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Moody’s downgrades YPF over Argentina takeover

April 18, 2012

NEW YORK: US ratings agency Moody’s yesterday downgraded oil firm YPF to B3 from Ba3 after Argentina announced the takeover of the subsidiary of Spain’s Repsol, sparking a row with Madrid.

“Moody’s downgraded YPF’s Global Local Currency Rating to B3 from Ba3 and National Scale Rating to Baa3.ar from Aa2.ar. All ratings remain on review for downgrade,” the agency said in a statement.

“Given YPF’s expected impending partial nationalisation by the B3 rated Argentine government, as opposed to Repsol YPF S.A.’s prior majority control, Moody’s believes that YPF should not be rated higher than the government.”

It said the downgrade also reflected “uncertainty regarding how the government will manage YPF, including uncertainty regarding the company’s future operating and financial profile”.

Moody’s move follows a warning by London-based Fitch Ratings that it may soon downgrade the rating of Repsol.

Fitch had already downgraded Repsol by a notch to BBB from BBB+ last month, meaning the company’s debt was considered to be of good credit quality but at some risk to changes in business and economic conditions.

Fitch warned it could downgrade Repsol’s credit rating by two more notches if developments resulted in a serious weakening of its balance sheet.

Both Spain and the European Union have strongly criticized the move by Argentina, and Madrid has threatened unspecified retaliatory action in the areas of diplomacy, trade, industry and energy.

Argentina’s President Cristina Kirchner has defended the takeover, accusing Repsol of failing to invest sufficiently in the country’s energy sector.

On Tuesday Argentina’s deputy economy minister Axel Kicillof, who helped mastermind the takeover, accused Repsol of hiding some US$9 billion in debt.



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