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Banking

Breaking views: Tiscali searches in vain for cash lines

By Camilla Palladino

www.breakingviews.com

Tiscali's investors have recovered some of their former optimism. The beleaguered Italian internet service provider's share price rose over 20% in September, after fears of a liquidity crunch rocked it earlier in the year.

This enthusiasm looks premature. Tiscali still needs to redeem a €250 million bond next year, and it cannot afford to do this out of its cashflows. And an asset disposal programme, which it pinned its hopes on after the low share price precluded a capital increase, has so far yielded disappointing results.

Granted, the group has sold several assets – including its operations in South Africa, Sweden, Norway and Switzerland – pretty quickly. But prices have been poor. These assets earned €105 million last year, almost 12% of Tiscali's €903 million of sales. So the selling price of €80 million is less than 80% of sales. The assets that Tiscali still has on the block generated about €80 million of revenues last year. So even if the company managed to extract a better multiple for them, it is hard to see how it could hit its stated aim of €250 million from disposals.

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