Ratings On Greece Raised To 'B-/B' From Selective Default On Completion Of Debt Buyback; Outlook Stable
|Publication date: 18-Dec-2012 12:05:07 EST|
- Greece has completed a distressed debt buyback.
- Following completion of the transaction, we are raising our long- and short-term sovereign credit ratings on Greece to 'B-/B' from 'SD' (selective default).
- The upgrade reflects our view of the strong determination of European Economic and Monetary Union (eurozone) member states to preserve Greek membership in the eurozone.
- The outlook on the long-term rating is stable, balancing our view of the government's commitment to a fiscal and structural adjustment against the economic and political challenges of doing so.
LONDON (Standard & Poor's) Dec. 18, 2012--Standard & Poor's Ratings Services today raised its long-term foreign and local currency sovereign credit ratings on the Hellenic Republic (Greece) to 'B-' from 'SD' (selective default). We also raised our short-term foreign and local currency sovereign credit ratings on Greece to 'B' from 'SD'. As a result, we have raised the ratings on all the outstanding issues, including those guaranteed by Greece, to 'B-/B'. The outlook is stable. The rating action reflects the completion on Dec. 17, 2012, of Greece's distressed debt buyback (see "Greece Ratings Lowered To 'SD' (Selective Default)," published Dec. 5, 2012, on RatingsDirect on the Global Credit Portal), in tandem with approval by the Eurogroup (the finance ministers of EU member states belonging to the eurozone) 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. Our criteria define the emergence from a sovereign default (short of resuming payment on the defaulted instrument) as the successful completion of an exchange offer or buyback. As the Greek buyback applied to only part of an issue--because some holders declined to participate in the transaction--we are raising the ratings on the original securities that remain outstanding. This reflects our opinion that Greece will likely continue to pay full debt service as originally contracted. Under our criteria, the 'SD' credit ratings of a sovereign government emerging from default are replaced by new ratings reflecting our revised view of that sovereign's creditworthiness (see Appendix B in "Sovereign Government Rating Methodology and Assumptions," June 30, 2011). We estimate €6.8 billion in foreign-law-governed bonds held in the market was not tendered in the March 2012 Greek commercial debt restructuring. If Greece's official debt were written-down--which could happen if Greece were to apply for a third European Stability Mechanism program in 2013 or 2014--eurozone official creditors may seek comparability of treatment for holders of outstanding foreign-law-governed bonds. Even after the buyback, Greece's end-2012 net debt-to-GDP ratio of over 160% of GDP remains onerous. Nevertheless, subject to Greece meeting program conditions, eurozone member states have said they would significantly improve official lending terms to the government. The improved terms would include maturity extensions on bilateral and EFSF loans on top of a 10-year deferral of Greek interest payments to the EFSF: an effective write down of the Greek public debt stock in net present value terms, assuming nominal GDP growth starts gradually recovering from 2014. The Economic Adjustment Program for Greece is scheduled to end in 2014, based on the assumption that Greece will be able to return to issuing medium- and long-term commercial debt by 2015. In our view, however, Greece's access to long-term commercial funding remains subject to numerous domestic and external uncertainties. The Eurogroup has today released €34.3 billion to Greece, €16 billion of which will be used to increase Greek banks' regulatory capital. The Greek government is likely to keep meeting a portion of its financing needs by issuing Treasury bills, and we anticipate the freshly recapitalized domestic banks will be important buyers of these. Greece's fiscal consolidation is largely premised on tax hikes and improved tax collection, an extensive privatization program, and wholesale cuts in government spending (adopted in November 2012). We believe these adjustments carry implementation risks given the projected further output contraction in 2012 and 2013, which will likely see social pressures persist. Badly needed net equity inflows into the real economy have not yet materialized in any material fashion. In this regard, the government has repeatedly failed to meet its privatization receipt targets--one reason behind this year's increased financing needs. At the same time, we believe a better-capitalized banking system and indications of a gradual restoration in private sector competitiveness could improve prospects in 2013 for Greece's more competitive sectors, particularly tourism. The stable outlook balances our view of eurozone member states' determination to support Greece's eurozone membership and the Greek government's commitment to a fiscal and structural adjustment against the economic and political challenges of doing so. We could raise our long-term rating on Greece if the government follows through fully on its steps to comply with the EU/IMF program, thereby restoring predictability to its policymaking as well as contributing to a sustained economic recovery and improved prospects of sustainable debt-servicing. We could lower the ratings if we believe that there is a likelihood of a distressed exchange on Greece's remaining stock of commercial debt. RELATED CRITERIA AND RESEARCH
- Greece Ratings Lowered To 'SD' (Selective Default), Dec. 5, 2012
- Sovereign Government Rating Methodology And Assumptions, June 30, 2011
- Criteria For Determining Transfer And Convertibility Assessments, May 18, 2009
- Rating Implications Of Exchange Offers And Similar Restructurings, Update, May 12, 2009
- Introduction Of Sovereign Recovery Ratings, June 14, 2007
- Criteria For Assigning 'CCC+', 'CCC', 'CCC-', And 'CC' Ratings, Oct. 1, 2012
Complete ratings information is available to subscribers of RatingsDirect on the Global Credit Portal at www.globalcreditportal.com. All ratings affected by this rating action can be found on Standard & Poor's public Web site at www.standardandpoors.com. Use the Ratings search box located in the left column. Alternatively, call one of the following Standard & Poor's numbers: Client Support Europe (44) 20-7176-7176; London Press Office (44) 20-7176-3605; Paris (33) 1-4420-6708; Frankfurt (49) 69-33-999-225; Stockholm (46) 8-440-5914; or Moscow 7 (495) 783-4009.
