Bond Covivo SA 2.125% ( XS1209112793 ) in EUR

Issuer Covivo SA
Market price 100 %  ⇌ 
Country  France
ISIN code  XS1209112793 ( in EUR )
Interest rate 2.125% per year ( payment 1 time a year)
Maturity 29/03/2022 - Bond has expired



Prospectus brochure of the bond Covivio S.A XS1209112793 in EUR 2.125%, expired


Minimal amount 100 000 EUR
Total amount 125 000 000 EUR
Detailed description Covivio S.A. is a leading European real estate investment trust (REIT) specializing in the development and management of office, hotel, and residential properties across major European cities.

The Bond issued by Covivo SA ( France ) , in EUR, with the ISIN code XS1209112793, pays a coupon of 2.125% per year.
The coupons are paid 1 time per year and the Bond maturity is 29/03/2022








Beni Stabili S.p.A. Siiq
(incorporated with limited liability under the laws of the Republic of Italy)
125,000,000
2.125 per cent. Notes due 30 March 2022
The issue price of the 125,000,000 2.125 per cent. Notes due 2022 (the "Notes") of Beni Stabili S.p.A. Siiq (the "Issuer" or "Beni
Stabili") is 99.672 per cent. of their principal amount.
Unless previously redeemed or cancelled, the Notes will be redeemed at their principal amount on 30 March 2022. The Notes are
subject to redemption, in whole but not in part, at their principal amount, plus interest, if any, to the date fixed for redemption in the
event of certain changes affecting taxation in the Republic of Italy and at the Make Whole Amount (as defined in Condition 6) at the
option of the Issuer at any time. In addition, the holder of a Note may, by the exercise of the relevant option, require the Issuer to
redeem or, at the Issuer's option, purchase such Note at 100 per cent. of its principal amount together with accrued and unpaid interest
(if any) to (but excluding) the Put Date upon the occurrence of a Put Event (each as defined below). See "Terms and Conditions of the
Notes -- Redemption and Purchase".
The Notes will bear interest from (and including) 30 March 2015 (the "Issue Date") at the rate of 2.125 per cent. per annum. Interest
on the Notes will be payable annually in arrear on 30 March in each year. Payments on the Notes will be made in Euro without
deduction for or on account of taxes imposed or levied by the Republic of Italy to the extent described under "Terms and Conditions of
the Notes ­ Taxation".
The Notes will constitute senior, unsecured obligations of the Issuer which will at all times rank pari passu among themselves and at
least pari passu with all other present and future unsecured obligations of the Issuer, save for certain mandatory exceptions of
applicable law.
The prospectus (the "Prospectus") has been approved by the Central Bank of Ireland (the "Central Bank"), as competent authority
under Directive 2003/71/EC, as amended (including by Directive 2010/73/EU, to the extent that such amendments have been
implemented in a relevant member state of the European Economic Area) (the "Prospectus Directive"). The Central Bank only
approves this Prospectus as meeting the requirements imposed under Irish and EU law pursuant to the Prospectus Directive.
Application has been made to the Irish Stock Exchange plc (the "Irish Stock Exchange") for the Notes to be admitted to the official
list of the Irish Stock Exchange (the "Official List") and trading on its regulated market ("Main Securities Market"). The Main
Securities Market is a regulated market for the purposes of Directive 2004/39/EC. Such approval relates only to the Notes which are
to be admitted to trading on the Main Securities Market or other regulated markets for the purposes of Directive 2004/39/EC or which
are to be offered to the public in any member state of the European Economic Area. This Prospectus (together with the documents
incorporated by reference herein) is available for viewing on the website of the Irish Stock Exchange.
This Prospectus is a prospectus for the purposes of Article 5.3 of the Prospectus Directive.
The Notes have not been, and will not be, registered under the United States Securities Act of 1933, as amended (the "Securities Act")
and are subject to United States tax law requirements. The Notes are being offered outside the United States by the Sole Underwriter
(as defined below) in accordance with Regulation S under the Securities Act ("Regulation S"), and may not be offered, sold or
delivered within the United States or to, or for the account or benefit of, U.S. persons except pursuant to an exemption from, or in a
transaction not subject to, the registration requirements of the Securities Act. For a description of certain restrictions on transfers of
the Notes, see "Subscription and Sale".
