco Ferré, Malo and Este brands, and operates under license the Just Cavalli, VJC Versace, Versace Sport, C’N’C Costume National and Galliano labels, said late Tuesday it needed time to verify the feasibility of a rescue package — believed to have been proposed by London-based Kingsbridge Capital Ltd. — which envisaged a capital increase and the repurchase of a bond. IT Holding’s board is expected to reconvene again before the end of the week.
IT Holding’s shares closed on Wednesday at 0.22 euros, or 28 cents at current exchange, on the Milan Bourse, giving the company a market capitalization of 52.9 million euros, or $68.2 million.
Analysts welcomed the proposal, but cautioned that further delays to IT Holding’s financial and operating restructuring might lead to an irreversible deterioration of the group’s business.
“The confirmation of the existence of a proposal for a rescue plan is good news for the company, although the decision to buy some more time to verify the proposal and the availability of banks and licensors to support it, means the risk of a further worsening in operating conditions before a decision is taken,” Unicredit analyst Davide Mercati wrote in a note.
IT Holding is weighed down by net debts, which, as of Sept. 30, totaled 295.4 million euros, or $380.7 million, including a 185 million euro, or $238.4 million bond, which expires in 2012. In December, credit ratings agencies downgraded the company for the second time in as many months, after it asked lender Intesa Sanpaolo SpA to postpone for a second time a 9.4 million euro, or $12.1 million, payment on a loan originally due in October to April.
Italian media speculated restructuring and finance specialist Kingsbridge, which is part of Austrian investment company Hardt Group, was negotiating a 100 million euro, or $128.9 million, investment. Kingsbridge did not return requests seeking comment.
IT Holding did not disclose details of the proposal, but Unicredit’s Mercati estimated that in order to buy back the bond, the company would need at least 200 million euros, or $257.7 million, in new resources, either through the capital increase or new bank financing.
“On top of this, the company would then need resources to finance restructuring and development,” Mercati wrote.
He added that a capital increase in excess of 100 million euros, or $128.9 million, would mean a huge dilution for existing shareholders, “but it should not necessarily mean a compulsory tender offer that can be avoided in the case of rescue plans.”
Mediobanca underlined that getting disgruntled licensors on board was crucial, estimating that IT Holding’s license agreements accounted for 65 percent of 2008 turnover and 77 percent of earnings before interest, taxes, depreciation and amortization. IT Holding said Monday a delay in royalty payments had created tension with licensors and that discussions were under way, aimed at finding a solution in the common interest of all parties. Speculation resurfaced last month, linking Renzo Rosso’s production unit Staff International SpA with the Just Cavalli license, which contributed more than a third of IT Holding revenues in 2007 and expires next year.
Mediobanca also reasoned that negotiations with Chinese businessman Billy Ngok’s Mensun Ltd. might have come to an end. IT Holding said Monday it was still in talks with Mensun, but no longer on exclusive terms, which expired at the end of last year. Ngok did not return requests for comment.