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ECONOMY | 13-08-2019 09:16

YPF bonds hit record low after Fernández-Fernández PASO win

Bonds drop amid fears Peronist victory will lead to re-imposition of regulated energy prices.

Bonds of YPF SA, Argentina’s state-owned oil producer, slumped on concern Sunday’s PASO primary election heralds the return of regulated energy prices that kept tariff largely frozen from 2002 to 2015.

The US$1.5 billion of YPF bonds due in 2025 tumbled more than five cents on the dollar to the lowest intraday price on record. The bonds now offer a yield to maturity of 12.78 percent. The 6.95 pecent bonds due 2027 fell a record 13.85 cents to 75, while the seven percent bonds due 2047 dropped 10.5 cents to 72.5, according to Trace pricing.

The opposition’s Alberto Fernández and Cristina Fernández de Kirchner won a landslide victory in the primary, giving them a seemingly unassailable lead ahead of October’s presidential election. The return of former president Fernández de Kirchner to power would spell renewed subsidies on energy bills, which coupled with rampant inflation saddled natural gas and electricity companies with heavy losses.

YPF spokeswoman Felicitas Castrillon declined to comment on the election results and the company’s bond performance when contacted by phone.

Companies with power-purchasing agreements in dollars that may be revised by the new administration will be particularly hard hit, according to SMBC Nikko Securites America. Those companies include Genneia SA, MSU Energy Holding Ltd. and Stoneway Capital Corp.

“There are ways to amend the USD PPAs without defaulting on them, such as by extending the tenor in exchange for a reduction in near-term payments,” said Roger Horn, a senior emerging-markets strategist at the bank in New York.

Power generator Genneia saw its notes due in 2022 slump 17 cents to 76 on the dollar Monday, offering a yield to maturity of 22 percent.

Bonds due 2022 in oil and gas driller Tecpetrol SA fell to 92 cents from 97. Even corporates with secured income in dollars like Aeropuertos Argentina 2000 are being dragged down in the stampede, with the company notes due in 2027 indicative prices losing 3 cents to 95. Pampa Energia notes were more resilient with bonds due in 2029 falling just one cent to 98.

by Pablo González & Katrina Lewis, Bloomberg

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