Untitled

Italian Companies Are Turning To The
Capital Markets Amid Weak Credit

Conditions
Primary Credit Analyst:
Renato Panichi, Milan (39) 02-72111-215; renato.panichi@standardandpoors.com
Secondary Contacts:
Jean-Michel Six, Paris (33) 1-4420-6705; jean-michel.six@standardandpoors.com
Gareth Williams, London +44 (0)20 7176 7226; gareth.williams@standardandpoors.com
Guy Deslondes, Milan (39) 02-72111-213; guy.deslondes@standardandpoors.com
Barbara Castellano, Milan (39) 02-72111-253; barbara.castellano@standardandpoors.com
Vittoria Ferraris, Milan (39) 02-72111-207; vittoria.ferraris@standardandpoors.com
Table Of Contents
Near-Term Economic Prospects Look Weak
Corporate Funding: A Slow But Seismic Shift Toward The Capital Markets
Now The Tide Seems To Be Turning
Some Factors Could Foster A Long-Lasting Disintermediation Phase
Some Snags Could Hinder Corporate Bond Market Development
Economic Recovery Could Propel Sustained Bond Market Growth
Operating Performance: Strong Exporters Are Coping With Recession
Better Than Others
Italian Corporate Ratings Are Sliding
Appendix: Ratings On Italy's Corporate Sector
WWW.STANDARDANDPOORS.COM/RATINGSDIRECT JUNE 5, 2013 1
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Italian Companies Are Turning To The Capital
Markets Amid Weak Credit Conditions
The circumstances that Italy's corporate sector finds itself in exemplify the eurozone's battle to escape recession. As
Southern Europe's largest economy attempts both to retrench fiscally and restore competitiveness, its corporations are
facing weak demand, rising unemployment, political uncertainty, and a slump in consumer and business confidence.
Standard & Poor's Ratings Services sees little chance of any economic reprieve this year or next, forecasting that the
economy will likely contract for the remainder of 2013 and stay flat in 2014. In this weak environment, Italian
companies selling goods and services to faster growing emerging markets outside Europe are protecting their profit
margins and cash flows more successfully than those operating mainly in cyclical industries at home. The food and
beverages and fashion industries in particular have shown greater resilience than others.
Yet, Italian companies are facing a further problem that we believe will increasingly drive large but also midsize firms
to issue more bonds on the capital markets. As Italy's banking sector embarks on a deleveraging path, companies are
finding it increasingly difficult to obtain bank funding, traditionally by far their largest source of credit. Loosened
corporate and tax legislation for midsize companies introduced in Italy in 2012 will likely be a further catalyst for
increased bond issuance. Already last year, Italian companies issued net 20 billion, partly offsetting the 44 billion
decline in bank funding. (Watch the related CreditMatters TV segments titled "Italian Companies Are Turning To The
Capital Markets" and "Le Societ Italiane Si Rivolgono Sempre Di Pi Al Mercato Dei Capitali," dated June 10, 2013.)
Overview
Italy's recession is squeezing the profit margins of many Italian companies more strongly than European peers.
Companies are also finding it increasingly difficult to obtain funding from domestic banks, traditionally their
predominant source of funding.
We believe this will encourage more Italian companies, particularly midsize firms, to issue debt on the capital
markets.
Yet, while disintermediation could improve companies' capital structures and reduce refinancing risks, the lack
of strong investor support or a developed private placement framework could make progress slow.
We believe that greater recourse to the bond market could help improve Italian companies' capital structures and
reduce refinancing risks because it could lengthen Italian corporate funding maturities and diversify the investor base.
Yet, the process of disintermediation, where capital market funding replaces bank lending, is likely to be long and
arduous. For instance, domestic institutional investors are so far showing little appetite for domestic midsize corporate
bond issues: On average, 80% have gone to foreign investors. The absence of a developed private placement market in
Italy has also limited issues of below 150 million-200 million.
We believe that continued stability in financial markets and a recovery of the domestic economy could propel
sustained growth of the corporate bond market. In a scenario of zero economic growth, in which companies issue
bonds mainly to refinance existing debt, we estimate the proportion of bond securities in total corporate funding may
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approach at best 11%-14% over the next five years. This would be up from 8% at the end of 2012. In a scenario of a
recovery of domestic economic growth over this period, we believe corporate funding could reach 14%-17%, mainly
because of a recovery of fixed investment from currently weak levels. Yet, even under this more favorable scenario,
Italian corporate issuers would not tap the capital markets as deeply as peers in France or the U.K. We therefore
expect that the Italian corporate funding system will remain centered on banks. Nevertheless, we think Italian
companies could gradually tap the capital markets significantly further in the future.
