Spain's Repsol says board backs preliminary YPF deal

Wed Nov 27, 2013 3:43pm EST
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By Tracy Rucinski and Andrés González

MADRID (Reuters) - The board of Spain's Repsol (REP.MC: Quote) unanimously agreed on Wednesday to start formal talks with Argentina over a compensation offer for assets Buenos Aires seized last year that could end an 18-month standoff between the two countries.

Sources with knowledge of the matter have told Reuters that the deal is worth $5 billion, half of what Repsol was initially demanding after Argentina seized its majority stake in energy company YPF (YPFD.BA: Quote) in 2012.

"With the aim of developing a preliminary agreement, Repsol has decided to start talks soon between its teams and the Argentine government to find a fair, efficient and quick solution to the controversy," Repsol said in a statement, without providing details of the offer.

It has hired an international investment bank to oversee the process.

Bilateral ties between Spain and Argentina have been on ice since the nationalization in April 2012, so any deal has significance beyond Repsol's own interests, particularly for Argentina as it seeks to restore investor confidence.

Argentine President Cristina Fernandez is trying to attract the billions of dollars needed to exploit the Vaca Muerta (Dead Cow) shale formation to help bolster central bank reserves drained in part by costly oil and gas imports.

Sources have said the settlement, which has the backing of the Argentine and Spanish governments, was likely to be in the form of U.S. dollar-denominated 10-year sovereign bonds rather than cash.

The YPF expropriation was a blow to Repsol, which has spent much of the past year in recovery mode, launching legal battles against Argentina while trying to compensate for the loss of a division that had accounted for a third of its production.   Continued...