By Charles Penty and Gianluca Baratti
Nov. 27 (Bloomberg) -- OAO Lukoil requested financing to buy a stake in Repsol YPF SA, Spain’s largest oil producer, according to Miguel Blesa, chairman of Caja Madrid, one of the banks that may fund the deal.
The Madrid-based bank has asked Russia’s largest non-state oil company for more guarantees, Blesa told reporters today in Madrid. Lukoil spokesman Dmitry Dolgov declined to comment when contacted by Bloomberg.
Lukoil, which owns oil-producing assets in Siberia, wants to boost refine capacity in the Mediterranean to process its crude. Analysts at JPMorgan Chase & Co. and ING Groep NV had expressed skepticism that Lukoil, which already owns refineries in Bulgaria and Romania and has agreed to set up an Italian oil venture next month, could afford another purchase.
“The odds of Lukoil being able to arrange financing are fairly high even with oil prices at $50 per barrel,” Steven Dashevsky, managing director of equities at UniCredit SpA in Moscow, said in a telephone interview today. “Lukoil remains a very profitable company.”
Sacyr Vallehermoso SA, the Spanish builder whose debt is six times its market value, is seeking to sell its 20 percent stake in Repsol to reduce debt as the nation’s housing slump shows no sign of easing. Criteria, a Barcelona-based investment company, has a 9.1 percent direct holding in Repsol.
A 30 percent stake in Repsol is worth about 5 billion euros ($6.5 billion), based on the oil producer’s closing share price on Nov. 20, the day before Criteria first disclosed the talks.
No Board Seat
Any oil producer interested in buying a minority stake in Repsol won’t qualify for a seat on the company’s board, Chief Executive Officer Antonio Brufau said today.
A potential investor seeking to have a say in the running of the oil producer would be required to make a public offer. “They have to cross the magic line,” Brufau told a conference in Madrid.
“It would be hard to keep a 30 percent holder off the board,” said Iain Reid, a London-based analyst at Marquarie Bank. “It would be better to have them inside the tent than outside.”
If a rival oil company were interested in buying a stake in Repsol, it would be limited to 10 percent of voting rights, under company statutes, Brufau said. “Any new entrant has to respect the company’s plan and bring value.”
Repsol, which operates five refineries in Spain, has lost 40 percent of its value this year. Crude oil futures have dropped 64 percent since reaching a record $147.27 on July 11.
‘Track Record’
“A lot will depend on the price, but Lukoil does have a track record of buying undervalued assets at distressed values, and ultimately profiting from them when the cycle turns,” said Dashevsky at UniCredit.
Lukoil currently has $6.9 billion dollars in bonds and loans outstanding, according to Bloomberg data. It had $1.66 billion in cash at the end of June.
Repsol gained 3.6 percent to 15.15 euros as of 2:40 p.m. in Madrid. Sacyr was down 0.8 percent at 7.75 euros. Lukoil added 1.7 percent to 857.20 rubles on the Micex stock exchange.
The cost of protecting Repsol debt from default has surged fourfold to a record since the middle of October.
Credit-default swaps linked to the company rose 4 to 376 today, according to CMA Datavision prices, compared with 94 on Oct. 14. An increase in the contracts indicates a deterioration in the perception of credit quality.
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. A basis point on a contract protecting 10 million euros of debt from default for five years is equivalent to 1,000 euros a year.
To contact the reporter on this story: Gianluca Baratti in Madrid at gbaratti@bloomberg.net
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