Inalpi SpA calls on milk suppliers to pay its skyrocketing debts to reassure creditor banks. It is not otherwise explained who could possibly invest in its venture capital, much less on the proposed terms.
Meanwhile, Minister Stefano Patuanelli is visiting Moretta (CN), to celebrate ‘a major dairy company that (…) manages to track milk quality on a daily basis’. (1) Without having read their financial statements or knowing, hopefully, the history of the ‘lowland alpine milk’‘ and other more serious precedents (2,3).
For the sake of fairness, it seems useful to point out, first and foremost to the farmers and cooperative members concerned:
1) the economic and financial situation of In.Al.Pi. S.p.A., as reflected in the 2020 budget,
2) the settlement of its convertible bond.
Inalpi SpA, property
Inalpi SpA is still a master industry, whose shares are divided between the Invernizzi family (70 percent) and the Barattero family (30 percent). The Invernizzi family now participates in it through the
– Pag S.r.l. (share capital € 10 thousand), which in 2015 purchased 70 percent of the shares of
– Inalpi (share capital €12 million), for €15.890 million, without even paying apparently, at the
– Saverni Investment Bv (Netherlands). Which was later incorporated into Inalpi itself.
1) Inalpi SpA, Budget 2020
The financial statements as of 12/31/20 of In.Al.Pi. SpA shows a series of significantly increasing values. We dwell on those that appear most enigmatic and critical.
1.A) Balance Sheet. Active.
Fixed assets
– Development costs, +€592,336 (+19.4%).
– Land and buildings, +€5,897,340 (+20.3%).
– Plant and machinery, +€24,571,085 (+69.8%).
– Total fixed assets +31,732,222€ (+41.2%).
Inventories (warehouse)
– Commodities +€4,261,437 (+75.2%).
– Work in progress +€4,017,111 (from zero).
– Finished products and goods +17,382,410 (+139.3%).
– Total inventories +€25,660,958 (+141.5%).
1.B) Balance Sheet. Passive
– Due to banks within the next year +€20,421,557 (+71.4%).
– Total amounts due to banks +€20,116,764 (+33.1%). For a total of €80,846,813.
– Total accounts payable +€5,230,957 (+13.8%). For a total of €43,107,280.
– Total debts +26,798,800€ (+26.5%),
– Total liabilities +€53,515,985 (+45.1%). Complessivamente, 172.272.283€.
1.C) Profit and loss account
The change in inventories of work in progress, semifinished and finished goods (+€20,907,573, from -€1,091,180) is noted in the value of production, which does not seem easy to reconcile with the inventories on the asset side of the balance sheet.
Moreover, the company took advantage of the ‘free revaluation’ of business assets for 26 million euros under the ‘August Decree’. (4) With fiscal as well as ‘umbrella‘ effects with respect to bankruptcy proceedings. Even so, it complicates the budget analysis.
1.D) Inalpi 2020 budget, brief notes
Reading the balance sheet data of In.Al.Pi S.p.A. as of 12/31/20, without knowing the accounting details, seems in any case to bring out:
– The revaluation of all assets, perhaps excessive and not new, (5) to cope with
– The substantial and indisputable increase in liabilities.
In a nutshell, Inalpi’s inventory increased accounting wise by 25 million euros, while sales remained unchanged. It is inferred that Inalpi is in financial difficulty, as bank debt has likewise increased.
2) Inalpi, the convertible bond.
The ‘Inalpi converting 2021-2036′ bond has a maximum total amount of € 15 million, in 150 bonds with a face value of € 100 thousand, with identical issue value, to be issued in one or more tranches. (6) 10 of these bonds, amounting to 1 million euros, have already been issued and subscribed as of 6/30/21 (date of first issue).
From that date and until 6/30/30 ‘unless extended‘ another 140 bonds, amounting to €14 million, may then be subscribed and issued on June 30 and/or December 31 of each year.
