S&P Global Ratings cut Argentina’s foreign and local debt to “selective default” after the South American nation said that it would postpone payments on as much as US$101 billion of debt as money poured out of the country.
“Following the continued inability to place short-term paper with private-sector market participants, the Argentine government unilaterally extended the maturity of all short-term paper on Aug. 28,” the ratings agency said in a statement. “This constitutes default under our criteria.”
The government is to postpone US$7 billion of payments on short-term local notes held by institutional investors this year and will seek the “voluntary reprofiling” of US$50 billion of longer-term debt, Argentine Minister of Economic Affairs Hernan Lacunza said on Wednesday evening.
It will also start talks over repayments on US$44 billion it has received from the IMF, Lacunza said.
Argentina’s peso and bonds have tumbled after opposition leader Alberto Fernandez routed Argentine President Mauricio Macri, a market favorite, in an Aug. 11 primary vote. The peso is down more than 20 percent since then and bonds have hit record lows, with investors pricing in a more than 90 percent chance of default in the next five years.
The upset in the primary election had already led two of the three biggest ratings companies to downgrade Argentina. On Aug. 16, Fitch cut the country’s long-term issuer rating by three notches to “CCC” from “B,” while S&P lowered the country’s sovereign rating to “B-” from “B” and slapped a “negative” outlook on it.
IMF officials who were visiting Argentina at the time of the announcement said they are analyzing the measures.
“Staff understands that the authorities have taken these important steps to address liquidity needs and safeguard reserves,” the lender said in a statement.
The fund was expected to disburse another US$5.3 billion in the next few months from a record US$56 billion agreement, though that is far from certain given the current crisis.
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