The Hal Holding group bought 388.7 million newly issued shares of Safilo for a total €118.1 million during Safilo's €250 million previously reported rights issue, which ended on Feb. 26. The issue was 81.87 percent subscribed, raising a total of €204.7 million, and financial analysts are upbeat about the company's turnaround.

The unexercised rights will be traded on the stock exchange until March 12; after that, outstanding shares issued for the capital increase will be bought by the Hal group and two banks, Banca IMI and UniCredit. The Hal group has pledged to plough up to €162.2 million into the recapitalization, indicating that it could spend another €44.1 million to buy more shares.

Before the €250 million recapitalization, Hal already had a stake of about 11 percent in the company. Depending on the final outcome of the recapitalization program, Hal stands to get a stake of between 37.23 and 49.99 percent in Safilo, but the final shareholding will only be known after March 15. In the meantime, the Tabacchis will see their share fall from less than 40 percent to around 10 percent.

After the partial recapitalization of the company, the rating agency Moody's upgraded Safilo's long-term corporate credit rating (Corporate Family Rating) and Probability of Default Rating (PDR) to Caa1 from Caa2 and Caa3 respectively. The rating of the company's high-yield bond remained unchanged at Caa3. Moody's also issued a positive outlook on the ratings.

Financial analysts were also upbeat, with Bank of America Merrill Lynch indicating Safilo as a «buy» with a €0.50 per share target price. The French broker Cheuvreux rates the stock as an «outperform» with a €0.54 target price. The stock is currently trading above €0.38.

Cheuvreux believes that the takeover by Hal will speed up Safilo's turnaround, and the worst of the company's woes seem to be over. It estimates that only 3.5 percent of Safilo's turnover was generated with Hal in 2009 so the partnership offers significant room for the eyewear company to increase volumes with the Dutch group, although the latter has insisted that its optical retail chains will retain the freedom to choose among multiple suppliers. It expects Hal to support Safilo thanks to cross-selling.

The broker also estimates that 28 percent of Safilo's revenues were generated last year by licenses expiring by before 2011, including Christian Dior. The French brand on its own represents about 15 percent of Safilo's sales, but Cheuvreux is confident the license will be renewed and that Luxottica will be excluded from the competition because it already has the Chanel license, which has a similar positioning as Dior.

It also expects that the proceeds of the recapitalization will be used to repay €185 million in senior debt and the remainder will be employed to reimburse short-term loans and as working capital. Cheuvreux estimates that Safilo's debt will fall to 40 percent of equity in 2010 from 95 percent at the end of 2009.

Safilo is scheduled to release its 2009 results on March 29. The current consensus of financial analysts' estimates is for sales to have reached €1.02 billion, Ebitda €64 million and the net loss €120 million.