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Greece Ratings Lowered To 'SD' (Selective Default)

Publication date: 05-Dec-2012 21:40:12 EST


  • We are lowering our sovereign credit ratings on Greece to 'SD'.
  • This follows the Greek government's Dec. 3, 2012, invitation to private sector bondholders to participate in a series of debt buyback auctions, which under our criteria we view as a selective default.
  • When the buyback is consummated (which we understand is scheduled to occur on or about Dec. 17, 2012), we will likely consider the selective default to be cured and raise the sovereign credit rating on Greece to the 'CCC' category.
LONDON (Standard & Poor's) Dec. 5, 2012--Standard & Poor's Ratings Services 
today lowered its 'CCC' long-term and 'C' short-term sovereign credit ratings 
on the Hellenic Republic (Greece) to 'SD' (selective default).

We lowered our sovereign credit ratings on Greece to 'SD' following the Greek 
government's Dec. 3, 2012, invitation to private sector bondholders to 
participate in a series of debt buyback auctions. In our opinion, Greece's 
invitation constitutes the launch of what we consider to be a distressed debt 
restructuring. Under our criteria (see "Rating Implications Of Exchange Offers 
And Similar Restructurings, Update," May 12, 2009), we consider an exchange 
offer as tantamount to default under the following two conditions:

  • The offer, in our view, implies the investor will receive less value than the promise of the original securities; and
  • We believe the offer is distressed, rather than purely opportunistic.
We consider that Greece's invitation satisfies these conditions, 
notwithstanding that investors may technically accept the offer voluntarily, 
and irrespective of whether an event of default as defined by the bond 
documentation occurs. In accordance with our criteria, we have therefore 
lowered our sovereign credit rating on Greece to 'SD' and our ratings on the 
affected debt issues to 'D'.

Under our criteria, we define a restructuring to include buybacks as an 
alternative to a potential conventional default, in which the investor or 
counterparty stands to fare even worse, and which motivates (at least 
partially) the investor's acceptance of such an offer. Standard & Poor's 
treats such offers and buybacks analytically as de facto restructuring and, 
accordingly, as equivalent to a default on the part of the issuer. 

When Greece's buyback is consummated (which we understand is scheduled to 
occur on or about Dec. 17, 2012), we will likely consider the selective 
default to be cured and raise the sovereign credit rating on Greece to the 
'CCC' category, reflecting our forward-looking assessment of Greece's 
creditworthiness. In this context, any potential upgrade to the 'CCC' category 
rating would reflect, among other factors, our view of the debt relief that is 
being delivered through the buy back and its contribution to putting the 
sovereign's public finances on a sustainable footing.


RELATED CRITERIA AND RESEARCH
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;
SovereignEurope@standardandpoors.com

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