Alitalia Shares Drop After Announcement

Nov. 11, 2005
The drop came after the Italian national carrier announced a 1.01 billion euros ($1.18 billion) rights issue for shares at a massive discount.

Shares in cash-strapped Alitalia SpA dropped sharply Friday after the Italian national carrier announced a 1.01 billion euros ($1.18 billion) rights issue for shares at a massive discount.

But the capital increase falls short of the 1.2 billion euros ($1.41 billion) the cash-strapped airline had originally sought.

The stock opened down 15 percent at 5.21 euros ($6.13) after having been suspended all day Thursday pending the capital increase statement. After a volatile opening, including two false starts, shares picked up and by midmorning were down 12 percent at 5.41 euros ($6.36).

The company said late Thursday that it will offer 1.26 billion shares to holders of its stock and bonds at a price of 80 euro cents (94 cents) apiece.

Alitalia plans to offer the shares beginning Monday until Dec. 2.

The capital increase is considered critical for the carrier. Alitalia believes that the issue, worth 1.5 times the current equity of the airline and first approved by shareholders nearly a year ago, will provide a lifeline as it struggles with soaring fuel costs and competition from European carriers.

Banks have been trying to work out a deal with Alitalia over the recapitalization, which aims to cut the Italian Treasury's stake in the airline from 62 percent to below 50 percent in line with European Union requirements.

The Finance Ministry said Thursday night that it was committing itself to subscribing to 489.2 million euros (about $575 million) in new ordinary shares, and its stake would drop to under 50 percent as part of the recapitalization plan.

The ministry said it had stressed to Alitalia's management "the need that it (the company) carry on with determination" to achieve the financial and economic objectives set out the airline's restructuring plan.

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