3.7200 +0.23 (6.59%)
Before hours: 9:25AM EST
|Bid||3.4500 x 1300|
|Ask||3.6800 x 1800|
|Day's range||3.4500 - 3.7500|
|52-week range||2.2500 - 10.0700|
|Beta (5Y monthly)||1.74|
|PE ratio (TTM)||1.12|
|Forward dividend & yield||N/A (N/A)|
|Ex-dividend date||09 Jul 2019|
|1y target est||4.85|
(Bloomberg) -- In the 99 years since it was founded to pump the oil fields of Patagonia, Argentine energy driller YPF SA has been whipsawed by countless booms and busts. If global oil markets weren’t collapsing, it seemed, then Argentina was mired in a debt crisis that was wreaking havoc on the whole nation’s finances.Never, though, had the company been pushed into a large-scale default of any kind. Until, it would appear, now. Word of this came in an odd way: Officials at state-run YPF sent a press release in the dead of night laying out a plan to saddle creditors with losses in a debt exchange.Implicit in its statement was a threat that traders immediately understood -- failure to reach a restructuring deal could lead to a flat-out suspension of debt payments -- and they began frantically unloading the shale driller’s bonds the next morning. Today, some two weeks later, the securities trade as low as 56 cents on the dollar.Creditors, including BlackRock Inc. and Howard Marks’s Oaktree Capital Group, are gearing up for bare-knuckled negotiations just four months after ironing out a restructuring deal with the government that marked the country’s third sovereign default this century alone.YPF’s downfall underscores just how hard the pandemic has hammered both the global oil industry and the perennially hobbled Argentine economy. Dollars are now so scarce in Buenos Aires that the central bank refused to let YPF buy the full amount it needed to pay notes coming due in March. That was the immediate cause of the restructuring announcement.A longer view reveals a steady decline in the company’s finances since the government re-nationalized it in 2012 and forced it to swell payrolls, artificially hold down domestic fuel prices and skimp on investments, leading to four straight years of oil-and-gas output declines.YPF must now reach a deal with creditors to get its finances in order to boost investment in the gas-rich Vaca Muerta shale formation in Patagonia.The task is even more urgent as the South American winter approaches with YPF unable to meet domestic gas demand, meaning Argentina will have to boost imports -- and fork over precious hard currency -- in the middle of a global spike in prices.“The central bank’s decision really put YPF between a rock and a hard place,” said Lorena Reich, a corporate-debt analyst at Lucror Analytics in Buenos Aires.In private conversations with investors, YPF officials are portraying the deal as a voluntary exchange and are insisting that they will pay back all their bonds -- with the exception of the notes coming due in March -- whether they are tendered in the swap or not. But that’s certainly not how investors interpret the situation, and ratings companies say the proposal constitutes a distressed exchange that would be tantamount to default.The company’s $413 million in bonds due in March tumbled 6.5 cents Tuesday, the most since September, to about 82 cents on the dollar.Overall, YPF is seeking to restructure $6.2 billion of bonds, pushing back a total of $2.1 billion in debt payments through the end of next year so that it can invest the money in bolstering production. The deal offers investors a slight upside from current bond prices, but would stick creditors with losses of as high as 16% on a net-present-value basis, according to calculations by Portfolio Personal Inversiones, a local brokerage.While some investors had anticipated YPF would try to refinance its short-term debt -- without imposing any losses -- the plan to restructure virtually all the company’s overseas bonds was a big surprise.“The offer crossed the line of reason,” said Ray Zucaro, the chief investment officer at RVX Asset Management in Miami, who owns YPF bonds. “There was no reason they needed to include all the bonds when they only needed relief on the short-dated notes.”YPF says it included all its securities in the swap to give all its bondholders a fair shot at exchanging into a new export-backed note maturing in 2026 that offers more protection than unsecured debt.Creditors have begun to form groups to negotiate the terms of the restructuring, and while the talks haven’t begun in earnest, the company says it’s willing to negotiate. On Jan. 14, YPF amended some of the rules for its consent solicitation after investor outcry over a procedural issue.Cash CrunchArgentina’s cash crunch couldn’t come at a worse time for YPF, which was already facing a drop in demand because of the pandemic. The driller needs more investment to ramp up capital-intensive shale production in Vaca Muerta as aging traditional fields decline. It’s expected to spend $2.2 billion in 2021 after last year’s paltry $1.5 billion. But that’s still a far cry from the more than $6 billion a year it invested in the wake of the nationalization.As the company looks for savings in the bond market, it’s also slashing other costs, cutting salaries and reducing its bloated workforce by 12%. It’s trying to sell stakes in some oil fields, as well as its headquarters in Buenos Aires, a sleek glass skyscraper where executives take calls looking out over the vast River Plate estuary into Uruguay.Founded in 1922 as one of the world’s first entirely state-run oil companies, YPF was passed from nationalist governments to military dictatorships until the early 1990s, when it was sold to Madrid-based Repsol SA as part of a short-lived attempt to free up the economy. In 2012, President Cristina Fernandez de Kirchner’s leftist government expropriated 51% of the company, eventually paying Repsol $5 billion in bonds for its stake. YPF’s market value today is just $1.6 billion.The central bank’s refusal to sell YPF the dollars it needs to pay its obligations, despite the company’s earlier efforts to refinance its short-term debt, is a bad sign for all overseas corporate bonds from Argentina, according to the financial services firm TPCG. The concern is that if the country’s flagship company isn’t eligible to buy dollars at the official exchange rate as the bank seeks to hold onto hard-currency reserves, no one else will be either.“The central bank’s message is pretty clear,” said Santiago Barros Moss, a TPCG analyst in Buenos Aires. “There just aren’t enough dollars in Argentina for corporates right now.”(Updates bond prices in the 11th paragraph. A previous version of this story corrected the 10th paragraph to make clear that YPF is telling investors that bonds maturing in 2021 wouldn’t be repaid if a restructuring deal fails.)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P.
