Thread: S&P Downgrades Greece To CCC, Outlook Negative

Greece Gets Triple Hooked: S&P Downgrades Country To CCC, Outlook Negative

Submitted by Tyler Durden
06/13/2011 12:24 -0400
102 comments

And there goes the EUR again. Furthermore, "Outlook Negative" on CCC means CC is next, then C, and lastly, D.

Overview

* In our view Greece is increasingly likely to restructure its debt in a manner that, under the conditions of any package of additional funding provided by Greece's official creditors, would result in one or more defaults under our criteria.

* We are also of the view that risks for the implementation of Greece's EU/IMF borrowing program are rising, given Greece's increased financing needs and ongoing internal political disagreements surrounding the policy conditions required by Greece's partners.

* Accordingly, we have lowered Greece's long-term rating to 'CCC', while affirming its 'C' short-term rating and removing the ratings from CreditWatch. The outlook is negative.

* The 'AAA' transfer and convertibility assessment for Greece, which applies to all members of the eurozone, is unchanged.

* Our recovery rating of '4' for Greece also remains unchanged, indicating an estimated 30%-50% recovery of principal by bondholders. We have revised our recovery rating base case default scenario for Greece to incorporate two hypothetical restructurings: an extension of maturities, followed by principal "haircuts".

Rating Action

On June 13, 2011, Standard & Poor's Ratings Services lowered its long-term sovereign credit ratings on Greece to 'CCC' from 'B'. The short-term rating was affirmed at 'C'. The ratings were removed from CreditWatch. The outlook on the long-term ratings is negative.

Standard & Poor's '4' recovery rating for Greece remains unchanged--indicating an estimated 30%-50% recovery upon default--and its 'AAA' transfer and convertibility assessment for Greece, which applies to all members of the eurozone, also remains unchanged.

Rationale

The downgrade reflects our view that there is a significantly higher likelihood of one or more defaults, as defined by our criteria relating to
full and timely payment, linked to efforts by official creditors to close an emerging financing gap in Greece. This financing gap has emerged in part because Greece's access to market financing in 2012 and possibly beyond, as envisaged in the current official EU/IMF program, is unlikely to materialize.

This lack of access, in our view, creates a gap between committed official financing and Greece's projected financing requirements. Greece has heavy near-term financing requirements, with approximately €95 billion of Greek government debt maturing between now and the end of 2013 along with an additional €58 billion maturing in 2014.

Moreover, the downgrade reflects our view that implementation risks associated with the EU/IMF program are rising, given the increasingly complicated political environment in Greece coupled with its current difficult economic climate.

In Standard & Poor's May 9, 2011 press release on Greece, we stated that we could lower our long-term rating further if we concluded that risk of a distressed debt exchange had increased. While we believe that official eurozone creditors are likely to provide additional funding to help close the emerging financing gap, based on recent statements made by the German government ahead of the June 20, 2011 Eurogroup meeting, we believe some official creditors will see restructuring of commercial debt as a necessary condition to such additional funding. We believe that private sector burden sharing could take the form of a debt exchange offer or an extension of debt maturities. In our view, any such transactions would likely be on terms less favorable than the debt being refinanced, which we, in turn, would view as a de facto default according to Standard & Poor's published criteria. In that event, under our criteria, this would result in the rating on the affected instruments being lowered to 'D,' while Greece's credit rating would be lowered to 'SD'(selective default). We are also of the view that, even if official creditors do not adopt this approach at the next Eurogroup meeting, the likelihood of such an action over the next year has increased materially.

In our view, the continuing recession in Greece (with unemployment rising to 16.2% in March 2011, up from 11.6% in March 2010) partly explains the weaker-than-planned budgetary performance so far this year, which has yet to be addressed by the Greek government. We believe that this slippage is also to some extent due to the absence of broad political consensus supporting additional budgetary adjustments. As a result, we think that the execution risks of Greece's EU/IMF borrowing program have increased. We still expect that the Greek government will work to achieve this year's budgetary targets and start implementing the revised medium-term program agreed to with official creditors. However, we also believe that the recession could well persist into 2012 and thus may further erode internal political support for the revised EU/IMF program.

While we have lowered our long-term ratings on Greece to 'CCC', we have maintained a recovery rating of '4,' reflecting our estimation of "average" (30%-50%) recovery for holders of Greek government debt in case of default. However, we have revised our rating recovery base case default scenario for Greece to incorporate two hypothetical debt restructurings: the first (possibly occurring within the next 12 months as implied by the 'CCC' long-term rating), featuring an effective extension of Greece's debt maturities; followed by a second hypothetical restructuring (possibly occurring by 2013), incorporating principal "haircuts" with the aim of placing Greece's public debt burden, which by our estimate could then exceed 160% of GDP, on what the government and its official creditors might consider to be a more sustainable footing.

Outlook

Greece's 'CCC' long-term credit rating reflects Standard & Poor's view that the risk of default under our criteria for full and timely payment within the next 12 months has increased significantly. Our negative outlook indicates that a downgrade to 'SD' could occur if Greece undertakes one or more debt restructurings or maturity extensions on terms that constitute distressed debt exchanges as defined by our criteria.

