Moody’s downgrades Greece’s credit rating again

Moody’s rating agency has cut Greece’s credit rating again, citing a risk of default despite a recent debt write-off deal.

Moody’s cut Greece’s rating from “Ca” to “C”, the lowest level on its scale.

The agency said on Friday: “Today’s rating decision was prompted by the recently announced debt exchange proposals for Greece, which imply expected losses to investors in excess of 70%.”

The deal writes off 107 billion Euros ($141.3 billion) of Greece’s debt.

Moody’s said the planned debt exchange, which involves private investors of Greek debt writing off much of the 206 billion Euros in Greek bonds they hold, “would constitute a distressed exchange, and hence a default”.

The agency acknowledged that the deal was necessary to help stabilize Greece. But Moody’s said: “The risk of a default even after the debt exchange has been completed remains high. Moody’s believes that Greece will still face medium-term solvency challenges.

“The country is unlikely to be able to access the private market once the second assistance package runs out; and its planned fiscal and economic reforms will still face very significant implementation risks.”

Earlier this week the Standard & Poor’s agency classified Greek debt as in “selective default”.