Near-Term Economic Prospects Look Weak
Italy is likely to stay in recession this year, in our view, and economic indicators continue to point to a weak picture.
The purchasing managers index for March shows that activity in the manufacturing sector remained weak, suggesting
a further contraction in real GDP over the next few quarters (see table 1). The April bank lending survey from the Bank
of Italy also underlined the overall weakness in the country. Overall credit to nonfinancial corporations fell by 3.4% in
March compared with the same month last year and 3.3% in February.
On a more positive note, the financial markets have so far reacted only moderately to the uncertainties following the
results of the Feb. 24-25 Italian elections. Furthermore, after the nomination of Enrico Letta as Italy's new prime
minister, we believe prospects of overcoming the political stalemate have improved. The Italian government bond
spread over the German bunds, which measures the risk of Italian bonds by comparing their yield with that of the
German bund, have returned to the pre-election level.
Nonetheless, near-term economic prospects remain weak, and we forecast a further sharp fall in activity in the first half
of 2013. Overall, we expect real GDP to shrink 1.4% in 2013 before registering fragile 0.4% growth in 2014. Domestic
spending shrank sharply during 2012 as high uncertainty, tight financial conditions, and fiscal consolidation hit
consumption and investment. We expect the same factors to weigh on growth this year, although to a lesser extent.
We forecast that real consumer spending will contract by 2.9% this year after tumbling 4.2% in 2012.
Consumer confidence, too, was still close to record lows in April 2013, which explains why households are continuing
to refrain from nonessential spending (see chart 1). The main drags on consumer confidence are likely to be a retreat
in household disposable income for a sixth successive year in 2013, as well as steadily rising unemployment, which we
think will hit 12% this year and 12.5% in 2014. A tax-heavy austerity plan will also continue to hit consumption, even if
the fiscal drag is less heavy in 2013 than in 2012.
The uncertain outlook for domestic demand, low capacity utilization, and the conditions for obtaining credit are still
curbing investment, which fell by 8.8% in 2012. We expect business spending on capital goods to decrease 3% again
this year, reflecting poor investing conditions. In 2014, the projected normalization in financing conditions coupled
with reduced uncertainty should alleviate this, in our view.
Table 1
Italy Main Economic Indicators
(%)
2009 2010 2011 2012 2013f 2014f
Real GDP change (5.5) 1.8 0.4 (2.2) (1.4) 0.4
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Italian Companies Are Turning To The Capital Markets Amid Weak Credit Conditions
Table 1
Italy Main Economic Indicators (cont.)
CPI inflation 0.8 1.6 2.9 3.3 2.2 1.8
Unemployment rate 7.8 8.4 8.4 10.6 12.0 12.5
Sources: S&P, Eurostat.
Chart 1
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Chart 2
Given that we think household and business investment will remain too weak to pull Italy out of recession, the
economy would have to rely on net exports to lift activity. On the back of sustained demand from non-EU trade
partners, exports increased 1.8% in 2012. We forecast that they will rise 1.5% this year and 2.5% in 2014. This implies
that an export-led recovery is unlikely to boost Italy's economic growth in the near term, as was the case in 2010-2011,
particularly given that we forecast that the eurozone (European Economic and Monetary Union) as a whole will shrink
0.5% in 2013. Since 2007, the Italian export sector has performed poorly, with exports down 0.8%, compared with
rises of 17.5% in Spain and 14% in Germany.
Export growth has fallen because Italian productivity has been declining since 2005 (see chart 3). Former Prime
Minister Mario Monti's cabinet had attempted to tackle some structural weaknesses, such as a segmented and rigid
labor market, an excessively regulated business environment, and high public spending, as well as the national debt
that weighed at 127% of GDP in 2012. These reforms will certainly help to produce a modest boost to the country's
growth potential. Yet, improved productivity remains one of Italy's key challenges.
