Credit line

Italy’s TIM on track to secure state-guaranteed line of credit – sources

Band Giuseppe Fonte, Valentina Za and Elvira Pollina

ROME, May 10 (Reuters)Telecom Italy TLIT.MI is on track to secure state guarantees on a credit facility worth up to 3 billion euros ($3.2 billion) with a preliminary green light expected on Wednesday, three people familiar with folder.

State-guaranteed loan would strengthen TIM’s position TLIT.MI finances as new CEO Pietro Labriola prepares a new turnaround plan for the former telephone monopoly, which posted a record net loss of 8.4 billion euros last year.

A group of banks made up of Italian UniCredit IDRC.MIFrench BNP Paribas BNPP.PA and Credit Agricole CAGR.PA as well as the Spanish Santander SAN.MC have pre-approved the financing of TIM subject to the Italian state providing guarantees, the sources said.

All interested parties declined to comment.

Under a temporary relaxation of EU state aid rules, Italian credit export agency SACE is able to provide guarantees covering up to 80% of loans granted large companies facing difficulties due to COVID-19.

The aid scheme runs until the end of June and so far has enabled SACE to provide guarantees on €34 billion in bank loans to major Italian companies.

The sources said SACE’s board would give preliminary approval for granting the guarantees on Wednesday. The green light from SACE is only the first step in a long approval process that requires the Italian Minister of Economy to sign a decree authorizing the commitment.

The economy ministry has no objections but approval can only after careful analysis of TIM’s request, one of the sources said.

The SACE guarantees would allow banks to offer TIM a line of credit worth between €2 billion and €3 billion, a separate source said. TIM is also evaluating alternative options as it strives to contain the cost of its debt, the source added.

TIM has struggled for years with declining revenues in its hyper-competitive home market.

Last week, it reported lower first-quarter profits and core revenue, saying household demand for connectivity had weakened after a pandemic-driven surge.

Burdened by more than 30 billion euros in gross debt, TIM has about 3 billion euros in bonds maturing this year.

TIM also faces a €1.7 billion payout by the end of September as part of the amount it put into the pot to secure frequencies in a fifth-generation mobile spectrum auction.

Hit by several debt rating downgrades, TIM is struggling to separate its network assets from its service operations and raise funds from new investors in the companies.

The car manufacturer Stellantis appealed in 2020 to SACE guarantees for a loan of 6.3 billion euros over three years which it repaid in January before the deadline.

($1 = 0.9480 euros)

(Reporting by Giuseppe Fonte, Valentina Za and Elvira Pollina Editing by Keith Weir)

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