The ratings agency Moody's has downgraded Greece to the lowest rating on its bond scale, following a deal with private investors that would see them ultimately lose 70 per cent of their holdings in Greek debt.

Moody's late Friday lowered Greece's sovereign rating to C from Ca, arguing that the risk of default remains high even if a bond-swap deal with banks and other private investors, due to be completed this month, is successful.

It said it would "reassess the credit risk profile" after Greece issues the new bonds.

Ratings agency Standard & Poor's took similar action on Feb. 27.

The swap deal aims to cut €107 billion ($144 billion) from the country's debt, and would see private investors lose more than half the face value of their Greek bonds in exchange for new ones issued with more favourable repayment terms for the crisis-hit country.

The exchange is an integral part of a second bailout package for Greece by other eurozone countries and the International Monetary Fund.

"Looking ahead, the EU program and proposed debt exchanges will reduce Greece's debt burden, but the risk of a default even after the debt exchange has been completed remains high," Moody's said.

"Moody's believes that Greece will still face medium-term solvency challenges: its stock of debt will still be well in excess of 100 per cent of gross domestic product for many years, the country is unlikely to be able to access the private market once the second assistance package runs out, and its planned fiscal and economic reforms will still face very significant implementation risks."