Fitch assigns BBB- to Uruguay notes

Fitch Ratings said it assigned a BBB- rating to Uruguay's 35.3 billion Uruguayan peso notes (equivalent to $1.25 billion) maturing June 20, 2022.

The notes are denominated in Uruguayan pesos and payable in U.S. dollars, and have a coupon of 9 7/8%.

Proceeds will be used for general budgetary and liability management purposes. Proceeds equivalent to $250 million are being used to swap out a portion of outstanding local bonds in inflation-indexed peso units.

Fitch said this issuance represents a step in the sovereign's strategy of deepening and diversifying its local-currency funding options. Uruguay's relatively high reliance on foreign-currency funding exposes its sovereign balance sheet to greater exchange-rate risk than that of its BBB category peers.

The bond rating is in line with the Uruguay's long-term foreign-currency issuer default rating of BBB-. As per the agency’s Sovereign Criteria (July 2016), bonds issued in local currency but payable in foreign currency are assigned the long-term foreign-currency issuer default rating.

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