Saipem: Moody's pone il rating preliminare "(P)Baa3" sotto
osservazione per un possibile downgrade
San Donato Milanese, 10 febbraio 2016 Â Saipem S.p.A., rende noto
che in data odierna Moody's ha comunicato, tramite la pubblicazione
di un comunicato stampa sul proprio sito internet [www.moodys.com]
e allegato al presente comunicato, di aver posto sotto osservazione
il provisional issuer rating pari a "(P)Baa3" attribuito a Saipem
in vista di un possibile downgrade. La decisione di Moody's segue
quella adottata da Standard & Poor's il 4 febbraio u.s. e si
fonda sostanzialmente sulle stesse considerazioni, vale a dire: ·
sul recente ulteriore indebolimento dei fondamentali dell'industria
dell'Oil & Gas, il conseguente rischio di cancellazioni e/o
ritardi di progetti e la riduzione degli investimenti delle Oil
Companies; · sul deterioramento dello scenario dei prezzi del
petrolio rispetto a ottobre 2015, quando è stato assegnato il
provisional rating a Saipem, scenario rivisto recentemente in
negativo dalla stessa Moody's; · sul potenziale impatto del
peggiorato contesto sulla capacità futura di Saipem di generare
cassa in linea con le ipotesi del piano strategico. Sulla base di
quanto sopra Moody's effettuerà una analisi approfondita nei
prossimi due mesi valutando la capacità di Saipem di gestire
l'attuale situazione ed i relativi potenziali impatti sul
portafoglio ordini residuo e sui risultati economico-finanziari,
prima di prendere una decisione sull'eventuale downgrade. Saipem è
uno dei leader mondiali nei servizi di perforazione, ingegneria,
approvvigionamento, costruzione e installazione di condotte e
grandi impianti nel settore oil&gas a mare e a terra, con un
forte orientamento verso attività in ambienti difficili, aree
remote e in acque profonde. Saipem fornisce una gamma completa di
servizi con contratti su base "EPC" e/o "EPIC" (`chiavi in mano') e
dispone di capacità distintive ed asset ad alto contenuto
tecnologico.
Sito internet: www.saipem.com Centralino: +39 025201 Relazioni con
i media: Tel: +39 0252034088 E-mail: media.relations@saipem.com
Ufficio stampa iCorporate: Tel: +39 024678752; Cellulare: +39
3669134595 E-mail: saipem@icorporate.it Relazioni con gli
investitori istituzionali e con gli analisti finanziari: Tel: +39
0252034653; Fax: +39 0252054295 E-mail:
investor.relations@saipem.comContatto per gli investitori
individuali: Email: segreteria.societaria@saipem.com
Saipem preliminary "(P) Baa3"rating placed under review for
possible downgrade by Moody's
San Donato Milanese (Milan), February 10, 2016 Â Saipem S.p.A.,
informs that today Moody's, through the publication of a press
release on its website [www.moodys.com] attached to this press
release, has communicated that it has placed under review the
provisional issuer rating of "(P) Baa3 " attributed to Saipem, for
a possible downgrade. Moody's decision, which follows the one by
Standard & Poor's on February 4th 2016, is substantially based
on the same considerations: · On the recent weakening of industry
fundamentals and the consequent increase in the risk of project
cancellations and/or delays and reduced capital spending by oil
& gas companies · On the deterioration in the oil-price
scenario which has occurred since October 2015, when Saipem was
assigned its provisional rating, and which has caused Moody's to
downgrade its expectations for future oil prices. · On the
potential impact of the weaker market context on Saipem's future
ability to generate cashflows in line with the strategic plan. In
light of these considerations, Moody's will conduct an in-depth
analysis over the next couple of months, assessing Saipem's ability
to manage this industry downturn and the relative impacts on the
backlog and financial results before reaching a decision on the
potential downgrade. Saipem is one of the world leaders in drilling
services, as well as in the engineering, procurement, construction
and installation of pipelines and complex projects, onshore and
offshore, in the oil & gas market. The company has distinctive
competences in operations in harsh environments, remote areas and
deepwater. Saipem provides a full range of services with "EPC" and
"EPCI" contracts (on a "turn-key" basis) and has distinctive
capabilities and unique assets with a high technological content.
