YPF SA (YPF), Argentina’s largest energy company, said it plans to pay off a $125 million loan to Repsol SA after the Spanish company sought immediate reimbursement following the nationalization of YPF.
YPF will also pay interest due Nov. 4, 2013, after Repsol sent a letter seeking payment, Buenos Aires-based YPF said in a filing with the U.S. Securities & Exchange Commission today. The loan was issued Aug. 3, 2011, before the nationalization.
Argentina’s government seized a 51 percent stake in YPF from Spain’s Repsol in April after saying the company wasn’t investing enough in exploration and production. YPF’s rating was lowered by Moody’s Investors Service on June 12 on the risk of debt acceleration. Repsol’s debt payment request was the first for Buenos Aires-based YPF since the seizure.
“I don’t think other investors will follow Repsol by asking for YPF debt acceleration because of the change of control clause,” Luz Padilla, head of investment activities at Doubleline Capital LP, said in a telephone interview from Los Angeles. “Even if some do, we think the Argentine government will cover the payments. They have already told investors they will and it makes no sense for them not to do it.”
“Repsol’s decision is based on the change of control of YPF,” Repsol spokesman Kristian Rix said by telephone today. “The loan was made in the context of financial support provided by the parent company to its affiliate and no longer has a reason to exist.”
YPF will immediately pay back the loan, according to the SEC filing.
Moody’s on June 12 cut YPF’s rating to Caa1 from B3 because of “YPF’s near-term liquidity risk of debt acceleration” sparked by a change-of-control clause that could be deemed an event of default under certain debt agreements.
About $1.6 billion of YPF debt was subject to change-of- control clauses, Moody’s said then. Moody’s today also cut Madrid-based Repsol’s outlook to negative from stable. Repsol’s shares have lost almost half their market value this year after the YPF nationalization.
Repsol, which has also been affected by the Spain’s sovereign debt crisis and a decline in Brent oil prices, last month lowered its dividend payout ratio to protect its ratings.
“The further downgrade of Spain’s sovereign rating may heighten the risks associated with the execution of the corrective actions initiated by Repsol in response to the YPF expropriation, as it seeks to cut debt and conserve cash,” Moody’s said in today’s statement.
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