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©Reuters. Foreign exchange restriction in Argentina affects corporate debt, according to Moody’s
Buenos Aires, Oct 25 (EFE).- The rating agency Moody’s warned this Tuesday that the continuity of the restrictions on access to dollars for the payment of debts of companies in Argentina negatively affects corporate debt.
In a report, the rating agency recalled that the Argentine Central Bank recently decided to extend until the end of 2023 a rule that expired next December and that establishes that companies must restructure 60% of their debts in foreign currency, stretching the payment terms to two years, and that they only have access to the foreign exchange market to settle 40% of their maturities.
According to Moody’s, these restrictions “significantly limit financing options” for companies.
“Most companies and infrastructure companies with debt denominated in foreign currency will resort to a forced debt swap,” said Daniela Cuan, senior analyst at Moody’s Investors Service.
Cuan pointed out that, in the cases of those companies that extend the payment terms of their maturities, the bondholders will be exposed to possible credit losses.
“The conditions severely reduce investors’ appetite for Argentine corporate debt,” he warned.
The extended measure was issued in September 2020 and requires private sector companies to refinance their financial debts abroad or local debt securities denominated in foreign currency.
These restrictions, according to the rating agency, “reflect the need for the Central Bank to increase its very low reserves in US dollars and meet the requirements” of the extended facilities agreement signed by Argentina with the International Monetary Fund last March and which establishes between its goals are an accumulation of reserves of 5.8 billion dollars this year.
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