Fitch rates Paraguay bond BB

Fitch Ratings said it assigned a BB rating to Paraguay's $500 million global bond issuance due March 27, 2027.

The bonds have a coupon rate of 4.7%.

The proceeds will be used for capital expenditures and refinance a portion of outstanding debt, Fitch said.

The rating is in line with Paraguay's long-term foreign-currency issuer default rating of BB.

Some factions within the country's legislature have challenged the legality of the bond issuance following a veto of the proposed 2017 budget and subsequent carry-over of the 2016 budget, Fitch explained.

The agency said it assumes, based on a review of a ruling by Paraguay's Supreme Court and other legal opinions, that the carry-over of the prior budget extends to the financing sources contemplated with it, therefore the issuance of bonds is in compliance with local laws.

Fitch also said it assumes the bonds will rank equally with all other unsubordinated external debt of the republic and include cross-default provisions with other outstanding bonds.

The rating is sensitive to any changes in Paraguay's long-term foreign-currency issuer default rating, the agency said.

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