TEXT-S&P raises PDV America corporate credit rating
<a href=reuters.com>Reuters, Fri May 9, 2003 04:33 PM ET
(The following statement was released by the rating agency)
NEW YORK, May 9 - Standard & Poor's Ratings Services said today that it raised its corporate credit ratings on PDV America Inc. and its wholly owned subsidiary CITGO Petroleum Corp. to 'BB-' from 'B+', and removed the ratings from CreditWatch with developing implications. In addition, Standard & Poor's upgraded by one notch PDV America's senior unsecured debt rating and CITGO's senior unsecured debt and secured term loan ratings.
The upgrades reflect the improved liquidity of PDV America and CITGO. PDV America and CITGO now have sufficient liquidity to meet financial obligations for 2003 without relying on material external financing or triggering a violation of financial covenants.
The ratings were originally placed on CreditWatch Feb. 6, 2003. The outlook is stable.
"During the past year, CITGO's financial condition has been buffeted by a severe downturn in refining margins and political instability in Venezuela that reduced crude shipments to its CITGO subsidiary. This combination of events caused CITGO's trade credit terms to worsen sufficiently to strain CITGO's liquidity and significantly increased the cost of accessing credit markets," said Standard & Poor's credit analyst Bruce Schwartz.
"However, in recent months, refining margins have rebounded, crude shipments from Venezuela have normalized, and the company has successfully raised external financing, bringing total cash and available borrowing capacity to about $1.2 billion. As such, CITGO's fiscal crisis has abated," added Mr. Schwartz.
Standard & Poor's also said that CITGO/PDV America still faces serious challenges over the intermediate term, most significantly a likely decline in refining margins later in 2003 and funding about $1.1 billion (through 2006) of required investments to meet new clean fuels standards.
PDV America is the holding company for CITGO, a large U.S. refining and marketing company. PDV America and its subsidiaries are an indirect, wholly owned subsidiary of Petroleos de Venezuela S.A., which is the national oil company of the Republic of Venezuela. Complete ratings information is available to subscribers of RatingsDirect, Standard & Poor's Web-based credit analysis system, at www.ratingsdirect.com. All ratings affected by this rating action can be found on Standard & Poor's public Web site at www.standardandpoors.com; under Fixed Income in the left navigation bar, select Credit Ratings Actions.