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Fall of Ferre Owner Threatens Italian Fashion Industry, Jobs

2009-02-26 23:01:13.665 GMT

By Armorel Kenna and Chris Staiti Feb. 27 (Bloomberg) -- The collapse of IT Holding SpA, owner of the Gianfranco Ferre designer label, has sent ripples across Italy’s fashion industry, threatening to take with it a host of seamsters, fabric suppliers and other couture houses. The Milan-based company, whose Ittierre unit makes jeans and accessories under license for Italy’s top designers including Roberto Cavalli and Versace, was put into bankruptcy protection yesterday after missing loan installments and failing to pay suppliers and royalties for as much as a year. “The situation is extremely serious for the Italian fashion industry, ” said Carmine Pizzuto, a lawyer who represents about 40 companies that supply Ittierre. “A failure would mean thousands of people on the street.” This week, Cavalli canceled the show for its young-adult line at Milan Fashion Week, citing “the difficult situation” at Ittierre. Designers rely on the event to court orders for their fall/winter collections. After a meeting with government officials, textile workers and consumer groups, Industry Minister Claudio Scajola said last night Italy decided to aid the 70 billion-euro ($89 billion) industry and will present its first proposal by the middle of March. “It’s the government’s intention to sustain the sector, which is central to the ‘Made in Italy’ branding and to the whole Italian economy, ” Scajola said in a statement. Half of the industry’s revenue comes from exports.

‘People Are Desperate’

Companies that supply fabrics and services to Ittierre haven’t been paid for as many as 13 months, forcing some of their owners to take out loans, or even use their homes as collateral to meet the payroll, said Pizzuto. The companies he represents, among about 200 that supply IT Holding, are owed 80, 000 euros to 1.6 million euros each, he said. “The banks are threatening to take people’s houses, ” he said. “People are desperate.” About 3, 000 people throughout Italy count on IT Holding for their livelihood, according to CGIL, the biggest national labor union. Hardest hit is Isernia, the southern town of 21, 000 people where Ittierre’s factory is based. The company is the region’s biggest employer after Fiat SpA, Italy’s biggest carmaker. “Isernia needs Ittierre to be saved whatever it takes, ” Mayor Gabriele Melogli said in a telephone interview. Ittierre’s factory is a source of income to about 600 families there. “The province of Isernia doesn’t have the means to absorb employees if there are layoffs.”

Diner’s Card Purchase

While IT Holding’s bankruptcy protection is the first for a Italian publicly traded fashion company since the financial crisis, it isn’t for Chairman Tonino Perna. Pantrem SpA, a jeans maker founded by Perna and his brother Remo in the 1970s, went bust in 1993 after accepting millions of euros in local and federal government assistance. Remo Perna’s GTR SpA went bankrupt a decade later after Prada SpA bought designer Helmut Lang and canceled its jeans line, which GTR produced. In 2000, Tonino Perna envisioned creating an Italian luxury- goods empire to bring fashion, travel services and credit to wealthy consumers. He bought the European card business of Diner’s Club that year, planning to hold an initial public offering. He sold it in 2003 to Citigroup Inc. to focus on the purchase of Ferre, which he acquired through a holding company before selling it to IT Holding for 161.7 million euros. Financing the purchase was a 175 million-euro bond, which was later extended to 185 million euros. It was the crippling conditions of the bond that hampered IT Holding’s ability to raise money in times of financial strife. Under the terms, the company was unable to sell shares, assets or units without turning the proceeds over to the bondholders. Perna, through an outside spokesman, declined to comment.

Malo Cashmere

IT Holding, which also owns the Malo cashmere brand and Plus IT accessories unit, missed a loan payment in October and an extension three months later. Standard Poor’s cut its long-term corporate debt rating to “selective default” in December. On Feb. 9, Moody’s Investors Service lowered its rating on the bonds to C, its lowest level, and downgraded the company’s probability of default to D, signifying default on all obligations. “If Ittierre loses the licenses, the value of the company will drop dramatically, ” said Davide Vimercati, an analyst at UniCredit Markets Investment Banking in Milan. “It would really surprise me” if designers weren’t looking for alternatives to Ittierre, he said.

For Related News and Information:

IT Holding’s debt distribution: ITH IM Equity DDIS GO

Top Italy news: ITAT GO Stories on bankruptcies NI BCY BN GO

Top retail news: TOP CON GO Stories on European smallcap stocks: TNI SMALLCAP EUROPE GO

--Editors: Kenneth Wong, Keith Campbell

To contact the reporter on this story: Armorel Kenna in Milan at +39-02-8064-4216 or;

Chris Staiti at +44-20-7330-7108 or

To contact the editor responsible for this story:

Kenneth Wong in Berlin at +49-30-70010-6215 or

Avv. Carmine Pizzuto    

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