Website: www.saipem.com Switchboard: +39 025201 Media relations
Tel: +39 0252034088; E-mail: media.relations@saipem.com iCorporate
press office Tel: +39 024678752; Mobile: +39 3669134595; E-mail:
saipem@icorporate.it Relations with institutional investors and
financial analysts Tel: +39 0252034653; Fax: +39 0252054295;
E-mail: investor.relations@saipem.com Contact point for retail
investors E-mail: segreteria.societaria@saipem.com
Rating Action: Moody's reviews Saipem's provisional (P)Baa3 rating
for downgrade
Global Credit Research - 10 Feb 2016
London, 10 February 2016 -- Moody's Investors Service, ("Moody's")
has today placed the provisional (P)Baa3 Issuer Rating of Saipem
S.p.A. (Saipem) under review for downgrade. RATINGS RATIONALE
Today's review for downgrade considers that much weaker industry
fundamentals increase the risk of project cancellations and delays
and reduced capital spending in the oil and gas sector and have the
potential to warrant a rating change for Saipem. Oil prices have
deteriorated substantially since Moody's assigned a provisional
(P)Baa3 Issuer Rating to Saipem in October and have reached nominal
price lows not seen in more than a decade. Moody's has adjusted its
view downward for the likely range of prices. We see a substantial
risk that prices may recover much more slowly over the medium term
than many companies expect, as well as a risk that prices might
fall further. Even under a scenario with a modest recovery from
current prices, producing companies and the drillers and service
companies that support them will experience rising financial stress
with much lower cash flows. Saipem's backlog stood at a significant
19 billion as of 1H 2015. Although this declined to 17.8 billion as
of 3Q 2015 due to a lack of significant new wins in the quarter and
the cancellation of the 1.2 billion South Stream contract, it also
excludes in excess of 600 million of new engineering and
construction (E&C) offshore contracts announced in Q4 2015.
This 18 billion contracted revenue backlog provides some visibility
into 2017 for both the E&C and drilling businesses, with 2.5
billion to be realized in 2015, 7.6 billion in 2016 and 7.7 billion
thereafter. However, Moody's now expects oil prices to remain below
$45 through 2018, with only a gradual recovery from current levels
around $30 and so expects continued pressure from Saipem's large
National Oil Company (NOC) and IOC clients both in terms of pricing
and simply delaying awards of both E&C projects and drilling
programmes, with the potential for some existing awards to be
rephased or even cancelled. On the other hand, Saipem has
significant presence in the Middle East, which accounts for 35% of
3Q 2015 backlog and is showing some resilience in the current weak
oil price environment. For the offshore drilling industry, Moody's
expects the strong negative trends will remain deeply entrenched
for the next several years and drillers' contracted revenue
backlogs, fleet utilization and cash flows will continue to slide.
With approximately 50% of floaters and 70% of jack-ups contracted
at year-end 2016 and only 25% of floaters and 43% of jack-ups by
the end of 2017, Saipem's fleet has a similar contracted picture to
many in the offshore drilling industry. There have also been
contract terminations, with TOTAL S.A. (Aa1 review for downgrade)
terminating its lease of the Saipem 12000 drillship for convenience
and Statoil ASA (Aa2 review for downgrade) suspending the lease for
the Scarabeo 5 semi-submersible. In this context, several of
Saipem's older floaters will find it challenging to re-contract in
2016-2017 and will likely have to be scrapped. On the land drilling
side, although Moody's expects continued work in the Middle East,
as reflected in Saipem's recent award in Kuwait, many of Saipem's
land rigs that roll off contract in Venezuela may not be
re-contracted due to Petroleos de Venezuela, S.A.'s (Caa3 stable)
weak financial position, despite the Venezuelan state's need to
continue to pump oil to generate revenue. Moreover, Venezuela will
likely continue to delay payments of receivables. At the time of
the initial provisional rating assignment, Moody's had expected
Saipem would still have a leveraged credit profile even after
paying down debt post raising equity, with Moody's gross adjusted
leverage based on our projections for FY2016-17 of between
3.0-3.5x, which was seen as weak for an investment grade
construction company. This leverage range was based on Moody's
expectation of a reported EBITDA between 1.0-1.1 billion in 2016,
which the rating agency expected to fall slightly in 2017. Moody's
debt adjustments add capitalized leases (using a three times
multiple, consistent with other companies in the construction
industry), pensions and drawing under a factoring facility. This
assessment was more conservative than Saipem's public business plan
targets at the time: of EBIT of approximately 700 million in 2017,
with a net financial position of less than 1.0 billion, moving to
net cash in 2019.
