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S&P cuts Argentina's credit rating

Standard & Poor's cut Argentina's credit rating, saying the country was more likely to default after the US Supreme Court rejected its appeal to avoid paying certain bond investors.

WASHINGTON: Standard & Poor's cut Argentina's credit rating on Tuesday, saying the country was more likely to default after the US Supreme Court rejected its appeal to avoid paying certain bond investors.

S&P lowered Argentina's rating by two notches, to "CCC-" from "CCC+", and called the outlook negative, suggesting a possible further downgrade.

"The downgrade reflects the heightened risk of default on foreign currency debt" following the Supreme Court decision, S&P said in a statement.

On Monday the Supreme Court refused to hear Argentina's appeal to overturn a lower court ruling that said the country would have to pay certain hedge funds the full value of their bonds, even though they refused to take part in the restructuring of its debt accepted by most of the country's creditors.

The ruling meant that Buenos Aires would have to repay the hedge funds in addition to servicing other creditors, adding more stress on the country's weak finances.

Argentina has to make $225 million in coupon payments on restructured bonds on June 30, and another $67 million on a separate series of bonds in September.

S&P said it would not consider non-payment of the hedge funds bonds, worth around $1.3 billion, a new default since it had held those bonds in default since 2002.

However, it said, the Supreme Court decision "raises the risk of payment interruptions on debt under New York law that is currently being serviced," S&P said.

"We think that the Argentine government has limited capacity to pay the plaintiff creditors while servicing its current debt."

"Although neither is certain, a default or a distressed debt exchange pertaining to currently serviced debt appears to be inevitable within six months, in our view, absent unanticipated significantly favourable changes in Argentina's circumstances."

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