Argentina is required to relinquish its controlling stake in the prominent energy firm YPF SA within two weeks, following a New York judge’s ruling in favor of litigators in a US$16-billion judgment. This decision poses a significant challenge for President Javier Milei ahead of important midterm elections.
Judge Loretta Preska ordered Milei’s government to transfer 51 percent of the company’s shares to a global custody account within 14 days. These shares will then be handed over to plaintiffs – former shareholders suing Argentina for the 2012 nationalisation of YPF. The President stated in a post on X that Argentina would appeal, attributing the mishandling of the case to his predecessors.
Argentina’s sovereign bonds and YPF shares declined following Monday’s ruling, and the country’s parallel exchange rate also weakened. Burford Capital, the leader in the litigation, experienced a surge of over 20 percent in its New York-traded shares.
Preska’s order significantly impacts Milei, who assumed the case upon taking office roughly 18 months ago, tasked with revitalizing Argentina’s struggling economy permanently. The lawsuit remains a looming issue for the country as it seeks to bolster hard currency reserves and prevent further dollar outflows, all while appealing the original judgment. Preska granted the litigators the authority to pursue the funds during the ongoing appeal.
“The fact that the country has reached this point is the direct responsibility of the useless Soviet, Axel Kicillof,” Milei stated, pointing to the current provincial governor of Buenos Aires who oversaw 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 attempted to ignore the case. Argentina has expressed a willingness to pay if funds were available, yet the country’s lawyers persist in their vigorous legal battles. As of March, Milei and his top advisers had not yet responded to Burford’s negotiators seeking an out-of-court deal. Preska’s order Monday may compel Argentina to negotiate, particularly if the transfer of shares disrupts YPF’s plans with partners to enhance oil and gas exports from the emerging shale region 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 stated. “This should lead the economic team to accelerate the negotiation process to arrive at a financial settlement.”
Argentina’s federal government holds a 26 percent ownership of YPF and oversees the 25 percent stake owned by provincial governments. The government has been ordered to transfer an overall stake valued at approximately US$6 billion.
In 2023, Preska ruled that the nationalisation breached YPF bylaws mandating a tender offer to all shareholders, ordering the government to compensate US$16 billion in damages 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 dismissed Argentina’s claim that the principle of international comity – respect for another country’s laws and official acts – necessitated her deference to Argentina regarding 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 stated.