Jacopo Barontini, Alvarez & Marsal’s Managing Director and Head of Financial and Operational Restructuring Italy, recently joined a roundtable discussion at Generalfinance’s annual conference in Grezzana, focusing on the latest trends in financing and corporate distress in Italy.

The event brought together industry experts, financial and legal professionals, and business operators to discuss the financial challenges faced by Italian corporates in the prolonged high- interest-rate environment, as well as the tools available to companies to navigate these conditions. A key focus of discussions was the role of factoring instruments in addressing stress situations and their interaction with the country’s new insolvency code.

In one of the panels, Barontini discussed the persistent reliance of Italian businesses on bank financing, the implications of entering the negotiated composition process (Composizione Negoziata della Crisi, or CNC), and the evolving role of alternative financing in the Italian market.

The main takeaways of the session are summarised below:

Corporate lending still dominated by banks: Italian corporates are still highly dependent on financing provided by traditional banks, in contrast with other European countries where alternative lenders – and private credit funds in particular – have gained significant ground over the past years.

Liquidity financing has become scarcer: Liquidity financing to cover working capital needs has become increasingly hard to obtain, especially following the activation of the CNC restructuring tool, with several banks retreating significantly from this type of lending. Even in consensual instances that have already been fully implemented and executed – such as court compositions with creditors (concordato preventivo) or restructuring agreements –, banks have continued to refrain from providing liquidity solutions, underscoring the rigidity of the Italian system.

Differences in bank vs. direct lending: Companies must consider what type of lender is more suited for their liquidity needs. For example, direct lenders often make lending decisions faster, whereas processing times at traditional banks tend to take more time. Factoring is a good example, where credit lines approval can be obtained with a much quicker decision process, especially when the provider specializes in stressed/distressed factoring. In contrast, banks can be competitive in their operational methods (no notification needed, less restrictive sale process), while factoring options may tend to lack these flexibilities. Another aspect is cost. Many entrepreneurs are not familiar with the concept of return on capital brought by short-term financing and hence may find borrowing costs excessive, without considering the impact of lack of liquidity in the longer term.

Impacts of the new Negotiated Composition: Another discussion topic was the impact of the new restructuring tool on banks’ risk exposures and the involvement of credit platforms. Due to regulatory capital rules concerning Stage 2 exposures, banks are required to reclassify their loan positions as “unlikely to pay” when they enter a CNC. Such exposures may then be transferred to credit platforms, leading to a growing “depersonalization” of the creditor-lender relationship.