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Rating Action:

Moody's downgrades YPF, ratings remain on review

Global Credit Research - 17 Apr 2012

New York, April 17, 2012 -- Moody's Investors Service downgraded YPF Sociedad Anónima (YPF) reflecting the Argentine government's expected partial nationalization of YPF. Moody's downgraded YPF's Global Local Currency Rating to B3 from Ba3 and National Scale Rating to Baa3.ar from Aa2.ar. All ratings remain on review for downgrade.

RATINGS RATIONALE

The rating actions reflect the expected approval of legislation that will enable the government of Argentina (B3 stable) and certain hydrocarbon producing Argentine provinces to take a 51% stake in YPF by declaring 51% of YPF's Class D shares of public interest and subject to expropriation. This 51% stake will be 51% owned by the federal government and 49% owned by various provinces. The government also announced that the company would come under immediate state supervision and control for a 30-day period, and declared hydrocarbon self sufficiency to be in the county's national interest. Approval of the legislation will result in the Argentine government and the provinces taking control of roughly 201 million Class D shares currently owned by Repsol YPF S.A. (Repsol, Baa2 stable), which would reduce Repsol's stake in YPF to 6% from 57%. The terms of compensation offered to existing shareholders has not been resolved and is expected to be determined by a federal tribunal.

Given YPF's expected impending partial nationalization by the B3 rated Argentine government, as opposed to Repsol YPF S.A.'s prior majority control, Moody's believes that YPF should not be rated higher than the government and has equalized the ratings.

The ratings review reflects uncertainty regarding how the government will manage YPF, including uncertainty regarding the company's future operating and financial profile. As a result of the ownership transfer, a change-of-control could be deemed an event of default under certain YPF debt agreements, giving rise to acceleration rights, barring a waiver from the lenders. Resolution of the review will be subject to whether an event of default is declared and how quickly it can be cured, as well as any clarifications on the intentions of the government regarding the management of YPF.

The principal methodology used in rating YPF was the Global Integrated Oil & Gas Industry Methodology published in November 2009. Please see the Credit Policy page on www.moodys.com for a copy of this methodology.

Moody's National Scale 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 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 ".ar" for Argentina. For further information on Moody's approach to national scale ratings, please refer to Moody's Rating Methodology published in March 2011 entitled "Mapping Moody's National Scale Ratings to Global Scale Ratings."

REGULATORY DISCLOSURES

The Global Scale Credit Ratings on this press release that are issued by one of Moody's affiliates outside the EU are endorsed by Moody's Investors Service Ltd., One Canada Square, Canary Wharf, London E 14 5FA, UK, in accordance with Art.4 paragraph 3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies. Further information on the EU endorsement status and on the Moody's office that has issued a particular Credit Rating is available on www.moodys.com.

For ratings issued on a program, series or category/class of debt, this announcement provides relevant 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 relevant regulatory disclosures in relation to the rating action on the support provider and in relation to each particular rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides relevant regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

Information sources used to prepare the rating are the following : parties involved in the ratings, parties not involved in the ratings, public information, confidential and proprietary Moody's Investors Service information, and confidential and proprietary Moody's Analytics information.

Moody's considers the quality of information available on the rated entity, obligation or credit satisfactory for the purposes of issuing a rating.

Moody's adopts all necessary measures so that the information it uses in assigning a rating is of sufficient quality and from sources Moody's considers to be reliable including, when appropriate, independent third-party sources. However, Moody's is not an auditor and cannot in every instance independently verify or validate information received in the rating process.

Please see the ratings disclosure page on www.moodys.com for general disclosure on potential conflicts of interests.

Please see the ratings disclosure page on www.moodys.com for information on (A) MCO's major shareholders (above 5%) and for (B) further information regarding certain affiliations that may exist between directors of MCO and rated entities as well as (C) the names of entities that hold ratings from MIS that have also publicly reported to the SEC an ownership interest in MCO of more than 5%. A member of the board of directors of this rated entity may also be a member of the board of directors of a shareholder of Moody's Corporation; however, Moody's has not independently verified this matter.

Please see Moody's Rating Symbols and Definitions on the Rating Process page on www.moodys.com for further information on the meaning of each rating category and the definition of default and recovery.

Please see ratings tab on the issuer/entity page on www.moodys.com for the last rating action and the rating history.

The date on which some ratings were first released goes back to a time before Moody's ratings were fully digitized and accurate data may not be available. Consequently, Moody's provides a date that it believes is the most reliable and accurate based on the information that is available to it. Please see the ratings disclosure page on our website www.moodys.com for further information.

Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

Gretchen French
Vice President - Senior Analyst
Corporate Finance Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Steven Wood
MD - Corporate Finance
Corporate Finance Group
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Moody's downgrades YPF, ratings remain on review
No Related Data.

 

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