Moody’s Ups Argentina’s Formosa Province

Moody’s has raised the issuer rating of the Argentine province of Formosa to B3 on the global scale and A3.ar in the local scale ratings from Ca and D.ar, respectively. Concurrently, the agency has assigned a B3 and A3.ar rating to the province’s 5% coupon USD co-participation tax revenue secured notes due 2022, a restructuring of the bonds due in 2005 that have been in default since 2003. The rating upgrade reflects the province's emergence from default with acceptance by bondholders of its restructuring proposal, the agency says. “In addition, the upgrade is based on the positive and increasing operating balances reported by the province since 2003, with a similar trend in financing surpluses,” Moody’s adds. The upgrade also considers Formosa's high reliance on federal revenue transfers and limited financial flexibility resulting from the large share of personnel costs in its current expenditures. On the new secured notes, the agency notes exchange rate risk as interest and principal payments will be paid in US dollars.