Fact Check: Argentina

876 days, 19 hours, 43 minutes ago

SINCE RUFO EXPIRED

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YPF’s first bond issue since Argentina’s default gets clipped

El Cronista Comercial reports that the first debt issuance by Argentina’s state-owned oil company, YPF, fell far short of its target because of the country’s sovereign default last year.  The company had announced – well in advance – that it would issue US$750 million in debt, its first issuance since Argentina’s government took the country into default last year.  But investors wouldn’t offer an interest rate that YPF could afford, and the company could only sell US$500 million in the operation:

“Yesterday more than 120 investors, mainly pension funds, investment and hedge funds in the United States, were involved. Also, private banks and insurance companies. And local investors, in a small proportion.  But despite the company having pre-announced the issuance due to an improvement in volatility, they ended up asking the (lead mandate) banks Citibank, JP Morgan and Itau for a rate over 9% for the longer term, which the company didn’t want to accept. (…) ‘The reasons are the Argentine default, the financial cost paid by Argentina, the price volatility of oil, and the oil and gas industry cutting back investment plans and laying people off,’ said sources linked to the issuance.”

Despite the fact that the Argentine government continues to deny it is even in default, investors– and their capital – live in the real world. Moody’s rated the debt issuance a punishing Caa1, with a negative outlook:

“YPF’s negative rating outlook is based on the negative outlook on the Argentine government … (which is) tied to concerns about the government’s haphazard policies, poor transparency and the quality and reliability of its official data reporting, as well as the sovereign’s willingness to pay its debt obligations.”

So even a company like YPF, with 49% ownership from private capital, is facing the consequences of the Argentine government’s puzzling default strategy, following the harm suffered by the country’s banks, its provinces and its municipalities.

Imagine if Argentina had settled with its creditors on mutually beneficial terms last year.  What a completely different picture all of this would be.