Fitch Ratings affirmed its ratings on Citgo Petroleum Corp., but warned of the negative impacts by operational risks and contagion effects from Washington’s sanctions on the U.S. refiner’s parent Petróleos de Venezuela (PDVSA).
Fitch Ratings affirmed the long-term issuer default rating (IDR) of Citgo Petroleum at 'B' with a Stable Outlook and the IDR of Citgo Holding Inc. at 'CCC+'. The rating agency also affirmed Houston-based Citgo’s existing senior secured notes and industrial revenue bonds at 'BB'/'RR1', Fitch said Sept. 5 in a press release.
“The ratings are negatively affected by operational risks and contagion effects from U.S. sanctions on Citgo's ultimate parent, Petróleos de Venezuela (PDVSA),” Fitch said. “The ratings are supported by the quality of refining assets, significant scale, moderate debt and plentiful liquidity.”
Citgo is 100% controlled by PDVSA, which is run by the government of Venezuela’s leader Nicolás Maduro. However, Citgo remains entangled in court cases brought up by Houston-based ConocoPhillips, among other companies worldwide, seeking compensation for asset expropriations under a prior Venezuelan government.
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“The parent's financial weakness creates a few paths that could trigger change of control clauses and a forced refinancing of Citgo's debt,” Fitch said.
“These include creditor lawsuits against Venezuela, PDVSA and its affiliates seeking to obtain judgements for litigation awards in U.S. courts and attach to shares of Citgo's ultimate U.S. parent (PDV Holding), coupled with the Office of Foreign Assets Control's (OFAC) decision to unblock current sanction restrictions,” the rating agency said.
Fitch said there are also actions by PDVSA's secured exchange note holders to collect on a pledge of 50.1% of Citgo Holding's capital stock.
Multiple creditors of PDVSA and the government of Venezuela have managed to obtain attachment on the shares of PDV Holding. While the Delaware district court launched the sale process of PDV Holding in Oct. 2023, the auction of PDV Holding shares cannot be closed without a special license from OFAC.
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