Fitch drops Greek rating by two notches

People pass a begging man holding a cardboard reding' I'm hungry' in central Athens on February 21, 2012

Source: Press TV
http://www.presstv.ir/detail/228015.html

Fitch credit rating agency has further downgraded Greece from ‘CCC’ to ‘C,’ after the country said it may force losses on private creditors who do not voluntarily sign up to a debt deal.

The international agency said Wednesday that Greece's rating would drop further to 'restricted default' after the bond swap plan is completed and will be re-rated again "at a level consistent with the agency's assessment of its post-default structure and credit profile."

"The exchange, if completed, would constitute a 'distressed debt exchange'," Fitch said.

The bond swap deal with private creditors will see EUR 107 billion of Greece's debt held by banks and other private holders of government bonds written off.

According to Fitch, private bondholders will see a 53.5 percent cut in the nominal value of their credits, thus some creditors may not accept the deal voluntarily, meaning that Greece would adopt the collective action clauses (CAC).

CAC allows a supermajority of bondholders to agree to a debt restructuring that is legally binding on all holders of the bond, including those who vote against it.

On Tuesday, Eurozone finance ministers agreed to provide Greece with a new EUR 130 billion loan to help the heavily indebted country stabilize its debt-to-GDP ratio and avert looming bankruptcy.

Greece had earlier in the month approved the austerity cuts demanded by the troika of the European Union, the European Central Bank and the International Monetary Fund, which was required in order to unlock the new bailout package.

The announcement of the austerity measures caused days of violent demonstrations in Athens that led to tens of people being injured, more than 100 shops being looted and a number of buildings set on fire.

Greece has the highest debt burden in proportion to the size of its economy in the 17-nation eurozone. Despite austerity cuts and the bailout funds, the country has been in recession since 2009.