Investing in the Notes involves risks. See "Risk Factors" beginning on page 2 of this Prospectus for a discussion of certain risks
prospective investors should consider in connection with any investment in the Notes.
The Notes will be in bearer form in the denomination of 100,000 each and, for so long as the Notes are represented by a Global Note
(as defined below) and Euroclear Bank SA/NV ("Euroclear") and Clearstream Banking, société anonyme ("Clearstream,
Luxembourg") (or other relevant clearing system) allow, in denominations of 1,000 in excess of 100,000, up to and including
199,000. The Notes will initially be in the form of a temporary global note (the "Temporary Global Note"), without interest
coupons, which will be deposited on or around the Issue Date with a common safekeeper for Euroclear and Clearstream, Luxembourg.
The Temporary Global Note will be exchangeable, in whole or in part, for interests in a permanent global note (the "Permanent
Global Note", and together with the Temporary Global Note, each a "Global Note"), without interest coupons, not earlier than
40 days after the Issue Date upon certification as to non-U.S. beneficial ownership. Interest payments in respect of the Notes cannot
be collected without such certification of non U.S. beneficial ownership. The Permanent Global Note will be exchangeable in certain
limited circumstances in whole, but not in part, for Notes in definitive form in principal amounts equal to 100,000 and integral
multiples of 1,000 in excess thereof, up to and including 199,000, each with interest coupons attached. No Notes in definitive form
will be issued with a denomination above 199,000. See "Overview of Provisions Relating to the Notes in Global Form".
SOLE UNDERWRITER
Morgan Stanley
Prospectus dated 27 March 2015



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IMPORTANT NOTICES
This document comprises a prospectus for the purposes of Article 5.4 of the Prospectus Directive and for the
purpose of giving information with regard to the Issuer, the Issuer and its subsidiaries and affiliates taken as a
whole (the "Group" or the "Beni Stabili Group") and the Notes which according to the particular nature of
the Issuer and the Notes, is necessary to enable investors to make an informed assessment of the assets and
liabilities, financial position, profit and losses and prospects of the Issuer.
The Issuer accepts responsibility for the information contained in this Prospectus. To the best of the
knowledge of the Issuer (which has taken all reasonable care to ensure that such is the case), the information
contained in this Prospectus is in accordance with the facts and contains no omission likely to affect the
import of such information.
The Issuer has confirmed to Morgan Stanley & Co. International plc (the "Sole Underwriter") that this
Prospectus contains or incorporates all information regarding the Issuer, the Group and the Notes which is (in
the context of the issue and offering of the Notes) material; such information is true and accurate in all
material respects and is not misleading in any material respect; any opinions, predictions or intentions
expressed in this Prospectus on the part of the Issuer or the Group are honestly held or made and are not
misleading in any material respect; this Prospectus does not omit to state any material fact necessary to make
such information, opinions, predictions or intentions (in such context) not misleading in any material respect;
and all proper enquiries have been made to ascertain and to verify the foregoing.
No representation, warranty or undertaking, express or implied, is made and no responsibility or liability is
accepted by the Sole Underwriter, BNP Paribas Trust Corporation UK Limited as trustee (the "Trustee") or
BNP Paribas Securities Services, Luxembourg Branch, as principal paying agent (the "Principal Paying
Agent") as to the accuracy or completeness of the information contained in this Prospectus or any other
information provided by the Issuer in connection with the Notes or their distribution.
This Prospectus is to be read in conjunction with all documents which are deemed to be incorporated herein
by reference (see "Information Incorporated by Reference"). This Prospectus should be read and construed
on the basis that such documents are incorporated in and form part of this Prospectus.
Investors should rely only on the information contained in this Prospectus. The Issuer has not authorised
anyone to provide investors with different information. The initial purchasers are not and the Issuer is not
making any offer of the Notes in any jurisdiction where the offer is not permitted. You should not assume that
the information contained in this Prospectus is accurate as of any date other than the date on the cover of this
Prospectus regardless of the time of delivery of this Prospectus or of any sale of the Notes.
