Trevi: the many faces of a restructuring plan

In 2017, the building sector in Italy represented around 11% of the country’s GDP, with a labor force 1.4 million strong (23% of all industrial workers), employed in 400,000 to 500,000 companies. From 2010 to 2016, Italy had seen a drop in the number of construction companies of nearly 9%, and a plunge in public works. To mitigate the stagnation on the domestic market, most Italian EPC contractors attempted to expand abroad, often in emerging or developing countries where payment and collection times were generally longer and riskier. In addition to all this, Trevi was also exposed to the tremendous upheaval in the oil and gas industry: after four years of relative stability, with the market holding steady at $105 a barrel, the price of crude cratered in February 2016 to $30. In this scenario, gas producers stopped exploiting their drilling rigs to full capacity, which in turn dramatically slashed turnover for drilling companies. 

As is typical of an engineering company, Trevi enjoyed substantial liquidity (€200-300 million), which served as a safety cushion to guard against the possible negative repercussions of market shocks and to stay flexible to deal with swings in working capital. But the Group closed out 2017 with less than €150 million in cash on balance, which dipped further to below €90 million in 2018. Basically, there wasn’t enough liquidity to run operations, let alone grow the business. At the same time, the gross financial debt continued to levitate, consisting of unsecured bank loans which escalated over time to top €780 million, an amount underwritten by more than 25 banks. Trevi was sailing into the perfect storm. 

In light of the negative shareholders’ equity, limited liquidity and high financial leverage, at year’s end 2017 Trevi management started hammering out possible solutions to get the Group back on solid footing again. In doing so, a new business plan was presented centering on developing engineering activities, with Oil and Gas Division no longer sitting at the Group’s strategic core. In the months of discussion that followed, the Board of Directors explored several alternative solutions, onboarding new third-party investors along the way. In the end, after nearly two long years of negotiations, the Group managed to finalize an out-of-court financial restructuring, according to the provisions of Article 182-bis of the Italian Insolvency Law, ensuring going concern status. In May 2019, the Board issued a press release announcing the approval of an autonomous restructuring solution.  

But that wasn’t the end of the story.  

 
Just a few weeks after this announcement, it became clear that the controlling shareholders (the Trevisani family) wouldn’t have the cash they needed to subscribe their stake of the capital increase, so they would be excluded from the restructuring operation. 

It was one year later, in May 2020, that Trevi announced the successful completion of the share issuance for €130 million, of which €88 million in cash consideration (paid by FSI and Polaris, who stepped in for the Trevisani family, as per their commitment in the restructuring agreement), and €42 million subscribed by converting financial receivables. At the same time, a capital increase of approximately €21 million was reserved for lending banks by converting the loans they held for the Group. Following the implementation of the restructuring agreement and the finalization of the share capital increase and the debt conversion, Trevifin SpA informed the market that its final shareholder group consisted of FSI Investimenti SpA (25.67%), Polaris Capital Management LLC (25.67%), banks and financial institutions that took part in the restructuring (41.85%), with other investors holding the remaining shares (6.81%). 

The unique feature of this case is that the restructuring operation was the outcome of a long process set in motion by the Trevi Group to explore a series of alternative solutions. Also involved in this process were new third-party investors who were willing to inject new money, in various forms and under specific conditions and commercial terms.