By Sarah White and Tracy Rucinski

Spanish oil group Repsol has sold a 5 percent stake to Singapore's government fund, Temasek, in a further step towards financial stability after the sale last week of gas assets to Shell.

Temasek, which has been boosting investments in the energy sector, bought Repsol's entire portfolio of treasury stock for 1.04 billion euros ($1.35 billion), lifting its holding to 6.3 percent, Repsol said on Monday.

Repsol made a 148 million euro loss on the transaction, after selling the stock at a discount.

But the deal should help Repsol's credit rating, under scrutiny since Argentina expropriated its majority YPF stake last year, triggering concerns over funding and growth.

"This deal draws a line under the credit rating issue for Repsol and gives them a long-term investor of the size of Temasek," Brendan Warn, analyst at Jefferies.

Temasek, the world's ninth-biggest sovereign investor, had no immediate comment on the deal.

Repsol, which last week beat earnings forecasts for the fourth quarter, helped by strong production growth, has been in recovery mode since the seizure of cash contributor YPF.

It had to focus on asset sales to chip away at its big debt burden as it tried to hang onto its investment-grade rating.

Repsol last month sold liquefied natural gas assets to Royal Dutch Shell for $4.4 billion cash, and said its net debt would halve to 2.2 billion euros once the deal is completed.

On Friday, ratings agency Moody's changed its outlook for Repsol to "stable" from "negative", citing progress in cutting its debt, while Fitch did the same at the end of January.

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