Repsol Meets Biggest Shareholder Sacyr Amid Easing Tension

MADRID (EFE Dow Jones)

In a move to ease a relationship that had become strained in recent months, officials from Spanish oil company Repsol YPF SA (REP.MC) met in private on Friday with officials of their largest shareholder, construction firm Sacyr-Vallehermoso SA (SYV.MC).

The meeting comes a day after the builder dismissed its chairman, Luis Del Rivero amid the mounting tension.

In 2006 Sacyr took on debt to buy a 20% stake in Repsol, using the shares as collateral for the loan. But Repsol's share price has fallen since then, putting pressure on the construction firm's finances.

Although it has reduced its huge debt burden to EUR11.2 billion at the end of June 2011, Sacyr, with a market capitalization of only EUR2.4 billion, must refinance the EUR4.9 billion in debt linked to the Repsol shares by the end of the year.

"Sacyr will probably sell 5% to 6% of Repsol," said David Gualtieri, a trader with Intermoney in Madrid. "Banks who loaned the money are asking for this, and it will fill the gap left by foreign creditors who are refusing to refinance."

He added that although the share sale could have a small negative effect on Repsol's stock, the operation will result in a more balanced shareholder base for the oil company.

At 1518 GMT, Repsol shares had increased 1.4% to EUR21.69, while Madrid's IBEX-35 index climbed 2.5%.

Under the direction of Del Rivero, who has been vice-chairman of Repsol, Sacyr launched a contentious campaign against Repsol's direction.

In August, Sacyr signed a pact with another large Repsol shareholder, Petroleos Mexicanos, or Pemex, to pool their votes in order to control just under 30% of the company. Beset by its heavy debt burden, Sacyr demanded that Repsol's leadership boost the oil company's market value, sell non-core assets and raise dividends.

But the need to refinance debt and the confrontations with Repsol ultimately put Del Rivero at loggerheads with other Sacyr shareholders.

On Thursday, Sacyr's board named its CEO, Manuel Manrique, as the new chairman. Demetrio Carceller, who, with a background in the petroleum industry, has become Sacyr's largest shareholder, was named vice chairman.

Manrique attended the meeting with Repsol on Friday, said a Sacyr spokesman, who added that the reunion was cordial.

Copyright (c) 2011 Dow Jones & Company, Inc.

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