Saipem is trying to raise its head today, the stock rises by 0.27% to 1.13 euros for 1.14 billion of capitalization after having lost more than 40% since the beginning of the year. Meanwhile, the Ftse Mib is positive for 0.6%. The energy group, which launched the third profit warning at the end of January with a consequent capital increase, must resolve the issue of the subordinated bond maturing on April 5 for 500 million euros before organizing the strengthening of at least 1.5 billion after that from 3.5 billion announced in December 2015. The issue, which in recent days saw the annualized yield jump to 117%, is starting to breathe today and trades at a price of 95 for a yield of 40%. The accounts for 2021 will be published on 23 February.
The issue benefits from the fact that the lending banks would have conditional on their consent to grant a 500 million bridging loan to pay the bond by the beginning of April to a commitment from the shareholders Eni (has 30.5% of Saipem) and Cdp ( owns 12.6% of the group) to cover at least one billion of the future recapitalization of the 1.5 billion, according to Il Messaggero. Unicredit and Intesa Sanpaolo, since the first talks relating to the entire financial maneuver, seem to have taken a more rigid position in a game whose outcome is not well defined at the moment.
The two large shareholders have already obtained the commissioner of the CEO, Francesco Caio, having joined him with two top managers, given that Eni has seconded Alessandro Puliti with the position of general manager and Cdp has transferred his deputy CEO and CFO Calcagnini. Despite this, today Banca Akros confirmed the reduced rating and almost halved the target price on the share from 1.7 to 0.9 euro per share due to the dilution resulting from the issue of new shares. Saipem was worth, in 2012, almost 50 euros per share (47.7), approximately 4.7 euros in 2019, today it resists to stay above 1 euro pre-strengthening.
Bestinver Securities notes that “the potential downside in the share price is still significant,” given that the company capitalizes 1.14 billion and shareholders must put in at least 1.5 billion. However, it provides for a formal commitment by Eni and CDP to recapitalize the group and, consequently, “a commitment by the banks to guarantee the liquidity necessary to repay the bond loan maturing in April”. The point and the free float (over 50%) linked to this title.
From what emerges in the press, a few days ago Rothschild, together with Paolo Calcagnini, the new head of financial planning and control, started a tight negotiation with the main banks, led by Intesa Sanpaolo and Unicredit, to obtain a bridge loan in a short time from 500 million needed to repay the first tranche of the 1 billion total bond on a total amount of 3 billion.
Add to this that behind Saipem’s profit warning last week there would be a loss of 500 million euros on a contract in the North Sea on behalf of Edf. A value that exceeds the 170 million announced last semester and is close to that of the entire order. Bloomberg points out that the project involves the installation of 54 wind turbines off the east coast of Scotland.
Last week Moody’s cut the long-term rating of the stock from Ba3 to B1 in the speculative area (subject to high risk and placed it under observation for another downgrade) for “the greater likelihood of persistently weak credit data”, at below the rating agency’s expectations over the next 12-18 months.
According to Moody’s, Saipem’s announcement “increases the risk of default as creditors could accelerate the repayment of some outstanding loans, in the absence of shareholder support, which could also trigger a cross-default on other debt instruments”. Furthermore, the expected results on the 2021 accounts “highlight the risk of weaker cash generation and profitability in the next 12-18 months, as well as the potential need to accelerate the restructuring and downsizing of activities”. However, “significant uncertainties remain as to whether the support will be sufficient to restore the confidence of the company’s customers, financial partners and debt holders,” writes Moody’s. (All rights reserved)

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