Negotiations between YPF and its creditors began this Tuesday in a climate of tension with the banks. Many creditors do not agree with the changes proposed by Affronti, the CEO of the oil company, to the bonds. In fact, in a statement, the Ad Hoc Committee of YPF creditors described the proposal as “hostile”. The idea of suspending the flow of income for two years does not make the banks any grace.
In total, the company wants to restructure $ 6.6 billion of seven series of negotiable obligations (NO) issued under New York Law with principal maturities between 2021 and 2047. Its proposal contemplates the exchange for three substitute bonds with a grace period until December of 2022, two with interest rates of 8.5% and maturity in 2026 and 2029 and the last with a 7% rate and maturity in 2033. In the case of the shorter bond, there are also export guarantees.
To modify the current conditions, a vote in favor of more than half of the creditors’ meeting is required as long as it obtains the necessary quorum. In a first call, the presence of 60% of the receivables is required. In a second instance, it is enough that 30% are presented. In addition, YPF imposed a floor of 70% for the modification of the fine print of the issuance prospectuses from which it will make the exchange compulsory for bondholders that have not accepted it.
The deadline for early acceptance – which has a cash incentive for those who accept – is January 18. If acceptance is not achieved by that date, the late acceptance proposal will remain open until the objective of reaching this exchange or a new restructuring offer is achieved.
For now, the market did not welcome the proposal and it was evidenced in the counter-movement of the rest of the oil companies that played the role of YPF on Wall Street on Wednesday. With Brent rising to nearly $ 57 a barrel, YPF’s ADR lost as much as 7% on the wheel and trimmed the loss to 5.4%. The market penalty is seen in the share price, just $ 4.18. For example, when at the end of 2016 oil was moving in the same price range, the role of the flagship oil company oscillated around 18 dollars.
YPF’s initiative includes two objectives: first, to comply with the Central Bank regulations that require companies to restructure their liabilities to reduce the payment of debt in foreign currency due to the lack of dollars and, also, to capitalize the company with new investments.
“If a company needs to capitalize, the restructuring of liabilities is not the best strategy. An offer of negotiable obligations convertible to shares with capital gain could be a more tempting alternative that allows to further compress the interest rate,” the analyst told LPO of Francisco Uriburu markets.
The sale of the YPF tower in Puerto Madero was also read in the market as a sign of the need for urgent capitalization. However, within the company they consider that it is a sign of efficiency due to the transfer to the home office of the bulk of the activities that were carried out in those offices and, as LPO was able to know, it assures the creditors that if an agreement is not reached, The oil company will not default, but it will be forced to reduce its investment program.
This would imply that in 2021 YPF would not be able to reverse the declining trend in total production either, despite the specific records by field in which it did land with fresh capital.
For now, in 2020 the company reported losses of almost $ 1.4 billion in the first three quarters.
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