S&P rates Banco Hipotecario notes B-

Standard & Poor's said it assigned a B- foreign currency senior unsecured debt rating to Banco Hipotecario SA's upcoming $100 million note issuance, which constitutes the second tranche of the bank's series IV notes due 2010 issued under the $1.2 billion senior unsecured global medium-term note program. With this issuance, the series will total $250 million. S&P also affirmed the Argentinean bank's B- counterparty credit ratings.

The outlook is stable.

Proceeds from the upcoming issuance will be used for liability management and to increase lending activities to the private sector.

S&P said the ratings on Banco Hipotecario reflect its relatively high exposure to the sovereign's creditworthiness, mostly originated by the government bonds received as compensation for pesification, the bank's high concentration in mortgage lending and the disagreements on Banco Hipotecario's future strategy between the controlling group and the Argentine government, the bank's other major shareholder.

These weaknesses are counterbalanced by a still-improving operating environment for the Argentinean financial system since the completion of the sovereign debt restructuring process and more benign macroeconomic conditions that result in higher intermediation with the private sector, the agency said. In addition, Banco Hipotecario shows a high capitalization level and a good liquidity position.

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