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S&P upgrades Argentina following debt payments

S&P Global Ratings on May 6 raised its long- andshort-term foreign currency sovereign credit ratings on Argentina to B- and Bfrom SD and D, respectively.

The upgrades reflect the Argentine government's May 5 paymentof $2.7 billion in past-due interest on bonds that were issued in 2005 and 2010and had gone into default in July 2014, the rating agency noted.

S&P also affirmed the country's B-/B long- andshort-term local currency sovereign credit ratings and its raBBB national scaleratings, with a stable outlook on the long-term ratings. Argentina's transferand convertibility assessment, meanwhile, was affirmed at B-.

The country's remaining holdout creditors who have notreached an agreement with the government hold $1.9 billion in face value of2001 defaulted sovereign debt, with an estimated claim of $5.5 billion, therating agency noted. It added, however, that the government has publicly saidit is open to negotiating with the remaining holdouts.

"Our ratings on Argentina reflect ongoing challenges toaddress the country's substantial economic imbalances, including high inflationand a large fiscal deficit, in a context of a still-polarized society and anunfavorable external environment," S&P said.

The rating agency expects that continued, althoughdeclining, fiscal deficits will likely contribute to a rising debt burden inthe coming years. The agency also expects GDP to decline in 2016, partly due tofiscal and monetary tightening, demonstrating the political and economicchallenges that lie ahead.

S&P Global Ratingsand Global Market Intelligence are owned by S&P Global Inc.