Banks navigate choppy waters with Saipem rights issue

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The Saipem 10000 deep-sea drilling vessel is pictured in the port of Genoa, Italy November 19, 2015. REUTERS/Alessandro Garofalo

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LONDON, June 22 (Reuters Breakingviews) – Italy’s Saipem (SPMI.MI) chose an unfortunate time to ask investors for money. The struggling energy company announced on Wednesday that it would launch a planned €2 billion rights issue on June 27, double its market capitalization, at a much-discounted price of €1 per share. Securing financing looks difficult as capital markets are battered by the prospect of high inflation and a possible recession. Saipem, which in January shocked investors with a huge profit warning, needs the capital to shore up its finances.

State-controlled investor Eni (ENI.MI), the Italian oil major, and Cassa Depositi e Prestiti have already pledged to recover the shares of their combined stakes, around 44%. But economic uncertainty, volatility and Saipem’s checkered history could make investors reluctant to assert their claims for the rest. The fact that Saipem warned that it could cancel the capital increase at the last minute could also discourage some shareholders. Shares fell 17% on Wednesday morning. Nevertheless, Saipem should benefit from the growing demand for oil and gas services in the context of the post-Ukrainian energy boom. For banks underwriting the offer, including BNP Paribas (BNPP.PA) and Citigroup (CN), this provides some comfort. (By Lisa Juca)

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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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