Reuters: S&P cuts Cyprus credit rating to SD after debt exchange

28 June 2013

Standard & Poor's on Friday downgraded the sovereign foreign currency credit rating on Cyprus to SD (selective default) from CCC, following the Mediterranean nation's debt exchange as part of a financial adjustment programme.

The decision follows the announcement by Nicosia that it was launching a debt exchange swapping €1 billion ($1.30 billion) of government bonds for new, longer-dated debt, to help it meet one of the conditions for its bailout programme. "In our opinion, the exchange materially changes the terms of the affected debt and constitutes what we consider a distressed exchange according to our criteria", S&P said in a statement. 

S&P said that after the exchange, which is expected to occur on July 1, the liquidity strains on the government should be alleviated. "We note, however, that the government will still need to deal with the forthcoming rollover of a stock of €950 million Treasury bills (5 per cent of GDP)", S&P said.

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