S&P downgrades Argentine debt rating in pesos to “selective default”

Argentina’s local currency debt credit rating was downgraded after the country secured enough bondholders to swap a series of local currency bills due 2024 for longer-term securities.

Standard & Poor’s lowered the rating of Argentine debt in pesos to “selective default” on Wednesday, following the announcement of a debt exchange offer for the equivalent of US$55.3 billion.

S&P Global Ratings cut Argentina’s long-term local currency debt rating to SD from CCC-, according to a statement issued Wednesday.

S&P considers that a debt exchange for new bonds that is carried out in a situation of financial uncertainty “equivalent to a default.”

The government’s recent agreement with investors to exchange about $55.3 billion in bonds for notes maturing between 2025 and 2028 was classified as a forced exchange, S&P said.

“As a result, we lowered our rating on Argentina’s local currency sovereign debt to ‘SD/SD’ from ‘CCC-/C’.”, reported the risk rating agency in a statement.

“S.D.” is the acronym in English for “selective default”.

“Once the debt swap is completed, we will likely upgrade our long-term local currency rating to ‘CCC’.”he added.

The agency maintained the CCC-/C rating for debt in foreign currency.

The auction results depended largely on the support of public sector bondholders. But the Government only managed to attract about 17.5% of private sector debt investors, according to government data.

While Argentina relies heavily on local debt swaps to manage its finances, the record size of the operation tested the local market’s confidence in President Javier Milei’s economic program just three months into his presidency.

With information from AFP and Bloomberg