Italy’s Snam Said to Seek Interest Rate Cut on $6.4 Billion Loan

Snam SpA (SRG), the owner of Italy’s biggest natural-gas network, is seeking to lower the interest rate on 5 billion euros ($6.4 billion) of loans it raised last year, according to three people with knowledge of the matter.

The company is negotiating the size of the rate cut with lenders, who provided the facility last July to help Snam repay debt owed to former parent Eni SpA (ENI), said the people, who asked not to be identified because the request is private.

A spokesman for Milan-based Snam, who asked not to be identified citing company policy, declined to comment.

Snam is paying interest of 250 basis points more than the euro interbank offered rate on a 2 billion-euro revolving credit due 2015, according to data compiled by Bloomberg. The facility also includes a 1.5 billion-euro term loan paying a 275 basis- point margin, and a 1.5 billion-euro revolver that pays 325 basis points with both maturing in 2017, the data show. A basis point is 0.01 percentage point

Snam sold 6 billion euros of bonds last year to help replace short-term bridge loans raised to support its spinoff from Eni, according to data compiled by Bloomberg. Bridge loans are often used as backstops to bond offerings or longer-dated bank debt.

Bank of America Corp., BNP Paribas SA, Citigroup Inc., HSBC Holdings Plc, Intesa Sanpaolo SpA, JPMorgan Chase & Co., Mediobanca SpA, Morgan Stanley, Societe Generale SA, UBS AG and UniCredit SpA are the bookrunners, Bloomberg data shows. Citigroup is agent on the deal.

Credit Conditions

Spanish utility Iberdrola SA (IBE) is also seeking to replace its debt a year early as credit conditions improve in southern Europe. Telefonica SA of Spain, Italy’s Enel SpA, Telecom Italia SpA, Fiat Industrial SpA, and EDP-Energias de Portugal SA, have borrowed more than 17 billion euros to refinance debt this year, Bloomberg data show.

The yield premium on bonds from companies in Europe’s periphery is 210 basis points compared to a record high of 444 in June, according to Bank of America Merrill Lynch’s Euro Periphery Non-Financial Index.

Snam is rated Baa1 by Moody’s Investors Service and A- by Standard & Poor’s, the third- and fourth-lowest investment grade levels, the data show.

To contact the reporter on this story: Stephen Morris in London at smorris39@bloomberg.net.

To contact the editor responsible for this story: Faris Khan at fkhan33@bloomberg.net.

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