Fitch downgrades Greece

Fitch Ratings said it downgraded Greece's long-term foreign- and local-currency issuer default ratings to C from CCC.

The short-term foreign-currency rating is affirmed at C, along with its euro area country ceiling at AAA, which is applicable to all euro area member states.

The downgrade follows news of the Eurogroup statement on a second financing program for Greece including 'private sector involvement' and subsequent news from the Greek authorities outlining the terms of the proposed exchange of Greek government bonds, Fitch said.

The rating action is in line with Fitch's statement on 6 June 2011, which outlined its rating approach to a sovereign debt exchange (see 'Fitch Outlines Rating Approach to a Sovereign Debt Exchange').

A common understanding has been reached between the Greek authorities and the private sector on the general terms of a private sector involvement exchange offer, including a nominal cut of 53.5% to the face value of the government bonds, the agency said.

The subsequent statement from the Greek authorities expands on the terms of the debt exchange and confirms the Greek government's intention to introduce collective action clauses into those bonds governed by Greek law, Fitch said.

If the exchange is completed, that would constitute a distressed-debt exchange in line with the agency's criteria, Fitch said.

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