By  on February 9, 2009

MILAN — The financial pressures keep building on Italy’s IT Holding SpA, parent of Gianfranco Ferré, Malo, Extè and a string of licensed brands.


On Monday, Ittierre SpA, the licensing and production unit of IT Holding SpA, said it will file for bankruptcy protection after running out of cash — and the entire fashion group could follow. That could set off a scramble by potential buyers to snap up some of Italy’s leading fashion brands.

IT Holding, which manages under license via Ittierre the Just Cavalli, VJC Versace, Versace Sport, C’N’C Costume National and Galliano labels, said Monday it had decided to place Ittierre into administration to allow the group to be restructured and to continue its business operations. IT Holding’s shares were suspended indefinitely on the Milan Bourse following the announcement.

“The board ascertained the absence of the conditions necessary to continue its operations in a regular course of business; in particular with regards to the availability of the necessary financial resources and the continuity of its license agreements,” IT Holding said.

Moody’s Investors Service downgraded IT Holding’s probability of default rating to D from Ca and the senior secured rating on its 185 million euro, or $239.5 million, bond due 2012 to C from Ca, saying the insolvency constituted a default. (Monday’s decision triggered a clause allowing bondholders to call for immediate repayment of the 9 7/8 percent senior notes.) The agency maintained a Ca rating on IT Holding’s corporate family rating and said the outlook on the ratings was stable.

Dollar figures are converted at average exchange rates for the periods to which they refer.

Ittierre accounted for 65 percent of IT Holding’s turnover in 2008 and 77 percent of earnings before interest, taxes, depreciation and amortization, according to investment bank Mediobanca. The business is also the most profitable part of the fashion group and widely viewed as the jewel in IT Holding’s crown.

Banking sources said whatever the outcome of Monday’s decision — be it liquidation of assets or debt consolidation and restructuring — the bankruptcy procedure would leave little value for current shareholders. They also expected IT Holding to follow Ittierre into administration.

IT Holding has been struggling to service net debts, which, as of Sept. 30, totaled 295.4 million euros, or $382.4 million, including the bond, due to soft consumer spending and difficulties in obtaining further support from banks.

Last week, IT Holding said a delay in royalty payments had created tensions with licensors. In December, credit ratings agencies downgraded the company for the second time in as many months after it missed an extension on a 9.4 million euro, or $12.2 million, loan payment originally due in October. In November, the firm forecast an 8 percent drop in 2008 revenues and a lower profit margin, after a net loss of 10.1 million euros, or $15.4 million, in the first nine months of the year. (In 2007, IT Holding returned to profitability with net earnings of 4.8 million euros, or $6.6 million, on revenues of 635.9 million euros, or $871.7 million.)

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