(Bloomberg) -- Investment firms including Oaktree Capital Management and BlackRock Inc. are organizing into two groups to negotiate with YPF SA after the Argentine oil producer proposed a debt swap that would saddle them with losses, according to people familiar with the matter.BlackRock is among a consortium of experienced emerging-market investors such as Ashmore Group Plc and Invesco Ltd. that have tapped law firm White & Case LLP to advise on the talks, said the people, who asked not to be identified because the information is private. Representatives for the firms declined to comment.The other group, advised by law firms Dechert LLP and DLA Piper LLP, is composed of credit funds including Howard Marks’s Oaktree. Together, its members hold more than $1 billion of YPF bonds, including more than 30% of one debt tranche in particular, according to people familiar with the matter. It is smaller than the White & Case group in terms of total principal, the people said. A representative for Oaktree declined to comment.Creditors began to organize after Argentina’s state-controlled oil producer asked bondholders Jan. 7 to swap about $6 billion of international debt, including a $413 million bond due in March. The offer, for new securities that don’t have a payment over the next two years, could impose net present value losses approaching 20% on some of the bonds, according to estimates.“The Committee urges YPF to direct its efforts to improving the consideration offered in exchange for the Old 2021 Notes,” Solomon Noh, an attorney at Dechert, wrote in a letter to YPF seen by Bloomberg. “The members of the Committee will readily make themselves available to share their views on potential enhancements that can be made.”The group advised by White & Case is formed by 13 institutional investors and holds over 25% of the company’s bonds, according to a Jan. 17 statement in which it described itself as the Ad Hoc YPF Bondholder group. The committee added that it holds 40% of the notes that mature from 2021 to 2024, and “well over 50%” of the bonds due 2025.FX DifficultiesYPF, unable to get the central bank to sell it the dollars it needs to make near-term debt payments and seeking to boost investment to reverse years of production declines, offered three new bonds that won’t pay interest until 2023 in exchange for seven securities.Neither group plans on accepting the offer and their main focus, for now, is working on an amended deal with the company, the people said. The two groups are in touch and may eventually combine, some of the people said.Bonds due in 2021 slid 6 cents on the dollar since the announcement while notes maturing in 2025 tumbled 9 cents.The proposed swap comes four months after the central bank demanded that companies with more than $1 million in monthly debt payments through March find a way to push back those obligations. While creditors anticipated a renegotiation of short-term debt, the move to swap all of YPF’s international bonds was a surprise, the people said.The company has struggled to adapt to an environment of low oil and gas prices caused by the pandemic, while also needing to spend billions of dollars to spur growth in Vaca Muerta, a large shale deposit in Argentina’s Patagonia region. YPF’s oil and gas production sank by about 10% last year.YPF’s credit rating was cut to C by Fitch and to CC by S&P following the debt exchange proposal.“We view the proposed reduction in interest expense not as a necessity for the company’s survival but instead a means for the company to fund an increase in capex,” Barbara Halberstadt, an analyst at JPMorgan Chase & Co., wrote in a Jan. 11 report. “While we understand the company is seeking alternative sources to put its growth plan back on track, we view this means by reducing cash interest payments to creditors as aggressive.”For its part, YPF has shown signs of being receptive to changing terms of the deal as needed to win creditors’ support. Last week, it amended certain procedural aspects of the debt exchange that had spurred investor outcry. People familiar with the company’s thinking say it’s willing to work with bondholders on coming to terms.A spokeswoman for YPF declined to comment.Meanwhile, the law firms involved have significant history tangling with each other. YPF is represented by Cleary Gottlieb Steen & Hamilton LLP, which represented the Argentine government in its lengthy battle against holdout creditors from its 2001 default. Dechert represented Elliott Management Corp. in that battle, while White & Case represented a separate group of holdouts.(Updates with details of Ad Hoc YPF Bondholder Group holdings in sixth paragraph)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P.
Investors need to pay close attention to YPF Sociedad (YPF) stock based on the movements in the options market lately.