Argentina Rating Downgraded by Fitch on 'Probable' Default

[asianobserve]

By Katia Porzecanski - Nov 27, 2012
Bloomberg
http://www.bloomberg.com/news/2012-...by-fitch-on-probable-default-from-ruling.html


Argentina's credit rating was cut by Fitch Ratings, which said a default is probable after a U.S. judge ruled the country can't make payments on its restructured bonds unless it pays holders of defaulted debt by Dec. 15.

The rating on Argentina's international law bonds was lowered to CC, eight levels below investment grade, from B, Fitch said today in an e-mailed statement. It cut the rating on bonds sold under Argentine law to B- from B.

U.S. District Judge Thomas Griesa ruled on Nov. 21 Argentina must deposit $1.33 billion for creditors who rejected the terms of the country's two debt restructurings before it makes a $3 billion coupon payment to holders of performing securities next month. Fitch said the country's failure to make a payment on warrants that are linked to economic growth would be considered a default on the country's other debt securities issued under international law.

"The downgrade of the long-term foreign currency IDR reflects Fitch's view that a default by Argentina is probable," Lucila Broide, an analyst at Fitch in New York, said in the statement.

Yesterday, the Argentine government and holders of the country's restructured bonds asked a federal appeals court for an emergency stay to block the judge's orders. In an e-mailed statement, the Economy Ministry said that Griesa's decision is unfair and that a scenario where holdouts seek equal terms as investors who accepted swaps in restructurings could be debated in Congress.

Speculation that Argentina will halt payments on performing bonds rather than pay the holdouts has made its debt the costliest in the world to insure against non-payment, according to credit default swaps. Argentine dollar bonds have plunged 13 percent since Griesa's decision, JPMorgan Chase & Co. indexes show.


Don't cry for me Argentina...

 

[pmaitra]

It is about time everyone downgraded the credibility of Standard & Poor and Fitch, and all other nonsensical 'pen-pusher' institutions, that produce no wealth, but make a lot of unnecessary noise.

I am really getting tired of hearing about these buggers.

 

[asianobserve]

I think the rating stemmed from the following Court decision and not from any in-house calculations -

U.S. District Judge Thomas Griesa ruled on Nov. 21 Argentina must deposit $1.33 billion for creditors who rejected the terms of the country's two debt restructurings before it makes a $3 billion coupon payment to holders of performing securities next month. Fitch said the country's failure to make a payment on warrants that are linked to economic growth would be considered a default on the country's other debt securities issued under international law.

The problem here is that Argentina does not like to follow this Court ruling. So if the Court decides with finality on this ruling will Argentina obey? Note that Buenos Aries is insisting on the settlement of other creditors by issuance of coupons without paying first those creditors who did not agree to the compromise. If Argentina insists on its position then it will prefer to default on the bonds held by its uncompromising creditors, hence, a default will happen.