Moody’s downgrades Argentina’s YPF

WASHINGTON – Moody’s on Tuesday downgraded its rating for Argentina’s oil company YPF another notch a month after Buenos Aires seized control of the country’s largest oil firm, citing concerns over its debt.

The ratings agency downgraded YPF’s global local currency rating to Caa1 from B3, but said its outlook was stable.

“The rating downgrade reflects YPF’s near-term liquidity risk of debt acceleration and the ongoing challenge of meeting maturing short term debt obligations as they become due,” Moody’s said.

“Moody’s believes that the company’s large foreign currency needs for its foreign currency denominated debt increases the risk of a debt restructuring that would result in losses to creditors and prompt a distressed exchange default.”

“Barring receipt of formal waivers from its lenders, a change-of-control and/or nationalization could be deemed an event of default under certain YPF debt agreements, giving rise to acceleration rights,” Moody’s added.

The ratings agency noted that to date, “YPF has not received default or acceleration notices on any of its debt obligations.”

Argentina declared YPF a public utility on April 16, with the government seizing a 51 percent stake in the subsidiary of Spain’s Repsol – infuriating Madrid, and sparking concern in the United States and the European Union.

Later the same week, it extended the move to YPF Gas, a separate company 85 percent owned by a division of Repsol.

President Cristina Kirchner has argued that the expropriation was justified because YPF crude production had dropped while oil and gas imports doubled in 2011. Imports are forecast to triple by the end of the year.