Conversely, if Greece's eurozone partners agree on a revised EU/IMF program that does not result in a default under our criteria for full and timely payment and the revised EU/IMF program is complied with, our ratings on Greece could stabilize at the current 'CCC' levels, even taking into account the risk of a debt restructuring in the form of a principal "haircut" by 2013.

http://www.zerohedge.com/article/greece ... k-negative

Allied Irish Banks Has Officially Defaulted - ISDA

Submitted by Tyler Durden
06/13/2011 07:54 -0400
24 comments

By unanimous vote, the ISDA determinations committee (which also includes such hedge funds as DE Shaw, Citadel, BlueMountain and Goldman Sachs) has agreed that Allied Irish Banks PLC has officially experienced a Restructuring Event. CDS settlement to proceed next. And yes, thanks to daily variation margin on CDS this means absolutely nothing, and should the cash/physical settlement auction clear tight of prevailing prices depending on where CTD bonds trade, it means CDS sellers will (gasp) receive daily margin cash at the end of the day. Yes, contrary to AIG-related stigma, selling CDS on an entity does not mean an automatic default for the sellers of protection. But that won't prevent those who have no idea how the CDS market operates to spread more BS stories, especially as relates to Greek, then all other PIIGS, CDS.

From ISDA: http://www.isda.org/dc/view.asp?issuenum=2011060901
EMEA Determinations Committee Decision 13062011
http://www.scribd.com/doc/57746002/EMEA ... n-13062011


http://www.zerohedge.com/article/allied ... ulted-isda

Greek, Portuguese and Irish CDS All At Record Wides

Submitted by Tyler Durden
06/13/2011 06:51 -0400
37 comments

Good morning Europe: do you know where you record wide PIIGS CDS are? From Reuters: "The cost of insuring Greek government debt against default rose to a record high of 1,600 basis points on Monday, hit by concerns that any second rescue of Greece will trigger a credit event or at least multi-notch rating downgrade of its debt. Five-year credit default swaps (CDS) on Greek government debt rose 58 bps on the day to 1,600 bps, according to data monitor Markit. The Markit iTraxx index of western European sovereign CDS was up 9 bps on the day at 220 bps, near a record high of 221 bps hit on January 10. Portuguese CDS were up 40 bps at 773 bps, while Irish CDS were 33 bps higher at 745 bps, both at record highs. Spanish CDS were up 13 bps at 289 bps." The slow motion European implosion is now accelerating as the reality that there is no spoon, nor rescue plan, is finally appreciated.

http://www.zerohedge.com/article/greek- ... cord-wides

Greek Parliament Preparing Evacuation Tunnel Ahead Of Wednesday Vote On IMF Bailout, General Strike And Parliamentary Blockade

Submitted by Tyler Durden
06/13/2011 18:50 -0400
93 comments

June 15, the day of a general strike in Greece, http://www.keeptalkinggreece.com/2011/0 ... e-june-15/ is also the day when the critical "mid-term agreement" http://vastminority.blogspot.com/2011/0 ... ainst.html between the insolvent country and the Troica will be voted on by the general assembly. "The agreement includes tax increases, slashing of wages and pensions and the lay-off of approximately more 100,000 civil servants in the next few years." Already the blog Occupied London has called for a blockade of the Athens parliament: "Last night (June 11th) the popular assembly of Syntagma square announced a call to blockade the Greek parliament ahead of the voting of the so-called Mid-term agreement between the Greek government and the troika (IMF/ECB/EU). The call-out for the blockade below is one of the most important acts we have seen by the Syntagma assembly so far. June 15th is gearing up to become a historical day in Greece, a crucial chance to block off the charge-ahead of neoliberalism here. Don’t be a spectator to this – translate and disseminate the text below; organise a gathering where you are, or come join us at Syntagma. This is the struggle for and of our lives." Needless to say, should the vote pass, and should the Parliament be blockaded, which it will be, the chances of politicians to leave general assembly unscathed may be compromised. Which is why we were not surprised to learn, courtesy of Covering Delta, http://coveringdelta.wordpress.com/2011 ... f-all-mps/ that the Greek parliament has hired foreign workers to clean out the underground tunnel which leads from the parliament to the port of Piraeus (soon to be privatized) in order to avoid what some fear may be the popular lynchings of MPs by the disgruntled masses.

From Covering Delta: http://coveringdelta.wordpress.com/2011 ... f-all-mps/

I just became aware of this report from Kontra channel here in Greece. Apparently, a tunnel that leads from Lykavitos to the Greek parliament, and from there to the sea port of Piraeus, is being cleaned out by foreign workers in preparation for the possible evacuation of Greek MP’s in the event of a storming of parliament ahead of wednesday’s vote on the new memorandum.

