Moody’s has downgraded Deoleo’s rating following the 89 million fine imposed in Italy for alleged non-payment of tariffs. The reduction, from ‘B3’ to ‘Caa1’, occurs in the midst of the company’s refinancing process. “If this decision stands, it has the potential to weaken Deoleo’s financial profile, despite the uncertainty over the timing and conditions of such payment,” said Valentino Balletta, ratings analyst at Moody’s.
The agency also maintains the ‘negative’ outlook, highlighting the risk and uncertainty surrounding the ruling, which could materially harm the company’s credit metrics and weaken its liquidity, as well as the increased risk of refinancing its debt maturities. Moody’s warns, in a special way, about the company’s ability to meet its debt maturities in 2025 and 2026 and points out that Deoleo will have weak liquidity during the next 12 months, taking into account the increased risk to be able to close the refinancing of its senior secured loan for 58 million euros and its fully drawn working capital line for 20 million euros, which They expire in June 2025.
The worst thing for the company is that Further downgrades could occur if the liquidity position worsens. Deoleo announced in June that it had begun negotiations to refinance the 160 million that mature in 2025, with indicative offers on the table and is confident of being able to close an agreement in the coming weeks.
Deoleo, which does not have any provision to face the fine, had a purchasing center in Switzerland that purchased the raw material, which was then processed in Italy and exported outside the European Union from the Swiss country. In accordance with community regulation, the company defends that it did not have to pay tariffs, something that is opposed by Italy, which understands that the subsidiary in this country is not an autonomous entity. “The argument put forward by the Customs Office about the necessary autonomy in decision-making by Carapelli International is not based on either Italian customs regulations or those of the European Union, and there are no judicial precedents in the European Union in line with the arguments used,” said the oil company in a relevant fact sent to the CNMV on November 21.
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