S&P cuts Greece's long-term ratings to 'selective default'

Standard & Poor's yesterday cut Greece's long-term ratings to 'selective default', the second ratings agency to go ahead with a widely expected downgrade after the country announced a bond swap plan to lighten its debt burden.

According to S&P, once the debt exchange was concluded, it would likely up the sovereign rating of Greece to the speculative 'CCC' category.

The agency said it lowered its sovereign credit ratings on Greece to 'SD' after the Greek government's retroactive insertion of collective action clauses (CACs).

It added Greece's retroactive insertion of CACs -- which enforced losses on investors that do not voluntarily sign up to the offer -- changed the original terms of the affected debt making the exchange a "distressed debt restructuring".

The bond swap was formally launched on Friday, and the deal would see bondholders take losses of 53.5 per cent on the nominal value of their Greek holdings, with actual losses put at around 74 per cent.

S&P said if enough bondholders chose not to go for the bond swap offer, Greece would face an imminent outright payment default.