Advanced Theory & Practice of Bonds

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1-2 December 2021

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Argentinian energy company YPF amended its restructuring proposal for its bonds $6.2bn worth, the latest effort to reach a deal after bondholders rejected the original offer. As per the latest round of amendments, the 2026s will now be backed by shares of YPF subsidiary YPF Energia Electrica as an added security for bondholders, who can sell the shares in the event that YPF defaults on its payments. Ezequiel Fernandez, an analyst at Balanz Capital Valores in Buenos Aires commented on this, “Pledging the YPF Energia Electrica equity stake was a significant concession. You can see that YPF heard the bondholders on the relevant issues.” Additionally, coupons through December 31, 2022 are set at 4% for the 2026s, 2.5% for the 2029s and 1.5% for the 2033s, substituting the two-year grace period. Coupons from 2023 will increase to 9% from 8.5% for the 2026s and 2029s while the 2033s will continue to pay 7%. The acceptance deadline is February 8. The bookrunners for the offer are Citi, Santander, HSBC and Itaú. According to a report by AR Partners analysts Paula Gandara and Rodrigo Nistor, YPF improved the offer by an average of 3% on a net present value basis, with a 7% improvement for the 2025s and 2027s.
YPF’s first proposal, launched on January 7 involved stretching out maturities, delaying interest payments and reducing near-term capital payments. The initial offer brought immediate disdain from large holders of the 7 bonds in the swap, who retained law firms Dechert and DLA Piper to block the restructuring proposal. YPF responded with a first amendment on January 15, improving the conditions required to reach majority approval for the swap to the 50% international standard from 30%. Roger Horn, a corporate analyst at SMBC Nikko Securities in New York said, “The sad thing is that YPF probably never wanted to do this. It’s the central bank who told companies to bring dollars home on a promise that they’ll be able to buy dollars later to pay debt service, a promise which they’re reneging on.”
Prices on YPF’s dollar bonds rose 3-7% with its 8.5% bonds due March and July 2025 rising 7.3% and 5.5% to trade at 83.48 and 69.38 respectively.
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