Fitch Ratings upgraded Argentina, reversing Friday’s cut to restricted default imposed after the government delayed payments on US$9.1 billion of Treasury bills.
The long-term issuer default rating was raised to 'CC,' Fitch said in a statement, while indicating that another default of some kind was highly likely.
The decision to delay payments on the dollar-denominated Treasury bills, known as Letes, until August 31, 2020, placed the country in a one-day technical default, Fitch said.
However, now that a new payment schedule has been imposed, the “distressed debt exchange has effectively concluded” and the country is no longer in technical default.
"The 'CC' rating indicates a high probability of another breach of some kind in the sovereign obligations of Argentina, which could include a new DDE or breach of traditional payment," said the rating agency.
Fitch attributed the change in the rating to which the government of President Alberto Fernández "took steps that could support his financial situation while engaging in discussions with the debt holders."
The rating changes are a repeat of events in August when Fitch and S&P Global downgraded Argentina to restricted default after ex-president Mauricio Macri delayed payments on US$7 billion of Treasuries, before lifting the rating a few days later.
S&P, which cut Argentina to “selective default” again last week has yet to reverse the downgrade, while Moody’s maintains a 'Caa2' credit rating.
Fitch said the government could make debt payments in the near term, but that debt service will become difficult again in the second quarter due to a wall of payments of around US$25 billion, out of S$64 billion due for the entire year.
The government’s decision to extend payments on its short-term notes for the second time in five months illustrates the depth of problems facing the incoming government of President Alberto Fernández. Argentina’s debt load stands at US$332 billion, including loans from the International Monetary Fund. Outstanding debt with private bondholders is about US$148 billion.