Agen­cies: Vol­un­tary rollover equals de­fault

Kathimerini English - - NEWS -

Fitch Rat­ings warned yes­ter­day it would treat a vol­un­tary rollover of Greece’s sov­er­eign bonds in any res­cue pack­age as a de­fault and would cut the coun­try’s credit rat­ing. “The essence of the prob­lem... is that Greece needs new money,” Andrew Colquhoun, head of Asia-Pa­cific sov­er­eign rat­ings with Fitch, said at a con­fer­ence in Sin­ga­pore. “Fitch would re­gard such a debt ex­change or vol­un­tary debt rollover as a de­fault event and would lead to the as­sign- ment of a de­fault rat­ing to Greece.”

A month ago Fitch down­graded Greece’s credit rat­ing three notches to B+ and warned it could down­grade the rat­ing fur­ther into junk ter­ri­tory. At the time, the rat­ing agency said an ex­ten­sion of the ma­tu­rity of ex­ist­ing bonds would be con­sid­ered a de­fault. Fitch is not alone in warn­ing that the Euro­pean Union’s ideas may be pro­pel­ling Greece to­ward a debt de­fault. Stan­dard & Poor’s cut Greece’s rat­ing to CCC from B on June 13, and has warned that any at­tempt to re­struc­ture the coun­try’s debt would be con­sid­ered a de­fault. Yes­ter­day, S&P said that it would need to see the de­tail of any Greek res­cue plan to de­ter­mine whether it counts as a de­fault. “We would need to know what’s been put to in­vestors and would it con­sti­tute a de­fault by our cri­te­ria,” S&P’s head of EMEA sov­er­eign rat­ings Moritz Krae­mer said at a con­fer­ence in Lon­don.

Krae­mer said there are “shades of gray” in any deal to ex­change or re­struc­ture dis­tressed debts and that if Greece did exit the euro, that would has­ten a re­struc­tur­ing of its debts. S&P has pre­vi­ously said an ex­ten­sion of sov­er­eign debt ma­tu­ri­ties would con­sti­tute a de­fault, as would a vol­un­tary ex­change, if S&P felt bond­hold­ers had no al­ter­na­tive to ac­cept­ing it. Whether or not an ex­change is deemed vol­un­tary “is not re­ally a fac­tor in our cri­te­ria,” Krae­mer said on the side­lines of the con­fer­ence.

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