Byline: Miles Costello
A large slice of the Italian debt market could be wiped out if a radical new set of proposals tabled before parliament last week by Consob, the country's market regulator, become enshrined in securities legislation.If adopted, Consob's proposals would prevent many Italian companies from using the new issue bond market in the country and hit the fee income of active international bookrunning investment banks, such as Lehman Brothers, Credit Suisse First Boston and Deutsche Bank.
Lehman is the number one bookrunner in the Italian league table, running nearly [euro]7.9bn ($10bn) of new debt deals for 44 issuers last year and holding a 10% share of the market, according to Dealogic, the data provider.
Institutional and retail investors would also find themselves potentially short of new bonds for their portfolios and domestic lead managers, such as Banca Intesa, Unicredit Banca Mobiliare and Banca IMI SpA, could lose out on underwriting fees if new market rules are applied.
Although Italian bankers sought to play down any potential harm to their market, one senior source said: "Sentiment is very unsettled at the moment. We are waiting to see the details of what the new regulations or regulator will be. It will be a while before we know whether the market has been really harmed by this."
Chief among Consob's proposals, laid out last week by chairman Lamberto Cardia before a parliamentary hearing in Rome, is that it should ban all Italian companies without a credit rating from selling bonds to the Italian public.
Up to 80% of new bonds issued in Italy last year were unrated, according to sources in Italy.
As part of a 21-page plan to crack down on the Italian securities market in the wake of the scandal gripping Parmalat, the collapsed dairy group, Consob said: "The circulation of corporate bonds to the public should only be allowed if a ratings valuation is undertaken by an independent agency."
While Parmalat was rated by international rating agency Standard & Poor's, Cirio, the Italian food group that defaulted on its bonds in November 2002, was not rated by any agency. …