Greeks are near junk to Moody's
Source: Agencies |
July 26, 2011, Tuesday
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MOODY'S cut Greece's credit rating further into junk territory yesterday and said it was almost certain to slap a default tag on its debt as a result of a new European Union rescue package.
It is the second rating agency to warn of a default after eurozone leaders and banks agreed last week that the private sector would shoulder part of the burden of a rescue deal that offers Greece more cash and easier loan terms to keep it afloat.
Moody's said: "The announced EU program, along with the Institute of International Finance's statement, implies that the probability of a distressed exchange, and hence a default, on Greek government bonds is virtually 100 percent."
Bank lobby IIF, which led private sector negotiations, aims to attract 90 percent investor participation in the bond exchange plan, which comes on top of the EU's new 109 billion euro (US$156 billion) bailout.
Moody's cut Greece's rating by three notches to Ca, just one notch above default, to reflect the expected loss implied by the proposed debt exchanges.
Greece now has the lowest rating of any country in the world covered by Moody's, which, like Fitch last week, said it will review Greece's rating after the debt swap.
It said: "Once the distressed exchange has been completed, Moody's will reassess Greece's rating to ensure it reflects the risk associated with the country's new credit profile, including the potential for further debt restructurings."
However, whereas Fitch pledged to move quickly to give Greece a higher, "low speculative grade" after its bonds had been exchanged, Moody's said it cannot forecast when the rating will change or how.
"It all depends how quickly the debt exchange takes place," said Alastair Wilson, Moody's managing director for Europe, Middle East and Africa credit policy. "Once we have greater visibility over that, we will reassess the credit profile quite quickly. Whether the rating will change is a different question."
A senior EU official said the aim is to conclude a voluntary swap of privately-held Greek bonds early in September.
Greek bank shares and the broader stock market were unaffected by Moody's action. Trading was flat.
It is the second rating agency to warn of a default after eurozone leaders and banks agreed last week that the private sector would shoulder part of the burden of a rescue deal that offers Greece more cash and easier loan terms to keep it afloat.
Moody's said: "The announced EU program, along with the Institute of International Finance's statement, implies that the probability of a distressed exchange, and hence a default, on Greek government bonds is virtually 100 percent."
Bank lobby IIF, which led private sector negotiations, aims to attract 90 percent investor participation in the bond exchange plan, which comes on top of the EU's new 109 billion euro (US$156 billion) bailout.
Moody's cut Greece's rating by three notches to Ca, just one notch above default, to reflect the expected loss implied by the proposed debt exchanges.
Greece now has the lowest rating of any country in the world covered by Moody's, which, like Fitch last week, said it will review Greece's rating after the debt swap.
It said: "Once the distressed exchange has been completed, Moody's will reassess Greece's rating to ensure it reflects the risk associated with the country's new credit profile, including the potential for further debt restructurings."
However, whereas Fitch pledged to move quickly to give Greece a higher, "low speculative grade" after its bonds had been exchanged, Moody's said it cannot forecast when the rating will change or how.
"It all depends how quickly the debt exchange takes place," said Alastair Wilson, Moody's managing director for Europe, Middle East and Africa credit policy. "Once we have greater visibility over that, we will reassess the credit profile quite quickly. Whether the rating will change is a different question."
A senior EU official said the aim is to conclude a voluntary swap of privately-held Greek bonds early in September.
Greek bank shares and the broader stock market were unaffected by Moody's action. Trading was flat.
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