Greece missing payments on bonds held by ECB would not trigger a default

Rating agency Standard & Poor's Ratings (S&P) said it would not downgrade Greece even if the country failed to meet the payment deadline on bonds maturing in July and August totaling €6.7bn held by the European Central Bank (ECB).

The bonds are the result of a bond swap completed in 2012, which saw the ECB exchange approximately €50bn of Greek government bonds it had purchased through the now extinct Securities Market Programme, for an equivalent par amount of new bonds.

However, S&P said it would not move the ratings on Greece to ‘selective default’ (SD) even if Athens fails to meet the payment deadline “because our sovereign ratings pertain to a central government's ability and willingness to service financial obligations to commercial creditors”.

The agency added that failure to meet the deadline in July and August would not directly affect any commercial creditors.

“The ECB has retained the totality of the new Greek sovereign bonds it received in the 2012 swap,” S&P said.

“Therefore non-payment of those bonds would not directly affect any commercial creditors.

“In such an event, Standard & Poor's would therefore not move its sovereign rating on Greece to SD.”