news 1 week ago

Citgo credit rating at risk amid Venezuela crisis: S&P

AFP

New York (AFP) -

The worsening financial and social crisis in Venezuela has now put the credit of the country's US-based oil company Citgo at risk, ratings agency S&P announced Thursday.

In the wake of the government and state oil company PDVSA defaulting on debt payments, S&P put the ratings of Citgo Holdings and Citgo Petroleum on "CreditWatch with developing implications."

The move indicates a ratings move is likely in the next 90 days. And while Citgo's debt is graded separately from its parent company, S&P cited "heightened uncertainty regarding the separation between CITGO" and PDVSA.

And while it is possible the situation will develop favorably for Citgo's "B-" debt rating, "we believe that it is somewhat more likely to be negative than positive."

Global ratings agencies already had declared Venezuela and state-owned oil company PDVSA to be in "selective default" due to the late payments on multiple bond issues.

PDVSA is the primary source of income for the oil-rich but cash-poor country. 

Although it sits atop the world's biggest oil reserves, Venezuela is struggling under an estimated debt burden of $150 billion and a worsening humanitarian crisis amid shortages of food and medicine.

S&P last month warned of a "one-in-two chance that Venezuela could default again within the next three months."

Caracas has only $9.7 billion in foreign reserves and needs to pay back at least $1.47 billion in interest on various bonds by the end of the year, and another $8 billion in 2018.

S&P noted an anti-corruption purge by Venezuelan President Nicolas Maduro, who last month ordered the arrest of six Citgo executives, including the acting CEO, who were in Venezuela for meetings at PDVSA. 

Those actions "could potentially threaten the separation between Citgo and PDVSA," and impact the US-based company's rating.

However, the agency also noted: "Given the immediate need for cash in Venezuela, there is a chance that PDVSA may seek to sell Citgo that would lead to an upgrade."