The pricing of a bond is never an isolated event but the final sprint of a long race. Debt capital market bankers know that it often takes months to lay the groundwork for a company to tap the cross-border market.

That has been the case for few issuers so much as Argentine state-controlled energy company YPF, which managed to persuade investors to separate analysis of its risk profile from that of the sovereign — even after President Cristina Fernández nationalized the company in May 2012, expropriating a 51% stake from Spain’s Repsol.

Less than two years after that headline-grabbing decision, YPF sold an 8.75%, 10-year bond in April 2014, taking $5.5 billion in orders from 325 accounts. The $1 billion transaction was the largest bond offering ever from an Argentine corporate issuer.

Achieving such a large size and such a wide investor base is impressive considering YPF was by then controlled by the Argentine government. The state’s 2014 default had not happened when the bond sale took place, although it was already under mounting pressure from holdout creditors. A deal to compensate Repsol for the nationalization was finalized but had not yet taken place. The country was still weeks from signing an agreement with Paris Club creditors over a debt of close to $10 billion.

YPF met investors in a non-deal roadshow in mid-2013. It issued a $150 million, five-year secured bond to assess interest in September, followed by a five-year $500 million bond in December.

“That was our strategy — to test the waters first with a toe, and then with a whole foot, before finally diving in,” says Daniel González, the company’s chief financial officer. “Decoupling ourselves from the Argentine sovereign was a challenge, and that was part of our strategy — not only to separate ourselves from Argentina, but to get that message across.”

After months of preparation, González says investors ultimately had more questions about the company’s fundamentals, the value of its shale gas reserves, its output and its Ebitda than about Argentina’s financial problems. “When pricing the deal, no one mentioned Argentina as a benchmark,” says González.

HSBC, Itaú BBA and Morgan Stanley managed the April deal, tightening pricing from the initial guidance of 9%, with investors telling LatinFinance at the time that the value of the company’s assets prompted them to place orders for the deal. Chadbourne & Parke, Estudio O’Farrell, Milbank, Tweed, Hadley & McCloy and Tanoira Cassagne gave legal advice.

“One of the most important things for us was to expand our investor base. The first bond was bought by about 20 investors, then about 100 chipped in for the second, and more than 300 for the third,” González says.

The last bond allowed YPF to attract not only emerging market investors but also high-yield and retail investors, he says. “There were important orders from hedge funds. There was also strong participation from real money accounts, a lot of retail, and that was new for us. Most of the demand came from the United States, but we also had orders from the Latin American region and Europe.” LF