(Adds Fitch, S&P ratings on bonds)
By Maximiliano Rizzi and Sarah Marsh
BUENOS AIRES, April 15 (Reuters) - Moody's bumped up Argentina's credit rating one grade to "B3" on Friday due to "economic policy improvements" under a new, business-friendly government and expectations the country will finally settle a legal battle with creditors.
The two other major ratings agencies, Fitch and Standard & Poor's, on Friday assigned "B" and "B-" ratings, respectively, to a historic bond issue next week. Both said they would assign a new rating to the sovereign issuer once Argentina had finally recovered from a 2014 default.
Argentina is preparing to launch its first international bond issue in 15 years next week, seeking to raise up to $15 billion to firm up government financing and settle litigation that followed its record $100 billion default in 2002.
President Mauricio Macri, who took office in December vowing to open up Latin America's third-largest economy, has made ending that legal battle and returning to global credit markets a priority during his first months in power.
Moody's upgraded Argentina to "B3" with a stable outlook, six levels below investment grade. It has been at "Caa1" since March 2014.
"The stable outlook ... balances our expectations for continued positive reform momentum and stabilization of reserve levels, with the still formidable macroeconomic challenges, particularly in reducing high fiscal deficits and inflation," the agency said.
Macri says settling with holdouts is key to attracting new investment in order to reboot the economy. The former businessman and free-market reformer hopes investment-driven growth combined with public spending cuts will reduce a ballooning fiscal deficit and bring down double-digit inflation.
He has his work cut out for him. In its ratings decision, S&P forecast inflation to slow toward 30 percent in 2017, nearly twice the government's target for next year.
The country defaulted on its restructured bonds in July 2014 due to its legal battle with the creditors that rejected its 2005 and 2010 swaps. But a U.S. court ruling this week allowed Argentina to resume payments on those bonds, thereby exiting default, after paying the holdouts next Friday.
Argentina on Friday confirmed the names of the seven banks managing its upcoming bond issue. Deutsche Bank AG, HSBC Holdings Plc, JPMorgan Chase & Co and Banco Santander SA were awarded the top role of global coordinators for the bond sale.
BBVA, Citigroup Inc, and UBS Group AG will join as bookrunners. The banks will earn a commission of 0.18 percent of the funds raised. (Reporting by Buenos Aires newsroom; Writing by Brad Haynes and Sarah Marsh; Edited by Chizu Nomiyama and Matthew Lewis)