Following the announcement by the Ministry of Economy of its decision to carry out a repurchase of Argentine debt bonds at market price, for an amount of about 1,000 million dollars, the rating agency Moody’s evaluated said operation as equivalent to a default. The reason for this rating is that, according to Moody’s, the reward of bonds at a price lower than their original value implies a loss for the investor.
However, no one is required to sell their bonds to the Government. Whoever suffers the loss is because they chose to sell their titles at the current price. There is always the possibility of keeping them in the portfolio and collecting successive amortizations -which begin in 2024- at nominal value. In addition, the buyback favors these holders by improving the market price of the bonds.
According to Moody’s, the Argentine debt recommendation is a “default”
On the other hand, the other two major risk rating agencies, Fitch Ratings and S&P Global Ratings, did not echo Moody’s attitude. “While participating bondholders would receive less than originally promised, at current and expected bond prices under our methodology, we do not view this transaction as a distressed trade,” analysts at S&P Global argued in a report. For example.
It is not clear, in this sense, the motivation behind Moody’s unilateral move. On the other hand, it should be remembered that the reliability of risk rating agencies was questioned as a consequence of the financial crisis of 2007/8.
Moody’s said that Argentina could “get out” of a devaluation in 2023 “without everything exploding”
A US Congressional investigation concluded in 2011 that “all three rating agencies were key in the financial crisis. Mortgage-backed assets, which were at the heart of the crisis, could not be traded without their seal of approval.
*By Víctor Beker, director of the Center for the Study of the New Economy (CENE) at the University of Belgrano.
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