TEXT-Moody's affirms PDVSA Finance long-term ratings

<a href=reuters.com>Reuters, Wed May 7, 2003 02:48 PM ET (The followng statement was released by the rating agency)

NEW YORK, May 7 - Moody's Investors Service confirmed the Caa1 long-term debt rating of PDVSA Finance Ltd. The confirmation ends a review for downgrade announced in January 2003. The review was prompted by the continuing uncertainty and possibly worsening conditions surrounding Petroleos de Venezuela's (PDVSA) ability to resume some level of normal operations after the strike that began in December 2002 and that seriously curtailed PDVSA's production and exports of crude oil and products.

PDVSA Finance is a Cayman Islands corporation and an indirect, wholly-owned subsidiary of PDVSA, Venezuela's national oil company. PDVSA Finance acts as a financing vehicle for PDVSA by issuing notes and using the proceeds to purchase current and future oil export receivables from PDVSA's principal operating and exporting arm. The receivables' cash flows are generally PDVSA Finance's only source of revenues, as well as the only source of payment of the notes. The rating agency said that the rating was confirmed in light of the sustained improvement in production, exports and collections; the ability of PDVSA Finance to comply with the debt service coverage ratio and the debt to equity ratio throughout the crisis; and the resolution of the two-month strike that virtually stopped all the company's production and exports.

Following the resolution of the strike, PDVSA production has returned to higher levels. In addition, amounts received in PDVSA Finance's collection account are improving. During January and February 2003, PDVSA Finance experienced an invoicing problem that impaired its collections on export receivables. As a result of this administrative issue and of substantially lower export volumes, PDVSA Finance's collections declined significantly during the first two months of 2003. In March, however, the company reports an improvement in collections, which is closer to historical amounts.

Finally, PDVSA Finance's debt service coverage ratio has remained above the 4:1 level that triggers the retention of receivables. Supported by the recovery in collections, the debt service coverage ratio has improved in April to 5.8 times, as compared to 4.5 times in March 2003. Furthermore, the debt to equity ratio that PDVSA Finance is obligated to maintain at a level below 7:1 times, has remained stable at approximately 4 times.

The agency noted that the rating of the PDVSA Finance notes is linked to the local currency and foreign currency ratings of PDVSA, which generates the receivables that back the repayment of the rated notes. PVDSA's local and foreign currency ratings are currently Caa1. The complete rating actions are: Issuer: PDVSA Finance Ltd. $400,000,000 6.45% Notes due 2004, rating confirmed at Caa1 $300,000,000 6.65% Notes due 2006, rating confirmed at Caa1 $300,000,000 6.80% Notes due 2008, rating confirmed at Caa1 $400,000,000 7.40% Notes due 2016, rating confirmed at Caa1 $400,000,000 7.50% Notes due 2028, rating confirmed at Caa1 $400,000,000 8.750% Notes due 2004, rating confirmed at Caa1 $250,000,000 9.375% Notes due 2007, rating confirmed at Caa1 $250,000,000 9.750% Notes due 2010, rating confirmed at Caa1 $100,000,000 9.950% Notes due 2020, rating confirmed at Caa1 EURO 200,000,000 6.250% Notes due 2006, rating confirmed at

Caa1 $500,000,000 8.50% Notes due 2012, rating confirmed at Caa1

Petroleos de Venezuela, the state oil company of Venezuela, is headquartered in Caracas, Venezuela.