The Issuer has not authorised the making or provision of any representation or information regarding the
Issuer or the Notes other than as contained in this Prospectus or as approved for such purpose by the Issuer.
Any such representation or information should not be relied upon as having been authorised by the Issuer or
the Sole Underwriter.
Neither the delivery of this Prospectus nor the offering, sale or delivery of any Note shall in any circumstances
create any implication that the information contained herein concerning the Issuer and/or its Group is correct
at any time subsequent to the date hereof or that any other information supplied in connection with the
offering of the Notes is correct as of any time subsequent to the date indicated in the document containing the
same or that there has been no adverse change, or any event reasonably likely to involve any adverse change,
in the condition (financial or otherwise) of the Issuer and/or its Group since the date of this Prospectus.
Neither this Prospectus nor any other information supplied in connection with the offering, sale or delivery of
any Note (a) is intended to provide the basis of any credit or other evaluation or (b) should be considered as a
recommendation by the Issuer or the Sole Underwriter that any recipient of this Prospectus should purchase
any Note. Each investor contemplating purchasing any Note should make its own independent investigation
of the financial condition and affairs, and its own appraisal of the creditworthiness, of the Issuer and the
Group. Neither this Prospectus nor any other information supplied in connection with the issue of the Notes
constitutes an offer or invitation by or on behalf of the Issuer or the Sole Underwriter to any person to
subscribe for or to purchase any Notes.
This Prospectus does not constitute an offer of, or an invitation to subscribe for or purchase, any Notes.

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Each recipient of this Prospectus shall be taken to have made its own investigation and appraisal of the
condition (financial or otherwise) of the Issuer and the Group and of the rights attaching to the Notes.
The distribution of this Prospectus and the offering, sale and delivery of Notes in certain jurisdictions may be
restricted by law. Persons into whose possession this Prospectus comes are required by the Issuer and the
Sole Underwriter to inform themselves about and to observe any such restrictions. For a description of certain
restrictions on offers, sales and deliveries of Notes and on distribution of this Prospectus and other offering
material relating to the Notes, see "Subscription and Sale".
In particular, the Notes have not been, and will not be, registered under the Securities Act and are subject to
United States tax law requirements. Subject to certain exceptions, Notes may not be offered, sold or delivered
within the United States or to U.S. persons.
In this Prospectus, unless otherwise specified, references to a "Member State" are references to a Member
State of the European Economic Area and references to "", "EUR" or "Euro" are to the currency introduced
at the start of the third stage of European economic and monetary union, and as defined in Article 2 of Council
Regulation (EC) No 974/98 of 3 May 1998 on the introduction of the euro, as amended. References to
"billions" are to thousands of millions.
This Prospectus is drawn up in the English language. In case there is any discrepancy between the English
text and the Italian text, the English text stands approved for the purposes of approval under the Prospectus
Directive. Certain legislative references and technical terms have been cited in their original language in
order that the correct technical meaning may be ascribed to them under applicable law.
Certain figures included in this Prospectus have been subject to rounding adjustments; accordingly, figures
shown for the same category presented in different tables may vary slightly and figures shown as totals in
certain tables may not be an arithmetic aggregation of the figures which precede them.
In compliance with the requirements of the Irish Stock Exchange, this Prospectus is available on the website
of the Irish Stock Exchange (www.ise.ie).
Forward-looking statements
This Prospectus may contain forward-looking statements, including (without limitation) statements identified
by the use of terminology such as "anticipates", "believes", "estimates", "expects", "intends", "may", "plans",
"projects", "will", "would" or similar words. These statements are based on the Issuer's current expectations
and projections about future events and involve substantial uncertainties. All statements, other than
statements of historical facts, contained herein regarding the Issuer's strategy, goals, plans, future financial
position, projected revenues and costs or prospects are forward-looking statements. Forward-looking
statements are subject to inherent risks and uncertainties, some of which cannot be predicted or quantified.