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Chart 3
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Chart 4
Corporate Funding: A Slow But Seismic Shift Toward The Capital Markets
Italian corporations have traditionally sourced funding predominantly from banks. However, we believe tougher
regulations and operating conditions for banks will put companies on a long path to disintermediation. The process,
though, is unlikely to be swift. Italian corporate reliance on bank credit is the strongest in the eurozone: Long- and
short-term bank credit constituted about 92% of Italian corporate funding at the end of 2012, bond issues just the
residual 8%. This, coupled with large corporate loan books on Italian banks' balance sheets, makes domestic banks
pivotal providers of corporate funding (see charts 5 and 6).
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Chart 5
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Chart 6
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Chart 7
One reason the corporate capital markets play a lesser role in Italy than in peer countries such as the U.K. and France
is that companies are comparatively smaller, which has made it more difficult for them to tap funding alternatives to
bank loans.
Italian corporate debt to GDP is below the eurozone average. Although it has increased in the past decade, it remains
sustainable, in our view, at 81% of GDP at the end of 2012 (see chart 7). This is higher than in Germany, but lower than
in France and Spain. What's more, this ratio has not materially increased since 2007, as it has for some European
peers. Indeed, debt to GDP has declined by three percentage points since 2009, mainly because debt from the banking
sector has fallen as a result of weak demand and restricted credit supply.
The ratio of financial debt to the aggregate of financial debt and shareholders' equity is also relatively moderate, in our
view, at 49% as of year-end 2012. It has increased over the past five years, largely owing to the decline in the market
value of equity.
Heavy reliance on bank funding by Italian companies leads to high recourse to short-term bank loans. Overall, we
consider this a weakness because it adds fragility to the corporate financing structure. Short-term loans constituted
31% of total Italian corporate debt at year-end 2012 compared with 54% at year-end 2000. Although this is declining, it
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is still well above the percentage of short-term bank loans for peer countries, such as Germany and France, where they
constituted about 18% at end 2012. The comparatively higher working capital of Italian corporate borrowers versus
peers in Europe, due to a longer payment period, explains only part of this difference. Nevertheless, long-term loans,
with maturities exceeding 12 months, are the fastest-rising type of corporate funding in Italy. As of Sept. 30, 2012, they
accounted for 782 billion, or 50% of Italian GDP, up from 25% of GDP in 2000. By contrast, corporate bonds still
constitute only a small share of total corporate debt, albeit a growing one. Direct access to the financial market
through bond issuance is mostly the prerogative of large corporates. Small and midsize entities (SMEs) source nearly
100% of their funding from domestic banks.
Now The Tide Seems To Be Turning
Since the second half of 2012, more Italian companies, mainly midsize companies, have started to turn to the financial
markets in response to shrinking bank credit. Corporate bond issues totaled 29 billion in 2012, about double the 15.1
billion figure for 2011 and about five times the issuance maturing in 2012. The upward trend is continuing this year:
there were 5 billion bond issues in the first quarter, mainly by speculative-grade companies ('BB+' or below; see chart
8).
Chart 8
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This new corporate bond issuance is helping domestic companies offset some of the funding squeeze arising from the
bank credit crunch. Italian corporate bond debt grew by 20 billion in 2012, while corporate funding from banks
contracted by 44 billion. As a result, Italian corporate net funding declined by about 24 billion in 2012. This is in
contrast to most European peer countries, where net funding increased (see chart 9). Only Spain fared worse. Notably,
2012 was the first year in the past 10 that the corporate net funding flow in Italy was clearly negative (see chart 10).
Given that only large and a few midsize Italian companies have had access to the bond market in the past year, the
credit crunch in 2012 will certainly have affected Italian SMEs more intensely.
On a positive note, though, last year was the first time that midsize corporates successfully issued bonds. These gained
acceptance in the financial market (see table 2).
Chart 9
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Chart 10
Table 2
Bond Issuance By Italian Midsize Companies
Issuer Corporate credit rating* Coupon (%) Bond amount (mil. ) Issue date Maturity date
Guala Closures B/Stable/-- Euribor + 5.37 275 Nov-2012 2019
Cerved Technologies B/Stable/-- Euribor + 5.37 250 Jan-2013 2019
Cerved Technologies B/Stable/-- 6.375 300 Jan-2013 2020
Cerved Technologies B/Stable/-- 8.00 230 Jan-2013 2021
Rottapharm BB-/Stable/-- 6.125 400 Nov-2012 2019
IVS Group BB-/Stable/-- 7.125 250 Apr-2013 2020
Sisal Holding Istituto di Pagamento B/Positive/-- 7.250 275 May-2013 2017
Titan 2 (TeamSystem Holding) B(prelim)/Stable/-- 7.375 300 Apr-2013 2020
Ratings are as of June 5, 2013.
