Repsol SA, the Spanish oil company whose YPF SA unit was seized by Argentina, had the outlook on its credit rating cut to negative from stable by Moody’s Investors Service because of concern about contagion from the sovereign debt crisis.
Moody’s has a Baa3 rating on Repsol bonds, the lowest investment grade. Repsol shares have lost almost half their market value this year after Argentina nationalized the company’s YPF unit and benchmark Brent oil futures fell about 11 percent, depressing its revenue outlook.
Spain’s biggest oil producer last month lowered its dividend payout ratio to protect its credit ratings. Spanish government debt yields rose to a euro-era record earlier this month as the European debt crisis intensified.
“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,” the ratings agency said in a statement in London.
Standard & Poor’s and Fitch Ratings also have Repsol on the lowest investment grade. S&P changed the outlook from negative to stable on June 22, citing confidence that Repsol’s management will be able to reduce debt this year.