YPF Slumps as NML’s Singer Seeks Argentine Asset Information
YPF SA (YPF), Argentina’s state-owned oil producer, is headed for the biggest weekly slump in five months as hedge fund manager Paul Singer’s NML Capital Ltd. expands its probe of seizeable assets in a defaulted bond dispute.
Shares in YPF tumbled 3.6 percent to 326 pesos at close in Buenos Aires, eroding yesterday’s 5.5 percent rally and extending a loss this week to 5.9 percent. The company’s bonds due 2018 declined 0.42 cent on the dollar to 101 cents after advancing 1.1 cent in the previous two days.
While the government sends mixed signals on plans to avert a default before a June 30 bond payment, YPF has been placed in the crosshairs of holdouts after U.S. Supreme Court justices ruled on June 16 that two banks must turn over information about the nation’s worldwide assets. NML Capital, a unit of Elliott Management Corp., asked to lift stays delaying enforcement of subpoenas in three U.S. jurisdictions after the Supreme Court ruling, according to court documents obtained by Bloomberg News.
NML is seeking Argentine asset information from U.S. energy companies that have or have had commercial ties with the goverment’s state-run oil producer including Exxon Mobil Corp., Chevron Corp., Apache Corp. and Dow Chemical Co.
“NML does not yet know what property Argentina has and where it is,” the documents filed at courts in Texas, Michigan and California say.
The company’s assets aren’t seizable, YPF’s press department said in an e-mailed statement.
“YPF is an independent company and run as such, in accordance with the law,” the company in an e-mail. “YPF’s assets don’t belong to the Argentine Republic, therefore can’t be embargoed for debt taken on by the sovereign.”
The decade-long court battle stemming from the country’s record $95 billion default in 2001 is coming to a head as the government considers negotiating a solution with holdouts or skirting U.S. court orders to pay restructured debt under local legislation.
“In the case of YPF, the funds will have to prove that it is the nation’s ‘alter ego’ and liable for losses suffered by holdouts, something we don’t see as possible,” Marcelo Villegas, a lawyer at Nicholson & Cano, said in a yesterday interview in Buenos Aires. “But the funds will have the right to ask for assets all over the world and freeze them until a judge from a different jurisdiction rules those assets don’t belong to the sovereign.”
Holders of 93 percent of the defaulted bonds agreed to debt restructurings in 2005 and 2010 while other creditors including the unit of billionaire hedge fund manager Paul Singer’s Elliott Management Corp., sued for better terms.
The holdouts will consider the oil producer’s assets as part of their bid to seek full repayment, Villegas said yesterday. Villegas, whose firm advised YPF on an international bond sale last year, said the company’s notes were structured to make it impossible to seize interest payments.
Stephen Spruiell, a spokesman for NML Capital, declined to comment on the firm’s plans to seek repayment through YPF assets.
In 2011, a U.S. court rejected the claim that Energia Argentina SA, a state-owned energy company, was the nation’s “alter ego” and liable for bondholder losses.
Argentina has countered about 900 embargo attempts by holdout creditors, Economy Minister Axel Kicillof said on June 17, from a seized naval ship docked in Ghana to attempts at embargoing the presidential jet, diplomatic and military properties to central bank reserves. President Cristina Fernandez de Kirchner rented a plane last year to fly to Vietnam to avoid embargo risk of using her presidential jet.
YPF, whose primary exploration focus is domestic, formed an initial $1.24 billion partnership with Chevron Corp., the second-biggest U.S. oil company, to develop 3 percent of the Vaca Muerta shale deposit in Argentina. The venture has been extended until 2048 with a potential investment of $16 billion.
YPF isn’t an easy target for the holdouts as it doesn’t operate internationally the way most large oil companies do, according to Tim Samples, a Professor of Legal Studies at the University of Georgia.
“Most YPF assets are located within Argentina and attaching assets in Argentina is virtually impossible for holdouts,” he said in an e-mailed response to questions. “The court order may interfere with YPF’s ability to access international financial markets without headaches. At the very least, these developments could make financing YPF’s operations more expensive.”
The company plans to invest $35 billion over five years and is actively seeking new partners from Petroleos Mexicanos to Petroliam Nasional Bhd to develop its non-conventional resources. The nation’s widening energy deficit has drained international reserves and put more pressure on YPF to increase production.
A government default would “fully close the issuance window that the government is trying to consolidate for YPF,” Bulltick Capital Markets economist Alberto Bernal said in a June 16 report. “Without YPF issuance, there’s no financial room for this company to develop the Vaca Muerta field, and hence, no capacity for Argentina to, at some point, control the ongoing widening of the energy deficit.”
YPF’s American depositary receipts tumbled 11.9 percent on June 16 after the U.S. Supreme Court ruling. The ADRs rebounded starting the next day after Fernandez said the country would find a way to keep current on its restructured debt and on comments from attorneys representing Argentina that they would begin debt talks next week in New York.
“Until holdouts and the sovereign reach a final deal, talks to attract foreign investors to develop shale deposits will be delayed,” Villegas said.
Volatility is set to continue, Argentine securities regulator Alejandro Vanoli told a conference in Buenos Aires yesterday.
“Once the negotiation ends, Argentine stock prices should rise as they are among the cheapest in the world,” he said.
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