Moody's: It considers Greece to have defaulted

Rating agency Moody's Investors Service said late Friday that it considers Greece to have defaulted on its debt hours after the Greek authorities and eurozone officials confirmed Greece's debt swap deal will proceed. The rating decision came after investors holding 85.8 per cent of Greece's private debt on Thursday had agreed to participate in the country's 206 billion euros (about 270 billion U.S. dollars) debt exchange deal, slashing about 100 billion debt from its debt pile. "According to Moody's definitions, this exchange represents a 'distressed exchange', and therefore a debt default," the rating agency said in a statement on its website. "This is because the exchange amounts to a diminished financial obligation relative to the original obligation, and the exchange has the effect of allowing Greece to avoid payment default in the future," it added. Under the debt swap deal, private Greek bondholders would agree to a 53.5 percent haircut on the face value of their Greek bonds in return for a cash payment equivalent to 15 per cent of their original holding and newly issued Greek bonds worth 31.5 per cent of their old bonds. Eurogroup President Jean-Claude Juncker said Friday in a statement that Greece had met all conditions for receiving the second bailout loans and Greece will activate the Collective Action Clauses (CACs) to force holders of bonds governed by Greek law to participate in the swap deal. Moody's said its announcement "has no implications for Greece's issuer rating, which remains C," and stressed it "does not use a 'Default' or 'Selective Default' rating, but rather maintains ratings on securities in default that are indicative of the magnitude of expected losses to investors." The rating agency said it will revisit Greece's rating in due course to assess the impact of the exchange on the sustainability of Greece's debt burden together with other relevant factors, including Greece's likely compliance with measures that are a condition of external support and its growth prospects. Moody's rating decision came hours after another international rating agency Fitch downgraded Greece's long- term foreign- and local-currency rating to "Restricted Default."