19/11/2009 By Gilles Castonguay ( Source: http://online.wsj.com )

Telecom Italia's Parent Holders To Refinance Debt

MILAN (Dow Jones)--Spain's Telefonica SA (TEF.MC, TF) and other shareholders of Telecom Italia SpA's (TIT.MI, TI) parent company have agreed to refinance about a third of the parent company's debt that comes due in December.

In a joint statement released late Wednesday, the shareholders said they would refinance it according to their respective stakes in the parent company, known as Telco.

The amount of debt carried by Telco is about EUR3.5 billion, some EUR1.1 billion of which comes due next month.

Telco's shareholders belong to a pact that controls 24.5% of Telecom Italia, Italy's largest telecommunications operator. Apart from Telefonica, the shareholders include Italian banks Intesa Sanpaolo SpA (ISNPY, ISP.MI), Mediobanca SpA (MB.MI) and insurer Assicurazioni Generali SpA (G.MI).

The Benetton family used to belong to the pact through its Sintonia investment vehicle, but it pulled out of it in October when the other shareholders renewed the pact for another three years. But Sintonia will still refinance the part of the debt to which it is exposed. "The share of debt attributable to Sintonia will be transferred to Sintonia at the time of its exit from Telco, that to the extent possible shall occur by the end of 2009," according to the statement.

The decision by the Benettons to abandon the pact was a reflection of the frustration felt among the shareholders over the poor performance of Telecom Italia's share price.

Concern about Telefonica's future role in Telecom Italia has also risen among some Italian politicians. They dislike the idea of a foreign company taking control of the operator's fixed-line network, which they consider a strategic asset to the country.