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06 Aug 2018
Buenos Aires City, August 06, 2018 -- Moody's Latin America Agente de Calificación de Riesgo S.A.
(Moody's) assigned a B2 local currency global scale rating and an A1.ar
national scale rating to the YPF Sociedad Anonima (YPF)'s up to
ARS 10 billion senior unsecured bank credit facility with Banco de la
Nacion Argentina. The facility will be used for general corporate
purposes. The rating outlook is stable.
YPF's B2/A1.ar ratings reflect the company's large oil and
gas production and reserve size; solid cash generation and credit
metrics for its rating category; its status as the largest industrial
corporate and energy company in Argentina; and the linkage to the
Government of Argentina, its controlling entity.
YPF's ratings are based on its underlying b2 Baseline Credit Assessment
(BCA), which expresses a company's intrinsic credit risk.
YPF's BCA reflects its vulnerability to the local energy policy framework,
as well as the company's status as the largest industrial corporate
and energy company in Argentina, where it generates the bulk of
its revenues. It also considers Moody's belief that,
although the company's credit metrics deteriorated during 2016 and remained
stable in 2017 given an adverse operating environment, they will
remain strong for the B rating category. Moreover, YPF benefits
from upstream/downstream integration and other business diversification,
and sizeable oil and gas reserves, including large shale resources
In addition, YPF's ratings reflect the application of Moody's
joint default rating methodology for government-related issuers
(GRI) and considers the close relationship between the company and the
government of Argentina, its controlling shareholder. Moody's
view includes the assumptions of i) moderate likelihood of extraordinary
government support to YPF in case of need and ii) high default correlation
between the company and the government. The government of Argentina's
ability and willingness to provide support to YPF is measured by the former's
B2 local currency rating and stable outlook as well as YPF's majority
government ownership and control, in addition to the importance
of the company to the Argentine economy, where it holds a dominant
market position in the energy sector. In turn, while YPF
accounts for only a small part of the government's revenue base,
which was equivalent to about 5% in 2017, the high default
correlation assumption reflects the tendency of the company and the government
to be jointly susceptible to adverse circumstances that simultaneously
move them closer to default. For instance, YPF derives the
majority of its revenues domestically; in addition, the company
and the government both share common exposure to foreign exchange rate
YPF's 1.8x reported debt/EBITDA at March 2018 was low for
its rating category; in addition, the company has a capital
structure profile comparable to a number of its higher rated global peers.
However, YPF's stated that net leverage will reduce to reach
about 1.5x in 2022. The reported leverage has been close
to the 2.0x limit the company has set internally, given payment
delays of government subsidies, which has pressured working capital
and increased funding needs.Although the company should benefit
from its integrated business model, the impact of over 25%
average foreign currency devaluation and inflation, on top of a
rigid cost structure due to unfavorable labor dynamics in the country,
will continue to affect YPF's cash flow generation. In addition,
current economic conditions may post resistance to elevated fuel price
increases. For these reasons, Moody's believes that
YPF's leverage will remain above management's target until
at least 2018.
YPF's cash and equivalents in March 2018 were USD 2.1 billion,
which negatively compares to USD 2.5 billion in debt coming due
until the end of 2019, although the bulk of this amount is owed
to local market participants and Moody's believes that a large portion
of it could be rolled over relatively easily. Most of the company's
cash is held in USD in bank accounts in Argentina. The company
has demonstrated ample access to both local and international capital
markets to conduct liability management. In 2016, YPF raised
close to USD 1.5 billion in debt. YPF usually holds USD
1 billion in cash but the company can easily operate with half of that.
YPF has a weak export profile, as it exported only around 10%
of revenues in the last twelve months ended in March 2018, similar
to 2017. The company's foreign currency risk is high as about
75% of its debt, 35% of its capital spending and 25%
of its operating costs are linked to the US dollar, which compare
to the 45% of the company's revenue generated in US currency.
YPF's stable outlook assumes that, in the next two to three years,
the company's credit metrics will remain at current levels, which
are solid for a B rating category. Moody's believes that
YPF's main shareholder, the Argentine government i) will exert no
influence over the company to spend in capital expenditures or dividends
beyond its operating cash flow generation capacity and ii) has incentives
to maintain prices of crude and oil products at a level that makes it
economically attractive for oil companies to invest to increase production
and reduce the country's dependence on imports of oil products and natural
gas. YPF's creditworthiness is linked to the credit quality of
the Argentine government, and thus the company's ratings could
be affected by changes to the sovereign ratings.
