Fitch upgrades Argentina

Fitch Ratings said it upgraded Argentina's long-term foreign-currency issuer default rating to CC from RD.

The upgrade of Argentina's long-term foreign-currency IDR to CC follows the conclusion of the government's unilateral extension of repayment of short-term dollar-denominated treasury bills (Letes) issued under local law on Dec. 19. Fitch considered this development to be a default on Argentina's sovereign obligations in the form of a distressed debt exchange, carried out via executive decree rather than a negotiation and downgraded its foreign-currency ratings to RD on Friday. The distressed exchange effectively concluded as the new repayment schedule has taken effect, Fitch said.

The CC rating indicates a high probability of another default of some kind on Argentina's sovereign obligations, which could include a new DDE or traditional payment default.

The new administration of President Alberto Fernandez announced its intention to restructure its long-term bonds issued under both local and foreign law early in 2020. It has taken steps that could support its financial position as it engages in talks with bondholders, including tightening capital controls to preserve central bank FX reserves, issuing some short-term peso-denominated debt in the local market and resorting to some central bank financing.

The administration also secured congressional approval of a package of emergency measures, including large tax increases and changes in the pension benefit formula, which could prevent an increase in financing needs in 2020, the agency said.

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