Demand for the issuance reached more than US$3 billion, allowing lead banks Credit Suisse, JP Morgan and HSBC to squeeze pricing and launch at a yield inside the guidance rate of 8.75 percent. Settlement will take place on March 23.

Saturday, March 19, 2016

YPF prices new 5-year bond at 8.5% rate

IRSA issues debt for US$360 million as appetite for Argentine assets is on the rise

State-controlled energy company YPF sold US$1 billion worth of new five-year bonds at a yield of 8.5 percent yesterday, the company said, wrapping up its financing needs for the year.

Demand for the issuance reached more than US$3 billion, allowing lead banks Credit Suisse, JP Morgan and HSBC to squeeze pricing and launch at a yield inside the guidance rate of 8.75 percent. Settlement will take place on March 23.

YPF’s debt issue comes on the heels of a US$360 million seven-year bond sale by real estate company IRSA Commercial Properties. Bonds have a 8.7 percent yield, will pay interests every six months and will expire in March 2023. The company had announced two weeks ago the approval by its board members of an issuance of up to US$470 million.

“We like the name and believe the company is one of the country’s top credits with a unique portfolio of assets and interesting opportunities ahead,” wrote analysts at a local brokerage.

“Moreover, it should benefit from the macro changes expected under the new government.”

Optimism over the prospects for the country as the government nears the end of an over 10-year legal battle with holdouts has buoyed appetite for Argentina assets. This week’s jump in crude prices to above US$40 a barrel no doubt also helped bolster interest in the Argentina oil company YPF.

YPF, whose credit spreads have widened during this year’s crude rout, opted to move ahead of any potential waves caused by the jumbo sovereign trade and to take out shorter-dated money in an effort to save on funding costs.

“Because we do not feel comfortable paying the high yields our bonds are trading at, we have decided to issue in the short-part of the curve,” YPF CFO Daniel González told investors on a conference call this week.

YPF’s output and profits have recovered since the nationalization in 2012, but are now suffering again due to the massive plunge in global energy prices. The price of a barrel of oil has fallen from above US$100 each to around US$30 each since 2014.

The company reported a sharp swing into the red in the fourth quarter of 2015, posting a net loss of 1.70 billion pesos (US$131 million). Full-year profits almost halved on the previous year to 4.58 billion pesos. Oil output at YPF rose 2.1 percent in 2015 while gas production climbed 4.1 percent. Overall, production grew by three percent.

In a clear acknowledgement that the global downturn was hurting the exploration, the company said two weeks ago that it plans to cut capital expenditure by at least 20-25 percent this year to mitigate the impact of the global oil price rout.

Miguel Ángel Gutiérrez looks set to become the new president of YPF following the resignation of the current head of the company Miguel Galuccio.Gutiérrez will be proposed as the Let’s Change administration’s pick at a key shareholders meeting next month.

Herald with Reuters