Exclusive: Argentina, Repsol to sign $5 billion YPF deal - source

LONDON Thu Feb 20, 2014 7:04pm EST

A man walks past a petrol station owned by Spanish oil major Repsol in central Madrid November 26, 2013. REUTERS/Sergio Perez

A man walks past a petrol station owned by Spanish oil major Repsol in central Madrid November 26, 2013.

Credit: Reuters/Sergio Perez

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LONDON (Reuters) - Argentina and Repsol SA (REP.MC) will sign a definitive $5 billion settlement over the seizure of YPF SA (YPFD.BA) within days, a source involved in the talks said on Thursday, ending a bitter two-year bilateral dispute.

Argentine President Cristina Fernandez nationalized Repsol's majority stake in the country's largest energy company in 2012, sparking a row with Spain, tension within Repsol's boardroom and a freeze on international investment in the Vaca Muerta shale field.

After 18 months of conflict, the two parties struck a preliminary compensation deal last November, but spent the past six weeks ironing out the details of a settlement that is half the $10.5 billion Repsol was seeking in international courts.

A deal, to be paid in U.S. dollar denominated bonds, had been complicated by Repsol's demands for guarantees on the paper, a challenge for a country that has been shut out of international debt markets since a sovereign default in 2002.

"The important part of this deal is that Argentina recognizes $5 billion of debt to Repsol over the expropriation," the source told Reuters on condition of anonymity because he was not authorized to speak on the record.

Under the terms of the agreement, Repsol will receive various bonds with a total nominal value of around $5.5 billion, including already issued Argentine dollar-denominated bonds and a new ad-hoc 10-year bond worth $3 billion, the source said.

A market source confirmed the offer was comprised of already issued Argentine bonds, governed under local law, and a new 10-year bond. Deutsche Bank acted as an independent advisor during the talks.

The deal still needs approval from Argentina's Congress and from Repsol's board of directors and shareholders. The board of the Spanish company is expected to discuss the matter on Tuesday.

Repsol declined to comment.

A spokeswoman for Argentina's economy ministry said the government would not reveal any details until the deal is signed, and will abide by the confidentiality clause.

For Argentina, putting an end to the Repsol conflict will open the door to developing the Vaca Muerta formation, possibly one of the biggest shale reserves in the Western Hemisphere.

Argentina needs foreign money to develop the field, but international investors, facing legal threats from Repsol, were reluctant to jump in.

Repsol has said that, once it has a firm settlement, it will drop all legal claims against Argentina and companies such as Chevron Corp (CVX.N) that agreed to invest in Vaca Muerta after the expropriation.

For the Spanish group, closing the chapter on YPF will finally allow it to focus on expanding its international exploration and production operations without a legal battle hanging over its head.

The company has said it is eyeing opportunities in North America and one source said it has hired JP Morgan to identify targets.

Repsol's shares, which traded as high as 19 euros after the preliminary YPF deal announced in November, closed at 17.985 euros on Thursday.

Repsol rejected an earlier YPF deal orchestrated by key shareholder Pemex of Mexico in June that would have given it $1.5 billion in bonds and a small stake in Vaca Muerta, saying it did not want to reinvest in the country.

(Additional reporting by Alex Chambers and Alejandro Lifschitz; Writing by Tracy Rucinski; Editing by Julien Toyer and Andre Grenon)

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Comments (1)
GermanHoldout wrote:
The Holdouts are waiting for an agreement too….

In the “Pari Passu” issue the Holdouts are 100% right! There is nothing to discuss. In the bond contracts “Pari Passu” is clear defined. It would be helpful, if the US Supreme Court promptly rejected Argentina’s unjustified appeal.

Argentina should rather sit down and negotiate an acceptable solution with the Holdouts!

The cause of Argentina’s decline is the largest financial crime in world history, this since 2002 ongoing HORROR-Default.

U.S. Sen. Rubio meant under undemocratic Argentina, that Argentina, for example, does not pay its debt.

Non-payment of debt since 2002 to the Holdouts, breaching of bond-contracts are criminal and are highly undemocratic!

Argentina as a great country must reenter the world!

For reentering the world, Argentina must end this HORROR-Default!

Argentina’s nightmare default, this since 2002 ongoing HORROR must finally have an end!!!

We, the holdouts, have been suffering for more than a decade!!

Since 2002, Argentina has not paid a cent to the holdouts!

President Obama should help and talk to President Kirchner to end Argentina’s Horror-Default.

President Kirchner (by the way a beautiful women) should end this since 2002 ongoing HORROR-Default and solve the holdout problem NOW!

Beyond the U.S. Hedge Funds there are still tens of thousands retail Holdouts worldwide, most of them from Italy and Germany.

Most of the Holdouts are “before default buyer”, who have bought their bonds at an average of 100% or even higher.

Argentina clearly has the capacity to repay the debt to the holdouts after more than a decade! The outstanding debt is only approximately 12 Billion. (incl. accrued interest) It is not much for the 3. largest economy in South America.

Holdouts want a simple, clear, secure and an ACCEPTABLE solution.

Holdouts DO NOT want such exotic financial constructs, as they were the swap conditions in 2005 and 2010, with an exorbitant Haircut, with many new bonds, with only Discount bonds above $50000, GDP Warrants etc., and with maturities in the eternity. Such “shares like” financial constructs are inacceptable.

A swap from the defaulted old bonds to new bonds is unacceptable also for tax reasons. In Germany, for example, if you would accept a swap, then you would have to pay for the new bonds 30% extra tax…

Following simple conditions might be acceptable for the Holdouts on the basis of the old bonds.(Without swapping from old to new bonds, also because of tax reason)

- at the latest, on 01/01/2015 (end of RUFO clause) Argentina should repay in CASH 100% of the nominal value of the defaulted bonds, which became due before 2015.

- For the accrued interest between 2002-2015 Argentina should emit new bonds with 50% discount, and with a maturity of 5 years.

Feb 21, 2014 1:05pm EST  --  Report as abuse
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