UPDATE 1: 2:55 p.m. ET 6/24/2019: YPF launched a new benchmark $500 million 10-year senior unsecured bond at 8.75%, a source knowledgeable of the deal said to Reorg.
Original Story 12:07 p.m. UTC on June 24, 2019YPF Sets Price Talk in Low-9% Area for New Drive-by Senior Benchmark IssuanceArgentine energy company YPF set price talk in the low-9% area for its new benchmark senior notes, according to a source close to the transaction. The drive-by offering will price later today as part of a deal led by HSBC, Itau and Citi.
The sell-side source added that if the amount of the bond surpasses $500 million, then proceeds from the deal will be mainly used to pay down outstanding debt. Funds will instead be used for general corporate purposes if the amount of the new offering is less than or equal to $500 million.
YPF’s
first-quarter net debt in U.S. dollars reached $7.3 billion, down from $8 billion in the opening three months
of 2018. Net leverage, expressed as net debt to last-12-month EBITDA, improved 0.1x year over year to 1.7x.
The issuance coincides with a decline in Argentine peso volatility. After declining by 10% in value against the USD to 44.9357 on May 15 from 40.7408 on March 15, the Argentine peso has improved to 42.7368, where it is currently trading.
The issuer last came to the market in
December 2017 when it raised $1 billion overall through a dual-tranche issuance maturing in 2027 and 2047. The shorter-dated $250 million 6.95% senior notes recently priced between 93 and 94 to yield 8.1%, up from a price of around 86 at the start of June, per MarketAxess. The $750 million 7% 2047s have also traded up by more than 7 points month to date to around 88 and a yield of 8.1%.
YPF is rated B2/B/B with a stable outlook by Moody’s, S&P and Fitch.
The last Argentine corporate that successfully raised debt capital was Transportadora de Gas del Sur in April 2018 when it
priced a benchmark $500 million 6.75% seven-year, noncall-four issuance at 99.725 to yield 6.8%. The deal came to the market
amid a challenging scenario for Argentine issuers that continued in subsequent months due to factors such as the sovereign’s high inflation, elevated country risk and weakened peso. Despite some investor optimism
last month following new monetary policy measures, Argentina’s country risk premium as measured by the JPMorgan Emerging Markets Bonds Index, or EMBI+, continues to be quite high at approximately 835 basis points while political uncertainty over the possibility of President Mauricio Macri losing his bid for re-election is still at the forefront of investor concerns.
Earlier this morning, the U.S. Supreme Court
denied the petition for
writ of certiorari filed by defendants YPF SA and Argentina in its litigation against Petersen Energía. The petitioners
said that the high court should grant their request as it had done for other Foreign Sovereign Immunities Act cases and opposed the U.S. government’s argument asserting that any alleged breach of a commercial obligation by a foreign sovereign is subject to suit in U.S. courts.