Argentina’s ninth default on its external debt is now official after some of its bonds were cut to default status by two rating companies.
Fitch Ratings reduced the South American nation to restricted default Tuesday, while S&P Global downgraded four of its dollar-denominated bonds to default from CC following a missed $500 million payment last week. That sets up a potential payout for traders who hold credit derivatives.
The Credit Derivatives Determinations Committee said in a statement Tuesday afternoon that it’s been asked to rule on whether a “failure to pay” credit event occurred. There were net wagers of $1.5 billion on the nation’s debt swaps, according to the latest data compiled by ISDA.
President Alberto Fernandez’s government is locked in talks with creditors to restructure $65 billion in overseas securities. Argentina extended the deadline for a deal until June 2, raising the stakes for a quick negotiation.
“The parties involved have indicated recent progress toward a comprehensive restructuring, although uncertainty remains around the prospects for reaching a deal with acceptance from bondholders sufficient to meet the different thresholds set in ‘collective action clauses’ in the securities,” Fitch analysts led by Todd Martinez wrote in a statement.
The country is burdened by inflation near 50% and an economy that was shrinking even before the pandemic hit. The government has said Argentina needs $40 billion in debt relief to set it back on the path to sustainable growth and officials have been in talks with bondholders for two months.
Economy Minister Martin Guzman said in an interview last Friday that the government would improve its offer to creditors, but didn’t give any details on his plans. Discussions with creditor groups continue, he said, adding that the latest proposals from bondholders have closed the gap between the two sides.
Last week, Moody’s Investors Service maintained Argentina’s credit rating at “Ca,” a rating consistent with significant expected losses for investors as the country renegotiates its debt, Moody’s senior credit officer Gabriel Torres said.