Standard & Poor’s Ratings Services said today that under its ratings criteria, application of retroactive “Collective Action Clauses” (CACs) affecting the timing or amount of debt service payments on outstanding Greek-law governed sovereign debt would constitute a selective default. Were such CACs implemented, Standard Poor’s would lower the sovereign credit rating (the issuer credit rating) on Greece to ‘SD’.
In the case of the Greek parliament passing legislation that would permit the amendment of Greek-law governed outstanding sovereign debt issues to retroactively include CACs, we would lower the issue ratings on debt issues concerned to ‘D’ from ‘CC’. For non-Greek-law governed sovereign debt issues unaffected by any change in Greek law, we would maintain our issue ratings on such non-Greek-law governed issues at ‘CC’, but subsequently lower the issue ratings to ‘D’ if and when they became eligible for the upcoming debt exchange. Under Standard & Poor’s criteria, an issuer’s unilateral change of the original terms and conditions of an obligation–even if not necessarily significant–may be viewed as a de facto restructuring and thus an event of default.
(source: Reuters)
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