(Image Source:  Flickr/J. Griffin Stewart)


BY VICTORIA CRAIG

It was a not-so-surprising move. The Standard and Poor’s credit ratings agency slashed Greece’s long term credit rating from double C to selective default. Fox Business explains the downgrade comes after the Greek government forced its bondholders into a bond swap – meaning new bonds would be worth less than half of the original value.

“S&P basically saying that, in all intents and purposes, what that means is bondholders are not getting the money back that they were promised and have agreed to take different terms and take a huge haircut of more than 70 percent.”

Under its own definitions, S&P said changing the terms of Greek government bonds results in debt restructuring and then default. Sky News notes the consequences if Greek bondholders don’t agree to the bond swap by their March 12 deadline.

“Private bondholders have yet to swap their investments with the 53.5%-reduced bonds they are supposed to get in exchange. It is quite conceivable that not enough of them offer up their bonds, which could in turn trigger a messy default (Greece simply not paying interest on its bonds) and the country not receiving its next bail-out cash. This would then potentially trigger Greece’s ejection from the single currency.”

Following the downgrade, the European Central Bank announced a decision to stop accepting Greek bonds as collateral for loans. A decision that will affect all euro zone banks. The Wall Street Journal explains what that decision means for Greek bonds and why the ECB took action so soon.

 

“Greek bonds that have already been posted as backing for ECB loans will have to be replaced with other assets ... officials worried that accepting defaulted Greek bonds, even if only one rating agency has made that determination, could damage its credibility.”


Despite the gloomy outlook for Greece, Bloomberg reports there is a silver lining.

“S&P says Greece will be upgraded once again once the private debt swap is complete provided everything goes according to plan.”

Further, a CNBC contributor says the downgrade and all that comes with it is not affecting worldwide markets.She says that’s because markets react to economic surprises not “priced into the market” — and this ratings change was anything but a surprise.

“Greece is a problem for Europe, it’s still a risk we want to watch but at the same time, every day that passes, more is priced in and I think this was something that was priced in.”

Still, the Wall Street Journal notes Moody’s Investors Service and Fitch Ratings are expected to follow S&P’s suit and place Greece in default as well.

S&P Downgrades Greece's Credit Rating

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Feb 28, 2012

S&P Downgrades Greece's Credit Rating

(Image Source:  Flickr/J. Griffin Stewart)


BY VICTORIA CRAIG

It was a not-so-surprising move. The Standard and Poor’s credit ratings agency slashed Greece’s long term credit rating from double C to selective default. Fox Business explains the downgrade comes after the Greek government forced its bondholders into a bond swap – meaning new bonds would be worth less than half of the original value.

“S&P basically saying that, in all intents and purposes, what that means is bondholders are not getting the money back that they were promised and have agreed to take different terms and take a huge haircut of more than 70 percent.”

Under its own definitions, S&P said changing the terms of Greek government bonds results in debt restructuring and then default. Sky News notes the consequences if Greek bondholders don’t agree to the bond swap by their March 12 deadline.

“Private bondholders have yet to swap their investments with the 53.5%-reduced bonds they are supposed to get in exchange. It is quite conceivable that not enough of them offer up their bonds, which could in turn trigger a messy default (Greece simply not paying interest on its bonds) and the country not receiving its next bail-out cash. This would then potentially trigger Greece’s ejection from the single currency.”

Following the downgrade, the European Central Bank announced a decision to stop accepting Greek bonds as collateral for loans. A decision that will affect all euro zone banks. The Wall Street Journal explains what that decision means for Greek bonds and why the ECB took action so soon.

 

“Greek bonds that have already been posted as backing for ECB loans will have to be replaced with other assets ... officials worried that accepting defaulted Greek bonds, even if only one rating agency has made that determination, could damage its credibility.”


Despite the gloomy outlook for Greece, Bloomberg reports there is a silver lining.

“S&P says Greece will be upgraded once again once the private debt swap is complete provided everything goes according to plan.”

Further, a CNBC contributor says the downgrade and all that comes with it is not affecting worldwide markets.She says that’s because markets react to economic surprises not “priced into the market” — and this ratings change was anything but a surprise.

“Greece is a problem for Europe, it’s still a risk we want to watch but at the same time, every day that passes, more is priced in and I think this was something that was priced in.”

Still, the Wall Street Journal notes Moody’s Investors Service and Fitch Ratings are expected to follow S&P’s suit and place Greece in default as well.

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