Macquarie Bank Ltd. and JB Drax Honore are among a group of banks and brokerages that may be forced to book losses as troubled Italian building firm Cimolai SpA seeks to restructure its liabilities to stay afloat.
(Bloomberg) — Macquarie Bank Ltd. and JB Drax Honore are among a group of banks and brokerages that may be forced to book losses as troubled Italian building firm Cimolai SpA seeks to restructure its liabilities to stay afloat.
The family-owned company, which filed for bankruptcy in Italy in October, wants to write down part of its €300 million ($325 million) debt linked to some soured derivative bets on the euro-dollar exchange rate, according to people familiar with the matter, who asked not to be named because the matter is private. Cimolai is set to present a restructuring plan to a court in Trieste in February, the people said.
Under the plan, the company would get an injection of fresh capital from a new investor. Both Italian and international building companies have already flagged their interest, the people said.
Details of the proposal are still being reviewed by company’s advisers at Lazard Ltd., including the size of the writedown, the people said.
A representative for Cimolai declined to comment when contacted by Bloomberg News. A representative for Lazard also declined to comment.
The engineering firm, whose projects include bridges, buildings, stadiums and the confinement structure for the Chernobyl nuclear power plant, couldn’t meet payments and margin calls on its derivative contracts when the euro fell to a 20-year low against the dollar in September.
When it filed for protection from its creditors the next month, Cimolai claimed many of these contracts were entered by former employees without the knowledge of the board.
Counterparties also include Deutsche Bank AG, Morgan Stanley, NatWest Group Plc, Ballinger & Co., Ebury Partners Ltd. and GPS Capital Markets Ltd., as Bloomberg has previously reported. Some of the firms have filed claims in London courts alleging they lost tens of millions of dollars combined after Cimolai halted payments. There is currently a stay, or a temporary halt, in place on those claims valid both in Italy and in the UK.
Ballinger and GPS didn’t respond to requests for comment. Spokespeople for the rest of the finance firms declined to comment.
The products at the center of the dispute are so-called targeted accrual redemption forwards, or TARFs. These are complicated FX contracts that have spawned multiple legal disputes between banks and family-owned corporations that bought them.
Cimolai’s restructuring plan, set to be presented to the court by Feb. 20, will also seek a haircut on €280 million of bank debt, the people said.
More stories like this are available on bloomberg.com
©2023 Bloomberg L.P.
