MOODY'S CONFIRMS DEBT RATINGS OF PDV AMERICA (Baa3) AND OTHER DEBT LINKED TO PETROLEOS DE VENEZUELA
New York, 05-08-98 -- Moody's Investors Service confirmed the Baa3 rating for senior notes of PDV America, Inc., the Baa2 rating for senior long-term debt of Citgo Petroleum Corporation, the Baa1rated guaranteed senior secured bonds of Petrozuata Finance Inc., and the Baa3 rating for senior secured bonds of Fertinitro Finance Inc. The ratings are confirmed in conjunction with Moody's announced review for possible downgrade of Venezuela's Ba2 sovereign foreign currency ceiling. The confirmed securities are the obligations of indirect wholly-owned subsidiaries or of significant project finance ventures of Petroleos de Venezuela S.A. (PDVSA), the state oil company of Venezuela. PDVSA's Ba2 debt ratings are also under review for downgrade.
PDV America is a U.S. based wholly owned subsidiary of PDVSA and the holding company for PDVSA's large and growing downstream investments in the United States. These investments include full ownership of Citgo Petroleum, one of the largest refining and marketing companies in the U.S. with long-term crude supply contracts from PDVSA affiliates. PDV America and Citgo are both U.S. based entities benefiting from U.S. dollar operating cash flows and covenant protections for debt holders. PDV America's long-term debt holders are serviced principally from a PDVSA mirror note obligation that, if breached, could jeopardize PDVSA's control of its key U.S. downstream assets.
The rating confirmations of Petrozuata Finance's Baa1 debt and Fertinitro Finance's Baa3 debt reflect Moody's view that the projects provide significant debtholder protections and insulation from sovereign intervention in project debt service. Relevant factors in this analysis for both projects include a sound project structure and the capture of significant U.S. dollar export flows offshore; strong practical and legal disincentives to physical product diversion; large petroleum supplies dedicated to the projects; major offtaker linkages and the presence of strong foreign participants; and strategic disincentives to sovereign intervention.
Citgo Petroleum Corporation is headquartered in Tulsa, Oklahoma. Its direct parent, PDV America, Inc., is located in New York, New York. Petroleos de Venezuela, S.A., is headquartered in Caracas, Venezuela.
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