Italian Government Approves Alitalia Bankruptcy, Bonds Collapse
Why the speedy decision to grant administration proceedings caught many investors, and certainly bondholders by surprise, is that as we noted earlier, the carrier is losing about €1 million ($1.1 million) a day and without government support risks running out of cash by the middle of May. The government has already thrown it a short-term lifeline, a bridging loan of up to 600 million euros to see it through the bankruptcy process. Absent a sale – which looks highly unlikely – or a nationalization, up to 12,000 workers are likely to lose their jobs, potentially resulting in another major shock to the Italian economy.
This is precisely the scenario that the Italian Economic Development minister warned about last Sunday: “A [sudden closure] would be a shock for GDP much greater than the scenario that we are looking at: a brief period of six months covered by a bridging loan from the government so as to find a buyer who could provide services that Italians need as travelers,” he said in an interview with Sky TG24 television.
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