NOTE: On July 25, 2016, the press release was corrected as follows: The first two sentences of the Press Release were replaced with the following: “Moody's Latin America Agente de Calificación de Riesgo (Moody's) assigned a Baa3.ar rating to Petrobras Argentina S.A.'s (PESA, B3 negative) proposed up to $500 million in senior unsecured notes. At the same time, Moody’s Investors Service assigned a B3 ratings to Petrobras Argentina S.A.'s (PESA, B3 negative) proposed up to $500 million in senior unsecured notes.” Revised release follows.
Buenos Aires City, July 05, 2016 -- Moody's Latin America Agente de Calificación de Riesgo (Moody's) assigned a Baa3.ar rating to Petrobras Argentina S.A.'s (PESA, B3 negative) proposed up to $500 million in senior unsecured notes. At the same time, Moody’s Investors Service assigned a B3 ratings to Petrobras Argentina S.A.'s (PESA, B3 negative) proposed up to $500 million in senior unsecured notes. The use of proceeds of the proposed notes will
be to repay existing $300 million guaranteed notes (rated B3/Baa3.ar
negative) due 2017 as well as for capital expenditures and working capital.
PESA's B3 corporate family rating and negative outlook remain unchanged.
The outlook on all ratings is negative.
On May 3, 2016, Pampa Energia S.A. (Pampa,
not rated) announced its intention to acquire Petroleo Brasileiro S.A.'s
(Petrobras, B3 negative) 67.19% stake in PESA.
Pampa is the holding company of an integrated energy group in Argentina,
dedicated to the generation, transmission and distribution of electric
energy as well as a small business in the oil and gas sector. On
May 12, 2016, Pampa announced that it may merge PESA with
and into Pampa. The merger is subject to approval of Pampa's
board of directors and shareholders as well as the approval by PESA's
board and shareholders. If the merger were approved and completed,
Pampa would be PESA's successor company and the obligor of the proposed
notes. The transaction is still pending local regulators'
approvals but the parties do not expect material changes in the structure
of the transaction during the approval process.
The sale of PESA will trigger the change of control clause at the company's
$300 million existing notes due in 2017, which are guaranteed
by Petrobras. According to the bond indenture, in case of
a change of control, PESA is required to make an offer to repurchase
the notes at a price equal to 101% of the outstanding principal
amount plus accrued interests. These notes represented about 90%
of PESA's outstanding debt as of March 31, 2016. PESA
has already announced that it will repay the notes as part of this transaction.
Upon conclusion of the acquisition process and assuming that the transaction
closes as agreed, Moody's will reassess its ratings on the
proposed notes, under the new ownership, capital structure
and business strategy of the new obligor. Moody's will also
evaluate the adequacy and sufficiency of information to monitor the ratings.
PESA's B3/Baa3.ar ratings are based on the company's position
as a relatively small diversified energy operator in Argentina with a
record of poor upstream capital efficiency characterized by low levels
of investment and reserve replacement and rising costs, vulnerable
to Argentina's uncertain policies. PESA's geographic and operational
diversification has declined as it has restructured and exited various
operations to focus in Argentina. With declining reserves and a
relatively short reserve life, PESA's primary operational challenge
continues to be to extend a largely mature asset base and show rising
production and reserve growth over the next few years. The ratings
are supported by the company's relatively solid credit metrics for its
rating category as well as some cash flow stability from its various energy
operations. PESA'S ratings also consider the uncertain government's
policies for the energy sector in Argentina.
PESA has used primarily internal sources to finance operations and capital
spending, although capex has been limited. Virtually all
of PESA's debt is US dollar denominated. As of March 31,
2016, the company had the equivalent to $133 million in cash
and marketable securities in local currency, enough to cover its
short maturities of $8 million plus approximately 40% of
its outstanding debt, as adjusted by Moody's.
Like most companies in Latin America, PESA does not have committed
bank credit facilities but it maintains uncommitted local bank lines for
working capital needs and has successfully tapped both local and international
markets in the past. PESA has no meaningful financial covenants
in its debt agreements. The cash repatriation requirements that
applies to a company's export sales have not had a large impact on PESA,
which sells most of its crude oil and natural gas in Argentina,
although refined product and petrochemical exports generally equal to
about 10% of its total revenues. Moody's believes
PESA's cash balances will be available to meet cross border debt service.
