For major deals where access to international liquidity and post-closing debt circulation on secondary marked are important, the main alternatives are bank debt (with the support of a fronting structure) and listed bonds. We tried to summarize the main issues. Any solution has to be identified on a case-by-case basis after a careful analysis of the transaction.

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Loans Bonds issued by Private Entities
Restrictions on Lending
into Italy on a professional
basis:
 Authorized Institutions: Italian financial institutions, EU financial institutions
controlled by EU banks, Italian/EU banks, non-EU banks subject to
authorization by the Bank of Italy, Italian insurance undertakings, Cassa
Depositi e Prestiti S.p.A., Sace S.p.A., Società di servizio per la
patrimonializzazione e la ristrutturazione delle imprese, Italian securitisation
vehicles, Italian and EU credit collective investment undertakings1 subject to
certain regulatory requirements including notification to the bank of Italy
 N/A
Withholding Tax (WHT)
with non-Italian lenders:
 Applicable withholding tax is 26% or the different percentage according to
double taxation treaties. Exemptions for mid-long term loans2: EU banks, EU
insurance undertakings, certain EU public entities and regulated/supervised
qualified investors in whitelisted countries
 WHT gross up generally paid by borrower
 N/A for bondholders if:
— bonds are listed , bondholders are in whitelisted countries and
beneficial owners of the interest
— OR bondholders are qualified investors and beneficial owners of the
interest
— OR bondholders are Italian/EU collective investment undertakings
owned by qualified investors with a majority of portfolio invested in
bonds
Deductibility of Interest3:  Yes, up to 30% of EBITDA  Yes, up to 30% of EBITDA
Thin capitalization4  N/A  Not applicable if:
— bonds are listed
— OR bonds are convertible to equity
— OR bonds are initially subscribed by regulated/supervised qualified
investors – these initial investors are guarantors in respect of the
payment obligations of the issuer towards transferees which are not
qualified investors
— OR mortgage bonds up to 2/3 of real estate value
Substitute Tax5  Yes for mid-long term loans granted by Italian/EU banks, non-EU banks
subject to authorization by the Bank of Italy, Italian insurance undertakings,
Italian securitisation vehicles, EU and EEA (i.e. Norway and Iceland) credit
collective investment undertakings
 Yes, irrespective of the nationality of the subscribers
Floating Charge
(“Privilegio Speciale”)6:
 Yes for mid-long term loans granted by Italian/EU banks, non-EU banks
subject to authorization by the Bank of Italy
 Yes, if bonds are subscribed by qualified investors and the circulation is
reserved to qualified investors only
Registration of Security:  Needs to be re-registered every time loan is transferred (avoided by using
Fronting Bank structure)
 Does not need to be re-registered if bonds are transferred
Comparison of Loans vs. Bonds issued by Private Entities

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1) With respect to EU credit collective investment undertaking specific legislation is expected soon
2) Loans having a duration longer than 18 months
3) Interest payments are deductible up to a threshold of 30% EBITDA
4) “Thin Capitalization” limits borrowing in the bond market for private entities to 2x Net Worth
5) The optional 0.25 substitute tax (“imposta sostitutiva”) regime (calculated on the aggregate principle amount of that issuance), previously
available for mid-long term bank loans and corporate bonds, is extended to the security package for mid-long term loans granted by EU
insurance undertakings, Italian securitisation vehicles and EU and EEA (i.e. Norway and Iceland) credit collective investment undertakings.
Please consider that the substitute tax now also covers assignments of loans, related receivables and security package
6) The “privilegio speciale” can cover several types of corporate assets, such as plants, equipment and machinery, raw materials and inventory,
finished products, commodities, assets acquired using the proceeds of the mid-long term bank loans/corporate bonds or receivables deriving
from the sale of any of the foregoing assets. It cannot cover real estate or registered movable assets (airplanes, ships or cars)
Comparison of Loans vs. Bonds issued by Private Entities
Footnotes