Moody's downgrades YPF

Moody's Investors Service said it downgraded YPF SA's global local-currency rating to Ba1 from Baa2, concluding a review for possible downgrade announced in December 2008. YPF's Ba2 foreign-currency bond rating, also under review for downgrade, was withdrawn when the rated bond issue matured in February.

The outlook is stable.

The agency said YPF's asset profile and position as Argentina's largest energy company rank its fundamental credit profile somewhat higher than is indicated by its Ba1 rating despite a relatively poor record of reserve replacement and declining oil and gas production.

However, the downgrade was prompted by Argentina's deteriorating economic profile and by concerns that the government's revenue needs and unpredictable policy framework could result in unfavorable tax and regulatory changes that will continue to pressure YPF's financial profile and operating performance, Moody's said.

In addition, Moody's believes that elements of potential support for YPF external to Argentina are no longer sufficient to justify YPF's rating at a level that pierces the country's Ba1 global local-currency ceiling.

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