Moody's downgrades rating on Argentina's government bond to 'Caa1'

March 17 Mon Mar 17, 2014 5:30pm EDT

March 17 (Reuters) - Moody's downgraded its rating on Argentina's government bond to "Caa1" from "B3", citing a fall in its official reserves leading to an increased risk of not meeting foreign-currency debt service obligations.

"Moody's estimates that the government faces dollar debt payments of over $20 billion between 2014 and 2015. However, Argentina does not have external funding options that would reduce its reliance on official reserves to pay debt," Moody's said in a statement on Monday. ()

Moody's also changed its outlook on the government bond Caa1 rating to stable from negative, citing a balance between no further significant drops in official reserves and continued pressure on the government in addressing the macroeconomic imbalances of the country.

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Comments (2)
GermanHoldout wrote:
Argentina is in selective Default (SD) since 2002!!

Argentina’s rating should therefore be “SD” since 2002. (and not B* or C*)!!

How is it possible, that neither journalists nor rating agencies realize it???

Argentina’s nightmare default, this since 2002 ongoing HORROR must finally have an end!!!

We, the holdouts, have been suffering for more than a decade!!

Since 2002, Argentina has not paid a cent to the holdouts!

President Obama should help and talk to President Kirchner to end Argentina’s Horror-Default.

President Kirchner (by the way a beautiful women) should end this since 2002 ongoing HORROR-Default and solve the holdout Problem NOW!

In the “Pari Passu” issue the Holdouts are 100% right! There is nothing to discuss. In the bond contracts “Pari Passu” is clear defined. Also, in the bond contracts Argentina has explicitly waived its sovereign immunity.

It would be helpful, if the US Supreme Court promptly rejected Argentina’s unjustified appeal.

The argument:->
“If the U.S. courts uphold the Holdout’s position, as negative consequences , Sovereign debt restructurings will be virtually impossible in the future.”
is NOT TRUE because, after Argentina’s 2001 Default all bonds imply the Collective Action Clause (CAC) A collective Action clause (CAC) allows a supermajority of bondholders (75%) to agree to a debt restructuring that is legally binding on all holders of the bond, including those who vote against the restructuring.
BUT, This CAC is NOT implied in Argentina’s repudiated old bonds!
Accordingly, Argentina MUST fulfill the bond contracts and repay the debt to the holdouts!

Also the Argument-> “The country has said that forcing it to pay the defaulted bondholders immediately would expose it to $43 billion in additional claims it can’t pay and trigger a new default. ”
is NOT TRUE, because the clause “Rights Upon Future Offers (RUFO)” ends in December 2014. That means, that from 01/01/2015 Argentina can make a better offer to the Holdouts, than it made in 2005 and 2010. Hence, additional claims from Exchange bondholders is completely ruled out.

Argentina should rather sit down and negotiate an acceptable solution with the Holdouts!

The cause of Argentina’s decline is the largest financial crime in world history, this since 2002 ongoing HORROR-Default.

U.S. Senators Rubio and Menendez meant under undemocratic Argentina, that Argentina does not pay its debt.

Non-payment of debt since 2002 to the Holdouts, breaching of bond-contracts are criminal and are highly undemocratic!

Argentina as a great country must reenter the world!

For reentering the world, Argentina must end this HORROR-Default!
Argentina’s nightmare default, this since 2002 ongoing HORROR must finally have an end!!!

Beyond the U.S. Hedge Funds there are still tens of thousands retail Holdouts worldwide, most of them from Italy and Germany.

Most of the Holdouts are “before default buyer”, who have bought their bonds at an average of 100% or even higher.

Argentina clearly has the capacity to repay the debt to the holdouts after more than a decade! The outstanding debt is only approximately 12 Billion. (incl. accrued interest) It is not much for the 3. largest economy in South America.

The “Lock Law” ends as of 12/31/2014. (End of the “Rights Upon Future Offers (RUFO) clause in December 2014.) That means, that from 01/01/2015 Argentina can make a better offer to the Holdouts, than it made in 2005 and 2010.

If Argentina and the holdouts made NOW A BINDING AGREEMENT with respect to the “time after” (end of the “Rights Upon Future Offers (RUFO) clause in December 2014), seizure risks and a technical Default would be immediately averted. Argentina could immediately return to the capital market and thus Argentina could refinance the payments to the holdouts, without using reserves.
Holdouts want a simple, clear, secure and an ACCEPTABLE solution.
Holdouts DO NOT want such exotic financial constructs, as they were the swap conditions in 2005 and 2010, with an exorbitant Haircut, with many new bonds, with only Discount bonds above $50000, GDP Warrants etc., and with maturities in the eternity. Such “shares like” financial constructs are inacceptable.

A swap from the defaulted old bonds to new bonds is unacceptable also for tax reasons. In Germany, for example, if you accepted a swap, then you would have to pay for the new bonds 30% extra tax…

Following simple conditions might be acceptable for the Holdouts on the basis of the old bonds.(Without swapping from old to new bonds, also because of tax reason)

- at the latest, on 01/01/2015 (end of RUFO clause) Argentina should repay in CASH 100% of the nominal value of the defaulted bonds, which became due before 2015.

