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04 Nov 2002
MOODY'S DOWNGRADES LONG-TERM DEBT OF PDV AMERICA TO Ba1; CONFIRMS Baa2 LONG-TERM RATINGS OF CITGO PETROLEUM WITH NEGATIVE OUTLOOK
New York, November 04, 2002 -- Moody's Investors Service downgraded to Ba1 from Baa3 the senior notes
of PDV America, Inc. The downgrade of the notes, which
already had a negative outlook, is based on the increasing volatility
and political uncertainty in Venezuela and on the incremental refinancing
risk pending the maturity of the notes on August 1, 2003.
PDV America, Inc., the holding company for most of
Petroleos de Venezuela's (PDVSA) downstream assets in the United States,
owns the stock of CITGO Petroleum Company and also holds as an asset a
mirror note receivable from an affiliate of PDVSA. PDVSA,
which is rated Ba1 for its cross border foreign currency obligations with
a negative outlook, provides the debt service on the PDV America
Moody's notes that PDVSA has provided timely payment on the mirror note
to retire other past PDV America obligations. The rating agency
believes that PDVSA continues to have the financial capacity and capital
access necessary to pay off the remaining notes, and that the onerous
implications of default, including potential loss of control of
CITGO, make it likely that PDVSA will make every effort to retire
the notes on a timely basis. However, the deteriorating political
environment in Venezuela continues to have a negative impact on market
access and financing spreads, which will make PDVSA's efforts more
difficult during a critical refinancing period. Moody's is retaining
a negative outlook on PDV America's Ba1 rating but the outlook could be
stabilized as PDVSA's refinancing plans become clearer.
Moody's also confirmed CITGO Petroleum's Baa2 long-term debt rating
and retained a negative outlook on the rating. The confirmation
reflects the direct protection for CITGO's creditors in the form of U.S.
based assets and cash flow, as well as the relatively minor impact
of force majeure curtailments on PDVSA's affiliated crude sales to CITGO.
The recent negative refining environment has caused CITGO to sustain operating
losses in 2002 before insurance recoveries related to the Lemont refinery.
Nevertheless, Moody's believes at this time that CITGO has the capacity
to fund higher capital outlays over the next two to three years without
unduly leveraging its own balance sheet. In addition, CITGO
historically has been allowed to manage its capital spending and dividends
to preserve financial flexibility. However, the negative
outlook reflects some risk that CITGO's dividend capacity could be used
to support PDV America's approaching debt retirements. Any significant
reliance on CITGO's cash flow could result in a downgrade of CITGO's Baa2
ratings, given its own increasing capital needs over the next few
PDV America, Inc. is headquartered in New York, New
York. CITGO Petroleum Company, a large independent refining
and marketing company, is located in Tulsa, Oklahoma.
Moody's Investors Service
Thomas S. Coleman
Senior Vice President
Moody's Investors Service
No Related Data.
© 2019 Moody’s Corporation, Moody’s Investors Service, Inc., Moody’s Analytics, Inc. and/or their licensors and affiliates (collectively, “MOODY’S”). All rights reserved.
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