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Montevideo, September 20th 2020 - 11:43 UTC

 

 

Moody's downgrades Argentina's credit rating

Saturday, April 4th 2020 - 09:05 UTC
Full article 9 comments
Moody’s said the rating reflects the combination of measures such as extension to maturities, lowering of interest rates and cuts to principal amounts of debt Moody’s said the rating reflects the combination of measures such as extension to maturities, lowering of interest rates and cuts to principal amounts of debt

Moody's downgraded Argentina’s credit rating on Friday, cutting it to Ca from Caa2 in a move that reflects the firm’s expectation that private creditors will incur losses as a result of the government’s efforts to restructure its sovereign debt.

The three years of recession and economic malaise put Argentina on a path toward restructuring well before the compounding impact of the deadly novel coronavirus, Covid-19. The virus has caused a pandemic that has infected well over 1 million people in 181 countries, killing nearly 59,000 people as of Friday evening.

“Argentina's government has initiated the process of restructuring about US$ 100 billion in market debt held by private investors as lack of market access has made it impossible to service its debt as currently scheduled,” the firm said in a statement.

Moody’s said the rating reflects the combination of measures such as extension to maturities, lowering of interest rates a cuts to principal amounts of debt held by private investors that will typically result in losses between 35% and 65%.

The negative outlook, Moody’s said, reflects the risk that losses could be beyond the 65% level.

President Alberto Fernández, has said he wants to restructure the foreign currency debt to give the economy time to recover from a recession, currently in its third year.

And his plans for a fast and friendly restructuring to be concluded by March 31 were stalled by the spread of the Covid-19 virus, which Moody’s warned will only compound Argentina’s “deep economic and budgetary challenges” and likely add funding stresses and losses likely to be incurred by bondholders. The estimated debt servicing of Argentine debt in 2020 is approximately US$ 49 billion.

On April 1, the government said it would seek to restructure US$ 83 billion in foreign currency debt with an offer to bondholders that would seek a grace period, an extension in maturities, a reduction in bond coupons and a potential haircut to the principal outstanding.

In February, the International Monetary Fund said Argentina’s servicing of its debt load was unsustainable. At that time the Argentine peso had depreciated by over 40% and sovereign spreads over benchmark US Treasuries blew out by 2700 basis points, net international reserves fell by half and real GDP contracted more than expected.

“As a result, gross public debt rose to nearly 90% of GDP at the end of 2019,” the IMF wrote in a staff technical note on public debt sustainability, published March 19.

By year-end 2019, Argentina’s total debt reached US$ 323 billion, or equivalent to 88% of GDP, the IMF wrote. The multilateral lender is by far the single biggest creditor, at US$44 billion, or 14% of the total.

Top Comments

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  • Marti Llazo

    “cutting it to Ca from Caa2 ” ?? --- that is very charitable. “Ca” was already “ highly speculative intrinsic, or standalone, financial strength, and are likely to be either in, or very near, default...”

    In a few weeks or perhaps less it will be rated by other agencies as “D.”

    That's D for Default, reeky. It was planned all along.

    Let's help reeky understand what default means, though other examples also apply:

    “.... [debt] issuers effectively fail to meet their debt service obligations...”

    ”....a missed or delayed disbursement of a contractually-obligated interest or principal payment (excluding missed payments cured within a contractually allowed grace period), as defined in credit agreements and indentures“

    ”...a change in the payment terms of a credit agreement or indenture imposed by the sovereign that results in a diminished financial obligation, such as a forced currency re-denomination (imposed by the debtor, or the debtor’s sovereign) ...”

    Argentina: the Poster Child for Default.

    Apr 04th, 2020 - 01:04 pm +3
  • bushpilot

    Marti,

    They don't cower at defaulting on their loans. They cower at having to honor them.

    Maybe I posted here repeatedly, “they won't default, they won't default, they won't default.”

    But now, because it seems that soon I am going to be wrong, I need to take a different line and say something else.

    “Maybe they will default, but that is really irrelevant”.

    Because not honoring your agreements doesn't matter if your economy grows.

    And remember how that certain leader's own pile of money grew between 2003 and 2007?

    You just have to remember ML,

    It is really better for both parties if I do not honor my part of the agreement with the people who loaned me money.

    Apr 05th, 2020 - 10:59 pm +3
  • imoyaro

    It's always educational to watch Kamerad/Komrade Rique spouting false figures to justify his support of the Narcokleptocracy. But then,he is a product of Viveza Criolla with a penchant for Castroism. In the final analysis, he will never be anything but...a chantapufi.

    https://oi1290.photobucket.com/albums/b521/imoyaro/chantapufi3_zpsgzwcn4qh.gif

    Apr 06th, 2020 - 04:51 pm +3
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