Italian Auto Supplier PSC Engages in Debt Restructuring Talks Amid Macroeconomic Challenges

Key Takeaway

• Italian auto supplier PSC is in talks to restructure over €300 million ($324 million) in bank debt, with Rothschild & Co. advising.
• PSC's financial strain stems from macroeconomic challenges like the pandemic, chip shortages, and rising inflation and energy costs.
• Asset-backed securities (ABS) market sees growth; US ABS sales hit $170 billion YTD, driven by auto loan securitizations.

Debt Restructuring Talks

Italian auto supplier Prima Sole Components SpA (PSC) is currently engaged in discussions with its bank lenders to address its debt structure. The company, which manufactures plastic parts for vehicles and household appliances, is looking to rework over €300 million ($324 million) in bank debt, some of which matures this year, according to sources familiar with the matter who spoke to Bloomberg on the condition of anonymity. PSC is collaborating with bankers at Rothschild & Co. to navigate this financial restructuring.

At the end of 2022, PSC had nearly €350 million in bank debt, as per its latest annual report. The company's most significant obligation is a €205 million loan extended in 2021 by banks including Intesa Sanpaolo SpA, BNP Paribas SA, and Unicredit SpA, which is 90% guaranteed by state-backed SACE SpA. This loan is due in 2027 and was scheduled to begin quarterly amortization payments at the end of 2023. Additionally, PSC has bilateral credit lines with various lenders, some of which are due this year and next, and a €12 million financing underwritten by Anthilia Capital Partners.

A representative for PSC did not respond to a request for comment, and representatives for Rothschild, Intesa, BNP, and Unicredit either declined to comment or did not respond.

Macroeconomic Challenges

PSC has faced several macroeconomic challenges over the past few years, impacting the auto supplier sector. The company has had to navigate the effects of the coronavirus pandemic, a global chip shortage, Russia’s invasion of Ukraine, and surging inflation and energy costs. These factors have collectively strained the company's financial health and operational stability.

The company is owned by a holding company of the Stirpe family, based in Frosinone, Italy. The Stirpe family also owns the local soccer club, Frosinone Calcio. At the end of 2022, PSC reported €901 million in annual revenues and employed over 4,000 people globally, according to a report on its website.

Asset-Backed Securities Market

In a related financial development, banks are increasingly turning to the asset-backed securities (ABS) market to manage their loan portfolios. The latest round of global capital rules, known as Basel III endgame, is expected to make certain loans more expensive for banks to retain. As a result, lenders are bundling more auto loans, equipment leases, and other types of debt into ABS.

In the US, ABS sales have reached $170 billion this year, up about 38% from the same period in 2023, according to Bloomberg data. Europe has seen similar growth, with issuance at approximately €21 billion ($22.9 billion) this year, up about 35% from the same point last year. Bank of America strategists recently raised their full-year US sales predictions for ABS to about $310 billion, primarily due to auto loan securitizations.

"We see attractive opportunities in asset-backed securities, particularly those linked to US households," said Kay Herr, JPMorgan Asset Management’s chief investment officer for US fixed income, in the Credit Edge podcast. "We absolutely see opportunities for yield pickup there."