KBRA Comments on Alitalia Extraordinary Administration Request

NEW YORK--()--On May 2, 2017, the shareholders of Italy’s flag carrier, Alitalia, voted unanimously to file for extraordinary administration in Italy, a form of creditor protection under Italian law that is similar to U.S. Chapter 11 bankruptcy-code protection. An extraordinary administration typically seeks to restructure large-scale organizations burdened with significant debt and other liabilities. Under Italian law, administrators will be appointed to determine whether the airline should reorganize or be liquidated for the benefit of creditors.

Alitalia was the subject of a bail-out in 2014 by means of a significant capital injection from Etihad Airways, with goals of achieving profitability during 2017. However, increased competition on routes operated by U.K.-based carriers and significantly higher labor costs led to the ultimate failure of Etihad Airways’ profitability goals for Alitalia. During late April 2017, labor unions representing Alitalia workers rejected a plan that called for job reductions and pay cuts for workers. Following the failure of these negotiations, Etihad Airways signaled an unwillingness to invest additional capital into the company and shareholders ultimately agreed to file for extraordinary administration proceedings on May 2, 2017.

Over the past year, Kroll Bond Rating Agency (KBRA) has closely monitored the developments relating to Alitalia through discussions with aircraft lessors/servicers and industry participants. As noted in the table below, several KBRA-rated aircraft ABS transactions have exposure to Alitalia.

At this time, KBRA does not view Alitalia’s extraordinary administration filing as having an impact on the ratings of the securities related to KBRA-rated aircraft ABS transactions. However, KBRA will continue its active dialogue with aircraft lessors and industry participants as the events relating to Alitalia’s possible reorganization continue to develop.

KBRA’s Financial Institutions Group will provide commentary in the near future regarding the impact of Alitalia’s extraordinary administration filing on various lessors.

To view the full comment, click here.

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About Kroll Bond Rating Agency

KBRA is registered with the U.S. Securities and Exchange Commission as a Nationally Recognized Statistical Rating Organization (NRSRO). In addition, KBRA is recognized by the National Association of Insurance Commissioners (NAIC) as a Credit Rating Provider (CRP).

Contacts

Analytical:
KBRA
Anthony Nocera, 646-731-2350
Senior Managing Director
anocera@kbra.com
or
Caitlin Colvin, 646-731-2465
Senior Director
ccolvin@kbra.com
or
Patrick McShane, 646-731-2376
Senior Director
pmcshane@kbra.com
or
Alan Greenblatt, 646-731-2496
Director
agreenblatt@kbta.com

Contacts

Analytical:
KBRA
Anthony Nocera, 646-731-2350
Senior Managing Director
anocera@kbra.com
or
Caitlin Colvin, 646-731-2465
Senior Director
ccolvin@kbra.com
or
Patrick McShane, 646-731-2376
Senior Director
pmcshane@kbra.com
or
Alan Greenblatt, 646-731-2496
Director
agreenblatt@kbta.com