July 27 (Bloomberg) — Greece will partially default on its debt once European officials push through a plan that will see bondholders foot part of the bill of a second bailout agreed to last week in Brussels, Standard & Poor’s said.
The rating company also cut its ranking for Greece to CC, two steps above default, from CCC, according to a statement published in London today. The outlook on the debt is negative.
“The proposed restructuring of Greek government debt would amount to a selective default under our rating methodology,” S&P said. “We view the proposed restructuring as a ‘distressed exchange’ because, based on public statements by European policy makers, it is likely to result in losses for commercial creditors.”
EU leaders agreed last week that bondholders will contribute 50 billion euros ($72 billion) to a new rescue package, with euro-region governments and the International Monetary Fund putting up a further 109 billion euros. The July 21 accord strengthened the region’s bailout mechanism to offer protection to other euro-region nations such as Ireland and Spain to avert contagion
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