Growth in total production while maintaining strong margins and relatively
low leverage could lead to an uplift of YPF's BCA. Over the medium
term, an improvement in Argentina's B2 rating and YPF's demonstration
of a strong financial trend could result in a ratings upgrade.
However, a rating upgrade will depend on a clearer view of the new
government's energy policies for the next several years and how that could
YPF's ratings could be downgraded if the company is unable to maintain
credit metrics at least at current levels, if it losses access to
credit markets, or if it lacks access to foreign currency to meet
debt service obligations. The ratings could also be downgraded
if the government of Argentina's B2 rating is downgraded.
YPF is an Argentina-based integrated energy company with operations
concentrated in the exploration, development and production of crude
oil, natural gas and liquefied petroleum gas, and downstream
operations engaged in refining, chemicals production, retail
marketing, transportation and distribution of oil and petroleum
products. The company is 51% owned by the Argentine government
and had revenues of USD 15.5 billion and total assets of USD 27.4
billion in March 2018. During 2017, the company generated
over 95% of its revenues in Argentina; its operations outside
of the country include exploration activities in the United States,
Brazil and Chile.
The methodologies used in these ratings were Global Integrated Oil &
Gas Industry published in October 2016 and Government-Related Issuers
published in June 2018. Please see the Rating Methodologies page
on www.moodys.com.ar for a copy of these methodologies.
Moody's National Scale Credit Ratings (NSRs) are intended as relative
measures of creditworthiness among debt issues and issuers within a country,
enabling market participants to better differentiate relative risks.
NSRs differ from Moody's global scale credit ratings in that they are
not globally comparable with the full universe of Moody's rated entities,
but only with NSRs for other rated debt issues and issuers within the
same country. NSRs are designated by a ".nn"
country modifier signifying the relevant country, as in ".za"
for South Africa. For further information on Moody's approach to
national scale credit ratings, please refer to Moody's Credit rating
Methodology published in May 2016 entitled "Mapping National Scale Ratings
from Global Scale Ratings". While NSRs have no inherent absolute
meaning in terms of default risk or expected loss, a historical
probability of default consistent with a given NSR can be inferred from
the GSR to which it maps back at that particular point in time.
For information on the historical default rates associated with different
global scale rating categories over different investment horizons,
please see https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1113601.
For ratings issued on a program, series or category/class of debt,
this announcement provides certain regulatory disclosures in relation
to each rating of a subsequently issued bond or note of the same series
or category/class of debt or pursuant to a program for which the ratings
are derived exclusively from existing ratings in accordance with Moody's
rating practices. For ratings issued on a support provider,
this announcement provides certain regulatory disclosures in relation
to the credit rating action on the support provider and in relation to
each particular credit rating action for securities that derive their
credit ratings from the support provider's credit rating. For provisional
ratings, this announcement provides certain regulatory disclosures
in relation to the provisional rating assigned, and in relation
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of the debt, in each case where the transaction structure and terms
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For any affected securities or rated entities receiving direct credit
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Exceptions to this approach exist for the following disclosures,
if applicable to jurisdiction: Ancillary Services, Disclosure
to rated entity, Disclosure from rated entity.
Regulatory disclosures contained in this press release apply to the credit
rating and, if applicable, the related rating outlook or rating
For issuers domiciled in Argentina, the regulatory report related
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Please see www.moodys.com.ar for any updates on changes
to the lead rating analyst and to the Moody's legal entity that has issued
Please see the ratings tab on the issuer/entity page on www.moodys.com.ar
for additional regulatory disclosures for each credit rating.
Nymia C. Almeida
Senior Vice President
Corporate Finance Group
Moody's de Mexico S.A. de C.V
Ave. Paseo de las Palmas
No. 405 - 502
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Mexico, DF 11000
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Marianna Waltz, CFA
MD - Corporate Finance
Corporate Finance Group
JOURNALISTS: 800 891 2518
Client Service: 1 212 553 1653
Moody's Latin America ACR
Ing. Butty 240
Buenos Aires City C1001AFB
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Client Service: 1 212 553 1653
No Related Data.
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