Fitch Downgrades YPF's LC IDR to 'B' & National Rating to 'AA(arg)'; Outlook
BUENOS AIRES, Argentina -- April 16, 2012
Fitch Ratings has downgraded the following ratings for YPF S.A.:
-- Local currency (LC) Issuer Default Rating (IDR) to 'B' from 'B+';
-- National scale rating to 'AA(arg)' from 'AA+(arg)';
-- Class III notes for USD50 million to 'AA(arg)' from 'AA+ (arg)';
-- Class V notes for ARP100 million to 'AA(arg)' from 'AA+ (arg)';
-- Two bond programs for USD1 billion each to 'AA(arg)' from 'AA+(arg)'.
The Rating Outlook for the above ratings has been revised to Stable from
In conjunction with these rating actions, Fitch has affirmed YPF's foreign
currency (FC) IDR at 'B' with a Stable Outlook. Fitch has also affirmed the
USD100 million notes due 2028 at 'B/RR4'. The 'RR4' reflects average recovery
prospects in the event of default. Fitch has also affirmed YPF's equity rating
at 'Level 1'.
The rating downgrades reflect the Argentine government's recent announcement
that it intends to introduce legislation to nationalize YPF. As a result,
YPF's LC IDR has been downgraded to the same level as the sovereign's 'B'
rating. Today, the government announced it intends take over YPF's class D
shares owned by Repsol and divide the ownership of these shares between the
Federal government (51%) and the oil and gas producing provinces (49%). Fitch
believes the law to allow the implement YPF's take over will be approved by
the Congress within a short time frame.
Ownership by the government will likely lead to greater inefficiencies and
lower profitability as government owned entities tend to incorporate more
social strategies into their business strategy. Fitch also anticipates that a
state owned YPF would take an active role in guarantying Argentina's domestic
oil and gas supply. This role might include managing and paying for natural
gas imports, which in 2011 represented a cost of USD 9.4 billion. The
government has also declared oil and gas production is an activity of public
The affirmation of YPF's FC IDR at 'B' reflects that the rating was previously
moved to the same rating level as the sovereign.
The company's bondholders can request that YPF repurchase the notes at 100%
plus accrued interest if an event of nationalization takes place and is
continuing. Such a request can be claimed by bondholders representing 25% of
principal of YPF's outstanding domestic and international notes.
Until now, YPF maintained an adequate business profile as Argentina's dominant
integrated oil company along with good credit ratios. Key credit concerns
center on YPF's weak upstream operating measures, a debt profile concentrated
on the short term and exposure to government's interference risk. As of
December 2011, YPF's cash position was USD339 million which compares to USD1.9
billion of short-term debt. Following the take over of Repsol YPF's stake in
YPF, the government is expected to hold 51% of the company, the Petersen Group
25%, Repsol YPF 6%, while the remainder is traded in the stock exchange.
Additional information is available at 'www.fitchratings.com'. The ratings
above were solicited by, or on behalf of, the issuer, and therefore, Fitch has
been compensated for the provision of the ratings.
Applicable Criteria and Related Research:
-- 'Corporate Rating Methodology', Aug. 12, 2011;
-- 'Rating Oil and Gas Exploration and Production Companies', Aug. 5, 2011.
Applicable Criteria and Related Research:
Corporate Rating Methodology
Rating Oil and Gas Exploration and Production Companies
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