Conditions, Pricing Leave YPF Shelving Bond

Investors and YPF failed to reach a compromise on pricing Monday against an already uncertain backdrop, forcing the Argentine oil concern to abandon attempts to sell its new 8-year, 7-year average life bond, say buyside sources. It is thought the market’s idea of a new issue premium and disagreements over pricing against comp Argentine oil comp Pan American Energy were just too much to bear for a company that had its heart set on a marquee trade. Indeed, with no immediate financing needs, YPF can afford to wait for better conditions. “YPF wanted to price way inside Pan American and investors wanted similar levels to PAE,” says an investor. By last week, however, leads were heard arguing that a new YPF or PAE 7-year would trade in the secondary market at around 6.15%-6.25% and with a 50bp new issue premium, a primary offering could come at around mid to high 6s. However, with investors heard asking for high 6s to a 7% handle, leads had little room to maneuver on pricing should markets suddenly turn south on further volatility emanating from the US and Europe. “It was a wide enough margin where we knew there wasn’t going to be any progress,” adds an analyst following the company. Broader market unease over debt problems in the US and Europe certainly made life difficult for the Argentine borrower, which was in no rush to pay a volatility premium. In this environment, some investors were simply unwilling participate in what was a relatively small corporate transaction, despite the company’s blue chip status in Argentina. “It doesn’t make sense to invest in a corporate that would be considered less liquid than the sovereign,” adds a second investor. The sovereign’s New York law 2017s have been trading to yield 8.072%. The oil and gas concern was looking to raise $300m-$600m size via bookrunners BNP Paribas, Citi, Credit Suisse, ING, Itau, Santander and Standard Bank. YPF is rated Ba2/BB minus from Moody’s and Fitch.