Agencies: Voluntary rollover equals default
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.