Cornerstone investors Eni and CDP together with a pool of banks are ready to advance 1.5 billion euros of an overall 2 billion euro capital increase to rescue troubled Italian energy service group Saipem, two sources said on Tuesday.
Energy group Eni owns 30.4% of Saipem while Italian state lender Cassa Depositi e Prestiti (CDP) holds 12.5%.
The two investors will make an advance on most of their part of the planned cash call, while Eni will temporarily guarantee a bridge-to-equity loan by banks worth 855 million euros ($943 million), one of the sources said.
State-owned trade credit insurer SACE will then step in, at a later date, to guarantee the bridge loan when it has had time to process complex paper work, two sources said.
Conditions are not right for the capital increase to be carried out at the moment due to market volatility after Russia's invasion of Ukraine, the sources said.
Saipem stunned investors in January when it downgraded earnings by a billion euros due to a significant deterioration of margins on some contracts, sending its shares tumbling.
In February it said it would cut costs, sell assets and scale back green ambitions to focus more on its core oil and gas business after plunging deep into the red last year.
It is due to unveil its turnaround plan and rescue package on Friday.
The sources said the funding package was very close to being signed off.
Part of the 1.5 billion euros will be used to meet a 500 million euro bond that matures in April even though the company does have liquidity to cover, one of the sources said.
Saipem's remaining outstanding bond portfolio of 2 billion euros will not be refinanced but will be allowed to run to maturity dates, the source said.
A revolving credit facility worth 1 billion euros, due to expire at the end of 2023, could be extinguished early and replaced with an identical line with a three-year maturity, one of the sources said.
But the source added it was still under discussion.
Eni, CDP and Saipem declined to comment.
($1 = 0.9069 euros)
(Reuters - Reporting by Andrea Mandala, Stephen Jewkes, Giuseppe Fonte; editing by Richard Pullin)