Argentina’s plan to buy back US$1,000 million of bonds abroad complies with the definition of defaultaccording to Moody’s Investors Service.
The credit adviser anticipates that the nation’s strategy of buying back dollar bonds in the short term, mainly those that expire in 2029 and 2030through direct purchases in the market are equivalent to a “exchange in difficulties and, therefore, a default by our definition,” Moody’s analysts wrote in a note, with Jaime Reusche among them.
According to Moody’s, the repurchase of Argentine debt is a “default”
Moody’s still gives Argentina a rating Cathe second lowest, and it gives you a stable outlook.
“The operation occurs at the expense of the shortage of foreign currency that is putting pressure on the country’s external finances, while doing little to support the sovereign’s ability to pay in 2024 and beyond,” Moody’s analysts wrote Jan. 24. “Government authorities have not specified what part of the US$1 billion will be used to purchase each of the bonds.nor the deadline for when the repurchase process will cease.
Debt repurchase: the doubts of economists and bankers
While the plan caused confusion among investors which pointed to the limited funds of the Governmentalso triggered a rally in the nation’s dollar bonds. That leaves some on Wall Street skeptical of a default designation.
“The IMF has been consulted by Argentina and seems to have given the green light for the repurchasesaid Stuart Sclater-Booth, a portfolio manager at Stone Harbor Investment Partners in New York. “There is no coercion at all from Argentina and other sovereigns, like El Salvador, have bought back their debt with good results.”
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