Some Factors Could Foster A Long-Lasting Disintermediation Phase
We see a number of reasons why Italian companies' recent interest in gaining direct access to financial market funding
may be more than just a passing phase. They include:
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Italian bank credit to companies is likely to continue shrinking over a longer period. It has already declined over the
past 18 months because of a difficult economic environment and changing operating frameworks for domestic banks.
Corporate loans declined by 3.3% in 2012, and almost stabilized in the first quarter of 2013. While one reason for this
was weak corporate credit demand, particularly for investment, tougher credit conditions by banks also played a role.
We believe the limited credit Italian banks have been offering will persist for some years given new capital
requirements under Basel III regulations and banks' need to reduce their exposures to European Central Bank funding
and digest a large stock of impaired loans accumulated during the recession since 2008.
Investor appetite for Italian corporate securities looks set to increase. Historically low interest rates on European
sovereign bonds with high ratings have induced investors in the corporate debt market to accept increasingly
narrowing spreads, including in the speculative-grade segment. These declining spreads and yields in turn prompted
both investment-grade and speculative-grade European corporate issuers to sell record high volumes of bonds in 2012
and 2013. If the decline in Italian sovereign spreads were to continue, we may see further sustained domestic and
international investor appetite for Italian corporate securities at attractive yields.
The cost of issuing bonds rather than loans is narrowing. The credit spread Italian banks apply to domestic corporate
loans has repriced significantly in the past few years, particularly for midsize corporates. As a result, there is no longer
a significant gap between the interest rate an Italian corporate issuer would pay for a bond issue and the cost that
banks apply for a loan with the same maturity.
Recent Italian corporate and tax legislation aims to encourage midsize companies to tap debt capital markets.We
believe 2012 Italian legislative changes mark a significant departure from the previously unfavorable framework for
corporate bond issuance. In particular, stock-exchange listed bonds that nonlisted companies issue now have the same
tax rate as those listed companies issue. The Italian legislator also relaxed the limits on bond volumes that nonlisted
companies may issue.
Large Italian banks are supporting further disintermediation.Large banks seem keen to encourage this process
because they recognize that it may sustain banks' fee revenues at a time when their interest margins have significantly
contracted. We understand that they may also perceive that, ultimately, a more diversified funding structure could
reduce their credit risk.
Some Snags Could Hinder Corporate Bond Market Development
Although the short track-record of midsize bond issues since the change in legislation in 2012 has highlighted the
growth potential in Italy's corporate bond market, it has also pointed to potential constraints. These include:
Domestic institutional investors continue to prefer traditional investments, particularly domestic sovereign bonds.So far,
domestic institutional investors have been rather reticent about domestic mid-market corporate bond issues. On
average, foreign investors have bought more than 80% of the total 2 billion in midsize bond issues since mid-2012.
However, as the domestic sovereign spread continues to decline, we believe domestic investors may look for more
attractive investment assets, including midsize corporate bonds. In this context, the presence of domestic bond
platforms on exchanges may enhance the liquidity of corporate bond issues, particularly when the size is relatively low.
We note in this respect that the Italian stock exchange launched a multilateral trading system for market specialists in
2012.
A developed private placement market for corporate bonds in Italy is lacking. We believe the pension reform the
legislature approved in 2012 could be an impetus for a larger corporate bond market in Italy over time because it could
add to demand for mid- to long-term investment assets from pension funds. However, unlike some other European
markets and the U.S., Italy doesn't yet have a developed private placement market for corporate bonds. In our
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observation, private placement markets typically provide a simplified and comparatively cheaper offering process than
the public market and are accessible to comparatively smaller companies, given that the minimum size for a private
placement is well below the minimum for a public issue.
The largest private placement market, in the U.S., issued a total $53 billion in 2012. The U.S. market is, however, not
suitable for most Italian midsize corporates because issuers are typically investment grade, and its private
investors--typically insurance companies--focus on companies with large U.S.-denominated revenue streams. In
Europe, the most developed private placement market is the German "Schuldschein" market, a bilateral and unlisted
loan market, on which largely multinationals and domestic midsize corporates issue. In Italy, too, the potential for a
private placement bond market for corporate issues exists--not least given the relevance of life insurance saving in the
country. However, development of such a market may necessitate regulatory changes, given that private placement
issues are generally not listed, to align fiscal treatment with those of listed bonds.
