YPF SA is using everything from a telephone hot line to radio ads to lure individuals after Argentina’s biggest oil company inundated the state pension fund and insurers with a record $1.2 billion of peso debt.
YPF, which was expropriated by the government in April, wants to tap some of the 344 billion pesos ($71 billion) on deposit at banks in its bond issue next week after selling most of its 5.7 billion pesos of debt securities this year to institutional investors. YPF is offering a 19 percent yield on the 50 million-peso sale of one-year notes, while banks pay 12.5 percent for 30-day deposits of less than 100,000 pesos.
The oil producer has become the biggest borrower in the local market as it seeks to finance a $37.2 billion production plan and is using the sale to test the appetite of individuals, according to RJ Delta Fund, as their savings are eroded by inflation that economists estimate is the second highest globally. Like most Argentine companies, YPF has been shut out of overseas debt markets with borrowing costs that are more than twice the average 5 percent in emerging markets.
“The level of publicity that they are giving this bond sale is unprecedented,” Luis Celasco, who manages $338 million of Argentine debt at RJ Delta, said in a telephone interview from Buenos Aires. “YPF is seeing a great deal of liquidity in private hands and wants part of it.”
Alejandro Di Lazzaro, a spokesman for Buenos Aires-based YPF, didn’t return an e-mail seeking comment.
Along Avenida Libertador, one of Buenos Aires’s major thoroughfares, posters read “Put your savings toward production with the YPF bond,” while Radio Continental and Radio Mitre, two of the capital’s most popular news stations, broadcast spots by the company urging individuals to earn money and help the country at the same time.
A television advertisement says “the YPF bond is a simple option for someone like you to invest in production.”
When she seized control of YPF from Spain’s Repsol SA on April 16, President Cristina Fernandez de Kirchner said it was for the “public good” and would lead to increased energy output and investment after fuel imports doubled in 2011.
Individuals can buy the securities by telephone, over the Internet or in person at banks, investing from as little as 1,000 pesos to a maximum 250,000 pesos.
The 19 percent annual yield offered by YPF compares with the benchmark deposit rate, known as the badlar, of 15.31 percent for 30-day deposits of more than 1 million pesos, and an average rate of 12.5 percent for deposits of less than 100,000 pesos, according to the central bank.
“The YPF bond competes with fixed-term deposits, especially for small savers who don’t have access to rates offered for deposits of more than 1 million pesos,” said Jorge Todesca, a former deputy economy minister, who now runs Buenos Aires-based research firm Finsoport. “It’s a good option.”
The bond yield still falls short of annual inflation that private economists estimate at 25 percent, which would be second only to Belarus, data compiled by Bloomberg show.
According to the government’s statistics institute, whose data has been questioned by the International Monetary Fund, consumer prices rose 10.2 percent in the year ended Oct. 31.
Political interference in the company’s operations and Repsol’s legal actions to obtain compensation will make it harder for YPF to sell bonds to investors who probably have never bought corporate debt before, according to Orlando Ferreres, a former deputy Economy Minister who now runs his own research company.
“It won’t be an easy sale, even with all the ads and publicity,” Ferreres said in a telephone interview. “This is a new product for most of those small investors and YPF doesn’t have a good image, given that it hasn’t paid Repsol yet and is facing a lawsuit abroad.”
The peso has weakened 12 percent this year, the most in emerging markets. It fell 0.1 percent to 4.8737 per dollar at 1:12 p.m. Buenos Aires time. Warrants tied to economic growth dropped 6.17 cent to 6.27 cents ahead of a $3.5 billion coupon payment on Dec. 15. The extra yield, or spread, investors demand to hold Argentine debt over U.S. Treasuries narrowed nine basis points to 1,032 basis points, according to JPMorgan Chase & Co.
Banks yesterday started receiving offers for the bond, which will be priced on Dec. 14. The amount of the sale may be increased to as much as 150 million pesos. To buy the securities, investors must have an account at one of the banks that are arranging the sale.
“There’s been great response from retail investors and demand should exceed the 50 million pesos comfortably,” Ariel Bertino, the head economist at the investment department of Banco Hipotecario SA, which is co-managing the sale, said in a telephone interview from Buenos Aires. “The general public for the first time is hearing about bonds and looking beyond time deposits for options to place their savings.”
The sale’s other managers are Banco de Galicia y Buenos Aires SA, Banco de la Provincia de Buenos Aires, Banco Macro SA, Banco Santander Rio SA, BBVA Banco Frances SA, Nacion Bursatil Sociedad de Bolsa SA, Nacion Fideicomisos SA and Banco Credicoop.
YPF has issued almost half of the total 11.2 billion pesos in debt sold in local markets since it was nationalized. Next week’s sale will be the smallest by the company, which has announced plans to raise a further 4.5 billion pesos by Dec. 17.
“The publicity effort is too big to think they just want 50 million from the public,” Todesca said. “If demand is good, more sales like this will come.”