29 Feb 2012

Standard and Poor's downgrades Greece

5:24 am on 29 February 2012

Ratings agency Standard and Poor's has again downgraded Greece's credit rating.

It has classified Greek debt as being in selective default.

Standard and Poor's action follows the launch of a major debt restructuring programme by Greece on 24 February.

Key creditors agreed to accept losses on their investments of nearly 75% by swapping their existing bonds for new ones which have a lower face value and which offer inferior returns.

The exchange is meant to be voluntary, but Greece has altered the terms of some of its existing bonds by inserting collective action clauses which mean that if enough of its creditors sign up to the deal any remaining investors can be forced to accept the new terms as well.

Standard and Poor's says that because these clauses materially change the terms of the original debt, they undermine creditors bargaining power and amount to a selective default.