Weak economic conditions are a further limitation. The weak economic situation in Italy is also constraining growth of
a corporate bond market. A tangible recovery could speed the process of financial disintermediation by improving
corporate creditworthiness and strengthening investor appetite for corporate debt, thus offering corporations an
opportunity to fund their investment plans. We believe that an economic recovery may also likely speed up a
restructure and merger process in the domestic corporate sector, after several years of recession and stagnation. This
may also result in stronger and better capitalized midsize corporations, which would be more attractive to domestic
and international investors.
Economic Recovery Could Propel Sustained Bond Market Growth
The significant 65 billion of corporate funding in Italy--both bond securities and loans--that is coming to maturity in
2013-2015 is an amount well above that of the previous three years and should sustain corporate bond issuance in the
short to medium term. Yet, the degree to which financial disintermediation progresses in Italy over the next few years
will clearly rest on the recovery of the domestic economy.
We envisage two possible growth scenarios ahead:
In a situation of zero economic growth, in which most issuance is to refinance existing debt, bond securities as a
share of total corporate funding may approach at best 11%-14% over the next five years, in our view, up from 8% at
end 2012. This scenario assumes the current credit crunch would only partially reverse.
Under a scenario recovering domestic economic growth, we believe the share of bond securities in total corporate
debt may reach between 14%-17% of total corporate funding over the next five years. In this case, demand to
finance investment needs would recover from currently weak current levels at a rate similar to the pre-crisis period
(about a yearly 5.2% in 1998-2007, or about 90 billion additional investments in the next five years).
Even under our more favorable scenario, bond issues would still constitute a far smaller share of the total than in
France or the U.K. This means that the Italian financial system will remain centered on banks. But the potential for
companies to tap the financial markets directly will nevertheless become far greater than at present.
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Operating Performance: Strong Exporters Are Coping With Recession Better
Than Others
In the shrinking economic and funding environment, operating conditions in the Italian corporate sector are showing
signs of decline, both in absolute terms and relative to Europe as a whole, according to our research. Using Standard &
Poor's Capital IQ data, we assessed the operating trends of a sample of three groups of companies:
Large Italian companies, comprising 92 businesses with revenues in 2011 exceeding 2 billion;
Midsize Italian companies, made up of 619 businesses with last-12-months' revenues of between 250 million and
2 billion; and
Large European companies (Europe Debt 1000), comprising Europe's 1,000 largest corporations in terms of total
debt outstanding.
Our study found that both large and midsize Italian companies' EBIT margins have declined sustainably from their
2007 peak, and that the performance gap between Italian and European companies has widened significantly since
2007 (see chart 11). Although large and midsize Italian companies have suffered similar EBIT margin declines, the
midsize firms' absolute margins are well below those of large corporations, reflecting their comparatively weaker
profitability.
Chart 11
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Our statistical analysis indicates that Italian companies are suffering from the economic weakness that started in the
last quarter of 2008. Yet, we believe this overall picture fails to capture some remarkable exceptions in certain
industrial segments. The historically very solid and export-oriented Italian luxury textile-fashion industry and food and
beverage industry are both performing far better than the Italian corporate sector as a whole. While fashion companies'
revenues and margins were temporarily hit by the global crisis in 2009, their performance improved immediately
thereafter, and by 2011 they had more than recovered profit margins lost in the crisis. Food and beverage firms also
suffered revenue declines during the crisis, but they swiftly recovered, and margins were not affected at all. The
operating performance of the high-precision-mechanisms segment, which is a strategic supplier for automobiles and
for certain large international industrial groups, is also withstanding the recession relatively well.
Cash generation and interest cover headroom lag European peers
Declining profit margins are also weakening Italian companies' operating cash flows. Among the large Italian
companies in our study, they contracted by 4.5% in 2012, after a 1.6% decline in 2011 (see chart 12). This deepening
decline is contrary to the general trend for the European Debt 1000 as a whole, which returned to marginally positive
growth in 2012.
Chart 12
Downward pressure on Italian companies' margins and cash flows, and upward pressure on their funding costs as a
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result of a heightened country risk premium have prevented them from restoring the same degree of interest cover
headroom as European peers as a whole. The EBIT-to-interest expense ratio of large Italian companies declined to
4.2x in 2012, which is 70 basis points below 2010 and 30 basis points below 2011 (see chart 13). Over the same period,
the Europe Debt 1000 bolstered this ratio from 5.1x to 5.3x.
