Greece Downgraded From BB- To B As S&P Believes More Than 50% Principal Debt Reduction Would Be Required

Tyler Durden's picture

From S&P:


  • Under our sovereign ratings criteria, a commercial debt rescheduling typically constitutes a default.
  • In our view, there is increased risk that Greece will take steps to restructure the terms of its commercial debt, including its previously-issued government bonds.
  • Accordingly, we are lowering both the long- and short-term ratings on Greece to 'B' and 'C', respectively.
  • We are leaving both ratings on CreditWatch Negative.

Rating Action

On May 9, 2011, Standard & Poor's Ratings Services lowered its long- and short-term sovereign credit ratings on the Hellenic Republic (Greece) to 'B' and 'C', from 'BB-' and 'B', respectively. Both the long- and short-term ratings remain on CreditWatch, with negative implications, where they were first placed on Dec. 2, 2010, and March 29, 2011, respectively. On May 9, 2011, Standard & Poor's '4' recovery rating for Greece remains unchanged--indicating an estimated 30%-50% recovery upon default- and its 'AAA' transfer and convertibility assessment for Greece, which applies to all members of the eurozone, also remains unchanged.


The downgrade reflects our view of increasing sentiment among Greece's key eurozone official creditors to extend the debt payment maturities of their €80 billion of bilateral loans pooled by the European Commission. As part of such an extension, we believe the eurozone creditor governments would likely seek "comparability of treatment" from commercial creditors in the form of their similarly extending bond and loan maturities.

Such private sector burden sharing would likely constitute a distressed exchange according to our criteria, for which we assign a rating of 'SD' for selective default. 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.

Standard & Poor's sovereign ratings address the capacity and willingness of a sovereign to pay its commercial debt. A rescheduling of official debt that left commercial debt untouched would not constitute a default under our criteria but would likely signal declining creditworthiness.

In Standard & Poor's statement on Greece on March 29, 2011, we said that we could lower our ratings on the Republic if either the 2010 final budgetary outcome or 2011 fiscal performance fell below our expectations. In fact, Greece missed its 2010 fiscal target (10.5% of GDP outturn versus 9.6% target) and achieving the 2011 target is uncertain. We believe that many of Greece's eurozone official creditors have concluded that the ensuing higher projected Greek government borrowing requirements have reduced the likelihood that the Greek government will be able to return to commercial markets for medium- and long-term issuance later this year or early next year as originally planned. Accordingly, they may see a restructuring of official and commercial debt as the best way forward.

Although an extension of maturities with no principal discount would likely imply a recovery greater than 50%, our projections suggest that principal reductions of 50% or more could eventually be required to restore Greece's debt burden to a sustainable level, given trend growth potential of the Greek economy.


Standard & Poor's intends to resolve its CreditWatch action within the next three months. If we perceive that the likelihood of a distressed exchange has increased further, the ratings could be lowered again. Conversely, if Greece's eurozone partners exempt commercial creditors from comparability of treatment while extending maturities on their official debt, then our ratings on the Hellenic Republic could stabilize at the current levels.

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ZeroPower's picture

Yawn. EURUSD bit of movement but nothing crazy yet.

The Axe's picture

Greeks fucking German to love

Re-Discovery's picture

The German re-fuck could be epic.

Rynak's picture

Hey, if it were me, i would fully approve the greeks fucking the country over in which i do live... perhaps not a total default, but just enough so that they can manage it.... UNDER THE CONDITION THAT THEY LEAVE THE EMU, DAMMIT!

Why? Simple:

Just make this insanity stop, please.

FunkyMonkeyBoy's picture

My apathy and attention to this never ending dog and pony show just got upgraded from Zzzz to Zzzzz+.

cossack55's picture

Wow. Thats high. zzzzz.......

wandstrasse's picture

yehhs-yawn this is buhhhh-yaawn-buhhhlish-yaaawn-zzzzzzzz

AldoHux_IV's picture

I thought credit ratings agencies were relics of the financial crisis-- day late and a dollar short (pardon the pun).

johngaltfla's picture

But it's not big deal. An isolated incident. Of course once the EUR hits 1.18 this will be a date known as a marker.

ivars's picture

Silver on its way to 30 after a short blip when greed temporarily equated selling  panic.


pazmaker's picture

Silver on its way to 30 after a short blip when greed temporarily equated selling  panic.


...and that has WHAT?? to do with Greece?




mcmoo's picture

That sapos link is from a post in MARCH? Why is that relevant? 

Rynak's picture

More importantly, his numbers are from.... i have no fucking clue what they are from. But who cares? He's part of the troll brigade anyways.

Here's the actual quick market update:

- CRB still sinking, but beginning to stabilize

- silver spot stabilized and rising quickly

- gold spot stabilized and rising quickly

- US dollar index rise stopped, now flat.

Or in short: They kicked the can..... about two weeks far.


hugovanderbubble's picture

Spain will sell Balearic Islands to pay Debt to German Institutions (its a binary option ...or default or sell Land)

The same will be done by Greece:..sell Islands to Rich German Entrepreneurs and obtain forgiven debt schemes

TexDenim's picture

Yes! Carlos Slim will buy Balearic Islands and form a new country, exempt from Mexican taxes. He won't have to learn a new language, because they already speak Spanish there. A great solution for Spain.

AldoHux_IV's picture

It's a race to the bottom in terms of fiat-- no wonder the Crimex needed to bang silver and invariably gold because it would definitely have hit trip digits by now in an unmanipulated market.

TexDenim's picture

ES did a big yawn. Who cares about Greece? It's got an economy about the size of a small American city.

hugovanderbubble's picture

I promise u TEXDENIM, that the problem is not just Greece, is the banking credit dilutive effect specially in Credit Agricole with more than 35.000 Greece loans and Bonds.


and second and most important.,,,SPAIN IS THE REAL MAZE for the ECB members(IMF too)...and if Spain crashes of course US will suffer too.

