The risk rating agency Standard & Poor’s (S&P) announced this Friday that it lowered the sovereign debt note from Argentina in local currency to “selective default” after the Treasury completed an exchange of that debt that it considered to be done under “disadvantageous conditions.”
S&P Global Ratings “reducedIts Argentine local currency sovereign issuer credit ratings to “SD/SD” from “CCC-/C” and its national scale rating to “SD” from “raCCC+,” it said in a statement.
The Argentine Treasury finalized this Thursday a debt swap in local currency that took the maturities from June to September 2023 towards a period after the presidential elections of this year and until 2024 and 2025, by offering securities with a return tied to inflation and the movement of the exchange rate.
Spokesmen for the Ministry of Economy considered that by the end of the year “the panorama“of maturities”looks clear”because it managed to reduce the projected maturities by 7.4 trillion pesos (about US$30,000 million or 27,000 million euros at today’s exchange rate), so that in the remainder of 2023 it will have to face 4.2 trillion pesos (about US$17,000 million ).
S&P considered that “This transaction is carried out under disadvantageous conditions (“distressed”) based on the probability of conventional default -in the absence of creditor participation- given by the marked macroeconomic vulnerabilities of the sovereign and its limited capacity to extend maturities and place debt in the local market without reliance on trades”.
He recalled that it is the fifth operation of this type that Argentina has carried out since August 2022.
He understands that the debt swap is “equivalent” to “a breach” and, therefore, reduced the rating of Argentina’s debt in pesos to the level of “selective default”.
S&P foresaw that “once the debt swap is complete”, could upgrade its long-term local currency debt rating to the “CCC” category.
In turn, it confirmed its foreign currency ratings at ‘CCC-/C’ and explained that “The negative outlook on the long-term foreign currency rating reflects risks related to pronounced economic imbalances and political uncertainty before and after the 2023 national elections.”
Source: EFE
Source: Gestion
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