By John Ward
The Slog just got a press release from ratings agency S&P. This is the gist:
‘…holders of CAC-affected GGBs [Greek government bonds] will likely be effectively subordinated to the ECB in terms of payment….Standard & Poor’s Ratings Services has written that effective subordination is a credit negative for peripheral eurozone sovereigns….The ECB’s swap has established a new precedent by adding another class of superior creditor to the existing group comprised of the ESM, the IMF, and other multilateral development banks. We believe that this development could further weaken the prospects of peripheral eurozone sovereigns currently receiving official funding to regain the ability to access the capital markets and could raise borrowing rates of those sovereigns still accessing the primary markets……additional ECB bond buying will inevitably lead to further subordination of investors’ positions….We have not taken rating actions on eurozone sovereign issuers following the ECB’s debt swap. We believe that the swap has, at least in this instance, changed the ECB’s status from implicit super-senior creditor to an explicit one.‘
Unless I’m reading something very, very awry here, this strikes me as S&P’s convoluted way of saying that it too will call default one second after the swap takes place. And interestingly, this is the first ratings agency verdict that has called out Mario Draghi’s separate ECB bond-swap deal as an obvious case for default.
So….the Greek bailout is further derailed…or the built-to-fail bailout is on track – depending on your viewpoint.