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Billionaire Eskenazis Risk Default As Argentina Takes YPF

Billionaire Eskenazis Risk $2 Billion Default as YPF Seized
The Repsol YPF SA oil refinery in Plaza Huincul in the Patagonian province of Neuquen, Argentina. Photographer: Diego Giudice/Bloomberg

Argentina’s billionaire Eskenazi family risks default on more than $2 billion of debt after the government seized control of oil company YPF SA and said dividends would probably be reinvested in the company.

The family’s Petersen Group, which has 25 percent of YPF, owes Spanish partner Repsol YPF SA 1.45 billion euros ($1.9 billion) after it bought a stake in YPF, the Madrid-based company said April 16. The Eskenazis counted on YPF dividend payments of as much as 90 percent of profit to repay Repsol and about $680 million of loans with banks including Citigroup Inc.

Petersen didn’t respond to telephone and email requests for comment. Danielle Romero-Apsilos, a Citigroup spokeswoman in New York, declined to comment.

“Should the Argentine government cut the dividend at YPF (which is the most likely scenario), the Petersen Group would default on its loans,” Exane BNP Paribas analysts Alexandre Marie and Charles Riou said in a note to clients yesterday. “A dividend payout of less than 90 percent triggers a default.”

YPF’s 2011 profit will not be used to pay dividends this year and will probably be re-invested, Deputy Economy Minister Axel Kicillof said yesterday in a congressional hearing.

President Cristina Fernandez de Kirchner ousted Sebastian Eskenazi as the head of Buenos Aires-based YPF April 16, appointing Planning Minister Julio de Vido to run the company and announcing plans to seize a 51 percent stake in YPF from Repsol. The expropriation follows the takeovers of airline Aerolineas Argentinas SA and a $24 billion pension fund by Kirchner since she took office in 2007.

‘In the Same Boat’

“Those that aren’t expropriated are more nailed than those who were,” Antonio Brufau, chief executive officer of Repsol, said yesterday at a news conference in Madrid, referring to Fernandez’s decision not to target the Petersen stake. “We’re all in the same boat. The Eskenazis are enormously worried.”

“Petersen had used YPF dividends to pay interest on the loans,” Borja Monforte, an analyst with Fitch Ratings, said in a telephone interview yesterday from Barcelona, Spain. “With the government taking control, it seems unlikely that Petersen will be able to use those dividends to pay back the Repsol debt.”

The family, which made its fortune in banking and construction, bought 15 percent of YPF from Repsol in 2008 in a deal backed by then-president Nestor Kirchner, the late husband of Fernandez. The acquisition was financed with a syndicated bank loan and a seller’s note from Repsol. The Eskenazis bought an additional 10 percent of YPF in 2011 with two similar loans.

The four loans covered the full value of the acquisitions.


Petersen’s 25 percent stake in YPF is pledged as collateral to the loans, Exane’s Marie and Riou said in their note. The stake would be divided between the debt holders if Petersen defaults, leaving 22 percent of YPF to the lending banks and 3 percent to Repsol, according to the report.

Petersen’s main stakeholders are Enrique Eskenazi and his sons Sebastian and Matias, who all helped manage YPF. The Group also owns four closely held banks in Argentina.

YPF’s market value more than halved to $7.7 billion from a high this year of about $16.2 billion on Jan. 23, according to data compiled by Bloomberg. The Eskenazis stake plunged to a value of about $1.92 billion, based on yesterday’s close.

Bank of America

Bank of America Merrill Lynch cut its 52-week target price for YPF’s American depositary receipts to $7.15 from $33 and reduced its rating to underperform from neutral after news of the takeover. Trading of the ADRs have been halted since April 16 in New York when they were trading at $19.50.

Spain vowed to retaliate against Argentine exporters and energy supplies as Repsol demanded $10.5 billion in compensation and vowed to use all legal means to win full payment.

Repsol declined 6.1 percent to 15.40 euros at 5:40 p.m. in Madrid, after dropping as much as 9 percent yesterday.

Kristian Rix, a spokesman for Repsol, declined to comment.

“People are not only taking out the market value of YPF but they’re also assuming they don’t get that repaid from Petersen,” Andrea Williams, who manages the 1 billion-pound ($1.6 billion) European equities fund at Royal London Asset Management and owns Repsol, said yesterday by telephone.

The seizure of the stake comes after more than two months of government pressure on YPF because of slumping production. The country could double output within a decade after the discovery of shale oil fields in the south that will cost $25 billion a year to develop and that will require YPF to find partners to help share costs.

Cash For Exploration

The government’s requests for YPF to increase investments included asking in March that the company use its cash to invest in exploration and production instead of paying semi-annual dividends.

The government’s representative on the board, Roberto Baratta, voted against paying dividends in 2011 and this year. Instead of paying dividends, YPF’s board proposed issuing new shares.

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