Future events or actual results could differ materially from those set forth in, contemplated by or underlying
forward-looking statements. The Issuer does not undertake any obligation to publicly update or revise any
forward-looking statements.
Market share information and statistics
This Prospectus contains information and statistics regarding the market share of the Beni Stabili Group,
which are derived from, or are based upon, the Issuer's analysis of data obtained from the sources set out in
the footnotes to the chapter "Description of the Issuer" below. Such data has been reproduced accurately in
this Prospectus and, as far as the Issuer is aware and is able to ascertain from information published by such
entities, no facts have been omitted which would render such reproduced information inaccurate or
misleading. Although the Issuer believes that the external source used is reliable, the Issuer has not
independently verified the information provided by the source. Furthermore, this Prospectus contains
statements regarding the Issuer's industry and its relative competitive position in the industry that are not
based on published statistical data or information obtained from independent third parties, but are based on the
Issuer's experience and its own investigation of market conditions, including its own elaborations of such
published statistical or third-party data. Although the Issuer's estimates are based on information obtained
from its customers, sales force, trade and business organisations, market survey agencies and consultants,
government authorities and associations in its industry which it believes to be reliable, there is no assurance

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that any of these assumptions are accurate or correctly reflect the Issuer's position in the industry. None of
the Issuer's internal surveys or information have been verified by independent sources.


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TABLE OF CONTENTS
RISK FACTORS .................................................................................................................................................. 2
INFORMATION INCORPORATED BY REFERENCE .................................................................................. 14
TERMS AND CONDITIONS OF THE NOTES ............................................................................................... 16
OVERVIEW OF PROVISIONS RELATING TO THE NOTES IN GLOBAL FORM .................................... 33
USE OF PROCEEDS ......................................................................................................................................... 35
DESCRIPTION OF THE ISSUER .................................................................................................................... 36
TAXATION ....................................................................................................................................................... 59
SUBSCRIPTION AND SALE ........................................................................................................................... 66
GENERAL INFORMATION ............................................................................................................................ 68




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RISK FACTORS
Any investment in the Notes is subject to a number of risks. Prior to investing in the Notes, prospective
investors should carefully consider risk factors associated with any investment in the Notes, the business of
the Issuer and its consolidated subsidiaries (together the "Group" or the "Beni Stabili Group") and the
industry in which it and the Group operates together with all other information contained in this Prospectus,
including, in particular, the risk factors described below. Words and expressions defined in the "Terms and
Conditions of the Notes" below or elsewhere in this Prospectus have the same meanings in this section.
The following is not an exhaustive list or explanation of all risks which investors may face when making an
investment in the Notes and should be used as guidance only. Additional risks and uncertainties relating to
the Issuer that are not currently known to the Issuer or that it currently deems immaterial, may individually or
cumulatively also have a material adverse effect on the business, prospects, results of operations and/or
financial position of the Issuer and/or its Group and, if any such risk should occur, the price of the Notes may
decline and investors could lose all or part of their investment. Investors should consider carefully whether
an investment in the Notes is suitable for them in light of the information in this Prospectus and their personal
circumstances.
Factors that may affect the Issuer's ability to fulfil its obligations under the Notes
Risks relating to the Beni Stabili Group
If the international real estate market continues to perform badly, it may have a negative effect on the
Group's asset values.
The Italian and international real estate markets are subject to cyclical trends and are influenced by a series of
macroeconomic factors. Market demand and supply are affected by, amongst other things, general economic
conditions, interest rate fluctuations, inflation trends, tax regimes, market liquidity and alternative investment
opportunities.
In the last few years the Italian real estate market has been negatively affected by the difficult European
economic situation, resulting in pressure on real estate values and depressed conditions in the investment
markets in general. Despite this, the Beni Stabili Group's operating results in 2014, setting aside
extraordinary and non-monetary items, were positive and its financial structure was reinforced. However, the
variation of the fair market value of the Group's property assets as a result of the ongoing crisis in the Italian
and international property markets has resulted in write-downs in recent years.
