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The Extraordinary Administration of Alitalia

By Law Decree dated 2 May 2017 the Italian Minister for the Economic Development submitted Alitalia (the former Italian flag airline) to the extraordinary administration procedure pursuant to Law 39/2004.

On 11 May the competent Court (the Court of Civitavecchia) declared the insolvency of Alitalia. The insolvency was the consequence of the failure of the merger between Alitalia and Etihad, the UAE air carrier from Abu Dhabi.

By the same Law Decree the Minister appointed three extraordinary commissioners to lead the company throughout the procedure.

The main purpose of the extraordinary administration is to implement a recovery plan meant to preserve the employment levels by way of three alternative solutions: (i) the financial restructuring of the company; (ii) the sale of the business as a whole, implying the continuation of the activity; (iii) the sale of the business, assets and contracts part by part, with the continuation of the activity as well.

On 17 May 2017 the commissioners published a call for the expressions of interest from any prospective bidders, who shall at first comply with financial and honourability requirements to be eligible for the acquisition of Alitalia's business, as well as meet the EU nationality requirement set out by Regulation EC 1008/2008 (i.e. more than 50% of a EU licensed air carrier must be owned by nationals of a Member State).

The timeframe to submit expressions of interest has expired on 5 June 2017 and, based on unofficial information spread by the Italian media, the Commissioners have received more than 30 expressions of interest, either for the entire aviation business or for a portion thereof (e.g. specific aircraft, contracts, slots etc.). According to rumours inside the air transport industry the prospective bidders may include major international airlines still being competitors of the target company at this time, such as Delta Air Lines, Air France, British Airways, Turkish Airlines, Air China and Ryanair, in addition to private equity firms like TPG, Cerberus and Indigo Partners.

Following a detailed evaluation of the various expressions of interest – with a main focus on the economic offer and proposed preservation of the employment levels – the Commissioners have selected 15 entities eligible to take part to the second phase of the procedure. Accordingly from 26 June to 21 July 2017 the selected entities have been granted access to a data room of Alitalia, in order to carry out the necessary due diligence and then decide as to whether a potential purchase may be of interest. The data room did not contain sensitive and confidential information that may bring undue advantages to Alitalia's competitors.

On 21 July 2017 the first part of the due diligence process has come to a conclusion. Thereafter, on 1 August 2017 the Commissioners have issued a call for the submission of non-binding offers that shall relate either to: (a) the entire business of Alitalia (including aviation, maintenance and handling); or (b) the aviation business (including maintenance activities); or (c) the airport ground handling business. The call has also clarified that the commissioners will give preference to the offers relating to the entire business of Alitalia. The deadline to submit non-binding offers is 15 September 2017. Afterwards, the next steps have been fixed as follows: (1) within 10 business days the commissioners will communicate the admitted bidder(s) to the second part of the due diligence; (2) within 2 October 2017 the binding offer(s), if any, shall be submitted to the commissioners; and (3) within 5 November 2017 the prospective final phase consisting of negotiating and/or enhancing the binding offers shall be concluded. Based on the above mentioned deadlines it appears that the purpose of the commissioners is to finalize the sale of Alitalia's business (either entirely or part by part) by the end of 2017.