=Contagious effect.

TexDenim's picture

That's true. It's the whole European mess. The Euro is really just the neo-DM. I suppose the Germans are thinking up some sort of solution. They are really not better off with Spain, Greece and Portugal with their own currencies, which they can then downgrade to screw German exporters.

wandstrasse's picture

...German exporters.


so you think the real economy is involved???

benburnyanki's picture

Nine Vand Str. Das Is Verbotten !!! Do not give away that Merkel just happened to live near the HQ of the Stasi to these sheep matey.

Hell if Meximericans find out they importing from the hidden I.G.Farben and Ford/Opel Panzer factories of big H they would shoot coke a cola out the nozes!

Vee hav a gute Mafia Family Biz running Deutche Exports GmBh so no give it away!

kaiten's picture

Greece still has some rating? Funny.

Imminent Crucible's picture

What's really funny is that Standards Are Poor gives Greek bonds a B rating while projecting a haircut of greater than 50%. CCC- is more like it, and ultimate recovery less than 30%.

But we have to pluck the chickens in stages, or the squawking will wake Mr. Molotov.

hugovanderbubble's picture

Hungary Remember...

Fiat Currencies = DEAD ZOMBIES

mayhem_korner's picture

Wasn't it Greece who pioneered the representative republic structure of government? 

How many years ahead of us are they...

Hephasteus's picture

They all had the same bond prices and all co-signed each others loans. Now they all have different credit ratings and bond prices. There is no Euro any more and there is no EU. All the advantages to being in euro are gone now it's just all those stuffy stifling repressive rules.

Good thing they filled the place with out of fucking nowhere unelected officials that don't represent the interests of anyone other than the banks that run the places.

benburnyanki's picture

they all fookin lawyer. Did you expect them to actually produce a valuable and saleable commodity. Common Matey, Lawyers are not worth 2 wooden nickles = 1 Greek Drachma

I, for example, crank out 5000 french fries for every dollar of pay I get! Do not try that at home BTW.

bugs_'s picture

5 cents on the drachma

nauagos020's picture


hello i am Greek.

I am a real estate developer (with no loan obligation) and even now in the so called greek-crisis i am building 5 apartment buildings, 1 office building and 2 holiday-residence complexes.

PLEASE listen carefully what i have to say about Greece.

Greece is one of the poorest countries but the Greeks (as an average) are very wealthy.

I am not talking about wealth being happy, healthy and so on.

Greeks (as an average) own more real estate that any other,

They do not rely on lending as much as other eauropeans or americans

They have gold (especially english gold pounds) that no average european or american has

I am not saying they are good people or that they have a lot of exports i am just saying they are wealthy.

However the wealth they have you cannot find it anywhere because it is no declared anywhere.

My friend that works for 850 euros per month has 4 acres of land outside the city near the sea, 24 gold coins (worth 6000 euros) he got as a gift from his family on the day he was born 25 years ago, and his own apartment he bought with no loan for 230000 euros (i am not talking about what his family owns but what he owns). How can this happen? he gets his 850 euros, he has a second job (as a plumber-not declared) that gets him another 850 euros (where he pays no taxes-poor Greece), he has a farm in the 4 acres that gets him minimum 1000 euros (from selling produce) also not declared anywhere (so he pays no taxes-poor Greece) and some times (3 or 4 times per year) he earns another 2000 to 2500 euros doing part time jobs  (like waiting or plumbing in hotels in summer-not declared and tax-free ofcourse). So he gets 10200 from his day job thatbecause in Greece until 12000 income you pay no tax he is tax free and 25000 euros from the rest that are tax free. so with a clean income of 35000 spending less that 9000 per year (no rent or mortgage) say 10000 with his vacations (health insurance and so on have been discounted from his 1050 euros pay giving him 850 euros) he gets 25000 euros in his bank each year.

That is why greek people are rich but Greece as a country is poor. The example i gave you can happen in smaller numbers (however not vry often) but at the most of time can be really magnified in case we talk about doctors, lawyers and so on that make  with the same method (these are real - calculated numbers) 200000 euros at least but they declare 12000 geting away tax free.

sure there are poor people and rich people like any country, sure there are people loosing their homes to the banks like every country.

But as an average believe me

Greeks are wealthy.

So whether Greece leaves Eurozone or not, whether drachma comes back it doesnt really matter.

All that matters is that the Banksters (Rothchilds and the gang -imf fed central bank of Greece...all properties of the same families...Rothchilds and the gang) come and get Greece for a  fraction of what it really costs. It is happening and it will continue to happen and the Greeks will beg for it to happen so that they continue to have theur 25000 at their bank accounts each year because they do not care what happens to the railway stations, the ports, the energy/water companies. They may even give them free like we did with Meganisi Island that the Rothcilds bought to build homes for the super rich just a cople of months ago(they bought land with value 60 mil euros for 6 mil euros).

To sum up...

do not worry about the Greeks just worry about Greece (but why should you-Greeks don't) and wahtever you do always remember it does not matter what you feel or what you do you are not in control no one except a few, very very few people are and what they want will happen and you DO NOT  know what will hapen NOONE does. You just guess.

lolmao500's picture

Funny how the US is as in bad shape as Greece but isn't downgraded.

Quantum Nucleonics's picture

Wow, S&P might actually be out in front of the news here... well, sort of.  They are saying the haircut will be 50%-ish, but the bonds are trading at 60-ish.  So they are saying the price needs to drop by 20%-ish. (On the other hand, a "B" rating seems a little high for a likely default with a 50% haircut, why don't they grow a pair and drop them to "C" or "CC"?)