Sacyr Cut to `Neutral' at Goldman on Repsol Refinancing Risk

Sacyr Vallehermoso SA (SYV) had its recommendation cut to ``neutral'' from ``buy'' at Goldman Sachs Group Inc. on investor concern Spain's fifth-biggest builder faces increasing pressure to reach an agreement with lenders because of its stake in oil company Repsol YPF SA. (REP)

Sacyr in 2006 spent 6.5 billion euros ($8.2 billion) to buy a 20 percent holding in the oil company. Repsol, owner of Argentina's biggest oil company, posted a record 16 percent drop on Oct. 22 after the South American country proposed a takeover of pension funds, fueling concern the nation is headed for its second default in a decade.

``The recent fall in Repsol's shares has led to diminishing prospects of Sacyr maintaining the loan terms with the syndicate banks for its Repsol-linked debt,'' London-based analysts at Goldman, including Markus Iwar, said in an e-mailed note today. ``As the overhang from Repsol and generally low risk appetite towards leverage remains, the risk to the downside in the near term is material.''

The Spanish builder has had to pay additional guarantees to lenders since Repsol shares traded below 21.9 euros, Merrill Lynch & Co. said in a Sept. 15 note. Both Sacyr and Repsol are based in Madrid.

To contact the reporters on this story: Brian McGee in Madrid at bmcgee3@bloomberg.net

To contact the editor responsible for this story: Andrew Noel at anoel@bloomberg.net

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