Argentina and Repsol reach compensation agreement over expropriation of YPF
26 February 2014
The agreement reached between the Republic of Argentina and Repsol (''Convenio de Solución Amigable y Avenimiento de Expropiación'') recognises the company's right to receive US$5 billion as compensation for the expropriation of 51 per cent of the shares of YPF and stipulates guarantees for effective payment as well as the termination of all judicial and arbitration proceedings and the reciprocal waiver of future claims (See: Argentina to compensate Repsol $5 bn over 2012 asset seizures).
The agreement does not enter into force until a number of conditions are met, including its approval by Repsol's annual general meeting followed by approval of a law especially sanctioned by the Argentinan Parliament .
Makeup of public debt
The agreement stipulates that the Government of Argentina will transfer to Repsol dollar-denominated public debt, as follows:
1) A fixed package with a nominal value of $5 billion, made up of:
- Bonar X: US$500 million
- Discount 33: US$1.250 billion
- Bonar 2024: US$3.250 billion
2) A complementary package, with a maximum nominal value of $1 billion, made up of:
- Boden 2015: US$400 million
- Bonar X: US$300 million
- Bonar 2024: US$300 million
The transferal of the complementary bonds will be adjusted so that the market value of the bonds is no less than $4.670 billion and up to a maximum nominal value of $6 billion. The market value will be calculated through quotations from international financial institutions. The complementary bonds will be delivered to Repsol by earliest maturity first up to the limits indicated in each bond.
The transaction will be complete with the delivery of the bonds in Repsol's favor with full guarantees in their deposit through an international financial clearing entity. Repsol is free to sell these bonds. If the sale proceeds were to exceed US$5 billion (excluding costs and interest), the excess would revert to the Republic of Argentina.
The Republic or Argentina's debt will be transferred to Repsol ''pro solvendo,'' that is that the debt will not be considered to be extinguished until full payment, be it through the sale of bonds or through ordinary payment through the bonds' maturity.
As an additional guarantee, the Argentina government recognises that if the debt were restructured or there were a failure to pay, Repsol has the right to accelerate debt payment and seek payment of the outstanding amount up to $5 billion through United Nations Commission on International Trade Law (UNCITRAL).
The compensation agreement is protected by the Bilateral Treaty between Spain and Argentina for the Protection of Investments (Acuerdo de Promoción y Protección de Inversiones entre España y Argentina).
Agreement with YPF
At the same time, Repsol will sign an agreement with YPF and YPF Gas by which all parties agree to desist from legal action as well as exchanging waivers.