2nd UPDATE: Repsol Shareholders Hit By YPF Seizure As Impact Widens

Collateral damage from Argentina's seizure of oil firm YPF spread Thursday to key Repsol shareholders Thursday, raising the stakes for the Spanish government as it battles to protect its interests in its former colony and dragging Mexico into the spat.

In yet another worry for Spain's battered economy, Argentina's move to take over Repsol's unit is hitting companies in two of the country's already long-suffering sectors: banks and construction.

Caixabank (CABK.MC), Spain's third-largest bank and Repsol's top shareholder with a 13% stake, Thursday said it wouldn't writedown the value of its stake in Repsol yet because such a move might acknowledge that Argentina was in the right. Chairman Isidro Faine told reporters in Barcelona that the company would be seeking a fair price for YPF, but he acknowledged that any settlement would be a long way off.

The bank faces an even bigger hit to its earnings, 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.

Caixabank, along with Repsol's other two major shareholders, Spanish construction company Sacyr-Vallehermoso SA (SYV.MC) and Mexican state-owned oil firm Pemex, face immediate problems with the valuations of their Repsol stakes, even if they don't make immediate writedowns.

Caixabank currently values its Repsol shares at around EUR21.1 each, while Sacyr, the second-largest shareholder with a 10% stake, values its Repsol shares at around EUR26, according to the estimates of Borja Castro, an analyst with Cheuvreux. That compares with Repsol's current share price of EUR14.66, the result of a 35% slide so far this year amid rising YPF nationalization threats.

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 just 6% from 57% currently.

Both Repsol and Spain's government have denounced the Argentine takeover as illegal, and Repsol has vowed to take the dispute to court.

The problem could be most acute for Sacyr, which has waged a six-year long struggle to gain control of Repsol. The construction company, like peers, took out loans in the boom years to diversify. It has since seen revenues collapse due to the problems in Spain's property sector and now depends heavily on Repsol's earnings and dividends. In the first nine months of 2011, Sacyr reported sales of just 877 homes, a fraction of the sales seen in the pre-crisis years.

However, creditor banks can force Sacyr to add collateral to back outstanding loans when Repsol shares drop below EUR10, said Javier Barrio, a BPI analyst.

Sacyr is struggling to service some EUR2.5 billion worth of debt it took on to buy the Repsol shares, and with its own shares trading at levels last seen in 1993, it is now worth only EUR700 million, or just over a third of the value of its Repsol stake.

Sacyr declined to comment.

Sacyr's plight comes as other Spanish construction firms see forays into the energy sector unravel. Peer Actividades de Construccion y Servicios SA (ACS.MC) took a stake in Spanish power utility Iberdrola SA (IBE.MC) and then tried to wrest control of the company. However, the now cash-strapped company Wednesday sold a 3.7% stake in Iberdrola for EUR798 million, booking a EUR540 million loss on the asset.

Mexico's Pemex, which owns 10% stake of Repsol, is seeing its strategic bet on Spain lose value quickly as Repsol's shares slide due to the loss of YPF, which represents just under half of Repsol's total oil reserves.

The company declined to comment Thursday, but Mexico's Finance Minister Jose Antonio Meade Wednesday warned during the World Economic Forum against a "return to protectionism and the expropriation of companies by countries."

Spain's government, meanwhile, Thursday continued a high-profile diplomatic campaign against the move that has placed the traditionally close ties between the two countries at their worst level in decades. Spain's Foreign Affairs minister Jose Manuel Garcia-Margallo called Argentina's move "an isolationist step" and welcomed the supportive stance of the U.S. on the issue.

Sacyr shares closed Thursday down 4.4% to EUR1.62 and CaixaBank's down 2.2% at EUR2.55. Repsol's shares were down 4.8% at EUR14.66.

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

(Pablo Dominguez en Barcelona contributed to this story.)

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