And, it is that haircut which has caused the S&P action. The nation essentially defaulted on those private obligations, the ratings agency says.
Standard & Poor’s Ratings Services said today that it has lowered its ‘CC’ long-term and ‘C’ short-term sovereign credit ratings Hellenic Republic (Greece) to ‘SD’ (selective default).
It its opinion, S&P stated:
We lowered our sovereign credit ratings on Greece to ‘SD’ following the Greek government’s retroactive insertion of collective action clauses (CACs) in the documentation of certain series of its sovereign debt on Feb. 23, 2012. The effect of a CAC is to bind all bondholders of a particular series to amended bond payment terms in the event that a predefined quorum of creditors has agreed to do so. In our opinion, Greece’s retroactive insertion of CACs materially changes the original terms of the affected debt and constitutes the launch of what we consider to be a distressed debt restructuring. Under our criteria, either condition is grounds for us to lower our sovereign credit rating on Greece to ‘SD’ and our ratings on the affected debt issues to ‘D’.
It is another example of a credit rating agency telling the financial markets what they knew several days ago
Douglas A. McIntyre