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Posted on 02/22/2012 5:34:50 AM PST by DeaconBenjamin
Fitch Ratings downgraded Greece's credit rating on Wednesday following yesterday's Eurozone agreement on a second bailout for the country and said a default is highly likely in the near term.
The agency cut Greece's Long-term foreign and local currency Issuer Default Ratings (IDRs) to 'C' from 'CCC'. The Short-term foreign currency rating was affirmed at 'C'. Fitch also affirmed the euro area Country Ceiling at 'AAA', which is applicable to all euro area member states.
"The downgrade follows yesterday's Eurogroup statement on a second financing programme for Greece including 'private sector involvement' (PSI) and a subsequent announcement from the Greek authorities outlining the terms of the proposed exchange of Greek Government Bonds (GGBs)," Fitch said.
Greece and private sector investors have agreed on the terms of a PSI exchange offer, including a nominal haircut of 53.5 percent to the face value of GGBs. The country has also confirmed the government's intention to introduce collective action clauses (CACs) into those GGBs governed by Greek law.
The rating agency said it regards the imposition of retrospective CACs as a material adverse change in the terms and conditions of GGBs in the context of an imminent debt exchange. It confirmed its assessment that the exchange will be distressed and de facto coercive on private holders of Greek bonds.
"The exchange, if completed, would constitute a 'distressed debt exchange' (DDE) in line with its criteria and consequently yesterday's announcements set in motion the agency's process for reviewing Greece's issuer and debt securities ratings," Fitch said.
The rating downgrade indicates that "default is highly likely in the near term", the agency said. Further, Fitch said the proposal to reduce Greece's public debt burden through a debt exchange with private creditors will, if completed, constitute a rating default. That would lead to the country's IDR being lowered to 'Restricted Default' ('RD'), it added. The ratings of GGBs affected by the exchange, including those not tendered but restructured under CACs will also be lowered to 'D' ('default').
Following the completion of the exchange, Fitch will move Greece's ratings out of 'RD' category and they will re-rated at a level consistent with the agency's assessment of its post-default structure and credit profile.
Sounds like great news for the US economy!
You know, just like everything that happens is unexpectedly good news for the US economy.
DJIA 13,000 here we come (again!)
Everybody knows Greece is about to be kicked to the curb and out of the EU. Boy, they think they’ve got problems now! I fear these people will burn down everything of historical value out of tantrums.
Greece is in BIG trouble.
AMEN. Using the usual caution of setting your Socialist filter on High, check out this grim prognostication: Greek deal: More pain for workers, no end to Europe’s crisis
Greece is a welfare state. It’s not just likely but guaranteed to default!
Downgrades are gettiing to be meaningless, when the borrowers can find people who are still willing to lend them money. - Tom
Ok, someone please layout a soverign default scenario.
Ok, someone please layout a soverign default scenario.
Karl Denninger at http://market-ticker.org/ had this to say about the Greece news.
Heh Heh: Fitch Says The “D” Word
Fitch has released a headline saying that the proposal to cut Greece’s public debt via a debt-swap would constitute a default (no, really?) and thus cut them from CCC to “C”.
The only surprise is that it’s not “D” yet (for Default, Dead, Dumb, Dumkoph, etc.) or “F” (for Fooked, basically.)
Looks like the “use by” date was about 24 hours.... or less.... oh, and Greece’s bond “rates” are going up, not down.
Mr. Market doesn’t buy it either.
And they are completely correct,anyone lending money to Greece isn’t getting it back or will have to go through dozens of hoops just to get a fraction of it back.
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