As such, despite good performance of the Group's operational activities and its savings on operating costs, in
2014 the Group recorded a loss of 231.605 million, due to specific extraordinary events, such as i) the early
repayment of loans and related hedging instruments, the most significant of which was related to the
refinancing of the Imser 60 securitisation, representing a cost of 172.445 million (net of the related tax
effect), ii) the introduction of the tax exemption system to the profit/(loss) on disposal of properties held for
leasing, introduced by the so-called "Decreto Sblocca Italia", which resulted in the cancellation of deferred tax
assets of 62.191 million, and iii) other extraordinary adjustments to valuations (write-downs of some
receivables and investments) and non-cash items (fair value recognition of the convertible bond option),
which involved the recognition of additional costs of 47.02 million. Further, both the 2013 and the 2014
results were affected by write-downs, in particular write-downs of 82.1 million in 2013 (representing a
decrease of 1.92 per cent. of the value of the Group's assets accounted for in the financial statements before
write-downs) and write-downs of 10.8 million in 2014 (representing a decrease of 0.26 per cent. of the value
of the Group's assets accounted for in the financial statements before write-downs). The write-downs in 2013
were still partly related to the negative impact of the amendments to the "IMU" (municipal tax, formerly ICI)
tax regime introduced in Italy during the year 2012 and partly related to the general uncertainty and volatility
of the real estate market, which negatively affected the value of certain real estate assets. The IMU tax was
introduced in 2012 and is a wealth tax due yearly, which is payable by owners of real estate assets or rights
located in Italy. The IMU ordinary rate is 0.76 per cent., which may be increased or decreased by 0.3 per cent.
by the relevant municipality, which applies to the official value of the relevant real estate asset/right in the
relevant register (i.e., the "valore catastale"). Pursuant to the Italian "2014 financial law", starting from 2014
the owners of real estate assets located in Italy are subject to a new municipal service tax (known as "TASI")
that, subject to certain conditions and within certain limitations, is levied in addition to the IMU tax at an
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ordinary rate of 0.1 per cent., which ­ for the year 2014 and, pursuant to the Italian "2015 financial law", also
for the year 2015 ­ may be decreased or increased by the relevant municipalities within the following limits:
(i) the TASI rate cannot exceed 0.25 per cent., and (ii) the rate of IMU added to the rate of TASI cannot
exceed 1.06 per cent. However, for the same years 2014 and 2015, the limits described under points (i) and
(ii) above may be exceeded up to an overall amount of 0.08 per cent. by the relevant municipalities.
Considering all the above, the Group cannot assure investors that further write-downs or extraordinary
adjustments, either as a result of the applicable tax regime, which could also be subject to further changes in
the future, or as a result of further difficulties in the real estate markets in general, will not occur.
Although the Group pursues an investment strategy aimed at minimising the impact of the economic cycle, an
extended period of economic downturn, such as that experienced in the current Eurozone crisis, or the
occurrence of other factors that negatively impact real estate values could have an adverse effect on the
Group's financial condition and results of operations.
The geographical concentration of the Group's property assets may have a negative impact on its business.
The Group operates wholly in the Italian market, with its property assets concentrated primarily in northern
Italy, and is therefore particularly exposed to the trends of the local economy.
As at 31 December 2014, approximately 76 per cent. of the Core Portfolio properties owned by the Issuer
were located in northern Italy, and especially in the Milan metropolitan area (approximately 47 per cent.). The
second largest city in terms of concentration is Rome where, as at 31 December 2014, 9 per cent. of the Core
Portfolio properties were located. Furthermore, 91 per cent. of the portfolio is composed of office properties
whereas 9 per cent. of the portfolio is composed of retail properties.
Consequently, the Group's results of operations and the value of its property portfolio could be negatively
affected by a worsening of the local economy or of the local real estate market in the Italian cities where the
Group's real estate assets are concentrated. This exposes the Group to specific local risks in relation to
changes in the local economy and local politics and/or planning laws, which cannot easily be predicted and
which could have an adverse effect on the Group's financial condition and results of operations.
The Group is primarily dependent on a limited number of tenants for its rental revenues.
