Client Alert

New Italian Measures Facilitate Debt Restructuring and Protect DIP Financing

July 02, 2012

BY BRUNO COVA, ANTONIO AZZARÀ, BERNADETTE ACCILI, PAOLO MANGANELLI & ANTEO PICELLO

On 26 June 2012 the law decree No. 83 of 22 June 2012 (the Decree), which was approved by the Government on 15 June 2012 and provides emergency measures for the reorganization of the incentives to foster development and growth of the Italian economy, has entered into effect.

Notably, the Decree has introduced material changes to the Italian Bankruptcy Act that have the effect, amongst other things, of facilitating debt restructuring and company bailouts, thus enhancing investment opportunities in distressed situations.

The Decree represents the very last step of a reform movement of the Italian bankruptcy system which began in 2004 with the aim of improving its efficiency and making the Italian distressed market more appealing for potential domestic and international investors.

In particular, the new provisions contained in the Decree will:

• Change the dynamics of restructuring negotiations, reducing shareholders leverage and providing a safer environment for negotiations;

• Increase investment opportunities by facilitating loan-to-own strategies and equity investments by third parties; and

• Provide a safe environment for DIP or bridge financings, thus facilitating restructurings and increasing investment opportunities.