Argentina to pay Repsol with bonds for YPF nationalization
BUENOS AIRES, Nov 28 (Reuters) - Argentina will pay Repsol with bonds to compensate the Spanish oil major for the seizure of its majority stake in energy company YPF, although the sum and terms have yet to be negotiated, Argentine officials confirmed on Thursday.
Cabinet chief Jorge Capitanich and Economy Minister Axel Kicillof said in statements to local media that the compensation offer aimed at ending an 18-month standoff between the two countries involves bonds, confirming news reports.
Repsol's board unanimously agreed on Wednesday to start formal talks with Argentina over compensation for the assets seized last year.
Sources with knowledge of the matter have told Reuters in Madrid that the deal is worth $5 billion, half of what Repsol was initially demanding after Argentina seized its majority stake in YPF in 2012.
"We will now start negotiating to guarantee that this preliminary agreement becomes a contract," Capitanich told reporters. He said the terms and maturity of the bond that Argentina will issue have to be worked out.
Kicillof said the two sides have come closer to agreement, but gave no further details on the proposed deal.
Talks are expected to hinge on guarantees sought by Repsol.
Argentina has not tapped the international bond market since it defaulted a decade ago and any bond issued to pay Repsol would have to be subject to Argentine law, which would make the bond less attractive.
Repsol has hired an international investment bank to oversee the process.
The preliminary agreement was reached within days of a cabinet reshuffle by President Cristina Fernandez that brought Capitanich and Kicillof into the cabinet with instructions to recover foreign investor confidence in Argentina, which has been shut out of financial markets since the massive 2002 default.
YPF CEO Miguel Galuccio told Reuters on Wednesday that the
deal being negotiated with Repsol will open opportunities for foreign companies to invest in the South American country's untapped oil and natural gas resources.
Already the world's No. 3 corn and soybean exporter, Argentina stands to become a major oil and gas producer as well if it can attract the tens of billions of dollars it needs to exploit the Vaca Muerta (Dead Cow) shale formation in Patagonia.