Argentina's YPF makes unlikely statement
NEW YORK, Feb 9 (IFR) - As an oil company nationalized by a government that recently defaulted on its debt, Argentina's YPF was an unlikely candidate to come to a bond market still shaken by crumbling crude prices.
But the Triple C rated borrower did just that last week, becoming one of Latin America's first corporates to sell bonds abroad this year when it priced a US$500m dual-tranche tap.
The trade indicated that optimism over Argentina's political outlook - a market-friendly president is expected to win October's election - is starting to outweigh other concerns. This bodes well for the City of Buenos Aires, which kicked off roadshows on Friday ahead of a possible bond offering.
Yet the clear success of the YPF trade also raised some questions.
A four-day rally in crude prices had been buoying oil credits, but that abruptly faded on Wednesday - just when the company had planned to price. US crude fell below US$50 a barrel on the day, thanks to news of rising US supplies. Brent, meanwhile, slipped another 5% by early afternoon to US$55.26 a barrel.
With those prices falling further since, some wonder whether YPF can reach break-even at its marquee Vaca Muerte development - one of the world's largest shale oil fields.
"Clearly, the economics for Vaca Muerte are different at this point," said Jorge Piedrahita, CEO at broker Torino Capital.
A relatively modest US$1bn book size arguably underscored the uncertainty on the buyside, and left the deal falling short of the US$750m size initially telegraphed by ratings agencies.
Nevertheless, the fact that YPF could tap its bonds at levels relatively close to where they came early last year - when positive sentiment over policy changes in Argentina was at its peak - showed the oil outfit still has market access. Continuación...