YPF to Price USD 9NC4 Unsecured Notes (IPT: 8.75%, Guidance: 8.50%)
We recommend to “BUY” the new YPFAR 2034 at 8.5%
USD Benchmark 9NC4 Senior Unsecured Issuance
YPF is launching a USD benchmark-sized 9NC4 senior unsecured notes issuance, with expected CCC/CCC ratings from S&P and Fitch, respectively. Proceeds are expected to be used for debt repayment and/or refinancing, including a concurrent tender offer and the redemption of its 2025 notes, as well as for investment in fixed assets and business acquisitions in Argentina.
The notes will amortize in three installments: 30% in January 2032, 30% in January 2033, and the remaining 40% at final maturity in 2034. Pricing is expected today, with initial price talk around 8.75%, and now guided at 8.5%.
Trade Recommendation
We recommend to “BUY” the new YPFAR 2034 (9NC4). At 8.500%, we find the notes attractive relative to the YPFAR 7.000% 2033s unsecured bonds, which yield 7.3% for a 5.4-year duration, and the YPFAR 8.750% 2031s unsecured bonds, yielding 7.8% for a 4.0-year duration.
We believe these bonds offer an appealing yield within YPF’s debt capital structure and are currently trading wide relative to the broader LatAm BB and EM BB curves. Meanwhile, YPF’s shorter-dated bonds are trading at or near par, limiting further upside potential.
Credit Impact - Positive
YPF’s issuance and tender offer represent a strategic move to mitigate refinancing risks ahead of the 2025 bond maturity wall. If successful, this initiative will enhance liquidity by extending USD-denominated maturities and securing longer-term funding during a period of heavy investment, which we expect to result in negative cash flow. We anticipate YPF will successfully refinance these bonds, supported by an improved operating performance in 2024 and more favorable macroeconomic conditions in Argentina.
As shown in the 3Q24 debt maturity chart below, a successful transaction would significantly reduce YPF’s short-term USD-denominated debt, strengthening liquidity and lowering refinancing risk. The impact on interest expense should be minimal, as the company plans to exchange its 8.5% 2025 notes for new notes expected to carry the same coupon.
YPF Launches Tender Offer for July 2025 Bonds
On January 2, 2025, YPF S.A. (Caa3/CCC/CCC) announced a cash tender offer to repurchase all of its outstanding 8.500% Senior Notes due July 2025, with a total principal amount of $757 million. The company is offering $1,019.50 per $1,000 of principal to bondholders participating in the offer. The tender offer will expire on January 15, 2025, at 5:00 p.m. New York time, with settlement expected on January 17, 2025. A guaranteed delivery settlement for securities tendered under special conditions is scheduled for January 21, 2025.
The offer is contingent on YPF successfully raising new debt through a concurrent or prior bond issuance. Investors who tender their bonds early may receive preferential treatment in the allocation of the new issuance. This move underscores YPF’s proactive approach to managing upcoming maturities, aiming to reduce short-term refinancing risk and improve its overall debt profile.
YPF has also indicated that it may redeem any remaining bonds after the tender offer, though it is not obligated to do so. This initiative is part of a broader liability management strategy to strengthen financial stability amid Argentina’s challenging economic environment.
The premium pricing of the tender offer provides a strong incentive for bondholders to participate. The success of this transaction will depend on investor appetite for YPF’s new issuance and broader market conditions.
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