Chart 13
Companies adopt defensive financial policies
In response to the recessionary environment, Italian companies are retaining a more cautious financial policy than in
the past. A surge in cash and equivalents they held on their balance sheets in 2011 and 2012 illustrates this
conservative trend (see chart 14). Cash, equivalents, and short-term investments constituted 8.6% of the total assets
held by the Italian large companies and 7.4% of the total assets of midsize Italian companies in our study. This cash
build-up appears precautionary in nature given poor operational trends, limited capital expenditures, and dividend
cuts. Indeed, this cautious financial policy could help preserve our current assessments of rated companies' credit
quality.
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Chart 14
Italian Corporate Ratings Are Sliding
Weakening operating performance is weighing on the credit quality of many the 36 companies we rate in Italy. Ratings
have been trending moderately negatively in 2012 and first-quarter 2013. We took a total of 20 rating actions in 2012
and five more in first-quarter 2013 (see chart 15). There were more than twice as many downgrades as upgrades,
which is not surprising given the severe recessionary environment in Italy since 2008 and a weak economic
environment in most countries to which Italian companies export or operate. We believe further negative rating
actions are possible in 2013 in the absence of a recovery in the domestic economy in late 2013. Our outlook
distribution reflects this (see chart 16). Negative outlooks continue to outpace positive outlooks. One reason for this
trend is the link between certain corporate ratings and the rating on the sovereign, the Republic of Italy (unsolicited
ratings BBB+/Negative/A-2), under our criteria.
Among heavy industries, weak domestic demand for passenger cars, down 12.3% in the first five months 2013 and
19.9% in 2012, has harmed car maker Fiat, whose sales are significantly exposed to the Italian market. Fiat's average
capacity utilization has shrunk over the past two years, and its Brazilian activities and the results of its subsidiary
Chrysler have entirely supported its operating margin. Performance in Italy has been extremely weak. Weak domestic
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demand is also weighing on the results of Italian cement companies Buzzi Unicem and Italcementi. Both experienced a
sharp reduction in sales and contracting margins in Italy. Both companies' operations outside Europe are helping offset
weakness at home. To some extent, their broad European operations are also a help, although construction demand in
Europe as a whole is sluggish.
Among companies in the consumer and service industries, the picture is more mixed. We recently revised our outlook
on eyewear manufacturer Luxottica Group to positive from stable, owing to its very solid operating results that have
been bolstered by sound geographical diversification. But the trend is different among telecom companies, which are
largely exposed to domestic demand. We downgraded Telecom Italia to 'BBB-' in May 2013 because we expect that its
EBITDA will continue to decline in 2013-2014, owing to unabated price competition in the mobile domestic market
and a tough economic environment.
Weak demand for power and declining gas spot prices in Italy compared with the European average are also weighing
on the country's power prices, with overall negative consequences for domestic power generators. Utilities are also
suffering from power overcapacity in most of their core European markets (except France), exacerbated not just by the
recessionary environment in Southern Europe but also the surge of renewable generation in Europe. Added to this,
Italian utilities face tougher fiscal pressures than their European peers. We anticipate these factors will weigh on Italian
utilities' operating performance this year, as reflected in the negative outlooks on most Italian utilities we rate.
Appendix: Ratings On Italy's Corporate Sector
Standard & Poor's rates a growing number of corporate entities based in Italy. We assigned two new issuer ratings in
2012 and four new ratings in the first five months of 2013. Among our 36 rated companies, 16 (or 44%) of them are in
the investment-grade category (with ratings of 'BBB-' or higher), and 20 (or 56%), are in the speculative-grade range
('BB+' or lower). The percentage of speculative-grade rated issuers is rising, having expanded from 41% at the end of
2010, and from 31% at end-2008. This reflects both new assignments of issuer ratings in the speculative-grade
category, as well as some in the heavy industry sector that have been revised from investment-grade.
Notably, most negative outlooks are in the investment-grade category and a large part reflects the negative outlook on
the sovereign, based on our criteria on the relationship between the corporate and sovereign ratings. However, a
limited number of Italian corporate issuers in the oil and infrastructure sectors have ratings that exceed those on the
sovereign. This reflects our view on the diversification of their activities outside Italy, strong stand-alone credit profiles,
or limited exposure to the sovereign.
