Repsol raises $1.3B through Temasek share sale

Spanish oil company Repsol SA said Monday, March 4, it had sold just over €1 billion ($1.3 billion) of its treasury shares to Singapore's Temasek Holding Pte Ltd., reducing leverage as it seeks to secure its credit rating.

State-controlled Temasek increased its stake in Repsol to 6.3% from 1.3%, paying €16.01 per share for the holding. The transaction valued the shares at a 1.7% discount to Repsol's closing price on Friday.

"With this agreement, Repsol fulfills its objective of selling its treasury stock, acquired in December of 2011 from Sacyr Vallehermoso [SA]'s lenders," Repsol said. "The sale to Temasek is part of Repsol's aim to consolidate its shareholder structure with the incorporation of investors of accredited international prestige."

The share sale means Repsol has raised about $5.7 billion of cash in the past week. The Madrid-based oil producer on Feb. 27 sold liquefied natural gas assets to Royal Dutch Shell plc for $4.4 billion of cash, a deal that also moved $2.3 billion of associated debt off Repsol's balance sheet.

Moody's Investors Service last week changed Repsol's credit rating to stable from negative following the sale to Royal Dutch Shell. "Moody's believes that Repsol should be able to reposition its credit metrics more solidly within the Baa3 rating category because of the transaction [with Royal Dutch Shell, and the fact that the rating agency expects Repsol's future operating cash flow generation will continue to be underpinned by the group's ongoing execution of its major upstream projects," Moody's analysts wrote Friday.

Repsol's credit rating has been under scrutiny since the Argentine government nationalized Repsol affiliate YPF SA in May. Repsol's 51% stake in YPF accounted for about 40% of its total Ebitda.

Repsol acquired a 10% stake in itself from Sacyr Vallehermoso in December 2011 for about $2.57 billion, saving its biggest shareholder from a looming debt crisis. Repsol sold half of those shares in January.

For Temasek, the acquisition of the 5% stake in Repsol extends a recent shift into energy- and resource-related assets.

"The investment in Repsol deepens our exposure to the energy sector through a high quality growth-oriented company," said Temasek investment managing director Tay Sulian. "The sector is a good proxy for the needs of transforming economies and growing middle-income populations, both of which are part of Temasek's investment themes."

Shares in Repsol traded Monday at €16.65, up €0.025, or just over 2%, on their Friday close.