UPDATE: Repsol Shareholders Hit By YPF Seizure As Impact Widens

Collateral damage from Argentina's seizure of oil firm YPF spread Thursday in Spain to key Repsol shareholders, as CaixaBank SA (CABK.MC)--one of the country's largest banks and Repsol YPF SA's (REP.MC)'s largest shareholder--said it doesn't yet plan to write down its controlling stake on the Spanish oil company.

In what could become yet another worry for Spain's battered economy, Argentina's move to seize Repsol's unit could hit companies in two of the country's already long-suffering sectors - banks and construction.

Speaking in Barcelona, where CaixaBank Thursday presented first-quarter earnings, Chairman Isidro Faine said Spain's third-largest bank by market value doesn't see an urgent need to write down its 13% stake in Repsol. Caixabank has a EUR3.34 billion valuation of the Repsol stake, according to its 2012 annual report. The market value of the stake Thursday was EUR2.41 billion.

Faine said that Argentina must pay a "fair price" for the stake it is claiming in YPF, backing up Repsol's official stance on the matter. However, he acknowledged the issue would take time to be resolved. A potential writedown of the Repsol stake could further erode Caixabank's results, after first-quarter net profit dropped 84% as it set aside most of its earnings to cover potential losses on its real estate holdings in line with new requirements set by the government.

The problem is especially acute for Sacyr-Vallhermoso SA (SYV.MC), a construction company that took on debt to buy a large Repsol stake in 2006 and has struggled to service that debt ever since. Analysts believe Sacyr, which was already forced by creditors to sell half of its Repsol stake earlier this year, may find it hard to keep the banks at bay.

As shares of Repsol tumbled Thursday for a third consecutive day, those of Caixabank and Sacyr also headed lower amid fears that the loss of YPF would lower Repsol's contribution to their earnings, and that accounting rules may eventually force them to write down the value of their stakes in the oil firm.

Borja Castro, an analyst with Cheuvreux in Madrid, said that Sacyr has valued Repsol at EUR26 per share in its books, compared with the current market value of EUR15.10. However, he added that Sacyr and other shareholders may delay a writedown of their Repsol stakes until Repsol itself formalizes the loss of YPF. This will likely follow a potentially lengthy legal battle.

At the same time, creditor banks can force Sacyr to add collateral to back outstanding loans when Repsol shares drop below EUR10, said Javier Barrio, a BPI analyst. But Sacyr's construction and real estate business is in bad shape, and the whole company is now valued at EUR700 million--little more than one third of the value of its stake in Repsol.

A Sacyr spokesman declined to comment.

The problems for Sacyr come as other Spanish construction companies struggle with assets that they bought using bank loans during the boom years. In an attempt to diversify, the companies bought assets including stakes in energy companies.

Wedensday, Actividades de Construccion y Servicios SA (ACS.MC) sold a 3.7% stake in Iberdrola for EUR798 million, booking a EUR540 million loss on the asset. It is also set to announce further asset sales.

Argentina's government took control of YPF's operations earlier this week, and an Argentine Senate committee approved Wednesday a bill to re-nationalize the firm, originally a state-owned company that was bought by Repsol in 1999.

The committee approval sets the stage for a vote next week by the full Senate on President Cristina Kirchner's proposal to take over 51% of YPF. The plan, likely to be passed, would leave the Argentine federal and provincial governments in control of the company and reduce Repsol's stake to 6% from just 57% currently.

Repsol shares had already fallen in recent weeks as speculation about a nationalization of YPF intensified. The stock has lost about a third of its value since the beginning of 2012.

At 1253 GMT, Sacyr was trading down 3.6% to EUR1.64, its lowest level since 1993, and CaixaBank was down 3.8% at EUR2.51. Repsol's shares were down 2% at EUR15.10.

-By David Roman and Anna Perez; Dow Jones Newswires; +34913958127; christopher.bjork@dowjones.com

(Pablo Dominguez en Barcelona contributed to this story.)

Caixabank (PK) (USOTC:CAIXY)
Historical Stock Chart
From Jun 2024 to Jul 2024