BUENOS AIRES Oct 31 Argentina's benchmark
dollar-denominated bond prices closed down by as much as 3.9
percent on Wednesday in local over-the-counter trade, a day
after Standard & Poor's downgraded the country's sovereign
At the same time, Argentina's risk spread widened sharply on
JPMorgan's EMBI+ bond index, as the cost of buying
protection against an Argentine default surged.
S&P cut Argentina's rating to B-minus from B and gave it a
negative outlook, citing increased policy risk and concerns that
a recent U.S. appeals court ruling could force the country to
repay creditors who have sued to collect on bonds in default
Argentina's dollar-denominated 2033 Discount bonds led
losses in the local OTC market, ending 3.9 percent lower
after sinking 7.1 percent just after the market
opened. The 2038 Par bonds closed down 2.7 percent
Both bonds were given to creditors in exchange for their
defaulted paper in debt swaps carried out in 2005 and 2010.
The Global 2017 bond, issued during the 2010 swap, ended 3.1
Argentina has restructured about 93 percent of the roughly
$100 billion it defaulted on a decade ago. Holdout creditors who
rejected the swaps continue to press in courts worldwide for
full repayment on the bonds.
On Friday, a federal appeals court in New York ruled that
Argentina violated bond provisions to treat all creditors
equally when it made payments to creditors who accepted the
swaps while refusing to pay the holdouts. It said Argentina must
pay the holdouts every time it services the restructured bonds.
"The market overreacted to the U.S. court ruling. Although
it wasn't expected to be so favorable to the holdouts, it does
little to hurt our country's payment capacity. For this reason,
the fall in sovereign bond prices may represent a buying
opportunity," Delphos Investment consultancy said in a report.
Fitch, however, put Argentina's foreign currency debt
ratings on negative watch on Tuesday, saying the court ruling
"increased uncertainty about Argentina's ability to service its
international securities issued under New York law on a timely
basis using the U.S. financial system".
Argentine Economy Minister Hernan Lorenzino was quoted by
state news agency Telam as saying: "The attacks by the ratings
agencies and the vulture funds will not keep Argentina from
fulfilling all its commitments".
Argentine officials refer to investment funds that buy
distressed or defaulted debt and then litigate to be repaid in
full as vulture funds.
"We're not going to pay a single dollar to the vulture
funds," Lorenzino was quoted as saying. "This policy is not
going to change because we have a commitment to the creditors
that entered the debt swap and we are going to respect that