Bonds rally at YPF after company
sugar-coat debt exchange offer
- New exchange proposal would now pay interest through 2022
- Offer includes pledge on some shares of YPF Energia Electrica
By Jorgelina Do Rosario and Scott Squires/Bloomberg
Petroleumworld 01 27 2021
Bonds of Argentine oil producer YPF SA climbed to a three-week high after the company improved a $6 billion restructuring offer. Stocks also jumped.
YPF's $540 million in securities due March 2025 rose almost 6 cents and shares rose as much as 9.3% after the state-controlled firm said it would offer investors three new bonds that would pay investors as much as 4% of interest through 2022. Previously, YPF proposed a two-year delay on debt payments.
YPF bonds have taken in a beating in recent weeks after the company floated a plan that threatened to stick creditors with losses of as much as 16% on a net present value basis. The new offer incorporates requests from some creditors who had formed groups to negotiate, said Roger Horn, a corporate analyst at SMBC Nikko Securities in New York.
The company's original offer stunned investors earlier this month. It was launched after Argentina's central bank said it wouldn't allow YPF access to the full amount of dollars it needed to make near-term bond payments. YPF says it's seeking debt relief to reverse years of production declines and fund capital expenditure in Argentina's shale-rich Vaca Muerta region in Patagonia.
“The sad thing is that YPF probably never wanted to do this,” Horn said. “It's the central bank who told companies to bring dollars home on a promise that they'll be able to buy dollars later to pay debt service, a promise which they're reneging on.”
YPF asking creditors for short-term relief as Argentina's dollars wither
The new 2026 bonds will now be backed by some shares the company owns in its subsidiary, YPF Energia Electrica , as additional security for bondholders, according to a company statement.
“Pledging the YPF Energia Electrica equity stake was a significant concession,” said Ezequiel Fernandez, an analyst at Balanz Capital Valores in Buenos Aires, who said the new offer should receive enough creditor support to restructure the short-dated notes. “You can see that YPF heard the bondholders on the relevant issues.”
According to the statement, the new notes due 2026, 2029 and 2033 will start paying 4%, 2.5% and 1.5% in coupons through Dec. 31 2022. After that, bonds due in 2026 and 2029 will accrue 9% annual interest, while bonds maturing in 2033 will pay 7%. The revised offer also increased annual coupon payments for the earlier-dated notes, starting in 2023. The new bonds start paying amortizations as early as February 2023.
It's the second time the company changed its initial offer, which was launched Jan. 7. Its first amendment modified the percentage of votes necessary to change the conditions on the bonds.
On a net present value basis, the company improved the offer by an average 3%, with a 7% bump on bonds maturing in July 2025 and in 2027, according to a report by AR Partners analysts Paula Gandara and Rodrigo Nistor. NPVs for the bonds range from as much as 95%, for the shortest-dated notes, to as little as 62% for the longest-dated notes. A successful exchange could save YPF as much as $1.9 billion over the next two years, according to the report.
Creditors have until Feb. 5 at 11:59 p.m. in New York to accept the offer. The exchange will settle Feb. 11.