Fitch downgrades Repsol on Spain economy, YPF expropriation

08 June 2012 17:44  [Source: ICIS news]

LONDON (ICIS)--Fitch has downgraded its credit ratings for Spain's energy and chemicals major Repsol because of the recent YPF expropriation in Argentina, as well as the weak Spanish economy, the US-based agency said on Friday.

Fitch said that Repsol may not receive any cash compensation from the Argentina government in the short- to medium-term following Argentina’s move to expropriate 51% of the shares of Repsol in oil and gas firm YPF.

In addition, Repsol’s downstream business, which is at the core of the company’s operations in Spain, is heavily exposed to the weak Spanish economy, Fitch said.

As such, macroeconomic headwinds in Spain could result in a reduction in demand for transportation fuels, which, in turn, would decrease Repsol’s internally generated cash flow and affect investment plans, Fitch said.

Fitch cut Repsol’s ratings from “BBB” to “BBB-“, with a negative outlook. The ratings’ upside potential is currently limited but may improve should Repsol divest some non-core assets, Fitch said.

“Fitch currently views eurozone macroeconomic risks as rising, rather than abating,” it added. Earlier on Friday, the agency already downgraded Spain’s sovereign credit rating, triggering a drop in European chemical and other stocks.

By: Stefan Baumgarten
+1 713 525 2653

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