Cimolai SpA, the Italian building firm trying to avoid collapse after suffering severe losses on currency derivatives, wants to ease the pain of its many creditors at the expense of broker JB Drax Honore.
(Bloomberg) — Cimolai SpA, the Italian building firm trying to avoid collapse after suffering severe losses on currency derivatives, wants to ease the pain of its many creditors at the expense of broker JB Drax Honore.
The troubled Italian engineering firm is seeking to write down about €500 million ($529 million) of unsecured debt by as much as 85% in a court restructuring process. Creditors including multiple banks and brokers will receive more, however, if Cimolai is successful in a legal claim against JB Drax, which the company alleges mis-sold it some of the currency derivatives, the filings show.
The family-owned company, whose projects include bridges, buildings, stadiums and the confinement structure for the Chernobyl nuclear power plant, filed for court protection in Trieste in October following its failure to meet payments and margin calls on derivative contracts after the euro dropped to a 20-year low against the dollar in September.
Since then, Cimolai has been locked in a legal battles with its banks and brokers, including JB Drax, which is the biggest counterpart on those derivative contracts. The broker seized €81 million of collateral and then filed a lawsuit in London alleging it’s owed €13 million because Cimolai defaulted or terminated some of these contracts. Cimolai is now looking to file counter claims against the broker, arguing it wasn’t equipped to understand the pricing of these complex financial instruments, the filings show.
“The company wasn’t able to and couldn’t in any way verify the mark-to-market,” Cimolai said, referring to industry jargon for an asset’s current market price. It couldn’t “estimate the probability curve of each contract to truly understand the intrinsic risk and its adequacy.”
Brokers Pursue Cimolai for Millions in Sprawling Legal Battle
A spokesperson for Cimolai declined to comment.
“We stand by our claim against Cimolai which was filed in the English Court at the end of last year,” said a representative for JB Drax. “Cimolai is yet to serve a defence to the claim.”
Under the restructuring plan, unsecured creditors will also receive an instrument tied to the performance of the business, which could add compensation equal to 15% of the loans’ face value.
As part of its restructuring plan filed with the courts on Feb. 20, Cimolai’s operating company will shift its activities to a newly created unit. The company could revisit the current proposal if it finds a new investor willing to inject new capital.
The filings also show Cimolai’s liabilities with an array of banks and brokerages. While Bloomberg has previously revealed the amounts owed to JB Drax, Macquarie and some others, the documents show debts of nearly €20 million for Deutsche Bank AG and almost €12 million for NatWest Group Plc.
Here’s the full list of Cimolai’s derivatives liabilities and counterparts, according to the filings:
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