Moody's downgrades Saipem

Moody's Investors Service said it downgraded Saipem SpA’s corporate family rating to Ba3 from Ba2 and its probability of default rating to Ba3-PD from Ba2-PD.

Moody's also downgraded the backed senior unsecured medium-term note program rating of Saipem's guaranteed subsidiary Saipem Finance International BV to (P)Ba3 from (P)Ba2 as well as the subsidiary's backed senior unsecured rating to Ba3 from Ba2. The outlook on Saipem and Saipem Finance has been changed to stable from negative.

“Today's downgrade has been primarily driven by Moody's expectation that the restoration of Saipem's credit profile comfortably in line with a Ba2 CFR is likely to take longer than 12-18 months. Moody's now expects that both the company's gross and net debt will further increase in 2022, contrary to previous expectations, because still-weak earnings are unlikely to fully cover Saipem's capital investments and working capital needs,” the agency said in a press release.

The agency noted it expects Saipem to breach the maintenance net leverage covenant at the year-end 2021 test, which is included in its revolving credit facility and essentially all bank debt.

“Moody's understands that Saipem has already approached its financing partners to request a waiver, with only positive responses so far. In that respect the agency considers Saipem's importance to the Italian economy as well as its shareholder structure, with its two key shareholders having direct and indirect ties to the government of Italy (Baa3 stable), as supporting factors,” the agency said. The new rating considers Saipem getting the waiver.

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