Friday, June 15, 2012

Billionaire Carlos Slim Buys 8.4% Of YPF

Billionaire Carlos Slim Buys 8.4% Of YPFNorthern, WI 6/15/12 (StreetBeat) – The world’s richest man isn’t afraid of populist governments or appropriations. On Thursday, an SEC filing revealed that billionaire Carlos Slim Helu bought 8.4% of recently nationalized YPF (NYSE: YPF), the Argentine oil company.

Carlos Slim bought 32.9 million class D shares of YPF, which is traded on the New York Stock Exchange. Those 32.9 million shares, accounting for an 8.4% stake, were valued at 10 pesos each, valuing the stake at 329 million pesos, which translates to approximately $73 million. (The regulatory filing didn’t specify if the shares were valued in Argentine or Mexican pesos, the former calculation is based on Argentine pesos).

Slim, whose fortune is now worth $54.3 billion according to our latest real-time billionaire’s list, apparently isn’t afraid to invest in Argentina despite the political turmoil the country has been through. In mid-April, the administration of Cristina Fernandezde Kirchner decided to nationalize 51% of YPF, an argentine integrated oil and gas company that was majority own by Spain’s Repsol.

The Argentine economy has been under pressure recently, as heavy subsidies and import restrictions are used to combat inflation that tops 20%, according to private measures. The government has already nationalized pension plans and changed the central bank’s charter in order to gain access to extra funding.

As the Kirchner administration stimulated consumption and subsidized basic services, inflationary pressure began to mount. When inflation got out of hand, Argentines sought to convert their savings into U.S. dollars, prompting the state to strictly regulate foreign exchange markets, in an attempt to quell capital flight. A lack of dollars has also led to intense protectionism, sparking to a trade war with Brazil and retaliation from China.

In 2011, Argentina’s energy balance came in negative for the first time in 17 years. With 34% of the country’s oil production and 23% of its natural gas in 2011, YPF was the country’s largest oil company. According to the Argentine government, Repsol’s aggressive dividend policy meant investments to ramp up production were limited. Interestingly, it was former president Nestor Kirchner, who passed away last year, who accepted Repsol’s dividend policy.

YPF had also recently found about 22.8 billion barrels of oil equivalent in the Vaca Muerta basin, one of the most important discoveries of unconventional resources over the last couple of years. A deteriorating trade balance and the prospects of juicing Vaca Muerta tilted the balance for Cristina Kirchner and her ministers.

Tapping those resources means Cristina will have to elicit international investment and expertise. Companies like Chevron and Petrobras have reportedly had conversations with the government. Having Carlos Slim as a major investor will definitely give YPF an air of normalcy, much needed after the governments many investor-spooking moves. Repsol has threatened to sue anybody that cuts a deal with YPF.

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