- For the accrued interest between 2002-2015 Argentina should emit new bonds with 50% discount, and with a maturity of 5 years.

Mar 17, 2014 6:17pm EDT  --  Report as abuse
GermanHoldout wrote:
Argentina is in selective Default (SD) since 2002!!

Argentina’s rating should therefore be “SD” since 2002. (and not B* or C*)!!

How is it possible, that neither journalists nor rating agencies realize it???

Argentina’s nightmare default, this since 2002 ongoing HORROR must finally have an end!!!

We, the holdouts, have been suffering for more than a decade!!

Since 2002, Argentina has not paid a cent to the holdouts!

President Obama should help and talk to President Kirchner to end Argentina’s Horror-Default.

President Kirchner (by the way a beautiful women) should end this since 2002 ongoing HORROR-Default and solve the holdout Problem NOW!

In the “Pari Passu” issue the Holdouts are 100% right! There is nothing to discuss. In the bond contracts “Pari Passu” is clear defined. Also, in the bond contracts Argentina has explicitly waived its sovereign immunity.

It would be helpful, if the US Supreme Court promptly rejected Argentina’s unjustified appeal.

The argument:->
“If the U.S. courts uphold the Holdout’s position, as negative consequences , Sovereign debt restructurings will be virtually impossible in the future.”
is NOT TRUE because, after Argentina’s 2001 Default all bonds imply the Collective Action Clause (CAC) A collective Action clause (CAC) allows a supermajority of bondholders (75%) to agree to a debt restructuring that is legally binding on all holders of the bond, including those who vote against the restructuring.
BUT, This CAC is NOT implied in Argentina’s repudiated old bonds!
Accordingly, Argentina MUST fulfill the bond contracts and repay the debt to the holdouts!

Also the Argument-> “The country has said that forcing it to pay the defaulted bondholders immediately would expose it to $43 billion in additional claims it can’t pay and trigger a new default. ”
is NOT TRUE, because the clause “Rights Upon Future Offers (RUFO)” ends in December 2014. That means, that from 01/01/2015 Argentina can make a better offer to the Holdouts, than it made in 2005 and 2010. Hence, additional claims from Exchange bondholders is completely ruled out.

Argentina should rather sit down and negotiate an acceptable solution with the Holdouts!

The cause of Argentina’s decline is the largest financial crime in world history, this since 2002 ongoing HORROR-Default.

U.S. Senators Rubio and Menendez meant under undemocratic Argentina, that Argentina does not pay its debt.

Non-payment of debt since 2002 to the Holdouts, breaching of bond-contracts are criminal and are highly undemocratic!

Argentina as a great country must reenter the world!

For reentering the world, Argentina must end this HORROR-Default!
Argentina’s nightmare default, this since 2002 ongoing HORROR must finally have an end!!!

Beyond the U.S. Hedge Funds there are still tens of thousands retail Holdouts worldwide, most of them from Italy and Germany.

Most of the Holdouts are “before default buyer”, who have bought their bonds at an average of 100% or even higher.

Argentina clearly has the capacity to repay the debt to the holdouts after more than a decade! The outstanding debt is only approximately 12 Billion. (incl. accrued interest) It is not much for the 3. largest economy in South America.

The “Lock Law” ends as of 12/31/2014. (End of the “Rights Upon Future Offers (RUFO) clause in December 2014.) That means, that from 01/01/2015 Argentina can make a better offer to the Holdouts, than it made in 2005 and 2010.

If Argentina and the holdouts made NOW A BINDING AGREEMENT with respect to the “time after” (end of the “Rights Upon Future Offers (RUFO) clause in December 2014), seizure risks and a technical Default would be immediately averted. Argentina could immediately return to the capital market and thus Argentina could refinance the payments to the holdouts, without using reserves.
Holdouts want a simple, clear, secure and an ACCEPTABLE solution.
Holdouts DO NOT want such exotic financial constructs, as they were the swap conditions in 2005 and 2010, with an exorbitant Haircut, with many new bonds, with only Discount bonds above $50000, GDP Warrants etc., and with maturities in the eternity. Such “shares like” financial constructs are inacceptable.

A swap from the defaulted old bonds to new bonds is unacceptable also for tax reasons. In Germany, for example, if you accepted a swap, then you would have to pay for the new bonds 30% extra tax…

Following simple conditions might be acceptable for the Holdouts on the basis of the old bonds.(Without swapping from old to new bonds, also because of tax reason)

- at the latest, on 01/01/2015 (end of RUFO clause) Argentina should repay in CASH 100% of the nominal value of the defaulted bonds, which became due before 2015.

- For the accrued interest between 2002-2015 Argentina should emit new bonds with 50% discount, and with a maturity of 5 years.

Mar 17, 2014 6:17pm EDT  --  Report as abuse
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