This is the view of Standard & Poor's (S&P), which reduced the nation's ranking from CCC to CC - just two steps higher than default level - Bloomberg reports.
The proposal will result in bondholders stumping up some of the cash for Greece's second bailout - a package agreed in Brussels last week.
S&P - which dates back more than 150 years - confirmed the action would amount to a default under its rating methodology, adding: "We view the proposed restructuring as a distressed exchange because, based on public statements by European policy makers, it is likely to result in losses for commercial creditors."
The package is to include a â¬50 billion ($72 billion) contribution from EU leaders and another â¬109 billion from the International Monetary Fund and governments in the euro region.
By Tony Aynsley