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Fitch upgrades Greek rating following bond swap

03-14-2012 11:01 BJT

LONDON, March 14 (Xinhua) -- Leading rating agency Fitch on Tuesday upgraded new bonds issued under Greek law to "B-" with stable outlooks as the debt-laden country completed a bond swap designed to open ways for the launch of the second bailout fund.

It is the first time Greece's rating has been upgraded since the country's sovereign debt crisis broke out at the end of 2009 and the first Fitch upgrade since 2003.

Though breezing a whiff of comfort for Greek leaders agonizing over the prospect of a possible default, the upgraded rating still falls short of the investment grade.

Fitch warned investors of significant writedowns to face value and difficulties of the country's economy, which is in its fifth year of recession.

"In Fitch's opinion, these considerations limit the potential gain that could be derived from any future restructuring of private sector bond holdings and underline the burden that could fall on official creditors," said a Fitch statement.

The Greek government said it had completed a bond swap program worth over 177 billion euros (about 232 billion U.S. dollars) as part of efforts to avoid a disorderly default.

The Greek government confirmed that 96 percent of private creditors agreed to participate in the bond swap, under which they exchange their holding of maturing bonds issued under the Greek law with lower-yield, longer-term securities.

Under the deal, private creditors will lose more than 70 percent on their holdings of the Greek bonds, allowing Athens to slash 105 billion euros (136 billion dollars) of its debt from the total pile of 305 billion euros (396 billion dollars).

Fitch kept a C rating for Greek bonds issued under foreign law as writedowns in this category won't be completed until early April. The deadline for investors to accept debt reduction for such bonds has been extended to March 23.

Fitch downgraded Greece's sovereign rating to "restricted default" last Friday, hours after the Greek authorities and eurozone officials confirmed that Greece's debt swap deal would proceed.

Greece is looking to receive the second bailout fund of 130 billion euros (about 171 billion dollars) as its parliament goes into session Wednesday to approve the new bailout.

Eurogroup President Jean-Claude Juncker announced late Monday that eurozone finance ministers have politically adopted the bailout program for Greece, but warned that the final launch of the program hinges on several preconditions including the agreement by the International Monetary Fund to contribute 28 billion euros (36 billion dollars) to help ease the Greek debt burden.

In a related development, Moody's downgraded Cyprus' government bond rating by one notch to BA1 from BAA3 on Tuesday and assigned a negative outlook to the ratings, citing the country's banking sector's exposure to Greece.

However, Moody's also noted "positive developments" in Cyprus since it placed the country's rating on review for downgrade in November 2011.

Editor:Wang Lingfei |Source: Xinhua

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