Fitch Expects to Rate YPF's US$100MM 2018 Notes Reopening 'B-/RR4'

miércoles 5 de marzo de 2014 16:41 GYT
 

(The following statement was released by the rating agency) NEW YORK, March 05 (Fitch) Fitch rates YPF S.A.'s (YPF) USD100 million reopening of the company's 2018 notes 'B-/RR4.' The reopening of the 2018 notes is available only to holders of the company's US$100 million senior unsecured notes due in November 2028. An exchange of debt instruments by these holders would not result in an increase in the company's debt. If successful, the 2018 notes outstanding would be increased to US$600 million. Key Rating Drivers YPF's ratings reflect its strong linkage with the credit quality of the Republic of Argentina (Fitch local and foreign currency Issuer Default Ratings of 'B-', Outlook Negative, and 'CC', respectively)and the company's low reserve life. LINKAGE TO SOVEREIGN: YPF's ratings reflect the close linkage with the Republic of Argentina resulting from the company's ownership structure as well as recent government interventions. The Republic of Argentina controls the company through its 51% participation after it nationalized the company on April 2012. Following this action, the company's strategy and business decisions are governed by the Republic of Argentina. LOW HYDROCARBON RESERVE LIFE: The ratings consider the company's relatively weak operating metrics characterized by low reserve life and historically declining production levels. As of year-end 2012, YPF reported proved reserves of 979 million barrels of oil equivalent (boe) and average production of 485,000 boe per day. Year-to-date September 2013, the company's average production of 485,000 boe per day is consistent with 2012 trends. Production has been relatively stable, though with a slight upturn during 2013, especially in 3Q'13, reaching 496,500 boe per day. This translates into a reserve life of approximately 5.5 years, which is significantly below optimal levels and has the potential to create significant operational challenges in the medium- to long-term. During 2012, the company's reserve replacement ratio was approximately 85%. STRONG BUSINESS POSITION: YPF benefits from a strong business position supported by its vertically integrated operations and dominant market presence in the Argentine hydrocarbons' market. Fitch anticipates that YPF will continue to exercise an active role in domestic fuel and gas supply. ADEQUATE CREDIT PROTECTION METRICS: YPF has relatively solid credit protection metrics, characterized by moderate leverage and a manageable debt amortization schedule. As of the last 12 months (LTM) ended Sept. 30, 2013, total financial leverage, as measured by total debt-to-EBITDA, reached 1.2x, which is considered low for the assigned rating. As of year-end 2012, YPF's total debt-to-total proved reserves ratio was average at USD3.5 per boe. Total debt as of Sept. 30, 2013 amounted to approximately USD4.5 billion, of which approximately USD1.1 billion was short-term. Total cash and equivalents amounted to approximately USD1.2 billion as of Sept. 30, 2013. EBITDA for the LTM ended September 2013 was approximately USD3.7 billion. During recent years, the company's leverage has been increasing, mostly as a result of increases in debt. The company's stated strategy is to maintain its net leverage below 1.5x. The 'RR4' Recovery Rating for the company's senior unsecured notes outstanding reflects an average expected recovery given default and is in line with the RR soft cap established for Argentina. Rating Sensitivity YPF's ratings could be negatively affected by a combination of the following: a downgrade of the Republic of Argentina's ratings; a significant deterioration of credit metrics; and/or the adoption of adverse public policies that can affect the company's business performance in any of its business segments. A positive rating action in the short- to medium-term is considered unlikely given the linkage with sovereign credit quality and the Negative Outlook for all foreign and local currency IDRs. Contact: Primary Analyst Xavier Olave Associate Director +1-212-612-7895 Fitch Ratings, Inc. One State Street Plaza New York, NY 10004 Secondary Analyst Paula Garcia Director +562-2-4993316 Committee Chairperson Daniel Kastholm Managing Director +1-312-368-2070 Media Relations: Elizabeth Fogerty, New York, Tel: +1 (212) 908 0526, Email: elizabeth.fogerty@fitchratings.com. Additional information is available at 'www.fitchratings.com'. 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