Italian engineering firm hires Lazard to restructure derivatives

Italian engineering company Cimolai SpA has hired advisers at Lazard Ltd. to help it restructure derivatives that have soured in recent months due to steep losses for the euro.

Privately owned Cimolai appointed a US investment bank, specialized in advising troubled companies, to assist in an overhaul of its liabilities linked to derivatives, according to people familiar with the matter who asked not to be named because the details are private.

A representative for Cimolai wouldn't say anything about the appointment. A spokesman for Lazard wasn't available to comment.

The company was exposed to derivatives tied to the euro-dollar rate called targeted accrual forwards, or TARFs, according to its latest available financial accounts. The bets went south as the euro fell against the dollar, with the common currency hitting parity for the first time in nearly two decades. The euro is now weaker than the U.S. dollar.

The company has used the derivatives to reduce its currency risk on its overseas projects, including a 60,000 seater stadium built for this year s FIFA World Cup in Qatar, the new Las Vegas Raiders stadium and the Perelman Performing Arts Center in New York. The group had $70 million of outstanding TARFs as of the end of 2020, and at least $230 million in 2019 according to the latest available data.

Cimolai designs and builds steel structures for bridges, buildings, arenas and even a weapons storage facility. The firm had 233 million $227 million of loans with Italian banks, including UniCredit SpA and Intesa Sanpaolo SpA at the end of 2020, according to its accounts. In 2021, it had revenues of €421 million, according to its website.

TARFs are a cheap way for investors to protect themselves against currency moves but also expose themselves to possible losses. The products were the focus of a scandal that saw Deutsche Bank AG look at the activities of bankers selling derivatives to corporate clients in Southern Europe, particularly Spain.