Saipem Finalizing Bank Pool for Cash Call, Debt

Italy's Saipem is finalizing a banking consortium to put the troubled oil contractor on a solid financial footing and run a cash call of more than 3 billion euros ($3.4 billion) as it readies a turnaround plan, people close to the deal said.

Two sources familiar with the matter said the consortium was still being cobbled together. At the moment there are seven core banks and a final decision is expected within two weeks, they said.

The consortium will need to underwrite a share offering in excess of 3 billion euros which is expected to be unveiled on October 27, the sources said.

It will also be asked to refinance Saipem's debt as the oil and gas contractor is saddled with 5.5 billion euros in debt.

Goldman Sachs and JPMorgan will play a leading role as global coordinators while other banks involved in the consortium are Citi, Deutsche Bank, Mediobanca, Intesa Sanpaolo and UniCredit , the sources said.

The banks in question did not comment.

Saipem, which is 43 percent owned by oil major Eni, needs to beef up its stretched balance sheet to allow Eni to sell down its stake.

The strategic plan Saipem is due to present this month is expected to include details of Eni's partial stake sale to Italian state lender CDP, which could be as high as 23 percent, and set the timetable for the capital increase and debt refinancing, the sources said.

Any rights issue might have to wait until early next year because of technical procedures.

Saipem, which has seen its market value shrink to just over 3 billion euros from some 14 billion euros at the start of 2012, is looking to involve a larger number of banks because of the risky nature of the refinancing operation.

One source said banks in the consortium had been asked to pump in 500 million euros of debt financing each, adding this was "a big cheque given the risk profile of the transaction."

The oil and gas industry has been hit hard by a slump in crude oil prices, with the European index falling by 15 percent over the past three months.

"Each bank is currently talking to their risk committee and assessing the risk of the transaction in the event of another sharp drop in the oil price," one of the sources said.


Investor Shakeup
Eni is committed to backing the planned rights issue alongside CDP, the sources said. The cash-rich state agency, which in turn owns Fondo Strategico Italiano (FSI), will become Saipem's anchor investor with a view to syndicating parts of its stake further down the road, one of the sources said.

With margins and orders battered by low oil prices, Saipem needs a large capital injection to keep it afloat. It has issued two profit warnings in just over 30 months and in July announced cost cuts including 8,800 redundancies.

Saipem currently funds liquidity needs through A- rated Eni. But the state-controlled major has flagged its intention to sell a big enough stake to deconsolidate the debt of its subsidiary to help fund its own business.

Saipem is looking for a credit rating for when it comes out from under the Eni umbrella and a capital increase would help its cause, a person close to the matter said.

In September Eni chairwoman Emma Marcegaglia confirmed reports the major was in touch with CDP over the sale of a stake.

Sources have previously said several options are on CDP's table and a solution will be found in October so an announcement could be made at the launch of Saipem's industrial plan on October 27-28.

The state lender, which holds 26.4 percent of Eni, already has controlling stakes in strategic energy grid companies Terna and Snam. The government of Prime Minister Matteo Renzi is said to consider Saipem a strategic asset.

Saipem, Eni and CDP declined to comment.

(By Pamela Barbaglia and Stephen Jewkes, Additional reporting by Francesca Landini)