YPF Avoids Hard Default With 60% Support for Key Bond Swap

February 11, 2021 15:52:16.298 GMT

(Bloomberg) -- Argentina’s state-owned oil producer looks set to avoid a hard default next month after creditors signed on to swap some of their bonds and the central bank agreed to provide the company with the dollars it needs to pay back the remainder.

YPF SA swapped almost 60% of the $413 million bond due in March, according to a company statement. Argentina’s flagship energy company also won support from 43% of creditors to exchange its 2024 notes, and 37% of holders of one of its securities maturing in 2025 to exchange their existing securities for a menu of three new bonds.

The moves will generate about $630 million of debt relief for YPF through 2022, according to people at the company with knowledge of the matter. The company aimed to restructure as much as $6.2 billion in debt payments -- exchanges that ratings agencies say would be tantamount to default -- to free up money to invest in the shale-rich region of Vaca Muerta in Patagonia.

“YPF was able to avoid the much feared default and get the sufficient amount to issue the three proposed notes,” said Lorena Reich, a corporate analyst at Lucror Analytics in Buenos Aires. “Now, the company needs to gain investors’ trust again and manage to grow on a relatively tight budget.”

YPF’s bonds due in March climbed 2.3 cents to 96.8 cents on the dollar, while its American depositary receipts rose as much as 2.3% as of 10:32 a.m. in New York.

The company needed support from more than 50% of holders of the March 2021 notes -- the most pressing maturity -- in order to exchange that bond. YPF said it couldn’t have paid the notes otherwise because the central bank wouldn’t let it buy a sufficient amount of dollars.

The monetary authority will allow the company to purchase between $100 million and $120 million in the official exchange market today, according to a central bank official with knowledge of the matter.

The company and its creditors negotiated for several weeks and there were four amendments to the original offer after the company surprised bondholders in early January with its proposal. Earlier this week, the company won the support of a key group of creditors to exchange the 2021 notes after the oil driller and refiner increased a cash payment for those notes.

YPF also hiked fuel prices for the third time this year on Feb. 1, is slashing costs by thinning its workforce, and is trying to divest assets including its office tower in Buenos Aires.

“The swap results buy YPF time to continue working to recover production levels, improve the profitability of the company and re-negotiate with bondholders on how to face the company’s next maturities,” said Lucas Caldi, a corporate analyst at Portfolio Personal Inversiones in Buenos Aires.

By Scott Squires and Jonathan Gilbert
--With assistance from Patrick Gillespie.