S&P joins Fitch, Moody's in downgrading Argentina amid coronavirus crisis
S&P downgraded Argentina’s long-term foreign currency rating to SD from CCC- after the government said in a decree it plans to postpone until the end of the year payments on up to $10 billion of dollar debt that was issued under local law, in a bid to relieve pressure over looming foreign currency payments.
“This constitutes a default under our distressed exchange criteria,” S&P said in a news release.
“The COVID-19 crisis has exacerbated Argentina’s already stressed fiscal needs and resources, leading the administration of President Alberto Fernandez to reconfigure its financial planning and budgetary priorities,” the agency said, adding that the likelihood of another foreign-currency default is “virtually certain.”
The move by S&P comes after ratings agency Fitch downgraded Argentina’s long-term foreign currency rating to “Restricted Default” from CC on Monday following the government’s decision.
Restricted Default is just a notch above “default” status, while CC represents very high levels of credit risk.
Moody’s Investors Service downgraded Argentina on Friday to CA from CAA2 and changed its outlook to negative, saying it was “likely” holders of Argentina’s sovereign debt would incur “substantial losses.”
Argentina, beset by a persistent economic crisis, is seeking to restructure about $83 billion in foreign currency debt under both international and local law. Delaying payments on local-law debt could give Argentina breathing room and may enable it more easily to pay foreign-law bonds.
The coronavirus outbreak has significantly darkened the economic outlook for Argentina, which has registered 1,628 cases and 54 deaths.
A central bank poll of economists released on Monday showed gross domestic product was estimated to shrink 4.3% this year. The number was down sharply from a 1.2% contraction forecast in the previous month’s poll.