Last week Greece and its international lenders reached a deal to lower the country's debt burden, which included a debt buyback.
The decision to lower the sovereign rating follows the government's invitation to private sector bondholders to participate in the debt buyback "which under our criteria we view as a selective default," S&P said in an e-mailed statement.
"When the buyback is consummated (which we understand is scheduled to occur on or about December 17, 2012), we will likely consider the selective default to be cured and raise the sovereign credit rating on Greece to the 'CCC' category," the statement said.
The outlook on the rating remains negative.
Euro zone finance ministers and the International Monetary Fund reached agreement on November 26 for steps to cut Greece's public debt and help the country regain access to international financial markets.
Greece said it would spend 10 billion euros to buy back bonds at a price range that topped market expectations. The move is seen as central to put the near-bankrupt country's debt back on a sustainable footing.
The buyback will be conducted through a modified Dutch auction in which investors declare at what level they are willing to sell their bonds before Athens sets a final price. (Reporting by U.S. Treasury Desk)