Greece’s debt rating lifted out of default category

Greece’s sovereign debt rating was lifted out of the default category by Standard & Poor’s after the country completed the largest debt restructuring in history.

Greece completed the third settlement in its €206bn debt exchange on Apr 25 after private investors agreed to write down about €100bn in the face value of their Greek bond holdings.

S&P downgraded the issuer rating to SD from CC on Feb 27 after the country inserted collective action clauses into Greek bonds to force investors to take part in the exchange.

The long-term sovereign debt rating was raised to CCC from SD, or selective default, with a stable outlook, the ratings company said in a statement.

“While the exchange has, in our view, alleviated near-term funding pressures, Greece’s sovereign debt burden remains high,” S&P said.

“Additional, albeit yet unspecified, deficit-reduction measures are likely to further exacerbate popular discontent with Greece’s budgetary consolidation strategy.”

Lucas Papademos’s government had to approve budget cuts and economic reforms in exchange for a €130bn rescue package from the EU and IMF.

A new government after elections are held on Sunday will have to decide on additional budget cuts for 2013 and 2014.

Foreign-law bonds that were not tendered into the exchange will retain their default rating, S&P said.

The participation rate in the debt swap was 96.9%, Greece’s finance ministry said last week.

Greece’s May 6 elections will determine the country’s strategic future and the next government must implement all measures passed through parliament required in return for a second bailout, Papademos, the prime minister, said.

“These elections will judge Greece’s strategic direction,” Papademos said at his last Cabinet meeting in Athens yesterday.

“The country’s future for the next decades is being determined and not just what government will be formed.”

Papademos said his interim government had positive results in averting “immediate dangers” to Greece and reforms must continue to be imple-mented by the next administration as conditions are still “particularly difficult”.

—Bloomberg