NEW YORK, March 15 Moody's Investors Service on
Friday cut the credit rating on Argentine sovereign debt
governed by foreign law to Caa1, citing the increased risk of a
default on these issues due to an ongoing U.S. legal case.
The case involves investors who declined to participate in
the restructuring of Argentine sovereign debt in 2005 and 2010
after the country defaulted in 2002. These
investors are known as "holdouts".
Moody's said the ratings move was made to differentiate
these restructured bonds governed by foreign law, from the rest
of Argentina's sovereign debt. It affirmed Argentina's B3 issuer
rating, which applies to bonds issued under local law.
The drawn out legal battle between Argentina and the
holdouts has raised fears of another default and is compounding
investor concerns about unpredictable policy-making and sluggish
growth in Latin America's third largest economy.
A U.S. appeals court is deciding whether to let stand a
lower court's order on how Argentina should pay some $1.3
billion to the holdout investors. The ruling stipulates that
Argentina is to repay these holdout investors at the same time
it makes regular coupon payments to bondholders who decided to
participate in the two restructurings.
In addition Moody's affirmed the Ca rating on the $6.3
billion of untendered debt that remains in default.
The outlook on all these ratings is negative, Moody's said
in its statement.