Moody's cuts Greek domestic rating ceiling on euro exit risk

NEW YORK (Reuters) - Rating agency Moody's Investors Service said it had lowered its ratings ceiling on Greek domestic debt issuers due to the rising risk of the country exiting the euro zone, but added it did not consider that the most likely scenario for the country.

Moody's said it lowered its assessment of the highest rating that can be assigned to a domestic debt issuer in Greece to Caa2, below the highest existing rating by the firm on any Greek security, which is B1 for certain covered bonds.

"Any rating actions taken as a result of the new ceiling will be released during the coming week," Moody's said in a statement on Friday.

"Moody's indicated that although the risk of a euro exit by Greece is substantial it is still not what it considers its 'central case' or most likely scenario," it said.

Greece holds parliamentary elections on June 17. Political parties that support and oppose the terms of the country's international bailout are running neck and neck in opinion polls.

Moody's said the risk of a Greek exit from the euro zone might increase further after the elections.

Abandoning the euro would mean large losses for investors as government and private debt issued under Greek law would be redenominated and the country's economy and banking system would be hit hard, the statement said.

"That disruption would generally imply additional losses for holders of debt securities issued by Greek entities, irrespective of their governing law," it said.

(Writing by William Schomberg; Editing by Peter Cooney)