MercoPress. South Atlantic News Agency

Fitch places Repsol on Rating Watch Negative following the YPF takeover operation

The Petersen Group headed by Sebastian and Antonio owe Repsol over 1.5bn dollars

Fitch Ratings has placed Repsol YPF, SA's ratings on Rating Watch Negative (RWN) following news that YPF takeover has been set in motion by the Argentine government.

The RWN reflects the uncertainty regarding the financial implications of the expropriation of YPF that in part will depend on potential compensation that Repsol may receive for its ownership stake, said the agency.

The agency also acknowledges that there is uncertainty regarding the repayment of the loans granted by Repsol to the Petersen Group related to the purchase by the latter of up to 25% of YPF's capital. As of December 2011, the amount of these loans (including interests) totalled 1.5 billion and they were serviced by cash dividends received from YPF by the Petersen Group. The scope of future cash dividends is unclear for now, Fitch said on Tuesday.

Repsol's rating could be negatively affected if a combination of provisions related to the loans to the Petersen group, inability to realise funds from its 5% remaining treasury shares and other aspects of the expropriation process result in a sustained weaker financial profile. Additionally, ratings may come under further pressure if a new proposed scrip dividend at the Repsol level (to be agreed by its shareholders) is unsuccessful.

Ratings could be downgraded by two notches if funds from operations (FFO)-adjusted net leverage is above 3.0x on a sustained basis, while FFO-adjusted net leverage above 2.5x is more commensurate with a 'BBB-' rating'

The RWN could be removed and the rating could be affirmed at 'BBB' if the financial profile post expropriation is not materially different from that of the agency's conservative rating case. Future rating guideline ratios will also depend on any potential amendments to the company's strategic plan, which it intends to present in May.

Fitch recently downgraded Repsol YPF to 'BBB' from 'BBB+' .

Meanwhile shares from Repsol-YPF plunged by 7.5% in Buenos Aires and in Spain they sank by 6.1% in trading at the Madrid Stock Exchange. Stocks transactions were halted Monday and remained suspended for today in Wall Street.