News Column

Moody's Places Argentina's (P)Caa2 Foreign Legislation Debt On Review,

July 3, 2014

-- Moody's has today placed Argentina's

(P)Caa2-rated foreign legislation debt under review, direction uncertain.

The review will focus on the Argentine government's response to US legal

rulings requiring it to pay certain "holdout" bondholders who have sued

the government in US courts concurrently with any payments it makes to

holders of its restructured debt.

In line with those rulings, the US courts stopped Argentina from making a

scheduled bond payment on restructured debt due on June 30. The

nonpayment constitutes only a technical default, since the restructured

bonds' documentation still gives Argentina a 30-day grace period to make

the payment. During this time, if sufficient progress is made in

negotiations with litigating bondholders, the court injunction against

servicing the restructured debt could be lifted. An agreement with the

litigating bondholders may therefore reduce the legal risks for

Argentina's foreign legislation obligations. Alternatively, Argentina's

failure to reach an agreement with the litigating bondholders would make

it illegal for it to pay its restructured debt, leading to an actual


Moody's notes that Argentina's debt in default, representing government

bonds that were not tendered in the 2005 and 2010 debt restructurings, is

rated Ca and is not subject to the rating review.

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Source: EMBIN (Emerging Markets Business Information News)

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