S&P Announcement As Argentina Rating Slashed On Pending Default

The press release:

RATING ACTION
On July 30, 2014, Standard & Poor’s Ratings Services lowered its unsolicited
long- and short-term foreign currency sovereign credit ratings on the Republic
of Argentina to selective default (‘SD’) from ‘CCC-/C’. At the same time, we
removed the ‘CCC-/C’ foreign currency ratings from CreditWatch, where they
were placed with negative implications on July 1, 2014.

We affirmed our unsolicited ‘CCC+/C’ long- and short-term local currency
sovereign credit ratings and ‘raBB+’ national scale rating on Argentina. The
outlook on these ratings on Argentina remains negative. The transfer and
convertibility (T&C) assessment remains ‘CCC-‘.

RATIONALE
On June 30, 2014, Argentina failed to make a US$539 million interest payment
on its Discount Bonds maturing in December 2033. Under the terms of the
Discount Bonds, Argentina had a 30-day grace period following the June 30
scheduled interest payment date to make payment.

Standard & Poor’s defines “default” to include instances where either
scheduled debt service is not paid on the due date or an offer of new
replacement debt contains terms that are less favorable than those of the debt
being replaced. Our interpretation of an issuer meeting its financial
commitments “as they come due” is that investors are paid in full and on time
(see “Timeliness Of Payments: Grace Periods, Guarantees, And Use Of ‘D’ And
‘SD’ Ratings,” published Oct. 24, 2013), failing which we lower the rating on
the relevant rated issue(s) to ‘D’ and we downgrade the issuer to ‘SD’.

Our affirmation of the ‘CCC+/C’ local currency ratings reflects our view that
the potential disruptions to interest payments on Argentina’s external debt
are not likely to further erode its ability to service its debt issued in its
local currency and under its local law. We also maintain our ‘CCC-‘ T&C
assessment for Argentina because we believe that assessment still reflects the
risks of Argentina’s restrictive exchange control laws and policies.

The foreign currency sovereign credit ratings will remain at ‘SD’ until
Argentina cures its payment default on the Discount Bonds. If and when
Argentina cures the payment default on the Discount Bonds, we will reassess
the sovereign’s general credit standing, most likely raising the foreign
currency rating to the triple ‘C’ or low ‘B’ categories.