Banks cross choppy waters with Saipem rights issue

2 minute read

The Saipem 10000 deepwater drillship is pictured in Genoa’s harbour, Italy, November 19, 2015. REUTERS/Alessandro Garofalo

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LONDON, June 22 (Reuters Breakingviews) - Italy’s Saipem (SPMI.MI) has chosen an unfortunate moment to ask investors for money. The struggling energy firm said on Wednesday it would launch a planned 2 billion euro share rights issue on June 27, twice its market capitalisation, at a deeply discounted price of 1 euro per share. Getting financing looks tough while capital markets are hit by the prospect of high inflation and a possible recession. Saipem, which in January shocked investors with a massive profit warning, needs the capital to shore up its finances.

State-controlled investor Eni (ENI.MI), Italy’s oil major, and Cassa Depositi e Prestiti have already committed to pick up the shares for their combined holdings, or about 44%. But the economic uncertainty, volatility and Saipem’s ropey history could make investors wary of taking up their rights for the rest. The fact that Saipem has warned it may cancel the rights issue at the last minute may also deter some shareholders. The shares fell as much as 17% on Wednesday morning. Still, Saipem should benefit from the rising demand for oil and gas services amid the post-Ukraine energy boom. For the banks underwriting the offering, including BNP Paribas (BNPP.PA) and Citigroup (C.N), that offers a speck of comfort. (By Lisa Jucca)

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(The author is a Reuters Breakingviews columnist. The opinions expressed are their own.)

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Editing by Neil Unmack and Oliver Taslic

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