Moody's Upgrades Greek Banks' Senior Unsecured Debt Rating

Moody’s Investors Service has today upgraded to Ca from C the long-term senior debt ratings of Greece’s four systemic banks — Alpha Bank AE, Eurobank Ergasias S.A., National Bank of Greece S.A., and Piraeus Bank S.A. At the same time, Moody’s affirmed the Caa3 long-term deposit ratings of the aforementioned banks (and Attica Bank S.A.), and upgraded all five banks’ baseline credit assessment (BCA) to caa3 from ca.
“The upgrade of the Greek banks’ BCAs and debt ratings primarily reflects the successful completion of the recapitalization process by all rated banks, which has strengthened their capital metrics, as well as our expectation of modest and gradual improvements in funding,” said Nondas Nicolaides, a Senior Credit Officer at Moody’s. “Our ratings balance these improvements in the banks’ credit profiles against the still significant downside risks due to the fragile operating environment in Greece.”
In a press release issued by Moody’s, it is stated that “The upgrade of all five Greek banks’ BCAs to caa3 from ca reflects the recent recapitalization, and Moody’s expectations of modest funding improvements that will support profitability, balanced against downside risks due to the fragile operating environment.
The same press release underlines that “The upgrade of the four systemic banks’ senior debt ratings to Ca from C reflects Moody’s view that the risk of potential expected losses for senior debt holders has reduced, but remains high. The rating agency notes the crystallisation of losses for senior debt holders through the banks’ liability management exercises (LMEs). These LMEs included an offer to investors to voluntarily exchange their senior debt with new shares of the bank worth 100% of the debt’s par value.
Although, any investors that sold their stock holdings in the first few days of trading after the actual exchange took place were able to recoup a substantial portion of their senior debt holdings’ par value, investors that retained such new shares to date are facing significant losses. Following the banks’ recapitalization and improved credit profiles, with the potential for more favorable prospects going forward, the rating agency considers that senior debt investors are less likely to sustain considerable losses.”
(Source: Moody’s Investors Service)

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