As at 31 December 2014, the Group's annual rental income generated from its top four tenants accounted for
approximately 74 per cent. of the Group's total rental revenues. Among these four main tenants (Telecom
Italia S.p.A., Intesa Sanpaolo S.p.A., Maire Technimont S.p.A. and the Italian public administration) Telecom
Italia alone accounted for approximately 54 per cent. of the Group's total rental income. The Issuer's
management, particularly in light of the current global economic and financial crisis which has caused
increasingly challenging times for the Group's clients, constantly monitors the creditworthiness of these main
tenants. Nonetheless, an extended period of economic downturn could result in a material breach of contract
by one or more of these or other tenants or a worsening of their creditworthiness or their capacity to fulfil their
rental obligations, which could have an adverse effect on the Group's financial condition and results of
operations.
The Group is exposed to credit risk arising from its commercial activity.
Credit risk represents the Group's exposure to potential losses that could be incurred if a counterparty fails to
meet its obligations. This risk arises primarily from economic and financial factors (i.e., where the
counterparty defaults on its obligations), as well as from factors that are technical, commercial, administrative
or legal in nature.
The Group's exposure to credit risk is due mainly to the concentration of its commercial relationships with
four major tenants (see "The Group is primarily dependent on a limited number of tenants for its rental
revenues" above).
Material defaults by major tenants or financial counterparties, or a significant increase in current default rates
by counterparties generally, could have an adverse effect on the Group's financial condition and results of
operations.
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As at 31 December 2014, receivables from tenants, before the related provision for write-downs, totalled
66.7 million (including receivables for invoices to be issued totalling 22.5 million, which were recorded
pursuant to the rules of IAS 17 in order to even out the overall contractual compensation over the term of the
lease). Of this amount, about 17.7 million was more than 12 months overdue. Moreover, the provision for
receivable write-downs as at 31 December 2014 totalled about 17.9 million.
For additional information on credit risk from the Issuer's business, see the 2014 Consolidated Financial
Statements, Paragraph 3.1 of the Notes to Financial Statements on page 103, which is incorporated by
reference in this Prospectus.
Credit recovery expectations are assessed on a position-by-position basis, taking into account existing validly
enforceable guarantees and opinions of external counsel in respect of any relevant recovery actions. The
operating and financial performance of the Group's more important tenants are monitored on an ongoing
basis, with bank sureties and guarantee deposits provided by tenants securing more than one quarter of the
aggregate amount of annual rentals as at 31 December 2014. However, assessments of creditworthiness are
based on the information available at the time and could be adversely affected by market or general economic
conditions, and could ultimately have a material adverse impact on the Group's financial condition and results
of operations.
The Group is exposed to fluctuating property values.
Since investment properties, properties held for sale and, where applicable, properties under development are
measured at fair value and the relative fluctuations are accounted for in the Group's income statement,
movements in property prices can have a significant impact on the Group's operating performance.
Furthermore, part of the Group's operating results derive from property trading, which is also significantly
influenced by property value trends and the volume of transactions. Rents and property values are cyclical in
nature, and are influenced by macroeconomic factors such as interest rates, liquidity and economic growth.
The Group's investment policy aims to minimise the impact of different stages of the cycle through a careful
selection of investments that offer long-term leases with creditworthy tenants, strategic locations in cities that
have a structural shortage of good quality office space and low vacancy rates. Purchases and sales of
properties in its trading portfolio are carefully monitored both to minimise risk and to exploit opportunities.
However, fluctuations in property values are largely out of the control of the Group and could have a material
adverse impact on the Group's financial condition and results of operations.
The Group's business and result of operations could be negatively affected by changes in the legislative,
regulatory and fiscal framework in Italy and at a European level.
The Group's activities are subject to a number of building, health and safety and planning legislation and
regulations (at both a national and regional level), environmental laws and regulations (at the European
Community level), landlord-tenant legislation, and specific tax regimes. There can be no assurance that
increased capital expenditure and operating costs resulting from future laws and regulations and amendments
to applicable tax rates and regimes will not adversely affect the Group's results of operations and financial
condition. The failure to comply with the requisite standards and regulations in relation to any particular
property may adversely affect such property's value and/or result in increased costs to be borne by the Group
in order to remedy such non-compliance, which in turn could have an adverse effect on the Group's financial
condition and results of operations.