The B3/Baa3.ar ratings on the proposed notes are based on the negative
outlook of Petrobras and on the uncertain energy operating environment
A positive rating action for PESA's B3/Baa3.ar rating would be
merited if Moody's believe that that the company will be able to
sustain its currently solid financial ratios and liquidity position.
A downgrade of the Argentine government that may reflect increasing political
and regulatory risk, or a governmental initiative on setting reference
prices that puts pressure on PESA's cash flows, debt service capabilities
or liquidity, could also put negative pressure on PESA's ratings.
PESA is an integrated energy company with operations focused on petroleum
exploration and production but with refining and product distribution,
and petrochemicals business. It also has interests in electric
generation, and in gas pipelines and NGLs production through Transportadora
de Gas del Sur S.A. (B3 stable). For the last twelve
months ended March 31, 2016, the company generated revenues
of $2.3 billion and had total proved reserves of 183 million
Petrobras is an integrated energy company, with total assets of
$241 billion as of March 31, 2016. Petrobras dominates
Brazil's oil and natural gas production, as well as downstream refining
and marketing. The company also holds a significant stake in petrochemicals
and a position in sugar-based ethanol production and distribution.
The Brazilian government directly and indirectly owns about 46%
of Petrobras' outstanding capital stock and 60.5% of its
The principal methodology used in this rating was Global Independent Exploration
and Production Industry published in December 2011. Please see
the Ratings Methodologies page on www.moodys.com.ar
for a copy of this methodology.
Moody's National Scale Credit Ratings (NSRs) are intended as relative
measures of creditworthiness among debt issues and issuers within a country,
enabling market participants to better differentiate relative risks.
NSRs differ from Moody's global scale credit ratings in that they are
not globally comparable with the full universe of Moody's rated entities,
but only with NSRs for other rated debt issues and issuers within the
same country. NSRs are designated by a ".nn" country modifier
signifying the relevant country, as in ".za" for South Africa.
For further information on Moody's approach to national scale credit ratings,
please refer to Moody's Credit rating Methodology published in May 2016
entitled "Mapping National Scale Ratings from Global Scale Ratings".
While NSRs have no inherent absolute meaning in terms of default risk
or expected loss, a historical probability of default consistent
with a given NSR can be inferred from the GSR to which it maps back at
that particular point in time. For information on the historical
default rates associated with different global scale rating categories
over different investment horizons, please see https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_189530.
For ratings issued on a program, series or category/class of debt,
this announcement provides certain regulatory disclosures in relation
to each rating of a subsequently issued bond or note of the same series
or category/class of debt or pursuant to a program for which the ratings
are derived exclusively from existing ratings in accordance with Moody's
rating practices. For ratings issued on a support provider,
this announcement provides certain regulatory disclosures in relation
to the credit rating action on the support provider and in relation to
each particular credit rating action for securities that derive their
credit ratings from the support provider's credit rating. For provisional
ratings, this announcement provides certain regulatory disclosures
in relation to the provisional rating assigned, and in relation
to a definitive rating that may be assigned subsequent to the final issuance
of the debt, in each case where the transaction structure and terms
have not changed prior to the assignment of the definitive rating in a
manner that would have affected the rating. For further information
please see the ratings tab on the issuer/entity page for the respective
issuer on www.moodys.com.ar.
For any affected securities or rated entities receiving direct credit
support from the primary entity(ies) of this credit rating action,
and whose ratings may change as a result of this credit rating action,
the associated regulatory disclosures will be those of the guarantor entity.
Exceptions to this approach exist for the following disclosures,
if applicable to jurisdiction: Ancillary Services, Disclosure
to rated entity, Disclosure from rated entity.
Regulatory disclosures contained in this press release apply to the credit
rating and, if applicable, the related rating outlook or rating
For issuers domiciled in Argentina, the regulatory report related
to this rating action is available on www.moodys.com.ar.
Please see www.moodys.com.ar for any updates on changes to
the lead rating analyst and to the Moody's legal entity that has issued
Please see the ratings tab on the issuer/entity page on www.moodys.com.ar
for additional regulatory disclosures for each credit rating.
Nymia C. Almeida
VP - Senior Credit Officer
Corporate Finance Group
Moody's de Mexico S.A. de C.V
Ave. Paseo de las Palmas
No. 405 - 502
Col. Lomas de Chapultepec
Mexico, DF 11000
Marianna Waltz, CFA
MD - Corporate Finance
Corporate Finance Group
Moody's Latin America ACR
Ing. Butty 240
Buenos Aires City C1001AFB
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