Fitch Ratings says that Greece’s government bond exchange constitutes a default, and it has downgraded the country’s ratings as a result.

The rating agency downgraded Greece’s ratings to the “restricted default” category from ‘C’ following confirmation from the Greek government and eurozone officials that the exchange of Greek government bonds will proceed. It says the downgrade reflects its view that the exchange would constitute a sovereign default event under its distressed debt exchange rating criteria.

Under the exchange, each €100 face value amount of Greek government bonds will be exchanged for new bonds with a face value of €31.5 and €15 of notes from the European bailout fund. Bondholders will also receive a notional €31.5 of Greek GDP-linked securities. It notes that the implied loss relative to the original terms and conditions of the bonds is estimated by market participants to be approximately 74%.

The new Greek government bonds will be issued on March 12. After that, Fitch will assign ratings to the new securities consistent with its forward-looking assessment of Greece’s credit profile.