MercoPress. South Atlantic News Agency

US ratings agency down-plays success of Argentina’s debt-swap deal

Argentine Economy minister Amodo Boudou

US ratings agency Moody's said that Argentina's debt-swap is unlikely to improve the liquidity profile for corporate issuers even when the highest-rated companies will be able to tap international debt markets and lengthen their debt maturity profiles.

“The overall success of Argentina's recent debt exchange may help it to return to the international debt capital markets, but the effort will have little effect on corporate issuers in the country”, said Moody's Investors Service report.

The debt exchange could help improve liquidity at the margin for companies, particularly if the government decides to issue a new 7-year benchmark bond, the report said. A new sovereign bond issue would offer better price transparency, and could result in some modest improvement in credit spreads.

However, it will likely still only be the highest-rated companies that will be able to tap the international debt markets and lengthen their debt maturity profiles as foreign investors are likely to remain wary about the ongoing political and economic events in Argentina.

“Without access to long-term funding, Argentine companies will still face ongoing refinancing risk,” said Daniela Cuan, Moody's VP-Senior Analyst. Cuan called refinancing risk “a major constraining factor in our credit analysis of rated Argentine companies.”

“Since Argentine banks have been reluctant to offer long-term funding, companies will have to meet their funding needs through internally generated cash flow and short-term credit facilities, typically with tenors of less than 270 days” Cuan added.

At its June 21 closing, 66% of the bondholders who had refused similar terms for the county's defaulted debt in 2005 swapped about 12 billion for the outstanding defaulted bonds, valued at 18 billion US dollars.

Argentina still has pending negotiations with the Paris-Club, sovereign to sovereign credits, for an estimated value of 6.5 to 7.8 billion US dollars depending on how capital and interest are calculated.

However the Paris-Club insists that an IMF auditing is necessary (and mandatory, according to the group’s statutes) previous to any understanding. But the Kirchner administration refuse having the IMF involved in monitoring of the Argentine economy.