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Billionaire Eskenazis Risk Default as Argentina Takes YPF

By Rodrigo Orihuela
April 19, 2012 12:54 PM EDT 1 Comments
Argentina’s Eskenazis in Refinancing Talks After YPF Seizure
Argentina’s Eskenazis in Refinancing Talks After YPF Seizure

Argentina’s billionaire Eskenazi family is in talks on funding alternatives for more than $2 billion of loans used to acquire a stake in YPF SA (YPFD) after the government decided to nationalize the oil producer.

The family’s Petersen Group is negotiating with several banks on financing options after the seizure, according to a company official, who asked not to be named because the talks aren’t public. Credit Suisse Group AG and BNP Paribas SA are among banks which have loaned money to Petersen for the acquisition of the company’s 25 percent stake in YPF.

President Cristina Fernandez de Kirchner ousted Sebastian Eskenazi as the head of Buenos Aires-based YPF on April 16, appointing Planning Minister Julio de Vido to run the company and announcing plans to seize a 51 percent stake in YPF from Spain’s Repsol YPF SA. (REP) The expropriation follows the takeovers of airline Aerolineas Argentinas SA and a $24 billion pension fund by Fernandez since she took office in 2007.

Petersen owes Repsol 1.45 billion euros ($1.9 billion) after it bought a stake in YPF, the Madrid-based company said April 16. The Eskenazis counted on YPF dividend payments of as much as 90 percent of profit to repay Repsol and about $680 million of loans with the group of banks.

‘On the Hook’

“Repsol is effectively on the hook for a 1.45 billion euro loan to the Petersen Group which was used to purchase a 25 percent stake in YPF,” Richard Segal, a credit strategist for emerging markets at Jefferies Group Inc., said in a credit note to clients dated today. “An irony is that this purchase (which occurred in stages) is believed to have taken place with the tacit approval of the Kirchner administration.”

Credit Suisse spokesman David Walker declined to comment. BNP Paribas didn’t return a call seeking comment.

Repsol had its ratings downgraded to BBB- from BBB, Standard & Poor’s Ratings Service said today in a statement, citing how the YPF takeover will “materially” worsen its credit metrics.

Argentine Senate committees yesterday approved the YPF takeover plan with some opposition support. The legislation will head for a full vote on April 25.

YPF’s 2011 profit will not be used to pay dividends this year and will probably be re-invested, Deputy Economy Minister Axel Kicillof said in a congressional hearing.

“Those that aren’t expropriated are more nailed than those who were,” Antonio Brufau, chief executive officer of Repsol, said April 17 at a news conference in Madrid, referring to Fernandez’s decision not to target the Petersen group’s 25 percent stake. “We’re all in the same boat. The Eskenazis are enormously worried.”

Collateral

The family, which made its fortune in banking and construction, bought 15 percent of YPF from Repsol in 2008 in a deal backed by then-president Nestor Kirchner, the late husband of Fernandez. The acquisition was financed with a syndicated bank loan and a seller’s note from Repsol. The Eskenazis bought an additional 10 percent of YPF in 2011 with two similar loans.

The four loans covered the full value of the acquisitions.

Petersen’s 25 percent stake in YPF is pledged as collateral to the loans, Exane’s Marie and Riou said in their note. The stake would be divided between the debt holders if Petersen defaults, leaving 22 percent of YPF to the lending banks and 3 percent to Repsol, according to the report.

“Should the Argentine government cut the dividend at YPF (which is the most likely scenario), the Petersen Group would default on its loans,” Exane BNP Paribas analysts Alexandre Marie and Charles Riou said in a note to clients April 17. “A dividend payout of less than 90 percent triggers a default.”

Bank of America

Petersen’s main stakeholders are Enrique Eskenazi and his sons Sebastian and Matias, who all helped manage YPF. The Group also owns four closely held banks in Argentina.

YPF’s market value more than halved to $5.2 billion from a high this year of about $16.2 billion on Jan. 23, according to data compiled by Bloomberg.

Bank of America Merrill Lynch cut its 52-week target price for YPF’s American depositary receipts to $7.15 from $33 and reduced its rating to under perform from neutral after news of the takeover.

Spain vowed to retaliate against Argentine exporters and energy supplies as Repsol demanded $10.5 billion in compensation and vowed to use all legal means to win full payment.

Repsol declined 4.8 percent to 14.67 euros in Madrid yesterday, after dropping as much as 6.7 percent yesterday.

Kristian Rix, a spokesman for Repsol, declined to comment.

Cash for Exploration

The seizure of the stake comes after more than two months of government pressure on YPF because of slumping production. The country could double output within a decade after the discovery of shale oil fields in the south that will cost $25 billion a year to develop and that will require YPF to find partners to help share costs.

The government’s requests for YPF to increase investments included asking in March that the company use its cash to invest in exploration and production instead of paying semi-annual dividends.

The government’s representative on the board, Roberto Baratta, voted against paying dividends in 2011 and this year. Instead of paying dividends, YPF’s board proposed issuing new shares.

To contact the reporter on this story: Rodrigo Orihuela in Rio de Janeiro at rorihuela@bloomberg.net

To contact the editor responsible for this story: Dale Crofts at dcrofts@bloomberg.net

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