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Argentina removed from restricted default by Fitch, downgraded by DBRS


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Argentina removed from restricted default by Fitch, downgraded by DBRS

Fitch Ratings upgraded Argentina's long- and short-term foreign currency issuer default ratings to CC/C from restricted default over a new repayment schedule taking effect with regards to the government's unilateral extension of repayment of short-term dollar-denominated treasury bills.

The rating agency had downgraded the country to RD on Dec. 20 saying it had defaulted its sovereign obligations "in the form of a 'distressed debt exchange' (DDE), carried out via executive decree rather than a negotiation."

Fitch said President Alberto Fernandez's planned measures including the restructuring of its long-term foreign and local bonds early in 2020, could aid debt payments in the near term. However, the country may not be able to handle a debt service of about $25 billion between March and May next year out of the $64 billion for the entire year, the rating agency added.

The rating agency is not ruling out risks of missed payments, considering the uncertainty around negotiations with bondholders.

Fitch affirmed Argentina's local currency ratings at CC/C.

Meanwhile, DBRS Morningstar downgraded Argentina's foreign currency issuer ratings to selective default over the delay of payments on the 182-day dollar-denominated short-term debt issued under local law, called Letes.

The country is seeking further deferment on its long-term foreign currency bonds, the rating agency added. The government also postponed the payment schedules for the entirety of its Letes short-term dollar-denominated debt to Aug. 31, 2020.

DBRS Morningstar said the status is likely to remain as the country will take several months "to attract sufficient participation [in] a debt exchange," especially if private creditors prefer to wait until the country sorts out its macroeconomic policy framework and outstanding IMF obligations.

The rating agency confirmed the country's local currency ratings at CC/R-5.