Argentina's credit rating cut by Fitch on public-sector debt swap

Argentina's credit rating has been downgraded by Fitch Ratings to the lowest level above default as the government plans to force state institutions to dispose of their holdings of dollar-denominated bonds.

The South American country's rating was downgraded two notches to C from CCC- by Fitch, according to a statement sent on Friday.

The debt swap, announced in an official government decree on Thursday, would involve unilateral swaps and forced currency conversions that qualify as a default under Fitch's criteria.

"The 'C' rating reflects Fitch's view that a default is imminent," wrote Fitch analysts led by Todd Martinez. The rating agency said that Argentina's score would be downgraded to restrictive default when the swap occurs.

State-owned banks and public pension fund Anses will swap 100 per cent of their holdings of foreign bonds under New York law for peso-denominated debt. Peso bonds maturing in 2036 will pay the higher yield of a dollar-linked or inflation-linked option.

Moody's Investors Service gave the country a Caa3 rating, the third lowest score with a stable outlook. S&P Global Ratings rated the country two notches higher with a negative outlook.