2.A) Supplier credit offsets, guarantees
‘Underwriting agreements’ may provide for the offsetting of obligations against liquid, certain and collectible claims. That is, milk suppliers will be able to ‘decide’ to accept 15-20 year unsecured bonds, in ‘blocks’ of 100 thousand euros, instead of receiving the currency due to them in the 30 days from month-end invoice date (7.8).
‘The bonds allocate a direct, unconditional and unsecuredclaim against the issuer [Inalpi, ed.] and will rank pari passu at all times with each other and with any other unsecured claim of the Issuer present or future.’
2.B) Constraints and outcomes
The transferability of the bonds is subject to the double constraint of their transfer to ‘qualified investors‘ (e.g., investment funds, credit institutions) and ‘prior written consent‘ from Inalpi.
The term of the bond is set at 15 years, until 6/30/2036. Subject to Inalpi’s decisions, ‘at its sole discretion,’ to:
– Extend the debt for another 5 years, until 30.6.41, or
– anticipate repayment (at ‘par value,’ i.e., initialvalue), in whole or in part, even in non-proportional shares among bondholders,
– convert the bonds into shares (at ‘conversion value’), in whole or in part, as desired. Also in advance, at the occurrence of ‘acceleration events’. (9)
2.C) ‘Returns’
Interest-at a nominal annual gross fixed rate of 2 percent-will be paid six months in arrears on 6/30 and 12/31 of each year. Except if the issuer Inalpi ‘doesnot have sufficient financial resources’ and therefore decides to ‘capitalize them in kind‘. Reserving the right to revoke its (exclusive) ‘capitalization option‘ at any time.
The ‘conversion price‘ of bonds into shares is subject to an algorithm that is based on the future economic performance of the company. With a multiplier (15 times EBITDA) worthy of an IT startup on Wall Street. On the unbelievable assumption that € 15 million-the total value of the loan, which almost coincides with the purchase price of 70 percent of Inalpi SpA’s shares from Saverni Investment Bv to Pag S.r.l. on 7/30/15 (when debts were a little more than half of what they are today)-may now express 4 percent of Inalpi’s shares.
The legend of Moretta
The fateful ‘second tower’ of milk pulverization is now known as ‘the legend of Moretta.’ Its appearance has been announced on several occasions over the years, including along with the legend of Inalpi S.p.A.’s IPO. The 24 million euros accounted for in 2020 alone for new plant and machinery would have made it possible to build as many as three or perhaps four new towers, in an economy of scale. But between the saying and the doing, the accounting assets and the real assets, Moretta’s legend has yet to reveal itself.
The bond regulation, in turn, does not even hint that Inalpi may build the second pulverizing tower. And it is also therefore plausible the idea that the venture capital serves first and foremost to secure the banks on € 81 million of debt as of 12/31/20. Perhaps even postpone payment of the 43 million in debts to suppliers forced into Stockholm syndrome by some 20 years. Minister Stefano Patuanelli, for that matter, enthusiastically declared that Inalpi is ‘an example of what we intend to incentivize also thanks to 1.2 billion euros allocated with the PNRR for supply chain contracts.’ (1) Poor Italy.
Inalpi and Coldiretti
Not even by design, Inalpi and its milk pulverizing towers have always been one of the dreams of Bruno Rivarossa, confederal delegate as well as historical director of Coldiretti Piemonte. Where he has returned — in the company of its current president (and former national president) Roberto Moncalvo — after several years spent at Palazzo Rospigliosi as a candidate dauphin of the timeless boss of bosses.
Bruno Rivarossa sees Inalpi as an answer to Piedmont’s dairy farmers and was in fact one of the promoters of its understanding with the regional confederations of Coldiretti Piedmont and Lombardy. (10) Inalpi helps solve the union problem of milk delivery and that’s enough. Except perhaps to defer payment terms and substitute cash for 20-year unsecured ‘notes’.
Cooperatives and cooperators
Cooperatives such as Piemonte Latte of Savigliano (CN) and Compral Latte of Cuneo, standard bearers of quality Piedmontese milk production, are probably the suppliers most exposed to the risk of ‘having to decide’ to join Inalpi SpA’s bond issue.
