-- Foreign Currency Issuer Default Rating (IDR) to 'RD' from 'CC';
-- Short-Term Foreign Currency Issuer Default Rating to 'RD' from 'C';
-- Local Currency IDR to 'CCC' from 'B-';
-- Discount Bonds issued under Foreign Law to 'D' from 'CC';
-- Performing Foreign Law Exchanged Securities (Pars and Global 17) to 'C' from 'CC';
-- Foreign Currency exchanged bonds under Argentine Law to 'C' from 'B-';
-- GDP linked securities to 'CC' from 'B-';
-- Local Currency exchanged bonds under Argentine Law to 'CCC' from 'B-';
-- Foreign and Local Currency non-exchanged securities under Argentine Law to 'CCC' from 'B-';
-- Country Ceiling to 'CCC' from 'B-'.
The ratings on the foreign currency exchanged bonds under Argentine Law have been simultaneously withdrawn due to the difficulty of monitoring the timely servicing of these bonds. The ratings on the GDP linked securities have also been withdrawn as these are no longer considered to be relevant to Fitch's coverage.
KEY RATING DRIVERS
The legal process related to the dispute between
Fitch's downgrade of the local currency IDR by one notch reflects the agency's view that the economy will suffer from higher uncertainty and financial volatility following the sovereign default, especially as the duration of default is unpredictable. The Argentine economy is already in recession and this is likely to worsen as the default event affects confidence and potentially further constrains foreign exchange flows to the country, leading to exchange rate volatility (official as well as parallel market rates). Potentially higher fiscal deficits and monetization of those deficits could further weaken
Fitch's downgrade of the Country Ceiling reflects the view that capital controls could be tightened further in the context of the sovereign's limited foreign financing options, especially as the authorities attempt to prevent a faster decline in international reserves. This could potentially impair the private sector's ability to access foreign exchange to meet debt service.
Fitch has downgraded the rating of performing exchanged bonds under foreign law to 'C' to reflect a very high level of default risk, particularly given the imminence of the next scheduled coupon payments. There is significant uncertainty pertaining to any possible negotiations between the government of
The next coupon payments are due on 30 September (Par bonds) and 2 December (Global 17 bonds). Moreover, cross-default provisions allow for holders of exchanged bonds series currently not in default to declare the acceleration of bond payments.
The Foreign and Local Currency IDRs do not have Rating Outlooks.
In the absence of bond payment acceleration, Fitch would move the rating of other Foreign Currency exchanged bonds under foreign law (Pars and Global 17) to 'D' if missed payments on their scheduled due dates are not remedied at the end of their respective grace periods.
On the other hand, the resumption of timely debt service on defaulted bonds will likely lead to the upgrade of the foreign currency IDR. At such time, Fitch will review the ratings of
Additional information is available at 'www.fitchratings.com'.
--'Sovereign Rating Criteria' (
--'Country Ceiling Criteria' (
Sovereign Rating Criteria
+44 20 3530 1219
Source: Fitch Ratings
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