S&P downgrades Argentinian sovereign rating 

13 November 2018 - 12:00 am UTC

Argentinian sovereign debt was downgraded by Standard and Poor’s to B from B+, due to the growth expectations, the inflation and the debt profile after the austerity plan the government is embracing, the rating agency said on a press release.

The outlook of the rating is stable. “The stable outlook reflects our expectation that the government will implement difficult fiscal, monetary, and other measures to stabilize the economy over the coming 18 months, gradually staunching the deterioration in the sovereign’s financial profile and debt burden, reversing inflation dynamics, and restoring investor confidence,” the company said on a press release.

The decision of S&P follows a decision of Fitch on 7 November to change the outlook to negative from stable, with a B rating. “The revision of Argentina’s Outlook to Negative from Stable reflects sharply weaker economic activity and uncertain prospects for multi-year fiscal consolidation and market financing availability as IMF funds are used up, posing risks to sovereign debt sustainability,” Fitch said at the time.
Moodys maintained its B2 rating. 

In an 18 October report, the ratings agency mentioned as relevant factors the economic volatility, the depreciation of the Argentinian Peso. “The stable outlook reflects our expectation that policy measures will remain broadly consistent with the goal of reducing fiscal and current account deficits. We expect compliance with the IMF program to materially reduce Argentina’s need to tap international capital markets to cover its financing requirements, which would shield the government from external refinancing risk through at least 2019,” the report said. “Upward movements in Argentina’s rating are unlikely at present,” the company said, mentioning that a “sustained reduction of fiscal and current account deficits as well as inflation,” could make a move in this sense.

Argentina has six highway PPP projects with a combined expected capex of about USD 6bn that are expecting to get funded. Most of the consortia are considering an international bond to fund the projects. At 2pm ET, 10-year sovereign bonds were trading with a yield of 9.58% and a z-spread of 659bps.

 

 

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