Venture capital without collateral, however, does not suit the needs of those facing feed and bill costs. Without being able to postpone them for 20 years or even being able to afford not to pay if something goes wrong in someone else’s house.
Cooperators in turn face the risk of suffering further payment delays, at best, in the event of adversity. (11) Just today, however, we learn of Compral Latte’s decision to underwrite 5 million euros in bonds. (12)
Dario Dongo
Notes
(1) Stefano Patuanelli, Facebook profile, post 17.7.21. Someone may perhaps remind the minister that food traceability has been mandatory for all operators in the supply chain since 1.1.2005 (date of implementation of EC Reg. 178/02, Article 18)
(2) Dario Dongo. Fake alpine milk. GIFT(Great Italian Food Trade). 1.2.18, https://www.greatitalianfoodtrade.it/etichette/latte-alpino-falso
(3) Dario Dongo. Fake alpine milk, dangerous relationships? GIFT(Great Italian Food Trade). 3.5.18, https://www.greatitalianfoodtrade.it/idee/latte-alpino-falso-relazioni-pericolose
(4) The so-called ‘August Decree,’ DL 104/20, converted with amendments into Law 126/20, in fact introduced the possibility of revaluing business assets, even on individual assets within the same category. With tax effects as well, upon payment of 3% substitute tax over three years starting in 2021
(5) See article cited in note 3, penultimate paragraph. Already the 2016 budget noted the unlikely figure, for an industry that does not process aged cheeses, of € 19 million in inventories. Where, if milk had accounted for even half of the declared raw materials, it would have been about 9 million liters (272 tanks). Inalpi’s financial statements, now as then, are certified by Deloitte (which in the dairy industry is remembered for certifying Parmalat’s financial statements before the big crash)
(6) Cf. Regulations for the bond loan, maximum 15,000,000 euros, convertible bonds maturing 2036 Inalpi S.p.A. “Inalpi converting 2021-2036.” Seen for advertisement in Moretta, 5/27/21. Filed with the Cuneo Chamber of Commerce
(7) Some items refer to possible payment delays already in progress, by Inalpi, to milk suppliers. The Antitrust Authority could perhaps order checks on this, as well as on the legality of any ‘invitations’ to offset claims on perishable food supplies with convertible bonds. With good memory of Article 62 of Law 24.3.12 no. 27, still largely unenforced
(8) Moreover, EU Directive 2019/633, as repeatedly pointed out, requires payment for perishable products within 30 days from the date of delivery. V. Dario Dongo. Unfair trade practices and the European delegation law, critical analysis. GIFT(Great Italian Food Trade). 4/24/21, https://www.greatitalianfoodtrade.it/mercati/pratiche-commerciali-sleali-e-legge-di-delegazione-europea-analisi-critica
(9) ‘Acceleration events,’ like any other condition of the loan, are decided at the sole discretion of Inalpi. And they concern the decisions of its assembly of mergers, demergers, transformations, incorporations into other entities, listings on stock exchanges or other regulated markets
(10) A Made-in-Italy milk powder airbag. Coldiretti Piedmont. 11.4.17, https://piemonte.coldiretti.it/news/un-airbag-di-polvere-di-latte-made-in-italy/
(11) Therefore, the writer also argues for the need to extend the rights under theUnfair Trading Practices (UTPs) Directive(dir. 2019/633) to the contributions of agri-foodstuffs in cooperatives. See article cited in note 8
(12) Luigina Ambrose. Compral latte participates in the Inalpi Investment Plan with 5 million euros. Fidelity, Fossanese weekly newspaper. 7/19/21, https://www.lafedelta.it/2021/07/19/compral-latte-partecipa-con-5-milioni-di-euro-al-piano-di-investimenti-inalpi/
Dario Dongo, lawyer and journalist, PhD in international food law, founder of WIISE (FARE - GIFT - Food Times) and Égalité.