The Group is currently involved in a number of disputes.
At the date of this Prospectus, Beni Stabili and other Group companies are parties to a number of legal and tax
disputes arising in the ordinary course of their activities (see the section headed "Description of the
Issuer - Litigation and contingencies", as well as pages from 151 to 159 of the audited consolidated annual
financial statements of the Issuer for the financial year ended 31 December 2014, incorporated by reference in
this Prospectus).
The Issuer is involved in a tax dispute with the Italian tax authorities regarding the sale of the entire
shareholding of Immobiliare Fortezza S.r.l. to the pension fund for the personnel of Banca Commerciale
Italiana (the "Comit Fund"). Following an appeal by the Italian Revenue Agency against the outcome of the
second level appeal, which was favourable to Beni Stabili, the Court of Cassation (Corte di Cassazione) is
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currently reviewing the lawfulness of the notice of settlement of the registration, mortgage and land taxes
issued by the Italian tax authorities. A negative outcome of these proceedings could result in the Issuer (which
is jointly liable with the Comit Fund), paying a total amount of approximately 115 million (plus interest
accrued during the proceedings) although it will only be possible to determine any final amount due by the
Issuer upon final judgement. Following the favourable outcome at the second instance of the proceedings in
the financial year 2011, the original risk fund provision of 42 million that had been set aside was released.
With regard to this dispute, it is also necessary to take into consideration that any payment obligations
pertaining to the Issuer, in the case of a possible adverse outcome in the tax judgment, could only be verified
and quantified at the outcome of the definition of relations, not currently defined, with the contractual
counterparty equally jointly and severally liable to the Treasury, namely the Comit Fund. It is still possible
that the Group may be required in the future to meet charges and payment obligations that are not covered by
the provision for legal and tax disputes, or that are not sufficiently covered, with resulting adverse effects on
the financial position and operating results of the Group.
The Group monitors the development of these proceedings, also with the help of external advisers and, where
necessary, has recorded provisions considered appropriate in light of the circumstances following a prudent
analysis of each dispute and the risks concerned. The evaluation of risks is, however, subjective and
necessarily involves estimations of potential liabilities. There can therefore be no assurance that the ultimate
outcome of these disputes will not have a material adverse impact on the Group's financial conditions and
results of operations.
The Group is dependent on a limited number of financing sources.
The future performance of the Group depends, among other things, on its ability to meet its payment
obligations and to make scheduled investments by using available operating cash flow and cash and by
turning to the capital markets or other sources of financing.
In order to meet its funding needs, the Group relies on short and medium-term credit facilities, long-term
mortgage loans and syndicated bank loans. The Group also raises debt financing in the capital markets
through bond issues and securitisation transactions. Mortgage loans to fund property purchases are structured
on the basis of the expected rental cash flows from the purchased property and taking into account operating
costs to be borne by the lessor.
Although the Group has been able to meet its funding requirements to date, there can be no assurance that it
will be able to secure additional debt or equity financing to fund its capital expenditure requirements or to
refinance its existing debts upon their maturity; or that it will be able to generate sufficient cash from
operations to meet its funding costs.
Borrowings used to finance the purchase of investment properties are structured on the basis of cash flows
generated by the underlying lease contracts, taking into account operating costs to be borne by the lessor. In
the short-term, the Group aims not to deviate significantly from a financial leverage beyond 50 per cent. of the
aggregate value of its property assets, while in the medium-long term, the Group aims to reduce progressively
its financial leverage. However, there is a risk that new financial resources may not be available (funding
liquidity risk) or the Issuer may be unable to convert assets into cash on the market (asset liquidity risk),
meaning that it may not be able to meet its payment commitments or continue investments. This may
materially and adversely affect the Issuer's results of operations and financial condition should the Issuer be
obliged to incur extra costs to meet its financial commitments or continue investments or, in extreme cases,
threaten the Issuer's future as a going concern and lead to insolvency.
