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S&P upgrades Argentina to CCC+ after $100B debt restructuring

S&P Global Ratings raised Argentina's long-term foreign and local currency sovereign credit ratings to CCC+ from SD, or selective default, following a successful $100 billion debt restructuring that frees up fiscal space for a country reeling from a recession deepened by the COVID-19 crisis.

The outlook on the long-term ratings is stable. The rating agency also upgraded Argentina's short-term foreign and local currency sovereign credit ratings to C from SD.

Argentina recently concluded restructurings of $66 billion in foreign-law and more than $40 billion in local-law foreign currency debt. S&P Global Ratings said the country has cured its foreign currency defaults following the debt exchanges, which involve a substantial cut in coupons and debt service relief for the coming years.

"This important step forward provides the opportunity for the government to articulate a broader plan to tackle various post-pandemic macroeconomic challenges, negotiate a new program with the [International Monetary Fund], and work to clear arrears with the Paris Club," the rating agency said.

The government can now focus on boosting economic growth, reducing inflation and funding its high fiscal deficit, which are challenges reflected on the stable outlook on Argentina's long-term ratings, the debt watcher added.

S&P Global Ratings said weak fiscal and external profiles, lack of monetary flexibility and limited financing options pose near-term challenges for Argentina, whose debt burden remains elevated with more than 70% of central government debt in foreign currency.

"We don't expect external market funding to be available for Argentina, and we do not assume any new IMF money at this time," the rating agency said. "Closing the financing gap will rely on local peso debt issuance, the central bank, and potentially some multilateral financing."

The rating agency expects Argentina's real GDP to contract 12.5% in 2020 before expanding 4.8% in 2021. Net general government debt is projected to hit nearly 100% of GDP in 2020 while the general government deficit is forecast to widen to about 9.25% of GDP this year.

This S&P Global Market Intelligence news article may contain information about credit ratings issued by S&P Global Ratings. Descriptions in this news article were not prepared by S&P Global Ratings.