Saipem - comment

Saipem released a profit warning on Monday after a review of their backlog of contracts. The ongoing pandemic and increase in cost of raw materials and logistics seems to have led to a write-off, reducing Saipem’s H221 EBITDA by €1bn. Revenue is expected to decline on the basis of increased in whole-life costs of the contracts, resulting in lower project margins, which translate into lower revenues.
Saipem have a €1bn RCF facility, undrawn in September, apparently with a net debt/EBITDA covenant of 3.5x for December 2021. The size was reduced to €1bn in 2018 when the facility was extended from December 2020 to July 2023. Upcoming maturity of €500m bond on 5th April. At the release of their Q3 numbers, they stated they had €700m of liquidity, and “first significant maturity in 2022 (bond) covered by existing liquidity”. So if first impressions are correct and the company earns zero CF, then from April there would be only €200m of liquidity remaining.
Saipem are in discussions with its shareholders, Eni (30%) and CDP - Italian state bank (10%), although CDP are rumoured to be looking for an exit. A rights issue may be necessary as the losses are expected to be in excess of 1/3rd of the company’s equity, which triggers Article 2446 of the Italian Civil Code.
It is rumoured that Rothschild are working with Saipem on a restructuring plan. We will commence work on the name and happy to discuss.