NEW YORK (TheStreet) -- Greece's private creditors may have agreed to a debt exchange swap with the struggling country but that doesn't mean Moody's has to like the deal.
The ratings agency lowered its rating on Greece's local- and foreign-currency bond ratings to its lowest rating of C from Ca and didn't assign an outlook for the ratings because it still sees a "very high likelihood" that the country will default.
"The announced debt exchange proposal implies that private creditors that participate will incur substantial economic losses on their holdings of Greek government debt," the agency said in a statement. "Moody's estimates that the percentage difference between the value of the coupon and principal promised by existing Greek government bonds and the value of the package investors will receive in the exchange exceeds 70%, which is consistent with a C rating."
There are still many details to be worked out with this debt swap and the conditions being set by Eurozone leaders for Greece to receive its next round of bailout monies, though the parameters of a deal have already been laid out. Moody's expects more clarity on the debt swap early this month when the exchange is executed, but it's got plenty of big-picture reservations."Looking ahead, the EU programme and proposed debt exchanges will reduce Greece's debt burden, but the risk of a default even after the debt exchange has been completed remains high," the agency said. "Moody's believes that Greece will still face medium-term solvency challenges: its stock of debt will still be well in excess of 100% of GDP for many years; the country is unlikely to be able to access the private market once the second assistance package runs out; and its planned fiscal and economic reforms will still face very significant implementation risks. U.S. stocks haven't been hampered by the debt problem in Europe in 2012 with the Dow Jones Industrial Average rising 6.2%; the S&P 500 advancing nearly 9%, and the Nasdaq Composite soaring 14.2%. --Written by Michael Baron in New York.
>To contact the writer of this article, click here: Michael Baron.
Select the service that is right for you!COMPARE ALL SERVICES
Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.
- Real Money + Doug Kass + 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV