Repsol Drops U.S. Suits Against Argentina Over 2012 Seizu

Repsol SA dropped two U.S. lawsuits it filed against Argentina after the South American nation seized its controlling stake in a local oil company in 2012.

Repsol, a Madrid-based oil company, filed the suits in May 2012, claiming breach of contract and violation of U.S. securities law. Argentina earlier this year agreed to a $4.67 billion compensation for its seizure of YPF SA, which Repsol said it received May 8.

Argentina’s President Cristina Fernandez de Kirchner ordered the nationalization of YPF in April 2012, saying Repsol had failed to invest enough in maintaining oil production. Repsol argued the seizure was illegal, touching off a two-year battle that included the U.S. suits.

Argentina holds the world’s second-largest reserves of shale gas and the fourth-largest of shale oil, according to U.S. Energy Information Administration data. The country is offering tax and export incentives to energy companies that invest at least $1 billion over a five-year period.

The parties didn’t disclose any terms for resolving the suits in separate one-page court filings yesterday in Manhattan federal court.

In the breach of contract case, Repsol accused Argentina of attempting to “walk away from the contractual obligations” it undertook when it chose to come to the U.S. to raise capital through an initial public offering of its formerly state-owned oil company.

Argentine Bonds

JPMorgan Chase & Co., the biggest U.S. bank, bought $2.8 billion of Argentine bonds at a discount from Repsol after the company received them as compensation for the YPF seizure.

The bonds, due in 2024, have a nominal value of $3.25 billion, the Spain’s largest oil producer said in a regulatory filing in Madrid. The transaction is expected to close by May 13, and Repsol will refrain for a limited period from selling its remaining Argentine bonds to other parties except under certain unspecified conditions, according to the filing.

JPMorgan probably believes it can resell the bonds to investors in the market, said Fernando Recalde, portfolio manager at Galileo Argentina SG FCI SA in Buenos Aires.

The cases are Repsol YPF SA v. Republic of Argentina, 12-cv-03877; Repsol YPF SA v. Republic of Argentina, 12-cv-04018, U.S. District Court, Southern District of New York (Manhattan).

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