London, 25 July 2011 -- Moody's Investors Service has today downgraded Greece's local-
and foreign-currency bond ratings to Ca from Caa1 and has assigned
a developing outlook to the ratings.
The combination of the announced EU support programme and debt exchange
proposals by major financial institutions implies that private creditors
will incur substantial economic losses on their holdings of government
debt. The rating's developing outlook reflects the current
uncertainty about the exact market value of the securities creditors will
receive in the exchange. After the debt exchanges have been completed,
Moody's will re-assess the credit risk profile of any outstanding
or new securities issued by the Greek government.
The announced EU programme along with the Institute of International Finance's
(IIF's) statement (representing major financial institutions) implies
that the probability of a distressed exchange, and hence a default,
on Greek government bonds is virtually 100%. The magnitude
of investor losses will be determined by the difference between the face
value of the debt exchanged and the market value of the debt received.
The IIF has indicated that investor losses are likely to be in excess
of 20%.
Looking further ahead, the EU programme and proposed debt exchanges
will increase the likelihood that Greece will be able to stabilize and
eventually reduce its overall debt burden. The support package
for Greece also benefits all euro area sovereigns by containing the severe
near-term contagion risk that would likely have followed a disorderly
payment default or large haircut on existing Greek debt. However,
Greece will still face medium-term solvency challenges: its
stock of debt will still be well in excess of 100% of GDP for many
years and it will still face very significant implementation risks to
fiscal and economic reform.
PREVIOUS RATING ACTION & METHODOLOGY USED
Moody's previous rating action on Greece was implemented on 1 June
2011, when the rating agency downgraded Greece's government
bond ratings by three notches to Caa1 from B1. Prior to that,
Moody's last rating action on Greece was taken on 9 May 2011,
when the rating agency placed Greece's government bond ratings on
review for possible downgrade.
The principal methodology used in this rating was "Sovereign Bond
Ratings", which was published in September 2008. Please
see the Credit Policy page on www.moodys.com for a copy
of this methodology .
REGULATORY DISCLOSURES
For ratings issued on a program, series or category/class of debt,
this announcement provides relevant regulatory disclosures in relation
to each rating of a subsequently issued bond or note of the same series
or category/class of debt or pursuant to a program for which the ratings
are derived exclusively from existing ratings in accordance with Moody's
rating practices. For ratings issued on a support provider,
this announcement provides relevant regulatory disclosures in relation
to the rating action on the support provider and in relation to each particular
rating action for securities that derive their credit ratings from the
support provider's credit rating. For provisional ratings,
this announcement provides relevant regulatory disclosures in relation
to the provisional rating assigned, and in relation to a definitive
rating that may be assigned subsequent to the final issuance of the debt,
in each case where the transaction structure and terms have not changed
prior to the assignment of the definitive rating in a manner that would
have affected the rating. For further information please see the
ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.
The rating has been disclosed to the rated entity or its designated agent
and issued with no amendment resulting from that disclosure.
Information sources used to prepare the rating are the following:
parties involved in the ratings, parties not involved in the ratings,
and public information.
Moody's considers the quality of information available on the rated
entity, obligation or credit satisfactory for the purposes of issuing
a rating.
Moody's adopts all necessary measures so that the information it uses
in assigning a rating is of sufficient quality and from sources Moody's
considers to be reliable including, when appropriate, independent
third-party sources. However, Moody's is not an auditor
and cannot in every instance independently verify or validate information
received in the rating process.
Moody's Investors Service may have provided Ancillary or Other Permissible
Service(s) to the rated entity or its related third parties within the
three years preceding the credit rating action. Please see the
ratings disclosure page on our website www.moodys.com for
further information.
Please see Moody's Rating Symbols and Definitions on the Rating Process
page on www.moodys.com for further information on the meaning
of each rating category and the definition of default and recovery.
Please see ratings tab on the issuer/entity page on www.moodys.com
for the last rating action and the rating history.
The date on which some ratings were first released goes back to a time
before Moody's ratings were fully digitized and accurate data may not
be available. Consequently, Moody's provides a date that
it believes is the most reliable and accurate based on the information
that is available to it. Please see the ratings disclosure page
on our website www.moodys.com for further information.
Please see www.moodys.com for any updates on changes to
the lead rating analyst and to the Moody's legal entity that has issued
the rating.
London
Sarah Carlson
Vice President - Senior Analyst
Sovereign Risk Group
Moody's Investors Service Ltd.
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
New York
Bart Oosterveld
MD - Sovereign Risk
Sovereign Risk Group
Moody's Investors Service, Inc.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Moody's Investors Service Ltd.
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JOURNALISTS: 44 20 7772 5456
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Moody's downgrades Greece to Ca from Caa1, developing outlook