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April 28 (Bloomberg) -- Holders of Greek bonds may lose as
much as 200 billion euros ($265 billion) should the government
default, according to Standard & Poor’s.

The ratings firm cut Greece three steps yesterday to BB+,
or below investment grade, and said bondholders may recover only
30 percent and 50 percent for their investments if the nation
fails to make debt payments. Europe’s most-indebted country
relative to the size of its economy has about 296 billion euros
of bonds outstanding, data compiled by Bloomberg show.

The downgrade to junk status led investors to dump Greece’s
bonds, driving yields on two-year notes to as high as 19 percent
from 4.6 percent a month ago as concern deepened the nation may
delay or reduce debt payments. Prime Minister George Papandreou
is grappling with a budget deficit of almost 14 percent of gross
domestic product.

“It’s now not just market sentiment, but a top rating
agency sees Greek paper as junk,” said Padhraic Garvey, head of
investment-grade strategy at ING Groep NV in Amsterdam.

Before yesterday, Greece’s bonds had lost about 17 percent
this year, according to Bloomberg/EFFAS indexes. The 4.3 percent
security due March 2012 fell 6.54, or 65.4 euros per 1,000-euro
face amount, to 78.32.