The Issuer's approach to liquidity risk is to have a financial structure which ensures an adequate level of
liquidity for the Group and, whilst the Issuer has taken steps to ensure adequate levels of cash flow and
liquidity, a decrease in revenues could negatively impact the ability of the Group to generate cash flow. In
addition, there are no guarantees that the Issuer will be capable of obtaining loans and financing from other
sources under the same or better conditions than those currently available to it. These factors may adversely
affect the Issuer's results and financial condition with possible consequences on the Issuer's ability to fulfil its
obligations under the Notes.
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The Issuer's ability to borrow in the bank or capital markets to meet the financial requirements of the Group is
also dependent on, among other things, favourable market conditions. (See "The current disruption in the
global financial markets may continue and may have an adverse effect on the Group's business" below.)
The current disruption in the global financial markets may continue and may have an adverse effect on the
Group's business.
Since the second half of 2007, disruption in the global credit markets has created increasingly difficult
conditions in the financial markets. These conditions have resulted in decreased liquidity and greater volatility
in global financial markets and continue to affect the functioning of financial markets and to impact the global
economy.
In Europe, despite measures taken by several governments, international and supranational organisations and
monetary authorities to provide financial assistance to Eurozone countries in economic difficulty and to
mitigate the possibility of default by certain European countries on their sovereign debt obligations, concerns
persist regarding the debt and/or deficit burden of certain Eurozone countries, including the Republic of Italy,
and their ability to meet future financial obligations, given the diverse economic and political circumstances in
individual member states of the Eurozone. It remains difficult to predict the effect of these measures on the
economy and on the financial system, how long the crisis will exist and to what extent the Issuer's business,
results of operations and financial condition may be adversely affected.
As a result, the Issuer's ability to access the capital and financial markets and to refinance debt to meet the
financial requirements of the Issuer and the Group may be adversely impacted and costs of financing may
significantly increase. This could adversely affect the business, results of operations and financial condition of
the Issuer, with a consequent adverse effect on the market value of the Notes and the Issuer's ability to meet
its obligations under the Notes.
The Group is exposed to interest rate fluctuations.
As the Group's financial indebtedness comprises various financings, including a number which require
payment of interest at a floating rate, it is particularly exposed to the risk of interest rate fluctuations. The
Group seeks to minimise its exposure through hedging activities, primarily interest rate swaps, interest rate
caps and zero cost collars. There is a constant monitoring of interest rate risk through valuation tests
conducted on a quarterly basis. Whilst the Group does not carry out any purely speculative transactions, nor
any transaction not directly connected to its debt exposure, and derivative instruments currently cover
approximately 85 per cent. of the outstanding principal amount of its indebtedness, the protection offered by
derivative instruments is limited in amount and in time and, as a result, future interest rate fluctuations may
nonetheless adversely affect the Group's financial conditions and results of operations.
The Group is exposed to fluctuations in the rate of inflation.
Most lease contracts with tenants are inflation-linked, providing for an increase in rent by a certain percentage
based on price inflation; however, none of the lease contracts provided for a corresponding decrease in rental
prices in the event of price deflation. Fluctuations in the level of inflation are largely out of the control of the
Group and could have a material adverse impact on the ability of the Issuer to meet its obligations under the
Notes and/or under its other financial indebtedness.
The Group may be insufficiently insured to cover all of the losses, damage and limitations of use which
may affect its Properties.
The Group is required by its best practice and policy guidelines to maintain or procure that there is maintained
certain insurance cover with respect to its portfolio of property assets consistent with market practice. In
addition, the Group is required to maintain such insurance cover in relation to assets that have been mortgaged
to secure financings (which is the case in respect of most of the Group's assets). The Group has entered into
an annual global insurance policy with a primary insurer covering damages to its property assets by fire,
natural and socio-political events, earthquakes and structural collapses, with an additional cover of up to a
maximum recoverable amount of 50 million per annum or insured loss regarding natural events and
earthquakes, by an additional insurance policy. The Group also has insurance covering liability for damages
caused to third parties for a maximum recoverable amount of 10.33 million, with an additional insurance
policy extending coverage for such damages up to 20.33 million.
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