Greece's credit grade was reduced to SD, or selective default,by Standard & Poor's from CCC after the government began buyingits bonds back from investors, a statement on the rating company'swebsite said yesterday.

The nation has offered 10 billion euros ($13.1 billion) topurchase debt issued earlier this year as the bailed-out countryattempts to cut a debt load that may threaten future internationalaid. The rating was lifted to CCC from SD in May after undergoingthe largest sovereign restructuring in history earlier thisyear.

“I don't think the downgrade will have a big impact,” saidHajime Nagata, who helps oversee the equivalent of $125.1 billionas an investor in Tokyo at Diam Co., a unit of Dai-ichi LifeInsurance Co., Japan's second-biggest life insurer. “They havealready restructured.”

Greece began repurchasing bonds maturing from 2023 to 2042 thisweek, offering a higher-than-planned price to increase demand forthe debt-reduction measure.

The buyback “constitutes the launch of what we consider to be adistressed debt restructuring,” S&P said in its statement. “Anypotential upgrade to the CCC category rating would reflect, amongother factors, our view of the debt relief that is being deliveredthrough the buy back and its contribution to putting thesovereign's public finances on a sustainable footing.”

The SD designation “includes the completion of a distressedexchange offer, whereby one or more financial obligation is eitherrepurchased for an amount of cash or replaced by other instrumentshaving a total value that is less than par,” according to S&P'swebsite.

Debt Reduction

The purchases have helped buoy the nation's debt. Greek bondshave returned 72 percent in the past three months, the bestperformance of 174 sovereign debt indexes tracked by the Federationof Financial Analysts Societies and Bloomberg.

European finance ministers last week eased the terms onemergency aid for Greece to help nurse the debt-stricken countryback to health.

Euro-area finance ministers last week announced debt- reductionsteps for Greece, including lower bailout loan rates and arecycling of the European Central Bank's profits on the nation'sbonds back to the Athens treasury.

Ministers from all 27 European Union nations will return toBrussels next week to ratify Greece's next aid payment, thefifth-straight week they'll have descended on the Belgiancapital.

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