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Argentina: Moody’s downgrades YPF and others

    Rafael Elias
    Rafael Elias

    Director, Latin America Credit

    Tellimer Research
    4 September 2019
    Published by

    Moody’s downgraded a series of non-financial Argentinian companies on Tuesday, including YPF S.A. (YPFDAR).

    The local branch of the rating agency downgraded YPF’s rating and senior unsecured bank credit facility ratings to Caa2/B1.ar from B2/A1.ar. At the same time, Moody’s Investors Service (the parent company) downgraded YPFDAR’s global scale senior unsecured notes to Caa2 from B2, as well as the company’s medium-term notes programme to (P)Caa2 from (P)B2. It also lowered the company’s baseline credit assessment (BCA) to Caa2 from B2 and placed all the ratings under review for downgrade.

    According to the agency, the action “follows the downgrade of the Government of Argentina’s senior unsecured ratings to Caa2 from B2… and reflects the strong credit linkages and exposure these companies have to Argentina’s regulations and operating environment.” The rating actions reflect Moody’s view that the creditworthiness of these companies cannot be completely de-linked from the credit quality of the Argentinian government, and thus their ratings need to closely reflect the risk that they share with the sovereign.

    It is clear, then, that the YPF downgrade was to maintain the difference between the sovereign ceiling and the company’s rating, and not because of any company-specific credit deterioration. Moody’s does, however, mention the possibility that further deterioration in Argentina’s finances (and the sovereign) could contaminate the companies that were affected by these rating actions.

    Some of the issuers that were downgraded include: Arcor S.A.I.C., Pampa Energía S.A., Pan American Energy S.L., Raghsa S.A., Tecpetrol Internacional S.L.U., Telecom Argentina S.A., Asociacion de Cooperativas Argentinas Coop., Holcim (Argentina) S.A., Mirgor S.A.C.I.F.I.A., and Sullair Argentina S.A.

    Elsewhere, for Marfrig’s Quickfood S.A., Moody’s left its rating unchanged at B3 on the global scale, while affirming its Baa2.ar rating on the national scale. The main reason for this was that Quickfood’s backed senior unsecured notes (fully guaranteed by its parent company Marfrig Global Foods S.A. rated B1 stable) was unchanged at B1 (stable outlook) on the global scale and upgraded to Aa2.ar from Aa3.ar on the national scale, other ratings remaining unchanged/affirmed.

    We currently have a Hold recommendation on YPFDAR bonds, and a mix of Buys and Hold on MRFGBZ bonds.