Financial Times
July 21, 2011
One thing is likely after this week’s negotiations in Brussels: Greece will become the first western developed world country to default in more than 60 years.
Strategists expect all three main rating agencies to determine that Greece has defaulted, because bondholders will suffer losses whatever plan policymakers decide to adopt involving private creditors. The options are debt exchanges, rollovers or buy-backs.
Although all three rating agencies were not commenting on Thursday, strategists say Standard & Poor’s is likely to put Greece on selective default, while Fitch will follow a similar route and put the country on restricted default, which is the same thing.
Strategists assume Moody’s will announce that Athens is in default, even though the agency does not have a specific default rating.
The terms “selective” and “restrictive” default mean Greece as an issuer will default, but only some of its bonds will be downgraded. Bonds that are not affected by whatever private creditor plan is used will not be defaulted.
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