(Adds Fitch, S&P downgrades)
By Walter Bianchi and Hugh Bronstein
BUENOS AIRES, May 26 (Reuters) – Argentine bonds rose strongly on Tuesday on optimism that a restructuring deal being brokered with creditors could be in reach, even as ratings agencies slapped the country with downgrades after it defaulted for the ninth time last week.
Over-the-counter bonds rose 3.8%, while country risk tightened 243 basis points to 2,535 over U.S. Treasuries, amid hopes negotiations to revamp $65 billion in debt would take “days, not months”.
Fitch downgraded Argentina’s sovereign rating to restricted default (RD) due to the missed payment relating to three bonds on Friday, however, and cut the ratings on the bonds themselves to default.
S&P cut the three bonds and a fourth local-law dollar bond to default and said they would remain there “pending conclusion of the debt renegotiations that are currently underway.”
Fitch said the sovereign downgrade was due to missed interest payments, that had originally been due for repayment in April and again on May 22 after a 30-day grace period expired. It acknowledged restructuring talks were moving forward.
“The parties involved have indicated recent progress toward a comprehensive restructuring, although uncertainty remains around the prospects for reaching a deal,” Fitch said, adding any deal would need to fulfill collective action clauses.
It added that once a deal was achieved and relations with creditors were normalized that would warrant upgrading the country’s sovereign rating.
Argentina and its creditors are restarting talks to reach a deal by a current deadline of June 2, with the country asking bondholders to sign non-disclosure deals.
The country’s largest province Buenos Aires is carrying out parallel restructuring talks to revamp $7 billion in foreign debt. It has extended negotiations until June 5. (Reporting by Walter Bianchi and Hugh Bronstein; Writing by Adam Jourdan; Editing by David Gregorio and Tom Brown)
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