Troubles at Fin.part: KPMG Cites Tension, Refuses to OK Books

Cerruti parent Fin.part got a slap this week when auditor KPMG, questioning the feasibility of its business plan, declined to certify the firm’s 2002...

Facchini said Fin.part is in "advanced talks" to sell off some real estate and manufacturing assets. In contrast to prior strategies, he pointed out that selling brands isn’t in the cards, but it could be in the future.

One Milan-based equity analyst cautioned that the firm had better find financing quickly or sell off a large brand like Frette. "Obviously, if they don’t do it on time, they run the risk of going out of business," he said.

Other sources indicated the Cerruti business has been shopped around, but Facchini is said to be seeking a premium price that will recoup what he paid during the inflated seller’s market of the Nineties. Those heady days ended about two years ago, with the now defunct Pegasus Group perhaps the industry’s most noted casualty.

Since acquiring Fin.part with partner Giancarlo Arnaboldi, Facchini has consistently run into roadblocks in his attempt to build the company into a luxury fashion powerhouse. In two separate transactions, it bought a 51 percent stake in Cerruti in 2000, paying about $70 million for its controlling interest. Earlier in the year, it had sold its Bonaparte hotel division for approximately $136 million, earmarking that money and another $50 million in warrants issued in 1998 for fashion and luxury acquisitions.

But after the Cerruti acquisition, servicing debt became a higher priority than its desire for a fashion empire. One year ago, Facchini said the company would seek to sell most of its assets in an attempt to reduce its debt load, as well as to focus on the development of the Cerruti business.

Originally, the debt-reduction plan was to sell Fin.part’s sportswear labels and generate about $187.5 million from those divestitures. Last May, the firm did manage to sell the sportswear label, Best Co., to its distributor, Cisalfa, but barely dented the debt with just $2.7 million in proceeds from the sale.

Last summer, Fin.part acknowledged that it would look into selling non-sportswear assets as well, including footwear label Andrea Pfister, if it wasn’t able to fetch a suitable price for its sportswear assets. In a market increasingly biased in favor of buyers, it’s been unable to get such a price and, since last July, has focused on selling Frette. The luxury linens and loungewear firm, which had about $135 million in 2001 sales, certainly fits the profile of Opera, the Italian investment group, but earlier this week, as reported, talks between Opera and Fin.part had stalled.
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