Standard and Poor's on Tuesday upgraded Greece's credit rating from 'selective default' (SD), citing the successful completion of the country's debt buyback program and the subsequent decision by European leaders to disburse loan installment.
Greece's long and short-term foreign as well as local currency sovereign credit ratings were lifted to 'B-' from 'SD'. Further, the ratings on all the outstanding issues, including those guaranteed by Greece, were upgraded to 'B-/B'. The outlook is 'stable'.
S&P said its latest rating action reflected the completion of Greece's distressed debt buyback on December 17. The rating agency downgraded Greek ratings to 'SD' on December 5, following the government's invitation to private sector bondholders to participate in the debt buyback, which S&P considered to be a distressed debt restructuring.
Tuesday's rating move also reflected the approval by the Eurogroup of a loan disbursement to Greece under the second economic adjustment program. "We view the eurozone member states' decision to provide material cash flow relief to Greece as indicative of their determination to restore stability to Greek finances, and to preserve Greece's eurozone membership," the agency said.
S&P also applauded the Greek government for its commitment to fiscal and structural adjustment despite economic and political challenges.
This month, the Eurogroup has released 34.3 billion euros to Greece under the bailout program. The program is scheduled to end in 2014. However, even after the buyback, Greece's end-2012 net debt-to-GDP ratio of over 160 percent of GDP remains onerous, S&P observed.
The agency said it could raise the long-term rating on Greece if the government follows through fully on its steps to comply with the EU/IMF program. On the other hand, it could lower the ratings if there is a likelihood of a distressed exchange on Greece's remaining stock of commercial debt.
According to S&P estimate, 6.8 billion euros in foreign-law-governed bonds held in the market was not tendered in the March Greek commercial debt restructuring.
by RTT Staff Writer
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