Fitch calls Greece ‘Restricted Default

Fitch Ratings has cut Greece’s long-term foreign and local currency Issuer Default Ratings to ‘Restricted Default’ from ‘C’, following yesterday’s debt deal.

Greece’s short-term rating remains at ‘C’, Fitch added, while the broader euro area rating remains at ‘AAA’.

The downgrade has been made because the event constitutes a sovereign default under the agency’s distressed debt exchange rating criteria.

The terms of yesterday’s deal mean implied losses for bondholders of 74%, Fitch said.

However, the ratings are likely to change on Monday 12 March. This is because of the structure of the deal which sees each €100 worth of Greek government bonds exchanged for new bonds with a face value of €31.5, €15 of EFSF ‘AAA’ rated bonds, and a notional €31.5 of Greek GDP-linked securities.

The settlement date for bonds exchanged under Greek law is 12 March.

“Following completion of the debt exchange and the issue of new securities, Fitch will raise Greece’s Issuer Default Rating (IDR) out of ‘Restricted Default’ and assign ratings to the new securities consistent with the agency’s forward-looking assessment of Greece’s credit profile following the distressed debt exchange. The post-exchange IDR and securities ratings are likely to be low speculative grade.”




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