The median rating distribution has progressively declined over the past five years to 'BB+' in May 2013, from 'BBB-' at
year-end 2010 and 'BBB' at the end of 2008. This reflects the significant number of negative rating actions we have
taken since the beginning of the financial crisis in 2008, as well as newly assigned issuer ratings in the
speculative-grade category.
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Chart 15
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Chart 16
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Chart 17
Table 3
Italian Corporations Rated By Standard & Poor's
Company Name Rating* Contact
A2A SpA BBB/Negative/A-2 vittoria.ferraris@standardandpoors.com
Acea SpA BBB-/Negative/A-3 vittoria.ferraris@standardandpoors.com
Aeroporti di Roma SpA BBB-/Positive/A-3 izabela.listowska@standardandpoors.com
Autostrade per I'Italia SpA BBB+/Negative/A-2 juliana.gallo@standardandpoors.com
Atlantia SpA BBB+/Negative/A-2 juliana.gallo@standardandpoors.com
Bormioli Rocco Holdings S.A. BB-/Stable/-- david.matthews@standardandpoors.com
Buzzi Unicem SpA BB+/Stable/B renato.panichi@standardandpoors.com
Cerved Technologies SpA B/Stable/-- renato.panichi@standardandpoors.com
CIR-Compagnie Industriali Riunite SpA BB/Stable/B renato.panichi@standardandpoors.com
Edison SpA BBB/Positive/A-2 nicolas.riviere@standardandpoors.com
Enel SpA BBB+/Negative/A-2 vittoria.ferraris@standardandpoors.com
Eni SpA A/Negative/A-1 simon.redmond@standardandpoors.com
EXOR SpA BBB+/Stable/A-2 renato.panichi@standardandpoors.com
Fiat Industrial SpA BB+/Stable/B barbara.castellano@standardandpoors.com
Fiat SpA BB-/Stable/B eric.tanguy@standardandpoors.com
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Table 3
Italian Corporations Rated By Standard & Poor's (cont.)
Finmeccanica SpA BB+/Stable/B werner.staeblein@standardandpoors.com
Gruppo Editoriale L'Espresso SpA BB-/Negative/-- patrizia.damico@standardandpoors.com
Guala Closures SpA B/Stable/-- rachel.lion@standardandpoors.com
Hera SpA BBB+/Negative/A-2 vittoria.ferraris@standardandpoors.com
Italcementi SpA BB+/Negative/B renato.panichi@standardandpoors.com
IVS Group SA BB-/Stable/-- renato.panichi@standardandpoors.com
Lottomatica Group SpA BBB-/Positive/A-3 melissa.long@standardandpoors.com
Luxottica Group SpA BBB+/Positive/A-2 nicolas.baudouin@standardandpoors.com
Piaggio & C. SpA BB-/Stable/-- barbara.castellano@standardandpoors.com
Rottapharm BB-/Stable/-- nicolas.baudouin@standardandpoors.com
Safilo Group SpA B/Positive/-- florence.devevey@standardandpoors.com
Safilo SpA B/Positive/-- florence.devevey@standardandpoors.com
SEAT PagineGialle SpA D/--/-- carlo.castelli@standardandpoors.com
Sisal Holding Istituto di Pagamento S.p.a. B/Positive/-- melvyn.cooke@standardandpoors.com
SNAM SpA A-/Negative/A-2 vittoria.ferraris@standardandpoors.com
STMicroelectronics N.V. BBB/Negative/A-2 matthias.raab@standardandpoors.com
Titan 2 SpA (TeamSystem Holding) B(prelim)/Stable/-- david.matthews@standardandpoors.com
Telecom Italia SpA BBB-/Stable/A-3 xavier.buffon@standardandpoors.com
Terna SpA A-/Negative/A-2 vittoria.ferraris@standardandpoors.com
Wind Telecomunicazioni SpA B+/Stable/-- osnat.jaeger@standardandpoors.com
Wind Acquisition Holdings Finance SpA B+/Stable/-- osnat.jaeger@standardandpoors.com
*Ratings as of June 5, 2013.
(Data Researcher: Rocco Semerano)
Additional Contact:
Industrial Ratings Europe; Corporate_Admin_London@standardandpoors.com
1142849 | 301112013
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