-- A top Spanish official says Spanish companies are worried about Argentina's move
-- A small Spanish company pulls back on Argentine investment plans
-- Moody's places Repsol rating on review for downgrade.
(Adds details about Spanish companies in Argentina, the Moody's announcement and other details.)
By Ilan Brat and Art Patnaude
Of DOW JONES NEWSWIRES
MADRID (Dow Jones)--Repsol YPF SA's (REP.MC) Spanish peers in other sectors fear for their operations in Argentina following the seizure of YPF SA (YPF, YPFD.BA) by the Argentine government, Spain's industry minister said Wednesday.
Spanish Industry Minister Jose Manuel Soria told Spanish state broadcaster TVE that other Spanish companies have expressed concern about their future in the country. At least one small Spanish company said Wednesday it would curtail a planned investment in the country in the wake of Argentina's decision Monday to seize 51% of YPF SA, leaving Repsol YPF SA (REP.MC) of Spain with a 6% stake.
"Investors look for regulatory certainty. Who would want to invest if regulatory certainty isn't guaranteed?" Soria said.
Yet many of Spain's other firms present in Argentina are far less leveraged to the country than is Repsol, which could limit their influence on Argentina. Soria's comments came as worries about Repsol's future financial health continued to mount.
Soria reiterated that the government is planning a response to the expropriation, which he said will be diplomatic, commercial and related with the energy sector. Though he did not provide specifics, some observers have speculated Spain's response could include import controls.
Spain's largest business association, the CEOE, called on the government of Spain and the European Union to help "reestablish a climate of confidence" between the two countries, it said in a news release.
Argentina accounted for only about 5% of telecommunications giant Telefonica SA's (TEF) total annual revenue and earnings before interest, taxes, depreciation and amortization, or Ebitda. A Telefonica spokesman declined to comment.
Banco Bilbao Vizcaya Argentaria SA (BBVA), Spain's No. 2 bank by assets behind Banco Santander SA (STD), owns BBVA Banco Frances in Argentina, but operations in the country represented 3.6% of the group's global gross income in 2011.
"So far, nothing has changed for us," said Paul Tobin, a spokesman.
But N2S, a small Spanish energy technology and communications company, said Wednesday that it would put the brakes on its plans to open an office in Buenos Aires, complaining about "the legal uncertainty" created by Argentine President Cristina Kirchner's move. The company said Argentina was its next stop after starting operations in Brazil, Mexico and elsewhere in Latin America.
YPF, Argentina's leading oil-and-gas company, produced more than half of Repsol's daily hydrocarbon output and accounted for about 35% of its 2011 Ebitda. Some analysts have said losing YPF could hurt Repsol's credit rating.
Moody's Investor's Service Wednesday placed Repsol's Baa2 long-term issuer rating on review for downgrade. Such a shift could be finalized in the next few weeks.
"The expropriation [of YPF] will reduce the scale and diversity of Repsol's business profile and increase its relative exposure to the challenged European downstream sector," Moody's said.
The share price of Repsol YPF SA (REP.MC) continued to drop Wednesday, building on hefty losses Tuesday as the Spanish government and analysts alike expressed concern about Argentina's move.
Repsol shares closed down 6.2% at EUR15.40 on Wednesday. The Argentina uncertainty has dragged down Repsol shares by more than 35% since the start of year.
The Argentine government blames YPF for low production that has forced it to spend heavily on importing energy, at a time when capital flight has made dollars scarce. But analysts note that the Argentine government has capped energy prices domestically, discouraging investment.
"Tuesday's conference call with Repsol management provided little reassurance on Argentina," said analysts at Nomura in a note, pointing out that much depends on the market's confidence that Argentina is willing to pay a fair value for YPF and how Repsol's management plans to finance growth without YPF.
Analysts at UBS said while they believe the full loss from the YPF takeover is already priced into Repsol shares, "we are uncertain that the compensation setting will be in line with the statutes or laws relating to YPF, and the external remedies available to Repsol are likely to be long and uncertain."
-By Ilan Brat and Art Patnaude, Dow Jones Newswires; +34 91 395 8125; ilan.brat@wsj.com
(Anna Perez contributed to this article.)
