Wall Street Journal
May 9, 2011
Ratings company Standard & Poor's Corp. Monday downgraded its rating on Greece to B—lower than what it rates war-ravaged Angola—saying it's increasingly likely that creditors will be asked to lengthen the maturities of existing bonds and loans.
The ratings company said such an extension would lead creditor governments to seek "comparability of treatment" from commercial creditors in the form of their similarly extending bond and loan maturities. This burden sharing "would likely constitute a distressed exchange," according to S&P's criteria.
"Even if there were no discount of principal, such an extension of maturities is generally viewed to be less favorable to commercial creditors than repayment according to the original terms of the debt," S&P said in its report. S&P said an extension of maturities with no principal discount would likely imply a recovery greater than 50%.
However, its projections suggest that principal debt reductions of 50% or more could eventually be required to restore Greece's debt burden to a sustainable level, given the potential for growth in the Greek economy.
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