Moody's downgrades Greece after debt swap

msnbc ^ | 3/3/2012 | Reuters

[tobyhill]

Moody's Investors Service on Friday cut Greece's sovereign debt rating to the lowest possible level after a debt-restructuring deal that imposes hefty economic losses for private creditors.

Moody's lowered Greece's local and foreign-currency bond ratings a notch to C from Ca, becoming the third credit rating agency to downgrade the country following the announcement of the swap deal to lighten its debt burden.

Moody's says that bonds rated C "are the lowest rated class and are typically in default, with little prospect for recovery of principal or interest." The rating agency added that it did not assign any future outlook.

"The announced debt exchange proposal," the credit rating agency said in a statement, "implies that private creditors that participate will incur substantial economic losses on their holdings of the Greek government debt."

On Monday, Standard & Poor's cut Greece's long-term ratings to "selective default," the second ratings agency to proceed with a widely expected downgrade after the country announced the bond swap.

[kabar]

Not very meaningful. It is like kicking a corpse, which has been dead for a long time.

[Nervous Tick]

Nobody but an idiot would loan them money now.

So I guess that means Ben Bernanke and Barack Obama will be first in line...

[blueunicorn6]

“Haircuts! Haircuts here! Come to Greece and get a haircut!”

[SunkenCiv]

Thanks tobyhill.

[Principled]

Nobody but an idiot would loan them money now.

Now?

Nobody but an idiot ever would - in the last 10 years.

I guess the idiots who did just weren't sufficiently educated in common sense to know that you can't consistently overspend and avoid running out of money.

[broken_arrow1]

Moody’s downgraded Greece’s rating from C— to MOOCH++!

[KarlInOhio]

They've been downgraded from drunken brother-in-law to meth addict cousin.

[expat2]

They figured that their CDS insurance would kick in and save their a$$es, but the banks that sold them the insurance aren’t about to pay off unless dragged kicking and screaming to it.

[KarlInOhio]

All of the attempts to force a "voluntary" principal reduction is a way for the banks to avoid paying the CDS. Since it was a voluntary reduction in principal the CDS default terms isn't triggered.

If I directly held those bonds I would rather have the default than get a 50% haircut now and then have almost all of the rest disappear when they leave the euro and immediately devalue the new drachma.

[Glenn]

Come to Greece and get a haircut!

Unless you are the ECB. They made sure they were made whole in this mess.

[expat2]

If I directly held those bonds I would rather have the default than get a 50% haircut

Exactly, but that's the last thing the CDS counter-party wants.

[Lancey Howard]

How do you “downgrade” from “dead”?

[Jacquerie]

Over a 21 day period, US debt last month went from 100% to 101% of GDP.

Recently middle class Greeks are dumpster diving for food. The ones that can escape, do so, without any money of course, for the government long ago instituted currency controls.

When the time arrives, where will Americans run to?

[SaxxonWoods]

Oh, it’s meaningful. That’s why Moodys did it on a Friday after the markets closed. They are giving investors all weekend to get over any panice and set up trading strategies for Monday.

Even after the latest bailout (which goes directly to the banks, not Greece), the losses are estimated at 70%. Yet the bond insurance is not being allowed to pay off on the losses. This will be the largest effect. Now everyone knows that bond insurance is a fraud. Which means bond yields in the eurozone will rise, perhaps sharply, to cover the newly realized risk.

Watch Spain and Portugal.

[kabar]

The markets already took the rating into account. It will not have any meaningful effect when the markets open on Monday. The ECB has already agreed to the terms worked out by the EU and the Greek government. The bond holders have agreed to the haircut. And the agreement signed by 25 of the 27 members of the EU will stave off interest increases in the short term.

IMO everyone knows that Greece is going thru a slow motion default. It is not a matter of if but when. The EU is just buying time for a soft landing. Greece will be getting out of the Eurozone. It can't and won't implement the austerity measures even though parliament passed them. It is just some kabuki theater so the Greeks can meet their next bond payments and get the EU handout.

[Nip]

Which is more accurate - Moody's or the Central European bank?

I vote for Moody's because they have to be accurate to stay in business. The Central European Bank, on the other hand, is a politically created organization. As such, it depends on parroting the correct political phrases to stay in power.

We, those of you think about things, knew this was where Greece was going to end up back in December when the “haircut” was first announced. I now am thinking about the other P.I.I.G.S. economies and where they are likely to end up in the next year or so.

[Nervous Tick]

>> I guess the idiots who did just weren’t sufficiently educated in common sense to know that you can’t consistently overspend and avoid running out of money.

What, then, do you think explains the fact that people all over the world loan US money by the trillions per year?