In a press release following the announcement, the Finance Ministry pointed out that contrary to Fitch and Standard & Poor’s, which downgraded Cyprus to Selective Default on June 28, Moody’s maintains Cyprus’ rating at Caa3 with negative outlook. The Finance Ministry said decisions by rating agencies according to their own criteria are noted, underlining however that “Cyprus has successfully secured its financing needs and that has been noted by the European Commission, the International Monetary Fund and the European Central Bank”, collectively known as the Troika.

The roll-over of the bonds maturing in the duration of the adjustment programme (2016) agreed with the Troika is an integral part of the sustainability of the Cypriot public debt and a condition of the €10 billion bailout.
“Cyprus has secured its financing needs exactly to avert possible dangers and adventures,” the Finance Ministry concluded. Moody’s considers Cyprus’ exchange of existing domestic government bonds as a default
Moody’s will revisit Cyprus’ rating in due course to assess the impact of the exchange on the sustainability of Cyprus’ debt burden together with other relevant factors, including the island’s likely compliance with measures that are a condition of external support and its growth prospects.

According to Moody’s definitions, the roll-over represents a ‘distressed exchange’, and therefore a debt default. This is because (i) the exchange amounts to a diminished financial obligation relative to the original obligation, and (ii) the exchange has the effect of allowing Cyprus to avoid payment default in the future.

Source: Cyprus Mail