Potential failure of Safilo’s recapitalization plan
The condition in Safilo is still deteriorating. According to reports by Reuters, the Italian eyewear maker Safilo is making further loss. In October and the beginning of November, Safilo has seen an extremely cautious order intake. Its high-end products were suffering the most. What’s more serious, Safilo suffered a net loss of 50.1 million euros in the third quarter, compared to 6.7 million euros during the same quarter of 2008. In particular, ordinary activities made 22.1 million euros of loss.
At the end of September, the net debt of Safilo reached 586.3 million euros. Due to the disappointing performance, Safilo warned on this Wednesday that it could default on its debts by the year-end. This is quite a bad news for share holders and creditors of Safilo. In October, Safilo was excited to receive cash tender from several companies. Hal Holding is the first launcher, followed by sunglass makers including Gucci and Dior. However, Chief Executive Robert Vedovotto warned that the recapitalization plan might fail. He insisted that the conditions for cash tender offer would not change. Only tender offer would be acceptable.
The fact is that until now, Hal Holding does not own any of the Safilo Notes itself. According to the earlier plan, Netherlands-based Hal will buy high-yield notes of 195 million euros at the price that is only 60% of their nominal value. In addition, Hal has also planned to restructure Safilo’s senior debt facilities. If this plan is going to be finished, the share of Hal will reach 49.99 percent, significantly higher than the current share of only 2%.
Due to the widening net loss in the third quarter, only 1.03% has been tendered. And tender offer committed by Gucci and Dior is conditional, based on the successful completion of a cash tender offer made by Hal Holding. Under the current situation, the recapitalization plan might not take place in all likelihood.