DBRS cuts Argentina

DBRS said it downgraded the Republic of Argentina’s long-term foreign currency issuer ratings to selective default from CC. The long-term local currency issuer rating remains at CC. The trend on the local currency issuer ratings is stable. This concludes the under review with negative implications for all ratings.

The Argentine government announced on Friday the postponement of payments on 182-day Letes, dollar-denominated short-term debt issued under local law. In addition, Argentina is seeking to defer interest payments on its long-term foreign currency (and foreign law) bonds. The lower house approved an emergency bill on Friday granting the administration authority to renegotiate debt terms.

Argentina was able to issue the equivalent of $315 million in local currency debt in local markets on Friday, providing some space for the government to roll over some of its short-term local currency obligations.

However, DBRS said distortionary taxes and restrictions on foreign currency purchases will limit the availability in the local currency funding, particularly if real interest rates move into negative territory as the government seeks to support economic activity. Utility price freezes and other price controls should reduce inflation in the short run but will do little to strengthen monetary policy credibility. Meanwhile, increased domestic subsidies and disincentives for investment are likely to pose challenges to fiscal and growth dynamics over the medium-term.

The foreign currency issuer ratings are likely to remain at SD until the government concludes the rescheduling of its foreign currency debts. If the government is unable to rollover maturing local currency debt, the local currency ratings could also be downgraded to SD, the agency said.

S&P cuts Seplat notes

S&P said it cut the rating on Seplat Petroleum Development Co.’s $350 million notes due 2023 to B- from B and affirmed the B issuer credit rating.

This action follows the acquisition of Eland Oil & Gas for £382 million, using a combination of available cash and a $350 million senior secured revolver.

As part of the transaction that closed on Dec. 17, Seplat upsized its revolver to $350 million and fully drew on the facility. Furthermore, Seplat maintained Eland’s $125 million ($75 million drawn) senior secured reserve based loan and this debt will be consolidated on Seplat’s balance sheet post-acquisition.

The RBL is secured against Eland’s main producing asset. “While the RBL is nonrecourse to Seplat, we believe that Seplat’s shareholding in Eland provides it with a moral imperative to support the RBL, despite not being contractually obligated to do so. We consider both the RCF and RBL as priority debt that rank ahead of Seplat’s senior unsecured notes and therefore believe that the notes are effectively subordinated to the secured debt obligations,” said S&P in a press release.

The outlook is stable.

S&P puts Pactera on positive watch

S&P said it placed its CCC+ long-term issuer credit rating on Pactera Technology International Ltd. and issue rating on the senior unsecured notes the company guarantees on CreditWatch with positive implications. China Electronics Corp. plans to acquire Pactera for $500 million cash.

S&P placed the ratings on CreditWatch because it expects Pactera’s credit quality to improve following its proposed acquisition by CEC. The agency said it believes CEC will have better capacity to support Pactera than the highly leveraged HNA Group. CEC is a conglomerate focusing on information technology and is owned by the Chinese central State-owned Assets Supervision and Administration Commission.

“We believe CEC’s relatively low leverage, which we estimate to be less than 3x as of end-2018, places it in a better position to support Pactera. Furthermore, as a central SOE, it is possible that CEC could receive potential extraordinary support from the government,” said S&P in a press release.

The agency expects nearly all Pactera’s debt will be repaid along with the transaction. This includes the $109.5 million notes due in April 2021 and the $212.6 million loan under the company’s secured term facility.

S&P rates GFH Financial B

S&P said it assigned its B long-term issuer credit rating to GFH Financial Group BSC.

GFH, though adequately capitalized, has so far achieved only partial progress in developing and disposing its legacy real estate assets, which adds to the volume of noncore assets on its balance sheet, the agency said.

“We consider GFH’s capital and earnings as adequate, reflecting our expectation that group’s risk-adjusted capital (RAC) ratio will stay at around 7.5%-8% over the next two years – a decline from 10.9% observed at year-end 2018,” S&P said in a press release.

The outlook is stable

Fitch revises views on four Nigerian banks

Fitch Ratings said it revised the outlooks on the long-term issuer default ratings of four Nigerian banks, Zenith Bank plc, Guaranty Trust Bank plc, United Bank for Africa plc and Bank of Industry, to negative from stable and affirmed their IDRs at B+. The agency also affirmed the AA(nga) national ratings of Stanbic IBTC Holdings plc and Stanbic IBTC Bank plc.

The rating actions follow the revision of the outlook on Nigeria’s long-term IDR to negative from stable on Thursday.

“The negative outlook on Zenith, GTB, UBA and BOI reflects our view that a sovereign downgrade would likely be accompanied by a downgrade of these issuers’ long-term IDRs. The ratings of Zenith, GTB and UBA are also sensitive to deterioration in operating environment and its impacts on asset quality and capitalization,” said Fitch in a press release.

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