Argentina, January 20, 2020 – The administration of President Alberto Fernandez launched and concluded an exchange on its peso-denominated short-term debt on Jan. 20, 2020. This followed the Dec. 19, 2019, unilateral extension (until August 2020) of U.S. dollar-denominated short-term paper held by private-sector market participants. We classify this peso-debt exchange as a distressed exchange, which constitutes a default under our criteria, and we are lowering our local currency sovereign credit ratings on Argentina to ‘SD/SD’ from ‘CCC-/C’. We are also affirming our long-term foreign currency sovereign credit rating at ‘CCC-‘, and the outlook remains negative. The negative outlook reflects prospects for a further restructuring of sovereign debt as the administration holds dialogues with bondholders, financial intermediaries, and official creditors on its policy priorities, economic strategy, and re-profiling plans.
Rating Action: On Jan. 21, 2020, S&P Global Ratings lowered its local currency sovereign credit ratings on Argentina to ‘SD/SD’ from ‘CCC-/C’ (our criteria do not distinguish between short term and long term when there is a default). We affirmed the foreign currency sovereign credit ratings at ‘CCC-/C’. The outlook on the long-term foreign currency sovereign credit rating remains negative. We also took the following rating actions:
- We lowered the long-term local currency-denominated issue ratings to ‘CC’ from ‘CCC-‘;
- We affirmed the long-term foreign currency issue ratings at ‘CCC-‘;
- We affirmed our ‘B-‘ transfer and convertibility assessment on Argentina; and
- We lowered our national scale rating on Argentina to ‘SD’ from ‘raCCC-‘.
Outlook: The negative outlook on the long-term foreign currency rating reflects the downside risks to timely and full payment of debt over the short term amid stressed economic and financial market dynamics. The sovereign’s access to liquidity is likely to remain constrained as the Fernandez Administration outlines its economic policies while engaging in dialogue with bondholders, bankers, and the International Monetary Fund. We could lower the foreign currency ratings if the government finalizes terms with bondholders for a potential debt restructuring that is characterized as a distressed debt exchange based on our methodology. Such a restructuring could entail an extension of maturities, which will not be compensated by the issuer, or a reduction in the face value of debt. Additionally, we could lower the ratings if economic and financial stresses further threaten timely debt service or the sovereign misses a debt payment. We could raise the ratings following implementation of a debt restructuring if policy signals and execution start to successfully turn around or stabilize private-sector confidence, market turbulence subsides, and the government regains access to market financing.
S&P Global Ratings, January 21, 2020
Atlantic Investors Service 