S&P downgrades Argentina to 'selective default'

S&P downgraded Argentina's long and short-term foreign currency sovereign credit ratings to 'selective default' (SD) from 'CCC-/C', according to a release by the rating agency.

S&P downgraded the ratings on account of Argentina's failure to make a US$539mn interest payment to discount bondholders on the due date, namely Wednesday, saying it defines "default" to include instances where either scheduled debt is not paid on time or an offer of new debt contains terms less favorable than those being replaced.

At the same time, the agency affirmed Argentina's 'CCC+/C' long and short-term local currency sovereign ratings and 'raBB+' national scale rating.

"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," said the agency.

Argentine representatives have been holding last-ditch talks with bond holdouts led by NML Capital and a court-appointed mediator after being ordered to by the US supreme court to pay the holdouts at the same time as discount bondholders under the so-called pari passu or equal treatment ruling.

S&P said it could revise its ratings when Argentina pays the discount bondholders, depending on the country's residual litigation risks, access to international debt markets and overall credit profile.

The case dates from Argentina's 2001 default on sovereign bonds.