marinabaysands: Repsol Sells 5% Stake to Singapore"s Temasek for $1.3 Billion

Repsol SA (REP), Spain’s biggest oil

company, sold treasury shares to Singapore’s Temasek Holdings

Pte for 1 billion euros ($1.3 billion) to bolster finances and

protect its credit rating.

Temasek, a state-owned investment company, bought the 5.04

percent stake for 16.01 euros a share, a 1.7 percent discount to

the previous close, in Singapore’s largest investment in Spain,

Repsol said today. Repsol’s 2.5 percent gain in Madrid made it

the top performer on the MSCI EMU/Energy (MXEM0EN) index.

The sale “solves any lingering doubts over the credit

rating,” Lydia Rainforth, an analyst at Barclays Capital in

London, said in an e-mailed response to questions. It leaves

Repsol “as a very well-funded company with better-than-average

growth prospects in the sector.” Rainforth has an overweight

rating on the stock.

The deal caps a flurry of events for the Spanish driller

that has struggled to avoid being the largest oil company

worldwide to be downgraded to junk. Last week, Moody’s Investors

Service changed Repsol’s outlook to stable from negative after

the Spanish driller announced the sale of most of its liquefied

natural gas assets to Royal Dutch Shell Plc (RDSA) for $4.4 billion in

cash excluding debt.

Repsol had said it would consider selling treasury shares

or converting preferred shares to improve its debt position and

avoid a credit-rating downgrade after the Argentine government

sei ed its YPF business in April and refused to pay

compensation.

Preferred Stock

The company will still have to convert its preferred shares

to a different security to improve its financial position,

Stuart Joyner, head of oil and gas analysis at Investec

Securities Ltd. in London, said in an e-mail. On the positive

side, he said today’s transaction removes a negative on the

common shares, an “overhang” caused by doubt over a treasury-

stock sale.

Repsol gained 2.5 percent in Madrid to close at 16.70 euros

on about six times the three-month average volume.

For Singapore, the transaction marks an increasing appetite

for energy investments, with Temasek raising its Repsol stake to

6.3 percent with the latest purchase.

The energy 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,” Tay Sulian, managing director for investment at Temasek, said in an

e-mailed statement.

Temasek’s Energy Interests

The share of energy and resources-related assets in

Temasek’s portfolio doubled to 6 percent at the end of March

2012 from a year earlier, according the latest annual report,

published in July. Temasek spokesman Stephen Forshaw confirmed

the details of the report.

The Spanish driller sold the first 5 percent stake of the

10 percent acquired from Sacyr in the stock market in January

2012. That transaction and today’s together will have “a

negative effect on reserves” of 148 million euros, Repsol said

today.

“With this move, Repsol delivers on its objective to

reinforce the balance sheet, not diluting shareholders,” BPI

analysts wrote in a report e-mailed today.

To contact the reporters on this story:

Patricia Laya in Madrid at

playa2@bloomberg.net;

Klaus Wille in Singapore at

kwille@bloomberg.net

To contact the editor responsible for this story:
Will Kennedy at

wkennedy3@bloomberg.net

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