S&P Global Ratings downgraded Argentina's local-currency sovereign credit ratings to SD, or selective default, from CCC-/C, calling the country's voluntary exchange offer of peso-denominated short-term paper Jan. 20 a distressed debt exchange that amounts to a default.
Investors who accepted the offer would receive lower returns than what they were originally promised, the rating agency noted.
"Significant uncertainty remains about the plans to service some sizable peso-denominated obligations that come due over the coming months," S&P Global Ratings also said, adding that it will not raise the credit ratings from SD as long as it believes that the likelihood of a next default is virtually certain.
S&P also downgraded the country's senior unsecured rating to CC from CCC- and affirmed its foreign-currency sovereign credit ratings at CCC-/C, with a negative outlook, reflecting downside risks to timely and full payment of debt over the short term. The rating agency expects the Argentine government to roll out a restructuring plan for its long-term foreign-currency debt with the private sector sometime in the coming months, but the timing and terms remain unclear.
A volatile exchange rate, high inflation, a deep economic recession, the deterioration of Argentina's financial environment, and strained investor confidence also weigh on the country's ratings, the agency said.
This S&P Global Market Intelligence news article may contain information about credit ratings issued by S&P Global Ratings, a separately managed division of S&P Global. Descriptions in this news article were not prepared by S&P Global Ratings.