S & P declares Greece in default

February 28, 2012 – GREECE – Greece became the first euro-zone member officially to be rated in default, 13 years after the single European currency was adopted to strengthen the European Union. Standard & Poor’s cut Greece’s long-term credit rating to selective default from double-C. The move was expected, as S&P said this month that it would consider Greece in default if it added “collective-action” clauses to its sovereign debt, effectively forcing all bondholders to accept a bond-swap offering. Greece’s Parliament approved that measure last week. Moody’s Investors Service and Fitch Ratings also are likely to place Greece in default. The ratings companies deem an issuer in default any time it fails to pay back creditors in full and on time. The bigger question remains whether the action triggers payments on credit-default-swap contracts, a form of insurance against a bond default or restructuring. The net payments that would change hands between buyers and sellers of credit-default swaps on Greece wouldn’t total more than an estimated $3.2 billion, according to the Depository Trust & Clearing Corp. A committee convened by the organization that oversees those contracts, the International Swaps and Derivatives Association, has been asked by an unidentified entity to decide whether Greece’s restructuring should trigger the payouts. –WSJ