Italy to deploy 20bn euros in 2021 for fund for virus-hit firms

ROME: Italy will supply around 20 billion euros ($24 billion) in firepower in 2021 to a new equity fund tasked with helping businesses weakened by the pandemic, the Treasury said.

The new fund, dubbed "Patrimonio Rilancio", will be financed through dedicated debt issues and operate as a special purpose vehicle managed by state investor Cassa Depositi e Prestiti (CDP), which is 83% controlled by the Treasury.

CDP will use the 20 billion euros in bonds issued by the Treasury as collateral to raise liquidity on the market.

The 170-year-old CDP is playing an increasingly active role in Italy Inc to keep strategic assets in national hands and mitigate the economic damage caused by the COVID crisis.

The Treasury has pencilled in 24.5 billion euros in debt issues linked to Patrimonio Rilancio this year but it will use part of the money for a different purpose - buying export agency SACE from CDP, in a deal worth 4.25 billion euros.

Bond issues linked to Patrimonio Rilancio will total another 19.5 billion euros in the following two years, the Treasury said in its Economic and Financial Document (DEF) officially published on Friday.

Italy's public debt, proportionally the highest in the euro zone after Greece, reached a record 155.6% of GDP at the end of 2020 and the DEF forecasts it will climb to 159.8% this year, the highest level in Italy's post-war history.

The timing of the bond issuance will hinge on the fund's capital injection deals, with the size of a first tranche to be set by a decree the Treasury is drafting, sources have said.

The fund, which has a 12-year time span for its investments, targets businesses in acute difficulties with revenues of more than 50 million euros.

The support will be provided through capital injections, bonds that convert into shares or subordinated debt, which ranks below senior debt when it comes to repayment.

CDP can also use the fund's money to support healthier companies alongside private investors, as well as buy stakes in listed companies deemed of strategic importance.