Court orders Argentina to turn over 51% stake in YPF to pay expropriation debt

A New York judge ordered Argentina June 30 to turn over its 51% stake in YPF, the country's biggest oil producer, to plaintiffs as a partial payment for the $16.1 billion it owes for the expropriation of the company in 2012, a move that could complicate the company's plans for growing oil and natural gas production and exports.

Argentina must transfer the shares to a custody account at the Bank of New York Mellon within 14 days, which will then initiate the transfer to the plaintiffs within one day of the deposit, US District Judge Loretta Preska said in the ruling.

The judge denied Argentina's request for oral argument in the same ruling.

The decision comes after Argentina lost a request in January 2024 for more time to pledge assets to avoid this enforcement, which allows the plaintiffs to recover what they are owed for the expropriation of YPF. The government argued at the time that a severe economic crisis, high inflation and a lack of access to international credit markets were making it hard to pledge the assets.

Preska said at the time, however, that Argentina was not showing any willingness to pay.

The ruling is in favor of Burford Capital, a London-based finance and asset management firm that financed the lawsuit for the Argentinian conglomerate Petersen and US-based investment firm Eton Park. Preska had earlier ruled that Petersen and Eton must be fairly compensated for the expropriation their stakes in YPF, which were 25% and 4%, respectively, at the time of the re-nationalization of the company. YPF had been sold off in the 1990s. After the seizure of the company, Argentina paid Spain's Repsol $5 billion in 2014 for taking its 51% stake.

A thorn in its side

YPF declined to comment on the judge's order.

Sebastián Maril, a director of US-based financial research company and advisory firm Latam Advisors, told S&P Global Energy that the ruling could stymie the company's operations.

"It's like a ghost hanging over the company," he said. "It's not a good sign."

From here out, there will be the possibility that these investment funds could take control of the company at anytime in the future, Maril added.

This threat comes at a time when the company has good projects for growing its production and exports, including for building a pipeline for exporting more than 500,000 b/d of crude from Vaca Muerta, one of the world's biggest shale plays. YPF is also leading projects to export 30 million mt/year of LNG.

The ruling also comes when the Javier Milei government is bringing runaway inflation under control and reviving economic growth, including by providing incentives for big projects like the construction of oil and gas export capacity, he said.

Plans to appeal

Milei said the government plans to appeal the ruling.

"All Argentines should know that we will appeal this ruling in all the appropriate instances to defend the national interests," he said on X.

Milei, a right-wing conservative, blamed the previous leftist government of Cristina Fernández de Kirchner, who ruled from 2007 to 2015 is now under house arrest for corruption, as responsible for this legal mess, saying they acted irresponsibly. The economy minister at the time was Axel Kicillof, who is now governor of Buenos Aires, the country's biggest province.

Despite Milei's complaints, Maril said the ruling political party has failed to act to defend itself against the lawsuit or figure out how to pay without losing control of YPF.

"Argentina has to start to pay attention to these cases," he said. "But it's not paying attention."

In January 2024, Milei's spokesman, Manuel Adorni, said the country would "comply with its commitments" and "respect" court orders, but said that alternatives would be studied for making the payment.