Reuters: Deals: RLPC-Eni in talks for 12 billion euro demerger loan

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RLPC-Eni in talks for 12 billion euro demerger loan Mar 30th 2012, 17:42 By Alasdair Reilly and Tessa Walsh LONDON | Fri Mar 30, 2012 1:42pm EDT LONDON (Reuters) - Italian oil and gas group Eni (ENI.MI) is talking to banks about a 12 billion euro ($16 billion) bridging loan to back the proposed demerger of gas grid operator Snam (SRG.MI), banking sources said on Friday. The jumbo bridge loan will refinance shareholder loans from Eni to Snam in a move designed to clean up Eni's balance sheet, the bankers said. The bridge loan will then be refinanced by bonds issued by Snam, they added. Eni declined to comment. "Eni has already funded the deal. Banks will be taking it off Eni's balance sheet and it will be refinanced by bonds," a senior banker said. The large size of the loan would be difficult for any borrower in a shrinking loan market hit by bank deleveraging, but is particularly challenging as the largest deal for a peripheral borrower. "This deal is big not only for Italy but for anywhere. If it happens, this will be the biggest thing to come out of southern Europe this year," another senior banker said. Banks have limited credit availability for peripheral countries but may be prepared to make an exception for Eni as loan volume languishes at 10-year lows and deal flow at 2000 levels. Credit approval would have to be sought at the highest levels in banks for a deal of this size. Lenders may also be able to take advantage of positive momentum generated by recent successful loans for Italy's Enel (ENEI.MI) and Spain's Telefonica (TEF.MC), totaling 3 billion euros and 3.4 billion pounds ($5.4 billion) respectively. Telecom Italia (TLIT.MI) is also making progress on its 4 billion euro loan refinancing. HIGH MARGINS The combination of high margins - 300bp for Enel, up to 250bp for Telefonica and 215bp for Telecom Italia - and the ability to use the loans as collateral to raise financing from the European Central Bank is making banks look more kindly at loans for top peripheral companies. However, while companies such as Enel have significant amounts of ancillary business to offer, Snam has a mainly domestic profile and has only bond business, which may not be enough to feed a large bank group. The success of the deal hinges on the bond market's view of the transaction. Banks will likely be willing to underwrite a large loan deal only if there is a quick bond market takeout or refinancing. The success of the deal hinges on the debt capital market's view of Italian corporate bonds. Banks will be happy to bridge as long as there's a takeout. "Banks will not want to be long on an Italian corporate with little ancillary business," a banker said. Eni, which owns a 53 percent stake in Snam that is worth around 7 billion euros, plans to exit the company by September 2013 as part of its 2012-2015 strategy plan. The demerger will be regulated through a government decree to be issued by the end of May. Snam has 11.2 billion euros of net debt, while Eni has 9.9 billion euros. Eni said that Snam has relatively low leverage compared to its regulated peers, but is relatively high compared with Eni's core oil and gas activities. Snam said that it had already begun the process of gaining direct access to capital markets by the end of the year in order to refinance its debt. ($1=0.7509 euros) ($1 = 0.6259 British pounds) (Editing by Greg Mahlich and David Holmes) Link this Share this Digg this Email Reprints

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