Exclusive: Argentina, Repsol to sign $5 billion YPF deal - source

Thu Feb 20, 2014 7:04pm EST
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LONDON (Reuters) - Argentina and Repsol SA (REP.MC: Quote) will sign a definitive $5 billion settlement over the seizure of YPF SA (YPFD.BA: Quote) within days, a source involved in the talks said on Thursday, ending a bitter two-year bilateral dispute.

Argentine President Cristina Fernandez nationalized Repsol's majority stake in the country's largest energy company in 2012, sparking a row with Spain, tension within Repsol's boardroom and a freeze on international investment in the Vaca Muerta shale field.

After 18 months of conflict, the two parties struck a preliminary compensation deal last November, but spent the past six weeks ironing out the details of a settlement that is half the $10.5 billion Repsol was seeking in international courts.

A deal, to be paid in U.S. dollar denominated bonds, had been complicated by Repsol's demands for guarantees on the paper, a challenge for a country that has been shut out of international debt markets since a sovereign default in 2002.

"The important part of this deal is that Argentina recognizes $5 billion of debt to Repsol over the expropriation," the source told Reuters on condition of anonymity because he was not authorized to speak on the record.

Under the terms of the agreement, Repsol will receive various bonds with a total nominal value of around $5.5 billion, including already issued Argentine dollar-denominated bonds and a new ad-hoc 10-year bond worth $3 billion, the source said.

A market source confirmed the offer was comprised of already issued Argentine bonds, governed under local law, and a new 10-year bond. Deutsche Bank acted as an independent advisor during the talks.

The deal still needs approval from Argentina's Congress and from Repsol's board of directors and shareholders. The board of the Spanish company is expected to discuss the matter on Tuesday.

Repsol declined to comment.   Continued...

A man walks past a petrol station owned by Spanish oil major Repsol in central Madrid November 26, 2013. REUTERS/Sergio Perez