KBRA Comments on Alitalia Extraordinary Administration Request

NEW YORK--(BUSINESS WIRE)-- 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.

Related Publications:

• Aviation ABS Rating Methodology
• Apollo Aviation Securitization Equity Trust 2016-2 (AASET 2016-2)
• ATLAS Series 2014-1
• Blackbird Capital Aircraft Lease Securitization Limited 2016-1
• Castlelake Aircraft Securitization Trust 2015-1
• Castlelake Aircraft Securitization Trust 2016-1
• DCAL Aviation Finance Limited
• Diamond Head Aviation 2015 Limited
• Eagle I Limited, Series 2014-1
• Emerald Aviation Finance Limited, Series 2013-1

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).

View source version on businesswire.com: http://www.businesswire.com/news/home/20170505005569/en/

Analytical:
KBRA
Anthony Nocera, 646-731-2350
Senior Managing Director
[email protected]
or
Caitlin Colvin, 646-731-2465
Senior Director
[email protected]
or
Patrick McShane, 646-731-2376
Senior Director
[email protected]
or
Alan Greenblatt, 646-731-2496
Director
[email protected]

Source: Kroll Bond Rating Agency

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