June 5, 2015 / 1:20 PM / 5 years ago

Fitch: Greece IMF Bundling Highlights Extreme Liquidity Pressure

(The following statement was released by the rating agency) LONDON, June 05 (Fitch) Greece's decision to bundle four payments due to the IMF this month highlights the extreme pressure on government funding, Fitch Ratings says. It does not have direct implications for Greece's 'CCC' sovereign rating. Greece has informed the IMF that it plans to bundle four repayments, totalling around EUR1.5bn, into one payment, now due on 30 June. The IMF said that members can ask to bundle principal payments falling due in a calendar month "to address the administrative difficulty of making multiple payments in a short period." The first of the bundled payments, worth just over EUR300m, is due today. Fitch's ratings reflect the risk of default to private rather than official sector creditors, so delaying repayment to the IMF is not in and of itself a ratings default. Nevertheless, bundling this month's repayments illustrates the pressure that a lack of market or official funding and tight liquidity conditions for Greek banks are putting on Greece's sovereign liquidity. Our 'CCC' sovereign rating, affirmed last month, indicates that default on privately held bonds is a real possibility. The risk that Greece misses its larger IMF payment at end-June cannot be discounted. The prospect of fiscal disbursements from Greece's official creditors is highly uncertain. The Greek government has not accepted the proposals presented by the institutions (the European Commission, European Central Bank, and IMF) this week. If the two sides do agree a deal, it will meet political opposition from elements of Syriza most hostile to the institutions' proposals for pensions and public sector wages. Time constraints mean we expect that an agreement would take the form of a further extension of Greece's existing programme beyond end-June and partial disbursements, conditional on Greece demonstrating its commitment to its terms. These funds would primarily be used to meet redemptions, which will rise sharply in July and August as bonds held by the Eurosystem fall due, as well as enabling Greece to fund a small ongoing deficit. Missing the larger end-June payment to the IMF would be credit negative. If no outline agreement between Greece and the institutions were in place, it would increase the risk that the ECB restricts Emergency Liquidity Assistance (ELA) to Greek banks. This may ultimately lead to restrictions on the banking sector to reduce liquidity strains, including capital controls. The risk of capital controls is reflected in our 'B-' Country Ceiling for Greece, which is just one notch above the sovereign IDR. Contact: Douglas Renwick Senior Director Sovereigns +44 20 3530 1045 Fitch Ratings Limited 30 North Colonnade London E14 5GN Mark Brown Senior Director Fitch Wire +44 20 3530 1588 Media Relations: Peter Fitzpatrick, London, Tel: +44 20 3530 1103, Email: peter.fitzpatrick@fitchratings.com. The above article originally appeared as a post on the Fitch Wire credit market commentary page. The original article can be accessed at www.fitchratings.com. All opinions expressed are those of Fitch Ratings. ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

0 : 0
  • narrow-browser-and-phone
  • medium-browser-and-portrait-tablet
  • landscape-tablet
  • medium-wide-browser
  • wide-browser-and-larger
  • medium-browser-and-landscape-tablet
  • medium-wide-browser-and-larger
  • above-phone
  • portrait-tablet-and-above
  • above-portrait-tablet
  • landscape-tablet-and-above
  • landscape-tablet-and-medium-wide-browser
  • portrait-tablet-and-below
  • landscape-tablet-and-below