Fitch raises Greece to ‘B-‘/Stable from ‘restricted default’

Fitch ratings agency has upgraded Greece to B- from «restricted default» following the completion of the private sector involvement, or PSI, which reduced the country?s debt by some 100 billion euros

Fitch said Tuesday that it had upgraded its rating and assigned a «stable outlook.» It said that the debt swap ?significantly improved Greece’s debt service profile and reduced the risk of a recurrence of near-term repayment difficulties on the new Greek government securities.?

It gave a B minus rating ? still junk status ? to the new bonds the country issued under Greek law, while keeping a C rating on foreign-law bonds as their settlement date is not until April 11.

In last week’s agreement, 83.5 percent of private investors holding Greek debt agreed to the deal, which will see them face real losses of more than 70 percent on their holdings.

?The agency considers that significant and material default risk remains in light of the still very high level of indebtedness post-PSI and the profound economic challenges faced by Greece, as reflected in the low speculative grade rating of ‘B-‘,? Fitch said.

The ratings agency added that it retains some reservations about whether Greece can make its debt sustainable in the years to come.

?Fitch notes that while it is possible to discern a downward trajectory of the public debt/GDP ratio to around 120% by 2020 as targeted by the EU/IMF, this outcome is very sensitive to assumptions regarding the implementation of fiscal austerity and economic growth,? the firm said in its note.

?The current government has completed a long list of ‘prior actions’. However, their implementation is likely to prove very challenging for any administration, while Greece’s ability to sustain primary surpluses of 4.5% of GDP from 2014 onwards is untested. Moreover, in the near term, the prospect of a general election and uncertainty over the composition and commitment of a new government to the EU-IMF programme also poses a significant risk.?

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