What Does Fitch Have to Say About Greece’s Debt Swap?
Greece’s debt swap has been met with approval by Fitch Ratings, which raised its long-term foreign and local currency issuer default ratings from Restricted Default to B- with stable outlooks on Tuesday. Fitch cited the 96 percent participation rate in the distressed debt exchange as the reason for its upgrade.
However, though Athens carried out the single largest debt writedown in history, international debt inspectors warn that the country’s recovery will be slower and harder than expected, and the new B- rating, which applies to the new bonds issued under Greek law, is still junk status; the new bonds are by no means investment grade.
The European Union’s executive commission, the European Central Bank, and the International Monetary Fund have indicated that Greece will have to make strenuous efforts in economic and budgetary reform, even with the 130 billion-euro bailout the debt swap helped secure. Now in its fifth year of recession, Greece’s economy is now expected to recover more slowly than previously thought and will stagnate in 2013, according to the troika’s most recent assessment. Growth is expected to return only in 2014.
Greece’s short-term foreign currency IDR has been upgraded to B from C, while foreign-law bonds remain a C, as the settlement date for their swap is not until April 11.
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