The company announced initial price thoughts of 8.875% area on an up to US$1bn five-year bond, rated Caa1/CCC+, that is scheduled to price Friday through leads Credit Suisse, JP Morgan and HSBC.

Thursday, March 17, 2016

YPF rushes to market US$1bn five-year bond

Oil company YPF is rushing to market this week ahead of an expected flood of issuance from the country in the coming months.

Following the sovereign's agreement with holdout creditors last month, Argentina's borrowers are weighing when best to issue bonds amid expectations of a supply surge this year.

The government moved closer to an expected US$11.68bn bond sale to pay litigant investors on Wednesday when it won the lower house's approval for the debt agreement.

President Mauricio Macri is expected to get the bill passed in the Senate later this month so that the government can issue the jumbo bond by a mid-April payment deadline.

YPF is getting in ahead of the sovereign, as well as provinces and other corporates, as those deals could pressure secondary spreads and complicate deal execution.

The company announced initial price thoughts of 8.875% area on an up to US$1bn five-year bond, rated Caa1/CCC+, that is scheduled to price Friday through leads Credit Suisse, JP Morgan and HSBC.

The oil company has seen its spreads come under pressure during the recent rout in crude prices, and it may be trying a shorter-dated tenor to reduce the cost of funding.

YPF's 2024s, which have a seven-year average life, were bid at a yield of 9.15% on Thursday, down from a recent high of 10.44% on January 19, while its 2025s were yielding around 9.125%.

"(YPF's bond) is not cheap in my view," said the broker. "Buenos was a deal where the issuer was willing to pay the concession."