|Analytical Group Contact:||SovereignEurope;|
No content (including ratings, credit-related analyses and data, model, software or other application or output therefrom) or any part thereof (Content) may be modified, reverse engineered, reproduced or distributed in any form by any means, or stored in a database or retrieval system, without the prior written permission of S&P. The Content shall not be used for any unlawful or unauthorized purposes. S&P, its affiliates, and any third-party providers, as well as their directors, officers, shareholders, employees or agents (collectively S&P Parties) do not guarantee the accuracy, completeness, timeliness or availability of the Content. S&P Parties are not responsible for any errors or omissions, regardless of the cause, for the results obtained from the use of the Content, or for the security or maintenance of any data input by the user. The Content is provided on an “as is” basis. S&P PARTIES DISCLAIM ANY AND ALL EXPRESS OR IMPLIED WARRANTIES, INCLUDING, BUT NOT LIMITED TO, ANY WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE, FREEDOM FROM BUGS, SOFTWARE ERRORS OR DEFECTS, THAT THE CONTENT’S FUNCTIONING WILL BE UNINTERRUPTED OR THAT THE CONTENT WILL OPERATE WITH ANY SOFTWARE OR HARDWARE CONFIGURATION. In no event shall S&P Parties be liable to any party for any direct, indirect, incidental, exemplary, compensatory, punitive, special or consequential damages, costs, expenses, legal fees, or losses (including, without limitation, lost income or lost profits and opportunity costs) in connection with any use of the Content even if advised of the possibility of such damages.
Credit-related analyses, including ratings, and statements in the Content are statements of opinion as of the date they are expressed and not statements of fact or recommendations to purchase, hold, or sell any securities or to make any investment decisions. S&P assumes no obligation to update the Content following publication in any form or format. The Content should not be relied on and is not a substitute for the skill, judgment and experience of the user, its management, employees, advisors and/or clients when making investment and other business decisions. S&P’s opinions and analyses do not address the suitability of any security. S&P does not act as a fiduciary or an investment advisor. While S&P has obtained information from sources it believes to be reliable, S&P does not perform an audit and undertakes no duty of due diligence or independent verification of any information it receives.
S&P keeps certain activities of its business units separate from each other in order to preserve the independence and objectivity of their respective activities. As a result, certain business units of S&P may have information that is not available to other S&P business units. S&P has established policies and procedures to maintain the confidentiality of certain non-public information received in connection with each analytical process.
S&P may receive compensation for its ratings and certain credit-related analyses, normally from issuers or underwriters of securities or from obligors. S&P reserves the right to disseminate its opinions and analyses. S&P's public ratings and analyses are made available on its Web sites, www.standardandpoors.com (free of charge), and www.ratingsdirect.com and www.globalcreditportal.com (subscription), and may be distributed through other means, including via S&P publications and third-party redistributors. Additional information about our ratings fees is available at www.standardandpoors.com/usratingsfees.
Any Passwords/user IDs issued by S&P to users are single user-dedicated and may ONLY be used by the individual to whom they have been assigned. No sharing of passwords/user IDs and no simultaneous access via the same password/user ID is permitted. To reprint, translate, or use the data or information other than as provided herein, contact Client Services, 55 Water Street, New York, NY 10041; (1) 212-438-7280 or by e-mail to: firstname.lastname@example.org.