By Nymia C. Almeida
NEW YORK -- Moody's Investors Service (Moody's) has downgraded Petroleos de Venezuela, S.A. (PDVSA)'s ratings to Ca from Caa3.
Moody's also lowered the company's baseline credit assessment (BCA) to ca from caa3. The rating action reflects the payment default on November 2nd, related to the 2017 notes, and Moody's expectation that the company will default on other debt obligations in the near term given its significant financial stress and the government's stated intention to restructure its debt. The ratings outlook remain negative.RATINGS RATIONALE
"The rating actions were triggered by the payment default on November 2nd, when PDVSA was expected to pay USD1,169 million in principal related to 2017 notes, and by the company's significant financial stress, which is derived from its limited ability to generate cash to meet short-term obligations and fund sufficient capital investments to sustain production and asset quality", said Nymia Almeida, a VP-Sr. Credit Officer at Moody's. In addition, Venezuela's president, Nicolas Maduro, on November 1st said that his government would initiate a restructuring and refinancing of the country's foreign debt, including that of PDVSA.
The downgrade of PDVSA's rating to Ca from Caa3 reflects Moody's view that expected loss has increased following these events.
The ratings of government-related issuers combine: (i) their underlying BCA, which represents the issuer's intrinsic credit risks regardless of government support and (ii) Moody's assumptions about the willingness and the ability of the respective government to provide extraordinary support in a distressed situation. In the case of PDVSA, the company's Ca rating does not have uplift to the level of the government's Caa3 rating, which is one notch higher.
Despite the government's significant influence on PDVSA's business decisions and dependence on its cash generation, Moody's assumes that the government has limited ability to support PSVSA's liquidity constraints given its own continued fiscal deterioration.
The following is a list of the affected ratings:
Issuer Rating downgrade to Ca from Caa3
GTD SR SEC 1ST LIEN GLOBAL NOTES due 2020 downgrade to Ca from Caa3
GTD SR GLOBAL NOTES due 2035 downgrade to Ca from Caa3
Outlook remains negative