Moody’s Investors Service has assigned a Caa2 (Global Scale Foreign Currency) ratings to the Senior Unsecured Notes to be issued by the Province of Buenos Aires for up to USD1,033 million approximately. The ratings are in line with the province’s long term foreign currency issuer ratings, which carry a negative outlook.RATINGS RATIONALEOn June 2, 2015 the Province of Buenos Aires priced some USD500 million of these new Notes at a 9.95% coupon rate.The bond issuance has been authorized by the Provincial Law Nº14652, by Governor’s Decree Nº59 of 2015 and by Resolution Nº106 of the provincial Ministry of Economy. The Province of Buenos Aires will use the proceeds to prepay outstanding provincial debt as well as to fund infrastructure and/or social projects during 2015. At the same time, the Province launched a bond exchange offer for up to USD500 million under a USD1,050 million 11.75% coupon rate Notes maturing in October 2015. After the settlement of the first tranche of these new Notes for USD500 million and conclusion of the mentioned exchange, both tranches will be consolidated and will form a single bond series of up to USD1,033 million.The rated bonds, which constitute direct, general, unconditional and unsubordinated obligations of the province, will be denominated and payable in US dollars with a maturity of six years. The bonds will amortize in two annual installments equivalent to 50% of the outstanding principal in 2020 and in 2021 and pay 9.95% annual interest rate on a semi-annual basis. The bonds will be subject to the State of New York Law.The assigned ratings are based on preliminary documentation received by Moody’s as of the rating assignment date. Moody’s does not expect changes to the documentation reviewed over this period nor anticipates changes in the main conditions that the bonds will carry. Should issuance conditions and/or final documentation of these bonds deviate from the original ones submitted and reviewed by the rating agency, Moody’s will assess the impact that these differences may have on the ratings and act accordingly.WHAT COULD CHANGE THE RATING UP/DOWNGiven the negative outlook on the issuer ratings, Moody’s does not expect upward pressures in the Province of Buenos Aires’s ratings in the near to medium term. However, a change in Argentina’s sovereign outlook back to stable could lead to a change in the outlook back to stable of the Province of Buenos Aires. Conversely, a sharp deterioration of the Province of Buenos Aires’s financial results, coupled with materially higher debt levels could add downward pressure to the assigned ratings. The province of Buenos Aires could also be downgraded if the negative outlook on the sovereign rating materializes into a rating downgrade.The principal methodology used in this rating was Regional and Local Governments published in January 2013. Please see the Credit Policy page on www.moodys.com.ar for a copy of this methodology.
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