Italian state lender Cassa Depositi e Prestiti (CDP) is in talks to buy a stake in Saipem as part of a restructuring of the troubled oil contractor that could include a capital increase of around 3 billion euros ($3.3 billion), people familiar with the matter said.
A deal is expected to be announced next month, when Saipem, currently 43 percent owned by oil major Eni, is due to present its turnaround plan, the sources said.
"The idea is to make a joint announcement on the cap hike and the CDP deal at the end of October," one of the sources said.
Saipem has seen margins and orders hit by lower oil prices and needs fresh capital to keep afloat. It has issued two profit warnings in just over 30 months and in July announced cost cuts including 8,800 redundancies to bolster its balance sheet.
Management has ruled out asset sales and the company has said it is studying a possible capital increase.
"The capital increase will be substantial, around 3 billion euros, that will help get the company back on its feet," a second source said.
Eni, which funds Saipem debt under the umbrella of its own A- credit rating, wants to sell down its stake in the oil contractor so that it can get Saipem's 5.5 billion euro debt off its books.
Eni is currently in talks with CDP about a possible stake sale and several options are on the table, a third source said.
"A solution will be found in the early part of October and an announcement made at the industrial plan on October 27-28," this source said.
Eni and Saipem declined to comment.
Saipem shares closed down 3.9 percent, after earlier being halted limit down for excessive losses.
At least five banks, including Goldman Sachs, have been contacted about the capital increase, a fourth source said.
"The letter was sent to the banks, two foreign and three domestic, yesterday," the source said.
One option being considered is for Eni to first cut its stake to around 28 percent and then reduce it further by not taking part in the capital increase, the source said.
But bankers close to Saipem said they believed Eni would end up participating in the rights issue given the substantial size.
Sources had previously said foreign investors from China and the Middle East had expressed interest in Saipem, which is a market leader in subsea cable-laying.
But the government of Prime Minister Matteo Renzi is said to consider the contractor a strategic company and the sources said only CDP was involved in the deal at this stage.
Eni brought in veteran oilman Stefano Cao in May to turn Saipem round and put it on a firmer footing to secure its own credit rating to refinance debt and fund development.http://www.reuters.com/article/2015/09/23/saipem-ma-capitalincrease-idUSL5N11T3JK20150923