S&P Downgrades Greece To CC From CCC, Expects Recovery Of 30-50% By Principal Bondholders

"Long-Term Sovereign Rating On Greece Cut To 'CC' On Likely Default; Outlook Negative

Overview

Following review of the July 21 statement by the European Council (EC), Standard & Poor's has concluded that the proposed restructuring, in the form of an exchange into discount or par bonds or a rollover into 30-year par bonds, of Greek government debt would amount to a selective default under our rating criteria.

In anticipation of the debt exchange, we have lowered the long-term rating on Greece to 'CC' and we have affirmed the 'C' short-term rating.

The outlook on the ratings is negative.

We view the proposed restructuring as one that would amount to a "distressed exchange" under our criteria because, based on public statements by European policymakers, the debt exchange or rollover is likely to result in losses for commercial creditors, and the objective of the debt exchange/rollover is to reduce the risk of a near-term debt payment default. Under our criteria, we characterize a distressed borrower as one that would--in the absence of debt relief--fail to pay its debt on time and in full.

While no exact date has been announced to initiate Greece's debt restructuring, we understand that it will commence in September 2011 at the earliest.

Our recovery rating of '4' for Greece remains unchanged, indicating an estimated 30%-50% recovery of principal by bondholders..."

at http://www.zerohedge.com/news/sp-downgrades-greece-cc-ccc-expects-recovery-30-50-principal-bondholders