[b] Greek Video: Οι εθνοπÏ

As Greece Prepares To Auction Off The Acropolis, Austria Is Selling Its Mountains



Submitted by Tyler Durden on 06/13/2011 17:01 -0400
102 comments

Have €121,000 lying around? Enjoy hiking in smallish central European countries with picturesque villages? Then this deal is for you. While its new European banker overlords are pushing Greece to sell off, pardon, "privatize" the bulk of its most monetizable assets, Austria has already seen the writing on the wall, and in a very proactive step, iss offering to see two mountain peaks in the Austrian Alps. From AP: "Two 2,000-metre (6,500-feet) mountain peaks in eastern Tyrol -- the "Grosse Kinigat" and the "Rosskopf" -- are up for sale for just 121,000 euros ($175,800) for the pair. On its website, Austria's federal real estate company, the Bundesimmobiliengesellschaft or BIG, proudly boasts that the two peaks offer the "most stunning views of the Carnic Alps and are popular destinations for mountain climbers and hikers"." As to why Austria is suddenly scrambling to sell mountains, nobody really knows: ""It's a mystery to me why they're wanting to sell the peaks right now," the mayor of the tiny village of Kartitsch, Josef Ausserlechner, told the Austrian news agency APA. "In Greece, they're selling off islands. In Austria, it's the mountains," he fumed." Lastly, the reason doesn't matter. What is certain is that some Goldman dodecatuple secret shell holding SPV will end up being the buyer. And where Greece and Austria have already ventured, so shall the rest of Europe boldly go very soon as the banking syndicate soon ends up owning literally everything.

From AFP:

Ausserlechner insisted the village of Kartitsch has right of first refusal, but could only afford to pay a symbolic price of "a couple of thousand of euros".

Interested buyers have until July 8 to place their bids and, according to the regional daily Kleine Zeitung, 20 people had already done so.

But whoever the new owners turned out to be, "they won't be allowed to fence them off. The public and hikers have right of way," mayor Ausserlechner insisted.

The only two questions that appear relevant to us: does Austria have an extradition treaty with the US, and how much gold warehousing space is available under said mountains...

http://www.zerohedge.com/article/greece ... -mountains

RepoClear Hikes Portuguese, Irish Bond Margins Yet Again

Submitted by Tyler Durden
06/13/2011 11:59 -0400
10 comments

Time to push out even more cash bond shorts:

From LCH.RepoClear http://www.lchclearnet.com/risk_managem ... -06-13.asp

In accordance with the Sovereign Credit Risk Framework and in response to the yield differential of 10 year Portuguese government debt and 10 year Irish government debt against a AAA benchmark, LCH.Clearnet Ltd has revised the risk parameters for Portuguese and Irish government bonds cleared through the RepoClear service. The additional margin required for positions of Portuguese government bonds will consequently be increased to 65% for long positions. The additional margin required for positions of Irish government bonds will be increased to 75% for long positions. These amounts will be adjusted for the current bond price*. Short positions will pay a proportionately lower margin.

1. This decision is based solely on publicly available yield spread data and in no way represents a forward looking market view. LCH.Clearnet will continue to monitor yield spreads closely and keep the parameters under close review in accordance with the Sovereign Credit Risk Framework.
2. The additional margin will be reflected in a margin call on Tuesday 14 June 2011.
3. For further information please contact either Tom Chapman (tom.chapman@lchclearnet.com) +44 (0)20 7426 6338 or Lianne Arnold (lianne.arnold@lchclearnet.com) +44 (0)20 7426 7376

Chris Jones
Executive Director and Head of Risk Management

http://www.zerohedge.com/article/repocl ... -yet-again

Following Major Losses, Norway Sovereign Wealth Fund Hits "Infinity" Pares Exposure To Greek Debt

Submitted by Tyler Durden
06/13/2011 10:28 -0400
91 comments

Back in September 2010, Norway's sovereign wealth fund, the second largest in the world, decided to be contrarian for contrarianness' sake, and announced it had "stocked up on Greek debt, as well as bonds of Spain, Italy and Portugal. http://www.bloomberg.com/news/2010-09-0 ... fault.html Finance Minister Sigbjoern Johnsen says he backs the strategy, which contributed to a 3.4 percent loss on European fixed income in the second quarter, compared with gains on bonds in Asia and the Americas." The explanation was one that not even the high priests of obfuscation and lies back in the US, which only invest in "maturity" could come up: "“The point is, do you expect these guys to default?â€

More Postcards From A Pre-Revolutionary Greece; Presenting "Goldman's Employee Of The Decade"

Submitted by Tyler Durden
06/13/2011 11:05 -0400
53 comments

Last night's major anti-IMF rally at Athens Syntagma square was one of the largest peaceful protests in Greece to date. There was one notable highlight: the dubious distinction of Greece's George Papaconstantinou as Goldman's employee of the decade (speaking of Goldman, whatever happened to that Fed investigation into Goldman's use of "derivative arrangements" with Greece. Reminder: "We are looking into a number of questions related to Goldman Sachs and other companies and their derivatives arrangements with Greece" Bernanke said in testimony before the Senate Banking Committee). Below is a photographic gallery of last night's events courtesy of Preza.tv



























http://www.zerohedge.com/article/more-p ... yee-decade