Fitch Rates Argentina's Upcoming 2021, 2026 & 2046 Global Bonds 'B(EXP)'

NEW YORK--()--Fitch Ratings has assigned an expected 'B(EXP)' rating to Argentina's upcoming issuance of USD-denominated bonds maturing 2021, 2026 and 2046.

Fitch expects the bond proceeds to be directed towards the payment of settlement agreements between Argentina and holdout creditors that did not participate in the 2005 and 2010 bond debt restructurings with the balance being used for general purposes of the government.

KEY RATING DRIVERS

On March 22, 2016, Fitch upgraded Argentina's long-term local currency IDR to 'B' with a Stable Outlook reflecting the improved consistency and sustainability of Argentina's policy framework, reduced external vulnerability, and the expected easing of fiscal financing constraints. These improvements balance risks related to relatively weak external liquidity, continued macroeconomic underperformance compared with peers, and deterioration of public finances in recent years.

The expected rating on Argentina's international bonds is above the sovereign's current long-term foreign currency Issuer Default Rating (IDR) of 'RD'. At the time of the local currency upgrade, Fitch indicated the resumption of timely debt service on defaulted bonds would lead to the upgrade of the long-term foreign currency IDR, most likely to the level of the long-term local currency IDR.

Since the last review of Argentina's sovereign rating, the government has continued to make progress toward removing the injunction that presently constrains Argentina from servicing its restructured debt.

The Argentine congress has approved legislation to remove the Lock Law and Sovereign Payments Law (two pieces of legislation that prevented authorities from negotiating with holdouts), and the government is moving ahead with the external debt issuance outlined above to pay for the settlement with holdout creditors, both preconditions to lift the injunction. These preconditions were validated by the Courts of Appeal on April 13.

RATING SENSITIVITIES

The rating would be sensitive to Argentina's sovereign rating once it cures the default on restructured debt. On the other hand, Argentina's failure to cure its default would result in a downgrade of the bond ratings.

KEY ASSUMPTIONS

Fitch assumes that Argentina will be able raise sufficient funds to allow the payment to holdout creditors, thereby paving the way to cure the sovereign default.

Date of Relevant Rating Committee: April 15, 2016

Additional information is available on www.fitchratings.com

Applicable Criteria

Sovereign Rating Criteria (pub. 12 Aug 2014)
https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=754428

Additional Disclosures

Dodd-Frank Rating Information Disclosure Form
https://www.fitchratings.com/creditdesk/press_releases/content/ridf_frame.cfm?pr_id=1002672

Solicitation Status
https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=1002672

Endorsement Policy
https://www.fitchratings.com/jsp/creditdesk/PolicyRegulation.faces?context=2&detail=31

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Contacts

Fitch Ratings
Primary Analyst
Erich Arispe, +1-212-908-9165
Director
Fitch Ratings, Inc.
33 Whitehall Street
New York, NY 10004
or
Secondary Analyst
Shelly Shetty, +1-212-908-0324
Senior Director
or
Committee Chairperson
Charles Seville, +1-212-908-0277
Senior Director
or
Media Relations, New York
Alyssa Castelli, +1-212-908-0540
alyssa.castelli@fitchratings.com

Contacts

Fitch Ratings
Primary Analyst
Erich Arispe, +1-212-908-9165
Director
Fitch Ratings, Inc.
33 Whitehall Street
New York, NY 10004
or
Secondary Analyst
Shelly Shetty, +1-212-908-0324
Senior Director
or
Committee Chairperson
Charles Seville, +1-212-908-0277
Senior Director
or
Media Relations, New York
Alyssa Castelli, +1-212-908-0540
alyssa.castelli@fitchratings.com