S&P cuts Greek rating on restructuring fears
Credit rating agency Standard and Poor’s has cut Greece’s rating to B from BB-, dragging it further into junk territory over concerns that a debt restructuring is increasingly likely.
One year into its EU/IMF bailout, Greece is struggling with weak revenues and a deep recession, fuelling speculation that it will have to restructure its debt to pull itself out of the fiscal mess that triggered the eurozone’s crisis.
“In our view, there is increased risk that Greece will take steps to restructure the terms of its commercial debt, including its previously-issued government bonds,” the agency said in a statement, warning that more downgrades could come.
S&P said eurozone countries would likely want private holders of Greek government debt to extend bond maturities as governments consider easing terms on the bailout that saved Greece from bankrupcty last year.
It said its projections suggest that principal reductions of 50 percent or more, known as a haircut, could be needed to restore Greece’s debt burden to a sustainable level.
Greece, whose fiscal slippages triggered Europe’s debt crisis, is rated junk by all three major rating agencies. All other eurozone countries have investment grades only.
Today’s rating puts S&P’s rating of Greece one notch below Moody’s B1 grade and four notches below Fitch’s BB+ rating.