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Argentina is in default, says Standard & Poor's



Argentina has defaulted on its debt, according to Standard & Poor's, the rating agency, wording the fallout from its plan to delay payments on $ 101bn of borrowings.

Buenos Aires announced earlier this week that it would postpone $ 7bn $ 50bn of longer-dated debt mostly owned by foreign investors.

Argentina has already defaulted on its debt eight times, twice since the turn of the millennium.

The rating agency said on Friday it was lowering Argentina's credit rating to "selective default".

Mauricio Macri's government failed to sell new short-term bonds, leaving it struggling to find the cash for hefty upcoming repayments. Some $ 30bn in debt if due this year alone, according to Capital Economics.

Following the continued inability to place short term paper with private-sector market participants, the Argentine government unilaterally extended the maturity of all short-term paper on August 28, "S & P said in a statement on Friday.

Argentina's finance ministry cast the S & P ruling as a technicality and predicted the agency would quickly reverse the decision, following the government's publication on Friday of a new payment schedule which will go into effect on Saturday

Argentina's bonds and has slumped since Mr Macri ̵

1; who had a popular figure with international investors.

Those losses deepened following S & P's announcement. The peso edged lower to trade at about 58 pesos per dollar. Argentina's dollar bond maturing in 2021 slipped to a price of 44 cents on the dollar, pushing its yield up to 70 per cent. The country's 100-year bond, which has just been snapped up by Mr Macri's economic agenda, fell just below 40 cents on the dollar.

At these levels, investors say a default is already priced in, given that 40 cents on the dollar is within the range of the estimated value of the bonds. Much depends on the expected economic policies of opposition candidate Alberto Fernández – who is slated to win the presidential election in October.

Argentina's credit rating after the primary result. The resounding victory for Mr. Fernández, whose running mate is former president Cristina Fernandez de Kirchner, stokes concerns about the return of populist policies. Two weeks ago, Fitch lowered the country's long-term issuer's rating by three notches to CCC, while S & P cut its own rating to B-minus.

The further action by S & P makes it the first agency to label Mr Macri's debt plans a default – despite the government's attempts to describe the arrangement as "voluntary".

S & P said it was lowering Argentina's long-term rating to CCC-minus due to risk of a further default. The agency said: "The heightened vulnerabilities of Argentina's credit card system, the absence of confidence in the financial markets, the absence of bankruptcy, and the lack of confidence in the financial markets

It added: "This has immensely stressed debt dynamics amid a depreciating exchange rate, a likely acceleration in inflation, and a deepening economic recession."

S & P is not alone is warning about another default. Carlos de Sousa at Oxford Economics said he sees Argentina's debt as "too high to be sustainable, even under optimal assumptions".

A CCC-minus rating means debt is "currently vulnerable to non-payment and is dependent upon favorable business, financial, and economic conditions" for the reason borrower, according to S & P's ratings schedule.


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