Greek Debt Rating Is Cut to Caa1 From B1 by Moody’s
Greece’s local and foreign currency bond ratings were cut to Caa1 from B1 by Moody’s Investors Service, which cited a growing risk that the country will default on its debt.
Moody’s said the outlook on Greek debt is negative, meaning that the rating could be reduced further. The rating is seven steps below investment grade.
“Greece is increasingly likely to fail to stabilize its debt ratios within the timeframe set by previously announced fiscal consolidation plans,” Moody’s said today in a statement. The country is also unlikely to meet its previously announced budget targets for 2011, it said.
European officials readying Greece’s second bailout in two years are preparing to ask investors to reinvest in new debt when existing bonds mature, overcoming central bankers’ objections to any restructuring. European leaders are trying to prevent the euro area’s first sovereign default after last year’s 110 billion-euro ($158 billion) rescue failed to prevent an investor exodus from Greece.
Greece was due to return to financial markets and sell about 30 billion euros of bonds next year. With its 10-year bonds yielding 16.1 percent, more than twice that at the time of the bailout, the European Union has indicated that Greece will need more aid to plug its financing gap.
The move by Moody’s follows a two-grade cut to B, five levels below investment grade, by Standard & Poor’s on May 9, which said further reductions are possible as the risk of default rises. The same day, Moody’s placed Greece’s B1 ratings on review for a possible downgrade.
To contact the editor responsible for this story: Steven Fromm at sfromm@bloomberg.net
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