by Charles Forelle
Wall Street Journal
June 21, 2011
Greece’s downgrade by Standard & Poor’s last week, to a rating of triple-C, reduces the euro-zone’s room to share some of the burden of Greece’s new bailout with its private creditors.
Here’s why.
Euro-zone leaders and the European Central Bank have made clear they intend to avoid having the ratings companies place Greece into “selective default.”
As we tediously explained a few weeks ago, that classification is used for issuers who have some of their obligations in default. An obligation is in default when the terms of repayment to creditors are materially modified.
Does some sort of “voluntary” offer to creditors to take longer-term debt in place of their soon-to-mature securities constitute default?
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