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Privatization touted to save Italy’s RAI

In a startling departure from previous policy, the Italian government is considering partial privatization of public broadcaster RAI as part of an emergency plan to save the indebted web from financial collapse. The Treasury Ministry, which controls RAI’s parent company, IRI, was spurred into coming up with a lifesaver for RAI after the pubcaster’s president, Claudio Dematte, announced Thursday that RAI lacked the cash to pay Christmas bonuses.

RAI has been carrying about $ 1 billion in debt for the past two years, and the operating deficit on an annual budget of $ 2.4 billion has always been kept to manageable levels.

But this year is different, for two reasons. With an operating deficit of $ 327 million for 1993, RAI’s financial situation has finally reached the point of no return. And Italy’s political climate has changed, which means the government will no longer tolerate the era of carefree spending at RAI.

The Treasury Ministry’s emergency plan to give RAI a massive cash injection comes as the pubcaster is tottering on the brink of bankruptcy. Under Italian law, RAI would have been forced into liquidation early next year if its parent company, IRI, refused to increase its capitalization, since the pubcaster’s deficit will exceed capital and reserves for 1993. The outlook for 1994 was no better, despite hundreds of millions of dollars in cuts that RAI management had prepared for next year’s budget. IRI, itself in a massive cash crunch, let it be known that it wasn’t giving RAI another lira.

Clearly bankruptcy was not an option, so after a week of wrestling with RAI management, the government offered a bailout.

Details of the plan have not been released, but reports circulating here say the emergency lifesaver would be a debt-for-equity swap on the part of RAI’s main creditor banks, effectively giving the banks a stake in the broadcaster, as well as seats on the board of directors.

The shares of RAI owned by banks could eventually be sold off to private investors. RAI would remain in state hands by retaining a so-called “golden share.”

Special government approval would be necessary, however, prior to any privatization of RAI, as it is currently forbidden by law.

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