Moody's rates Mendoza bonds B3, A3.ar

Moody's Investors Service said it assigned B3 global scale and foreign currency ratings and an A3.ar Argentine national scale rating to the $241.2 million bonds due 2018 issued by the Province of Mendoza, Argentina.

The ratings reflect the province's improving credit circumstances as reflected in recent years' better financial performance, lower debt ratios and gains in labor market conditions. The province's bond exchange of October 2004, under which the bonds now rated were offered, also provided notable debt relief, the agency said.

The B3 rating assigned is constrained by Argentina's foreign currency country ceiling for bonds.

The province's bond exchange offered to replace $250 million bonds paying 10% interest due 2007 with a like amount of new bonds paying 5½% interest and maturing in semiannual installments through 2018.

The amount of new bonds actually issued is smaller than the amount offered in exchange because more than $8 million of old bonds was tendered as payment for provincial taxes and, as a result, made ineligible for exchange, the agency said.

The old bonds continue to be rated Ca reflecting the province's decision to stop payments, effective September 2004, to bondholders who did not accept the exchange. The holdouts have challenged the exchange in U.S. courts, and that litigation remains unresolved, although rulings issued to date have been in the province's favor.

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