On November 3, 2017, S&P Global Ratings lowered its corporate credit and issue-level ratings on Petroleos de Venezuela S.A. (PDVSA) to CC from CCC-. On November 2nd, President Nicolas Maduro announced the formation of a government commission to restructure the sovereign’s and PDVSA’s external debt obligations. Given the highly constrained external liquidity situation for the sovereign and domestic entities, S&P Global would consider any restructuring of PDVSA’s debt to be a distressed debt exchange and equivalent to default.
On November 6, 2017, Moody’s Investors Service downgraded Petroleos de Venezuela, S.A.’s (PDVSA) ratings to Ca from Caa3, its senior secured notes to Ca from Caa3 and it senior global notes to Ca from Caa3. According to Moody’s, 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.
On November 7, 2017, Fitch Ratings downgraded Petroleos de Venezuela S.A.’s (PDVSA) Issuer Default Rating to C from CC and its senior unsecured and secured debt issuances to C from CC. According to Fitch, the rating downgrades reflect the recent announcement by both the Company and the government that they intend to pursue a renegotiation of the Company’s sovereign external debt obligations. The downgrades also reflect the previously missed payments on international bonds that are currently within their 30-day grace periods. In Fitch’s view, this makes a default event highly probable.
On November 7, 2017, Moody’s Investors Service downgraded CITGO Petroleum Corporation’s (PDVSA is the ultimate controlling shareholder) corporate family rating to Caa1 from B3, probability of default rating to Caa1-PD from B3-PD; and its senior secured and unsecured ratings on term loans and global notes and internal revenue bonds to Caa1 from B3. According to Moody’s, the rating actions follow Moody’s downgrade on November 6, 2017 of Petroleos de Venezuela S.A. (PDVSA)’s ratings to Ca from Caa3 given the Company’s payment default on November 2nd, related to the 2017 notes, and Moody’s expectation that PDVSA 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. Read more on distressed companies.
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