However, as a result of the scale of the change in our oil price
deck for 2016, 2017 and 2018, Moody's now expects it is more likely
that Saipem will underperform what at the time was a conservative
Moody's base case and might breach one or more of the triggers to
downgrade the rating. In light of these adverse industry
developments and the likely prolonged nature of this challenging
operating environment, there is a substantial risk of a rating
downgrade. Moody's will conduct an in-depth analysis over the next
couple of months and reach a rating conclusion based on our view of
Saipem's projected financial performance and ability to navigate
this industry downturn. Against this background, Moody's review
will assess (i) the company's order backlog and intake and bidding
pipeline, (ii) execution track record including progress on loss
making contracts, (iii) earnings, cash flow generation and leverage
going forward, including impacts of any additional disposals or
cost cutting, (iv) management's strategic objectives and financial
policy considering the investment grade rating might now be
downgraded, (v) progress on the equity raising and refinancing and
(vi) liquidity and refinancing risk associated with the bridge to
bond facility that matures by 2018 at the latest. WHAT COULD CHANGE
THE RATING UP/DOWN As Saipem's provisional rating has been placed
under review for downgrade, an upgrade of the rating is unlikely in
the medium-term. That said, over time Saipem's ratings could
upgraded if it maintains a strong order backlog and conditions
improve in the oil and gas markets leading to it sustaining: (i)
EBITA over $750 million, (ii) FFO/debt above 30%, and (iii) Moody's
adjusted gross leverage is sustained below 2.5x, while maintaining
good liquidity and the company builds a good execution track
record. Moody's had previously stated that Saipem's provisional
rating could be downgraded, if (i) Saipem issues less than 3.5
billion in equity to repay debt, (ii) Moody's were to conclude that
Moody's adjusted gross leverage will remain over 3.5x, (iii)
FFO/debt remains below the midtwenties percentage or (iv) if
liquidity deteriorates. PRINCIPAL METHODOLOGY The principal
methodology used in this rating was Construction Industry published
in November 2014. Please see the Ratings Methodologies page on
www.moodys.com for a copy of this methodology. Saipem, based in
Milan, Italy is a leading engineering, construction and drilling
company focussing on the oil and gas industry and specialising in
remote areas and deepwater. It has a large offshore fleet of 30
construction vessels, 15 drilling rigs and 57 remotely operated
vehicles (ROVs), capable of executing technologically difficult
projects, as well as 10 fabrication yards and 111 onshore rigs,
including 11 managed or under construction. As of the
last-twelve-months to 30 September 2015, the company generated
revenue of approximately 12 billion with a broad regional diversity
across the world. REGULATORY DISCLOSURES For ratings issued on a
program, series or category/class of debt, this announcement
provides certain regulatory disclosures in relation to each rating
of a subsequently issued bond or note of the same series or
category/class of debt or pursuant to a program for which the
ratings are derived exclusively from existing ratings in accordance
with Moody's rating practices. For ratings issued on a support
provider, this announcement provides certain regulatory disclosures
in relation to the credit rating action on the support provider and
in relation to each particular credit rating action for securities
that derive their credit ratings from the support provider's credit
rating. For provisional ratings, this announcement provides certain
regulatory disclosures in relation to the provisional rating
assigned, and in relation to a definitive rating that may be
assigned subsequent to the final issuance of the debt, in each case
where the transaction structure and terms have not changed prior to
the assignment of the definitive rating in a manner that would have
affected the rating. For further information please see the ratings
tab on the issuer/entity page for the respective issuer on
www.moodys.com. For any affected securities or rated entities
receiving direct credit support from the primary entity(ies) of
this credit rating action, and whose ratings may change as a result
of this credit rating action, the associated regulatory disclosures
will be those of the guarantor entity. Exceptions to this approach
exist for the following disclosures, if applicable to jurisdiction:
Ancillary Services, Disclosure to rated entity, Disclosure from
rated entity. Regulatory disclosures contained in this press
release apply to the credit rating and, if applicable, the related
rating outlook or rating review. Please see www.moodys.com for any
updates on changes to the lead rating analyst and to the Moody's
legal entity that has issued the rating.
Please see the ratings tab on the issuer/entity page on
www.moodys.com for additional regulatory disclosures for each
credit rating. Douglas Crawford VP - Senior Credit Officer
Corporate Finance Group Moody's Investors Service Ltd. One Canada
Square Canary Wharf London E14 5FA United Kingdom JOURNALISTS: 44
20 7772 5456 SUBSCRIBERS: 44 20 7772 5454 Anke Richter Associate
Managing Director Corporate Finance Group JOURNALISTS: 44 20 7772
5456 SUBSCRIBERS: 44 20 7772 5454 Releasing Office: Moody's
Investors Service Ltd. One Canada Square Canary Wharf London E14
5FA United Kingdom JOURNALISTS: 44 20 7772 5456 SUBSCRIBERS: 44 20
7772 5454
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