Saipem core investors, banks to advance 1.5 billion euros of cash call -sources

2/2 © Reuters. A man wearing a face mask, amid the coronavirus disease (COVID-19) pandemic, walks near the sign of Italian energy Eni company at a gas station of Egyptian International Gas Technology "Gastec" in the Red Sea resort of Sharm el-Sheikh, south of Cairo, Egy 2/2

By Andrea Mandala and Stephen Jewkes

MILAN (Reuters) -Saipem core investors Eni and CDP together with a pool of banks are ready to advance 1.5 billion euros of an overall 2 billion euro capital increase to rescue the troubled Italian energy service group, two sources said.

The two investors, tied by a shareholder pact, will stump up in advance most of their share of the planned cash call by injecting more than 600 million euros, one of the sources said.

At the same time Eni, which owns 30.4% of Saipem, will temporarily guarantee a bridge-to-cash call loan provided by a pool of eight banks worth 855 million euros ($941 million).

State-owned trade credit insurer SACE is then expected to step in, at a later date, to guarantee the bridge loan when it has had time to process complex paper work, two sources said.

On Wednesday CDP Chief Executive Dario Scannapieco said he was confident about finding a solution for Saipem.

Saipem shares, which have lost more than 40% since the start of the year, were up 7.4% in late trading.

Saipem stunned investors in January when it downgraded earnings by a billion euros due to a significant deterioration of margins on some contracts, sending its shares tumbling.

In February it said it would cut costs, sell assets and scale back green ambitions to focus more on its core oil and gas business after plunging into the red last year.

It is due to unveil its turnaround plan and rescue package on Friday.

BOARD MEETINGS

The sources said conditions were not right for the capital increase to be carried out at the moment due to market volatility after Russia's invasion of Ukraine, adding it could be launched after the summer.

The banks providing the bridge loan, that will be repaid when the cash call is launched, are also likely to comprise the consortium for the capital increase, one of the sources said.

Sources said the banks were concerned about taking on too much risk and were seeking guarantees.

The boards of Eni and CDP are due to meet later on Wednesday to clear the package which will then be discussed by the Saipem board on Thursday, the sources said.

Eni and Saipem declined to comment.

According to one of the sources, part of the 1.5 billion euros will be used to meet a 500 million euro bond that matures early April even though Saipem does have liquidity to cover it.

Saipem's remaining bond portfolio comprising four bonds for an overall 2 billion euros will not be refinanced but will be allowed to run to maturities between 2023-2028, the source said.

A revolving credit facility worth 1 billion euros, and due to expire at the end of 2023, could be extinguished early and replaced with an identical line with a three-year maturity, one of the sources said.

But the source added it was still under discussion.($1 = 0.9091 euros)