YPF expropriation case: Burford requests Argentina’s shares of the company

The hedge fund is reportedly seeking to force an out-of-court negotiation in the US$16.1 billion lawsuit

Burford Capital has requested Judge Loretta Preska grant them all of Argentina’s YPF shares as payment for the US$16.1 billion the country owes the financial firm after losing the oil and gas company takeover lawsuit.

Burford’s ask was made in secret some time during the past week and became known on Friday after Argentina requested the judge make it public. The country currently owns 51% of the company’s shares. 

The expropriation case itself is currently on appeal. The process will finish once the Appeals Court and, eventually, the U.S. Supreme Court decide on Argentina’s situation.

Sebastián Maril, CEO of Latam Advisors LLC, who has been following the case closely, told the Herald that Burford is not interested in seizing YPF but rather in forcing an out-of-court negotiation. 

Preska, however, could accept the request given that, in November, she said that the country’s 51% equity stake could be pledged as collateral for the debt. At the time, she excluded the 49% allocated for certain provinces.

Maril said Argentina would file a motion against Burford’s request on May 16 and that Burford would file a motion in support on May 30. Preska is not expected to rule before mid-June.

From a legal standpoint, even if the government wanted to give the shares up, it would need two-thirds of Congress to approve the decision. But if Preska rules in favor of Burford and the country fails to give up the shares, Argentina would be in contempt of court, Maril said, something that already happened in 2014 in Thomas Griesa’s New York court in a case where hedge funds were suing the country over defaulted payments.

The YPF case can be traced back to 2012, when the Argentine Congress expropriated 51% of the shares of oil and gas company YPF from Spanish multinational Repsol, at the time the majority shareholder. Three years later, Burford Capital bought the trial rights from two companies who owned part of the 49% remaining shares — Petersen Energia Inversora and Petersen Energía —, as well as a third company called Eton Park. Burford considered that Argentina had failed to make a tender offer for their YPF shares in 2012 and took the country to court. Preska ruled in their favor in September.

The Milei administration, whose flagship “omnibus bill” included the re-privatization of YPF, has not visibly changed its strategy in the litigation. President Milei has even said he would create a new tax to pay for the judgment, which he jokingly called the “Kicillof tax,” a jab at current Buenos Aires governor Axel Kicillof, who was in charge of the takeover as deputy economy minister in 2012. 

“Argentina did not pledge a collateral and it is not negotiating,” Maril said. “Some noise and pressure are starting to show.”

Among the pressure points coming Argentina’s way, Maril named the International Monetary Fund’s seventh review of the country’s program. In the report, the Fund stated that Argentina could regain access to private capital markets if it made efforts “to engage in legal processes” related to the sovereign debt litigations of YPF and GDP-linked warrants. Both trials amount to roughly US$17 billion.

Argentina has said it is willing to pay but can’t due to its international reserve scarcity crisis. According to the consulting firm Ecolatina, the country has negative US$500 million in its Central Bank, although the number goes down to negative US$2 billion if the maturities for a bond issued to country importers is accounted for.

For Maril, the main issue is not economical but political, as he considered there are “over ten ways” the country could pay once it negotiates with the creditors — for instance, by issuing a bond.

“This telenovela started with a vote in Congress in 2012, and it should end the same way, either this year or the next,” Maril said.


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