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Rating Action:

Moody's rates YPF's proposed USD 750 million add-on to global notes maturing in 2018 and 2024

Global Credit Research - 04 Feb 2015

New York, February 04, 2015 -- Moody's Investors Service has assigned a Caa1 global foreign currency rating to YPF Sociedad Anonima's (YPF)'s proposed USD 750 million in aggregate in add-ons to its outstanding 8.875% USD 587 million notes due in 2018 and 8.750% USD 1,000 million notes due in 2024. Both series were issued in the global capital markets. The outlook on the ratings is negative.

RATINGS RATIONALE

Since YPF is majority owned by the Argentine government, YPF's Caa1 rating reflects the application of Moody's joint default rating methodology for government-related issuers (GRIs). YPF's Caa1 rating combines its underlying Baseline Credit Assessment (BCA) of b3; the Caa1 local currency rating and negative outlook of the Argentine government; and the rating agency's view of moderate support from and high dependence on the sovereign.

YPF's underlying BCA reflects the company's exposure to Argentine economic instability, including an unpredictable government policy framework, and exposure to foreign currency convertibility and transfer risk. While YPF has maintained its strong financial track record since coming under government control in April 2012, this track record still remains limited. In addition, the BCA is supported by the company's status as the largest industrial corporation and energy company in Argentina and is also based on the company's low leverage and high levels of retained cash flow when compared with many of its peers. YPF benefits from upstream/downstream integration and other business diversification, and sizeable oil and gas reserves, including large shale resources in the longer-term.

The government of Argentina's ability to provide support to YPF is measured by its Caa1 local currency rating and negative outlook but Moody's support assumptions are constrained by the low policy transparency and predictability of the Argentine government. Moody's consider the government's willingness to support YPF as moderate, which is based on YPF's majority government ownership and control, as well as the importance of YPF to the Argentine economy, with a dominant market position in the energy sector. While YPF is expected to account for only a small part of the government's revenue base, the high default dependence reflects the high correlation between YPF's credit profile and Argentine economic trends. YPF derives the majority of its revenues domestically; also, the company and the government also both share common exposure foreign exchange rate risk.

YPF's negative rating outlook is based on the negative outlook on the Argentine government. YPF and the government's ratings are closely linked since YPF is a government-related issuer and also due to the negative impact of the government's involvement in the energy sector. The negative outlook on the sovereign rating is tied to concerns about the government's haphazard policies, poor transparency and the quality and reliability of its official data reporting, as well as the sovereign's willingness to pay its debt obligations.

YPF's ratings could be downgraded if it is unable to maintain sufficient liquidity and access to foreign currency in order to meet its debt service obligations. The ratings could also be downgraded if the government of Argentina's Caa1 rating were to be downgraded.

There is limited upside for YPF's ratings over the near-term though continued growth in oil production while maintaining strong margins and low leverage could result in positive pressure on the BCA. Over the longer term, an improvement in Argentina's Caa1 rating and continued demonstration of a strong financial track record could result in a ratings upgrade.

The principal methodology used in these ratings was Global Integrated Oil & Gas Industry published in April 2014. Other methodologies used include the Government-Related Issuers methodology published in October 2014. Please see the Credit Policy page on www.moodys.com for a copy of these methodologies.

YPF is an Argentine 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 17.6 billion and total assets of USD 26 billion for the twelve months ending September 30, 2014.

REGULATORY DISCLOSURES

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 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 certain 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.

For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this rating action, and whose ratings may change as a result of this rating action, the associated regulatory disclosures will be those of the guarantor entity. 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 review.

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.

Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating.

Nymia Thamara Cortes de Almeida
VP - Senior Credit Officer
Corporate Finance Group
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Mexico
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Marianna Fernandes Rodrigues Waltz
Associate Managing Director
Corporate Finance Group
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SUBSCRIBERS: 55-11-3043-7300

Releasing Office:
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Moody's rates YPF's proposed USD 750 million add-on to global notes maturing in 2018 and 2024
No Related Data.
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