Repsol Slumps as Argentina Proposes Taking Over Funds

By Paul Tobin

Oct. 22 (Bloomberg) -- Repsol YPF SA fell the most in 11 years in Madrid trading after Argentina proposed a takeover of pension funds, fueling concern the nation is headed for its second default in a decade.

Spain's biggest oil producer slumped as much as 15 percent to 15.22 euros, the steepest intraday decline since October 1997. The stock traded at 15.40 euros as of 3:02 p.m. local time. Repsol owns YPF SA, the largest oil company in Argentina.

Madrid-based Repsol spokesman Kristian Rix said there is no ``objective reason'' to justify the stock's slump today. The company is monitoring ``the origin and spreading'' of market rumors, Rix said.

Argentine bond yields soared above 24 percent before President Cristina Fernandez de Kirchner announced a plan late yesterday to seize $29 billion of private pension funds. The last time the government sought to tap workers' savings to help finance debt payments was in 2001, just before it stopped servicing $95 billion of obligations.

``This is terrible news for companies with investments in Argentina,'' said Alberto Espelosin, who helps manage the equivalent of $7.7 billion at Zaragoza, Spain-based Ibercaja Gestion.

The retirement system in Argentina, set up in 1994 to help bolster capital markets, owns about 5 percent of companies listed on the Buenos Aires stock exchange and 27 percent of shares available for public trading, data compiled by pension funds show. The government's proposal to take control of 10 funds still needs congressional approval.

Boost Exploration

Repsol is trying to increase exploration in countries including Russia as it cuts reliance on fields in Argentina. Chairman Antonio Brufau plans to spend 33 billion euros ($42 billion) through 2012 to stem five years of dwindling oil and gas reserves.

Madrid-based Repsol said last month it would announce in November a date for the delayed sale of a 20 percent stake in YPF on the local stock market. Earlier this year, Repsol closed the sale of 15 percent of YPF to local investor Enrique Eskenazi for $2.2 billion. The Spanish explorer and refiner bought YPF from Argentina's government in 1999.

Other Spanish companies with investments in Argentina also fell today. Telefonica SA lost as much as 9.3 percent to 14.17 euros and Banco Santander SA slid as much as 9.7 percent to 8.38 euros.

The cost of protecting Argentina's bonds against default soared yesterday, as five-year credit-default swaps based on Argentina's debt jumped 2.38 percentage points to 32 percent, according to Bloomberg data.

Credit-default swaps, contracts conceived to protect bondholders against default, pay the buyer face value in exchange for the underlying securities or the cash equivalent should a company fail to adhere to its debt agreements. An increase indicates a deterioration in the perception of credit quality.

To contact the reporter on this story: Paul Tobin in Madrid at ptobin@bloomberg.net