S&P affirms Paraguay ratings

Standard & Poor's said it affirmed its SD long-term foreign and CCC long-term local currency sovereign credit ratings on the Republic of Paraguay.

At the same time, S&P removed its CCC local currency rating on Paraguay from CreditWatch with positive implications, where it was placed on Dec. 23, 2003. The outlook on the local currency rating is positive.

"The removal from CreditWatch reflects a delay in the implementation of the government's plan to regularize public debt management, which has postponed Paraguay's exit from default," said S&P credit analyst Sebastian Briozzo. "It also indicates that future rating actions may be less imminent than normally signaled by a CreditWatch designation."

S&P lowered Paraguay's foreign currency sovereign credit ratings to SD on Feb. 13, 2003. The government is in the process of curing the default through an exchange offer affecting several dollar-denominated domestic debt instruments totaling $138 million.

The exchange has been delayed by difficulties in locating all affected debt holders and by operational problems with the central bank, the paying agent. The government reports that the acceptance level on the exchange has already reached 70%. This ratio is expected to increase significantly during the final stages of the exchange, during which time the government will be able to identify small holders of government paper who are also included in the restructuring.

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