Standard & Poor’s on Wednesday downgraded the rating of Argentine debt in pesos to “selective default”after the announcement of an offer of debt swap that was executed this week and which presented a 77% acceptance on the total of the titles that expired in 2024 and in this way they were cleared more than $42 billion.
S&P considers that a debt exchange for new bonds that is carried out in a situation of financial uncertainty “is equivalent to a default.”
S&P: what the rating agency said
“As a result, we downgraded our rating on Argentina’s local currency sovereign debt to ‘SD/SD’ from ‘CCC-/C’.‘”, the risk rating agency reported in a statement. “SD” 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. Likewise, it should be noted that the agency maintained the CCC-/C rating for debt in foreign currency.
The results of the debt swap were largely influenced by the support of public sector bondholders. However, official data reveals that the government was only able to raise about 17.5% of the debt from private sector investors.
What the City says
Although Argentina relies heavily on local debt swaps to manage its finances, the record size of this operation has tested the confidence of the local market in the economic program of President Javier Mileijust three months after taking office.
However, from the city they downplay the importance of the agency’s decision, because as market sources point out to Ámbito, “They always lower our rating after trades“. The source, who asked not to be identified, maintains that “they are branded as “selective default“for not complying with the conditions when they were originally issued”.
“YesIf you go to the real reason for the exchange it is highly positive“, he adds. In a similar vein, the economist Federico Furiase expressed himself on his social networks, warning that: “The Selective Default (SD) for 24 hours is merely methodological due to the liability management operation. The relevant news for the market is that S&P announces that it would raise the debt rating in local currency from CCC- to CCC.
Source: Ambito
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