Eni sells Saipem stake to Italy’s FSI to reduce debt burden

10/28/2015

ANGELINA RASCOUET

LONDON (Bloomberg) -- Eni SpA agreed to sell a stake in oil-services company Saipem SpA to Fondo Strategico Italiano SpA in an effort to get its debt off the balance sheet.

Eni, which owns 43% of Milan-based Saipem, sold a 12.5% interest to Italian state-controlled Cassa Depositi & Prestiti’s FSI investment fund, Eni said in a statement dated Oct. 27. The stake was valued at 440.9 million euros ($486.5 million) at Tuesday’s closing price.

By ridding itself of the debt, Italy’s largest oil producer would be better placed to boost its credit rating, which was cut by several banks this year. Saipem’s net borrowings have weighed heavily on Eni, its largest shareholder. Saipem’s accounts will be unconsolidated from Eni’s as part of the agreement that also includes Saipem repaying debt of 6.1 billion euros to Eni.

“The additional financial resources will be used to develop the very significant oil and gas reserves we have discovered over the past few years and to strengthen our balance sheet in line with our targets,” Eni CEO Claudio Descalzi said in a statement. “It enables us to focus on our core activities and to enhance our financial flexibility.”

Saipem Plan

Saipem also unveiled a plan to boost its finances through selling 3.5 billion euros in new shares by the first quarter of next year and refinancing 3.2 billion euros of debt, according to a separate statement. It’s among oil-service companies raising capital after the crude-price slump forced clients to defer or cancel projects, squeezing earnings. In July, the company announced plans to cut 8,800 jobs and lowered its profit forecast for the year.

Cassa Depositi & Prestiti, 80% owned by the government, is also Eni’s biggest shareholder, with a 26% stake.

Eni was downgraded by Citigroup Inc., Canaccord Genuity Group Inc. and Kepler Cheuvreux in January and by Jefferies Group LLC in February. Standard & Poor’s cut Eni’s long-term rating in April and lowered its outlook to negative earlier this month, citing deteriorating credit metrics.

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