Repsol appointed Deutsche Bank AG to advise it on the compensation pre-settlement it reached with Argentina regarding the seizure of 51% of YPF in April 2012. The arrangement was negotiated in Buenos Aires this week by ministers from Argentina and Spain, Repsol executives, and representatives from the Spanish company’s two largest shareholders, Mexico's Petroleos Mexicanos, Pemex and Barcelona-based CaixaBank SA.
The proposal is based on 5 billion dollars of 10-year bonds, which may carry a coupon of 8.25% to 8.75%, according to some media releases from Madrid since all the sides involved in the deal agree to keep details in confidentiality.
Repsol board's had anticipated it had decided to contract an investment bank of international prestige to advise the oil company board in negotiations of the pre-arrangement and help 'conduct the process', which it described as complex as relevant'.
The pre-arrangement was announced on Tuesday and considered positively by Repsol's board on Wednesday. It is believed that Pemex played a leading role in reaching the agreement. Pemex has been very critical of Repsol's managers.
Pemex has an almost 10% stake in Repsol. CEO Emilio Lozoya, who took part in this week’s talks, said in several occasions that Repsol should take a more “proactive and prudent approach” to resolve the YPF matter.
Argentina holds the world’s second-largest reserves of shale gas and the fourth-largest of shale oil, according to U.S. Energy Information Administration data. The country is offering tax and export incentives to energy companies that invest at least one billion dollars over a five-year period.
Repsol asked a World Bank panel in July to help prevent YPF from developing the company’s seized assets. Repsol also filed a lawsuit demanding fair compensation for the seizure of its YPF stake with the Washington-based International Center for Settlement of Investment Disputes.
In Buenos Aires President Cristina Fernández personally contacted Spanish Prime Minister Mariano Rajoy to express gratitude for the “active role” played by Madrid’s Industry, Energy and Tourism Minister José Manuel Soria in the YPF-Repsol deal.
On Wednesday, Cristina Fernandez contacted Mexican head of state Enrique Peña Nieto and highlighted the “preponderant” part assumed by Pemex chief Emilio Lozoya in the negotiations that concluded this week with the approval of an accord that will compensate Repsol for the 2012 expropriation of the firm's 51 percent stake in Argentina’s energy giant YPF.
Meantime Argentine Economy Minister celebrated the news about the compensation deal but made clear Argentina was not planning to pay “what the Spanish firm demanded.” Such numbers -Kicillof affirmed- were “way far” from the company's scope.
Saying that 'not paying Repsol' for the 51% stake in the energy giant was “impossible,” Kicillof showed satisfaction over the deal clinched by Argentina, Mexico and Spain.
“The idea was not to harm Repsol, only 51% of the company’s shares were expropriated. I am very satisfied because we have made an approach over something we cannot provide further details due to confidentiality agreements”, the minister told reporters from a local radio station today.
“We are tremendously satisfied because what has been done is to double investment, exploration and production growth investments of the oil company,” Kicillof added and warned the administration of President Cristina Fernández had decided to pay Repsol but following Argentina’s own expropriation legislation.
“What was not going to be paid was the number Repsol demanded, a number that was way far from the company,” the newly appointed head of Argentina’s economic affairs stated.