MILAN: Italian oil services group Saipem will price a rights issue of up to 3.5 billion euros on Thursday as tumbling oil prices continue to batter its shares, fuelling concerns a steep discount could be needed to win over investors.
The oil contractor said in a statement its board would meet on Thursday afternoon to set the final terms of the offer which would kick off next Monday, confirming what sources earlier told Reuters.
Last year Saipem said it would hold its cash call in the first quarter of this 2016 as part of a four-year turnaround plan aimed at ensuring the company's survival. With its margins and order book squeezed by low oil prices, the company needs a large capital injection to fund development and keep afloat.
Saipem, which has a market capitalisation of just 2.8 billion euros ($3.05 billion), said the timeframe of the offer, which will end on Feb. 11, would be subject to clearance by market watchdog Consob. Analysts are expecting the company to offer a steep discount because of the fall in oil prices and the large size of the issue.
"To get this away in today's market you need a discount of somewhere around 30-40 percent," Bernstein oil analyst Nicholas Green said. Earlier this month, France's CGG offered a 72 percent discount over its closing price to launch a 350 million euro capital increase.
The sharp fall in crude prices has prompted oil producers to cut investments and seek lower prices from companies that run drilling rigs and lay pipelines, forcing them to tap markets for funds to help cope with the slump.
Saipem, controlled by oil major Eni and state lender Cassa Depositi e Prestiti, has seen around 14 billion euros wiped off its market value in the last three years. On Wednesday its shares fell 10.4 percent to 5.6 euros, touching 13-year lows.
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