Moody's downgrades Saipem

Moody's Investors Service said it downgraded Saipem SpA’s corporate family rating to B1 from Ba3 and its probability of default rating to B1-PD from Ba3-PD. Moody's also lowered the backed senior unsecured medium-term note program rating of Saipem's guaranteed subsidiary Saipem Finance International BV to (P)B1 from (P)Ba3 and the subsidiary's backed senior unsecured rating to B1 from Ba3.

The agency placed all the ratings under review for downgrade and changed the outlook to under review from stable.

“Today's rating action follows Saipem's announcement that its statutory financial statements in 2021 are likely to show a loss for more than one third of its equity, which triggers the application of Article 2446 of the Italian Civil Code. This event increases default risk because lenders could accelerate repayment of certain loans outstanding absent shareholder support, which could also trigger a cross default to other debt instruments. Furthermore, the projected results highlight the risk of weaker cash flow generation and profitability in the next 12 to 18 months, as well as a potential need to accelerate restructuring and downsizing of its operations,” Moody’s said in a press release.

Saipem will need substantial support primarily from its shareholders to ensure the long-term viability of its business and to avoid a default in the next 12-18 months, the agency said.

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