Manutencoop bonds fall on contract cancellation alert

February 10, 2016   

LONDON: Manutencoop Facility Management SpA’s bonds fell after the Italian cleaning company told noteholders it may lose a major contract because of a competition investigation. The company’s 345 million euros ($386 million) of 8.5 per cent bonds due August 2020 dropped 23 cents on the euro to a record-low 56 cents, according to data compiled by Bloomberg. The decline pushed the yield on the notes up to 25 per cent, the data show.

State-run Consip SpA is seeking to end a school-cleaning contract with Manutencoop, and may exclude it from future tenders, the Bologna-based company said in a statement e-mailed to bondholders Monday and obtained by Bloomberg.

That’s after the Italian Competition Authority said it will fine Manutencoop 48.5 million euros for flouting competition rules when it bid for the work.

“Consip is a very major customer and the potential inability to bid for contracts would substantially impair Manutencoop’s business,” said Felix Fischer, a credit analyst at independent research provider Lucror Analytics in Singapore.

Officials at the company didn’t immediately respond to an e-mail seeking comment on the statement to bondholders. The company is appealing against the ruling, according to the statement. Moody’s Investors Service downgraded the company one step to B3 earlier this month, six levels below investment grade, saying the fine could put a strain on Manutencoop’s liquidity.