Wednesday, October 31st 2012 - 04:00 UTC

Fitch Ratings downgrades Argentine bonds following Judge Griesa ruling

Fitch Ratings has placed Argentina's Long-term foreign currency Issuer Default Rating (IDR) of 'B', Short-term IDR of 'B' and the international bonds issued under New York Law on Rating Watch Negative (RWN).

New York Appeals court upheld Judge Griesa's ruling that Argentina breached the 'Equal Treatment Provision'

The agency has affirmed Argentina's local currency IDR at 'B' with Stable Outlook. The Country Ceiling has also been affirmed at 'B'.

The RWN reflects increased uncertainty about Argentina's ability to service its international securities issued under New York Law on a timely basis using the US financial system following the recent US Appeals court ruling.

On 26 October, the US Court of Appeals for the Second Circuit in New York upheld US District Judge Griesa's ruling that Argentina breached the 'Equal Treatment Provision' of the original New York-based law bonds defaulted in 2001.

The provision states that the payments rank at all times “at least equally with all other present and future unsecured and unsubordinated external indebtedness” (‘pari-passu’). The remedy of the ruling orders Argentina to make payments to holdouts at the same time as or prior to its payments to holders of the 2005 and 2010 restructured debt.

In February 2012, the district court also issued an injunction to all parties involved, directly or indirectly in advising upon, preparing, processing or facilitating any payment on the Exchange Bonds prohibiting them from aiding and abetting any violation of the Court order.

The Court of Appeals sent back the case to Judge Griesa for clarification of the payment formula and the legal responsibility assigned to third parties and intermediary banks in the application of the ruling. Once Judge Griesa clarifies these two issues, the case automatically goes back to the Appeals Court, which should consider the merits of the clarification.

The Argentine government has stated that it would appeal to the US Supreme Court, but it is unclear at this stage if the Supreme Court will take up the matter.

Fitch notes that there is some uncertainty about the timeframe of the legal process and when or how it could affect the country's ability to pay NY-law external debt. At present, Fitch understands that the government of Argentina is not legally restrained from making payments on its performing debt under NY law without making payments to the plaintiffs.

However, this could change depending on Judge Griesa's observations and the subsequent considerations by the Appeals Court on these issues. The next coupon payment on the securities is on 1 December 2012.

In addition, there is uncertainty about whether the Argentine government would abide by the final ruling of US Courts given the government of Argentina's previous stance of objecting to making payments to holdout investors.

Argentina's 2005 'Lock Law' prohibits the government from re-opening the exchange or from conducting any type of in-court, out-of-court or private settlement with holdouts without prior authorisation from Congress.

Fitch will continue to monitor how this case evolves and to what extent it impedes Argentina's ability to make timely debt service payments on its external market debt issued under New York Law.

A missed payment on debt would constitute a default event and Fitch would move Argentina's foreign currency IDR to 'RD' (Restricted Default) and the bond ratings of the affected securities to 'D' (Default).

On the other hand, a positive resolution that allows Argentina to continue servicing its NY-law external debt without interruption after the Appeals Court's final ruling would lead to the removal of the RWN.

13 comments Feed

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1 Troy Tempest (#) Oct 31st, 2012 - 05:32 am Report abuse
”A missed payment on debt would constitute a default event and Fitch would move Argentina's foreign currency IDR to 'RD' (Restricted Default) and the bond ratings of the affected securities to 'D' (Default).”

Means nothing.

CFK has her bags packed for Caracas.

Needs to recoup from ' low blood pressure'. * swoons dramatically *

* frantic scurrying by BK, PH-ALEX, and other La Campora Juvenil*
2 toooldtodieyoung (#) Oct 31st, 2012 - 07:01 am Report abuse
I can imagine the ol' Harpy walking up and down, wearing out the carpet in her office muttering to herself “The whole world is against me!!”

Sad to say that this time, she would be right, 'cos they are. All that remains is for her loyal followers to carry her, shoulder high, from the parliment building and then hang her from the nearest lamp post.
3 MurkyThink (#) Oct 31st, 2012 - 10:20 am Report abuse
I can bet Griesa' s pocket flanks with US but his senses with Argentine Italians.
4 Gordo1 (#) Oct 31st, 2012 - 12:36 pm Report abuse
I believe that as la Cretina avows that the financial/economic state of Argentina is sound then she should do the honourable thing and pay the debt owed to those bond holders who held out for 100% reimbursement. They took a stance/gamble and should now be reimbursed for the risk they took.
5 British_Kirchnerist (#) Oct 31st, 2012 - 01:35 pm Report abuse
More financial victimisation. I will never abandon my support for the best President in the world, and the most beautiful
6 Idlehands (#) Oct 31st, 2012 - 01:44 pm Report abuse
BK - could you lend me $100? I need it to make a point.
7 Troy Tempest (#) Oct 31st, 2012 - 02:07 pm Report abuse

could not resist cheer leading
8 Conqueror (#) Oct 31st, 2012 - 02:48 pm Report abuse
Meanwhile, in other news, Dumbo Lorenzino has stated that argieland will “never” pay the hedge funds. Setting argieland on a direct collision course with a US District Court and a US Appeal Court. Since argieland doesn't have a case, that should ensure that the US Supreme Court will decline to hear any appeal. The US Second Circuit Appeal Court ruling, as amended by Judge Griesa's payment formula WILL apply. And argieland will be stuffed again. Here's a thought. Is Lorenzino already in contempt of court?
9 Joe Bloggs (#) Oct 31st, 2012 - 03:45 pm Report abuse
5 BK

LOL! Keep it up. I love how you carry on with your “pro-Argentina/ CFK” stance. You must be very disciplined. Others would've just abandoned the idea by now. Anyone who didn't know better would truly believe you support Argentina. That is until they read your posts for a while and realise just how fanciful they truly are.

Well done. I commend you for your endurance.

About another week now and the ink should be dry. LOL!
10 briton (#) Oct 31st, 2012 - 09:48 pm Report abuse
it seems no matter what the world does to Argentina,
it seems to have no effect of CFK at all,

everyone else suffers but her,

her pockets must be full of her countries wealth by now,
so why should she care...
11 Pirat-Hunter (#) Nov 01st, 2012 - 02:47 pm Report abuse
Argentina should switch to from paper currency to gold currency and don't worry about Fitch rating since We still don't know what happened to the money IMF gives away to corrupt liars. We do not need IMF or anyone hand outs, let's remember that Argentina did a lot better during a no loan period then all the years IMF stole our money with no accountability of a single dollar. Besides we have a national bank for money and we can also sell bonds or as I stated before move from paper currency to gold.
12 China owns the UK (#) Nov 02nd, 2012 - 07:14 pm Report abuse
@10 briton
how about your country the UK?...see the UK Debt Clock
13 briton (#) Nov 02nd, 2012 - 08:20 pm Report abuse
3 days out of date lol.

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