Fitch Ratings has downgraded Greece’s credit rating to C after the country came to an agreement on the terms of a second bailout package with the international community.
The beleaguered nation’s long-term foreign and local currency issuer default ratings have been lowered from its previous CCC, taking it to the brink of a default rating.
The downgrade follows confirmation of Greece’s second bailout package, which includes debt restructuring that will see bondholders hit with a loss of the country’s government debt.
Creditors face a 53.5 per cent haircut on the value of Greek government bonds under the terms of the private sector involvement exchange offer. Fitch says this means an effective default by Greece is “highly likely in the near term”.
“In Fitch’s opinion, the exchange, if completed, would constitute a ’distressed debt exchange’ in line with its criteria and consequently yesterday’s announcements set in motion the agency’s process for reviewing Greece’s issuer and debt securities ratings,” the agency says.
If Greece follows through with its intentions to reduce its public debt through an exchange with private creditors, Fitch says it will issue the country with a ’Restricted Default’ rating.