YPF Sells $800mn Bond to Fund Debt Buyback

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(Bloomberg, 10.Jan.2024) — Argentina’s state-owned oil driller YPF SA tapped international investors with a new dollar bond to help finance a buyback of existing debt, according to people familiar with the matter.

The firm sold $800 million in fixed-rate debt due 2031, according to people familiar with the matter. The notes priced at 99.083 cents on the dollar with a 9.75% yield, down from initial price talk in the low 10%-range, said the people, who asked not to be identified because they’re not authorized to speak about it.

The energy giant will start paying back principal on the debt in July 2026, the people added, giving the bond a weighted average life of about 4.75 years.

The offering comes as YPF plans to repurchase as much as $346 million in outstanding dollar bonds due in April. The company said it would pay cash for the bonds and is offering a premium for investors who tender before Jan. 19.

Some investors questioned whether the bond provides a high enough yield to compensate for risks as President Javier Milei attempts to turn some of his economic campaign promises into reality. “It’s hard to take a look at this ahead of Milei’s battle that looms with congress,” said Omotunde Lawal, head of EM corporate debt at Baring Investment Services in London.

Milei has said he wants to privatize state-run companies, pointing to YPF as an eventual target during his campaign. While the president can seek to privatize companies by decree, he is expected to require support in congress, where his party has a minority.

Analysts at S&P Global Ratings said the focus remains on YPF’s ability to manage its liabilities. “We view this transaction as opportunistic,” analysts Diego Ocampo and Amalia Bulacios wrote this week, referring to the company’s buyback plan. “YPF’s liquidity profile remains healthy with sizable cash reserves, ample access to domestic markets, and manageable short-term debt maturities.”

The company had cash reserves of roughly $1.3 billion at the end of September, according to S&P. The analysts affirmed YPF’s credit rating at CCC-, deep in junk territory, with a negative outlook. Fitch Ratings has assigned YPF a CCC- score, three notches above default, while Moody’s Investors Service grades the company at Caa3.

Citigroup Inc., JPMorgan Chase & Co. and Santander are managing the bond deal. A spokesperson for YPF didn’t immediately respond to a request for comment.

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By Kevin Simauchi and Maria Elena Vizcaino. With assistance from Esteban Duarte

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