Moody's Investors Service on Friday has downgraded Greece's local- and foreign-currency bond ratings to C from Ca and has not assigned an outlook to the ratings citing recently announced debt exchange proposals.
Greece is facing this latest round of downgrade following its effort to reduce its debts through a debt swap deal with its private bondholders. On Feb 27th, Standard and Poor's downgraded its rating on Greek sovereign debt to 'selective default'. Recently, Fitch also lowered its rating on Greek debt to 'C' from 'CCC'.
Moody's said this debt exchange proposals imply expected losses to investors in excess of 70 percent, which is consistent with its criteria for a C rating.
Moody's said it will re-assess the credit risk profile and ratings of any outstanding or new securities issued by the Greek government, only after the Eurogroup's assessment of Greece's adherence to bailout conditions has been finalised, debt exchanges have been completed and a new Memorandum of Understanding between the EU and the Greek government has been finalized and published.
In addition, Moody's expects the announced proposal for private-sector involvement would constitute a distressed exchange, and hence a default, on Greek government bonds. Moody's also said investors are likely to experiences losses, if the debt exchange is not undertaken as planned and added that it expects further clarity on the execution of the exchange in early March.
Moody's said its decision not to assign an outlook is based on the very high likelihood of a default by the Greek government on its bonds and the fact that C is the lowest rating on its rating scale.
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