YPF: fundraising just got harder
October 31, 2012 8:58 pm by Jude Webber
A US appeals court ruling that Argentina must treat its defaulted and performing debt equally not only leaves it staring at the unappealing prospects of default or paying the “vultures” it has vowed to scorn forever. It also risks scuppering nationalised oil company YPF’s ability to raise funds internationally.
That, at least, is the view of some financial experts in Buenos Aires.
Take Guillermo Nielsen, who as finance secretary worked on Argentina’s first debt swap after its 2001 default on nearly $100bn. As he told beyondbrics:
A year ago, financing YPF was part of the Repsol’s problem [Argentina expropriated 51 per cent of YPF from Repsol in May without compensation]. Now it’s the government’s problem. There’s no way Galuccio is going to get the money. It was already a difficult task. Now, after this ruling, you see credit ratings downgrading Argentina and YPF is … government-owned. (Getting financing) is almost an impossible task.
And here is Miguel Kiguel, an economist:
Argentina wants to get money for YPF. All these problems are a sword of Damocles – any big investors will see that.
Miguel Galuccio, YPF CEO, talked himself blue in the face in 70 meetings with investors in the US and England in September, briefing them on his ambitious plans for the company. YPF says the “non-deal roadshow” went well – he is a seasoned oilman, after all, and his technical expertise is well respected.
But if investors find it hard enough to contemplate a country where foreign exchange restrictions make it tough to repatriate earnings; where the very expropriation of YPF underscores the perceived fragility of contracts; and where inflation statistics are accused of having been doctored for five years; the holdout ruling will do nothing to reassure them.
YPF, which came back from the roadshow full of optimism that its message had got through, had no immediate comment.
Argentina has vowed neither to pay what it calls “vulture funds” seeking to collect in full on debt it bought after the default at a knock-down price, nor to default – something it could be forced to do if payments made to the performing bonds issued in debt swaps in 2005 and 2010 to replace the defaulted debt have to be shared among holders of defaulted debt as well.
Argentina is sticking to its guns – but while it is still in default with the Paris Club of Western creditor nations, has not paid its share of a separate holdout case at the World Bank arbitration tribunal and has litigation over the YPF expropraiton looming over it, international investors could hardly be blamed for not making a beeline to Buenos Aires. Ratings downgrades, like the one on Tuesday from Standard & Poor’s won’t help.
And there’s more. Plaintiffs seeking to collect on a $19bn judgment against Chevron in Ecuador are now filing to attach assets in Argentina and Colombia.
Why should that matter to YPF? Well, it is trying to tie up a deal with Chevron to help it develop its giant Vaca Muerta shale resources. Any embargo may not affect the partnership, but it could presumably affect Chevron’s ability to plough in investment.
A Chevron spokesman says its investment strategies are not affected by the plaintiffs’ bids to collect on the judgment by squeezing its assets worldwide, and would not be drawn on the implications for the YPF partnership or how much protection an alliance with a state-owned company might afford. YPF also had no immediate comment on whether its planned partnership with Chevron would be affected.
