Argentina must give up its controlling stake in signature energy company YPF SA within two weeks after a New York judge sided with litigators in a US$16-billion judgment, delivering a setback to President Javier Milei before crucial midterm elections.
Judge Loretta Preska gave Milei’s government 14 days to surrender 51 percent of the company’s shares to a global custody account, from which they’ll be transferred to plaintiffs – former shareholders suing Argentina over its 2012 nationalisation of YPF.
The President confirmed in a post on X that Argentina would appeal, blaming his predecessors for mishandling the case.
Argentina’s sovereign bonds and YPF shares both dropped after Monday’s ruling, while the country’s parallel exchange rate weakened. Shares for Burford Capital, which is leading the litigation, saw its New York-traded shares soar more than 20 percent.
Preska’s order is a major blow to Milei, who inherited the case when he took office about 18 months ago on a mission to turn around Argentina’s flailing economy once and for all. The lawsuit has continued to hang over the country as it struggles to build up hard currency reserves – not leak even more dollars – even as it appealed the original judgment. That’s because Preska gave the litigators the right to try to get the money while the appeal takes its course.
“The fact that the country has reached this point is the direct responsibility of the useless Soviet, Axel Kicillof,” Milei said, referring to the current provincial governor of Buenos Aires who led the nationalisation of YPF in 2012. “More than 10 years have passed and Argentines continue to suffer the consequences of the worst government in Argentine history.”
Milei has largely tried to turn a blind eye to the case. While he has said that Argentina would be willing to pay if it had the money, lawyers for the country have continued to fight tooth and nail. Behind the scenes, as of March, Milei and his top advisers hadn’t even gotten back to Burford’s negotiators looking to reach an out-of-court deal.
Preska’s order Monday may force Argentina to the table, especially if transferring the shares interferes with YPF’s plans with partners to advance export of oil and gas from the burgeoning shale patch known as Vaca Muerta, according to Walter Stoeppelwerth, chief investment officer of Buenos Aires-based brokerage Grit Capital Group.
“With the shares in limbo, these processes could be delayed in a meaningful manner,” he said. “This should lead the economic team to accelerate the negotiation process to arrive at a financial settlement.”
Argentina’s federal government owns 26 percent of YPF and has custody over provincial governments’ 25 percent stake. The overall stake the government has been ordered to hand over is worth about US$6 billion.
Preska ruled in 2023 that the nationalisation violated YPF bylaws that required the company to make a tender offer to all shareholders and ordered the government to pay US$16 billion in compensation and interest.
“From the market sentiment perspective, this is an issue that the current government is forced to deal with in another reminder of Cristina Fernández de Kirchner’s negative legacy,” said Gorky Urquieta, an emerging-markets portfolio manager at Neuberger Berman.
The judge rejected Argentina’s argument that the principal of international comity – respect for another countries laws and official acts – required her to defer to Argentina on the requested turnover.
“While the Republic demands that this court extend comity, it simultaneously refuses to make any effort to honor the court’s unstayed judgment,” Preska said.
The case is Petersen Energia Inversora SAU v. Argentine Republic, 15-cv-02739, US District Court, Southern District of New York (Manhattan).
by Bob Van Voris, Jonathan Gilbert & Kevin Simauchi, Bloomberg
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