Threading the YPF Petroleum Needle
This week, Judge Preska in New York Judge ordered Argentina to turnover its 51% stake in YPF to judgment creditors.
Welcome Avatar! The latest chapter in the YPF renationalization saga dropped yesterday, when NY Judge Loretta Preska ordered Argentina to hand over its 51% stake in YPF to a global custody account. President Milei has already indicated Argentina will appeal. Meanwhile, the billions in interest in the case keep ticking and it is unsure how this additional debt bomb will be defused.
At the current YPF stock market capitalization, 51% of YPF ($11.2 billion approximately) is not even enough to cover the full $17 billion expropriation lawsuit, so even adhering to this ruling would not solve Argentina’s YPF headache former Minister Axel Kicillof created under Cristina Kirchner’s watch.
Correction regarding the market cap pointed out by user RossA in the comment section: “I think you used YPF's EV ($22B) instead of its Market Cap ($13B) of which Argentina owns 51%. So this is $6.B - a partial payment on the $16B+.”
YPF was publicly traded when Cristina’s government decided to renationalize a majority stake of the company in 2012. If the Argentine government thought it was a good future opportunity to own a share of a company it had sold a few years earlier, it only had to buy the shares on the market.
But instead Argentina decided to expropriate shares through a vote in Congress to make it look more “democratic”, without respecting international law or YPF stockholders. These oil-smeared chickens have now come home to roost, with the NY judge ruling in favor of Burford Capital — who bought the case from the Grupo Petersen slice of the original shareholders — and demanding the Argentine Republic to return the shares.
The populist damage by Kicillof & Co has already been done, and handing over majority ownership now will only result in a lose/lose scenario for Argentina, given the enormous energy surplus that will be generated for the decades to come thanks to Vaca Muerta. That is a lot of potential billions that do not find their way to the international reserves if Argentina has to give up its 51%.
It is unlikely that the Milei government will adhere to this request, and in the remainder of this article I will discuss potential ways around having to hand over the 51%.
Autist note — if you’re not familiar with the ins and outs of the nationalization process around YPF, and the current lawsuit, these articles dive into the core of the matter to get you up to speed (in chronological order):
