3,401 research outputs found
Managing large corporate crisis in Italy: an empirical survey on extraordinary adminstration
No full textExtraordinary Administration (amministrazione straordinaria), a sort of Italian Chapter 11, was introduced into Italian bankruptcy legislation in 1979, in order to manage large corporate crises. Differently from other Italian bankruptcy procedures, Extraordinary Administration is a sort of hybrid since it is under the jurisdiction of both the administrative authority (Ministry of Industry) as well as the Court. Currently there are two distinct phases. During the initial “observation” phase, the company is managed by an extraordinary administrator who has to verify if there is a real possibility for restructuring. According to the restructuring program, prepared by the administrator, in the second phase the company, following a going concern logic, can either be sold to other investors or guided towards a stand alone recovery. As often happens with bankruptcy laws, there is ample theoretical framework and a very large number of studies have been carried out, focused on the legal aspects (for a general overview in English see Panzani, 2009) while economic issues have not been thoroughly investigated. Among the few we refer to Floreani,1997; Leogrande, 2003; Danovi, 2003; Falini 2008. In such a context, this paper aims at presenting some initial empirical evidence regarding how the procedure was put into effect between 1999 (the year of the reform) and 2008. Sources of information are documents available from the Ministry of Industry, which sets out the procedure and has to approve the restructuring plan and the Court Houses that are empowered to accept filing for Extraordinary Administration, in cases of insolvency. The data collected, regarding almost all cases ruled by Act 270/1999 refer to 65 groups composed by 313 companies. The paper investigates: i) the economic relevance of the phenomenon; ii) the characteristics and assets of the companies involved; iii) timeframes and management aspects; iv) safeguarding of the work force. The author is aware that because of the statistical limits the analysis can be considered an initial survey, but it is worth presenting as the basis for future studies and to create the conditions for proper discussion for an institution whose real weight is often merely imagined, rather than known
Private equity for distressed companies in Italy
No full textFor several reasons, vulture funds have never been popular. While economic literature about venture capital is very articulated, this is not the case with vulture funds. Even in recent years, only a few academic papers have appeared (Hotchkiss & Mooradian, 1997; Rosenberg, 2000; Gilson 2001; Feder & Lagrange, 2002; Altman 2004; Altman & Hotchkiss, 2006; Kutcher & Meitner, 2006 about the German market; Krasoff & O’ Neill, 2006). In mature markets, especially Anglo-Saxon ones, high segmentation and specialization are normal. For every phase in the life cycle of companies there is a correspondent set of specific investors. Whether in decline or in crisis, it is easy to find investors willing to buy out shares, in order to check the chances for a turnaround or to acquire relevant portions of debts in order to carry out arbitrages of value. The purpose of this paper is to provide a comprehensive overview of turnaround financing in Italy, meaning operations regarding distressed or troubled companies, carried out by professional private equity investors. Sectorial data show that total investment in turnarounds is on the rise but still amounts to less than 5% of the Italian private equity market. Greater attention, however, seems to be paid by professionals and the media because of the great economic returns expected.
Rare, older works dedicated to the Italian market (Perrini, 1997; Danovi, 2001 and 2003) have shown not only the absence of dedicated operators, but also a general lack of interest for this private equity niche. More recent studies (AIAF 2009) trace the birth and first steps of specialized investment funds. In comparison to the situation surveyed in the past, this study tries to investigate whether there has been an improvement by means of analyzing the answers to a questionnaire submitted to a selected sample of professionals.
A significant change within the sector was expected due to both internal and external factors, a more developed private equity market and the reform of the Italian bankruptcy law in primis. The wider range of solutions offered by the new set of laws, indeed, aims at easing the successful restructuring of distressed companies. However, empirical data highlight only a modest increase in total investment despite a growing interest towards the topic. Furthermore, there is evidence that a few private equity funds, originally set as specific to turnaround, have now diversified their activity to target also more traditional deals. The new legislative framework will probably cause significant, long-term effects; nonetheless, some delicate issues responsible for the slow development of the Italian market for distressed securities still remain unresolved
PAC (PREVENTIVE ARRANGEMENT WITH CREDITORS): A TOOL TO SAFEGUARD THE ENTERPRISE VALUE.
No full textItalian Insolvency Law has been widely reformed since 2005 in order to introduce new legal procedures aimed at preserving troubled companies, discerning viable from irredeemable businesses, and increasing productivity through a more efficient management of insolvency proceedings. The excessive duration of bankruptcy cases was repeatedly brought to the attention of the European Court of Human Rights, relating to the right to a fair trial in terms of reasonable duration. After the reform, the Preventive Arrangement with Creditors (Concordato Preventivo) became Italy’s equivalent of US’s Chapter 11 and can be considered the main instrument used by small and medium-sized companies (and sometimes large ones) to manage insolvency by avoiding bankruptcy. This paper provides an empirical analysis on filing of Preventive Arrangements with Creditors in the Court of Milan, one of the largest courts in Italy, in the 2005-2014 period. Through the exam of 835 cases, 70% of the total number, the research shows the different features of the procedure, analyzes the characteristics of companies that resort to it and its diverse purposes of liquidation or restructuring. Due largely to the newness of the legislation, along with the complexity of the Italian system, it is rather difficult to generalize conclusions. Nevertheless, the paper shows how Preventive Arrangements with Creditors can be considered a more efficient instrument than the alternative bankruptcy, both in terms of timeframe as well as with creditors‘ satisfaction. As part of the overall European reform process of insolvency proceedings, following the 2014 Recommendation issued by the European Commission, Italy seems to provide useful insights for other countries in Europe.
The article was appreciated:
1) both at a national level because:
1.a) on the one hand Cespec, that is the Center for Studies for Executive and Bankruptcy Procedures of the Italian insolvency specialized Judges expressed interest in the research resultes and supported a second level survey with the different methodology of questionnaires (obtaining replies relating to 3,000 PAC cases presented in most of the districts of Italian courts); the results of this further research were published in the Bank of Italy Publication "Negotiating tools for the solution of crises of company: the arrangement with creditors ";
2.b) on the other hand, the authors Riva and Danovi were heard at the Second Justice Commission of the Senate in 2017 and at the Second Justice Commission of the Chamber in 2018 in order to propose observations on the text of the crisis and insolvency code;
2) both at an international level since, in the light of the results obtained, the authors Riva and Danovi have been actively involved in the research funded by the EU (European Commission JUST / 2014 / JCOO / AG / CIVI / 7627) "Best practice in European restructuring . Contractualized resolution of the inconvenience in the shadow of the law "(www.codire.eu) which saw the partnership between the University of Florence (Project Coordinator), Humboldt-Universität zu Berlin (Partner) and Universidad Autónoma de Madrid ( Partner), supported by the Consejo General del Poder Judicial (Associate Partner), Bank of Italy (Associate Partner) and OCRI-Entrepreneurship Lab Research Center of the University of Bergamo (Associate Partner). This international research led to:
2.i) the publication of a book and several collective papers and publications edited by the research representatives in the various countries (Lorenzo Stanghellini, Riz Mokal, Christoph G. Paulus, Ignacio Tirado) in which the researches here under consideration were considered as the italian data set reference; those works suggested, on the basis of the results obtained, possible changes to the Insolvency Directive;
2.ii) the presentation of the results obtained in Brussels at the Center for European policy studies on 5 July 2018
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