S&P raises Paraguay ratings

Standard & Poor's said it raised its long-term foreign currency sovereign credit rating on the Republic of Paraguay to B- from SD. At the same time, S&P raised its long-term local currency sovereign credit rating on the republic to B- from CCC and its short-term foreign currency sovereign credit rating on Paraguay to C from SD, and affirmed its C short-term local foreign currency sovereign credit rating.

The outlook on both the long- and short-term ratings is stable.

S&P said the upgrades follow the completion of the distressed debt exchange that cured Paraguay's bond default.

"The foreign currency rating on Paraguay was lowered to SD on Feb. 13, 2003, following the government's failure to honor put clauses on domestically issued U.S. dollar-denominated bonds in late January 2003," explained S&P credit analyst Sebastian Briozzo. "The government subsequently fell into payment arrears on a series of domestically issued U.S. dollar-denominated bonds totaling US$138 million, maturing between 2003 and 2006.

"The exchange does not involve any reduction in the face value of the debt. The new bonds are being issued in several series at a reduced interest rate and falling due between September 2004 and 2008, during the term of the current administration."

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