(Moody’s Investors Service, 7.Mar.2017) – Moody’s Investors Service revised to positive from stable the outlook for several companies operating in Argentina, while all ratings were affirmed. The companies’ outlook change follows the revision of the Argentine government’s B3 rating outlook to positive from stable on March 6, 2017.
ISSUERS AND RATINGS AFFIRMED — OUTLOOK CHANGED TO POSITIVE
Arauco Argentina S.A.: the Corporate Family Rating (CFR) was affirmed at B1 and the rating of the senior unsecured notes, guaranteed by Celulosa Arauco y Constitucion S.A. (Baa3 stable), was affirmed at Baa3. The outlook of the issuer was changed to positive from stable and the outlook of the notes remains stable.
Arcor S.A.I.C.: the CFR and the rating of the senior unsecured global bonds was affirmed at B1.
Pan American Energy LLC, Argentine Branch: the ratings of the backed senior unsecured medium-term notes programs were affirmed at (P)B1 and the rating of the backed global medium-term notes was affirmed at B1. The outlook was changed to positive from stable.
Pan American Energy LLC: the CFR was affirmed at B1. The outlook was changed to positive from stable.
YPF Sociedad Anonima: the senior unsecured notes were affirmed at B3. The rating of the medium-term notes program was affirmed at (P)B3. The outlook was changed to positive from stable.
RATINGS RATIONALE
The rating outlook revision for these companies follows the outlook change of Argentine government’s B3 Issuer rating outlook to positive from stable on March 6th, 2017, supported by the rising likelihood that the recently policies introduced, which have laid the ground for future improvements to Argentina’s economic and fiscal strength, and the improvements in Argentina’s institutional strength will be sustained and bring improvements in Argentina’s credit profile.
Moody’s expects that Argentina’s economy will return to growth in 2017 and 2018, supported by the government’s improved policy mix which has sought to reduce inflation and increase investor confidence.
The positive outlook for the affected companies reflects Moody’s view that the creditworthiness of these companies cannot be completely de-linked from the credit quality of the Argentine government, and thus their ratings need to closely reflect the risk that they share with the sovereign. Moody’s believes that a weaker sovereign has the potential to create a ratings drag on companies operating within its borders, and therefore it is appropriate to limit the extent to which these issuers can be rated higher than the sovereign, in line with Moody’s Rating Implementation Guidance.
***