Correction - Fitch Affirms PDVSA's IDRs at 'BB-', Outlook to Negative.CHICAGO -- (This is a correction for the release that went out earlier today. It corrects the amount of notes affected.) Fitch Ratings Fitch Ratings An international rating agency for financial institutions, insurance companies, and corporate, sovereign, and municipal debt. Fitch Ratings has headquarters in New York and London and is wholly owned by FIMALAC of Paris. has revised Petroleos de Venezuela S.A.'s (PDVSA PDVSA Petroleos De Venezuela, SA ) Rating Outlook to Negative from Stable following Fitch's revision of the Bolivarian Republic of Venezuela's Rating Outlook to Negative from Stable. Concurrently, Fitch affirms PDVSA's foreign and local currency Issuer Default Ratings (IDRs) at 'BB-', and the National long-term rating at 'AAA(ven)'. This rating action affects $7.5 billion of outstanding notes due 2017, 2027 and 2037. Due to its high dependence on crude oil, decreases in the Venezuela crude oil basket will adversely affect the broader economy of Venezuela The economy of Venezuela is based on oil, although efforts have been made to develop heavy industry, e.g. steel and aluminium, and revive the agricultural sector. From the 1950s to the beginning of the 1980s the Venezuelan economy was one of the strongest in South America. . Furthermore, Fitch remains concerned with the long-term challenges faced by PDVSA regarding the company's ability to extract and develop hydrocarbons reserves, sufficiently reinvest in its business, and the potential increase in taxes that hinders the company's ability to invest in much needed infrastructure. PDVSA's foreign and local currency IDRs are constrained by Fitch's 'BB-' foreign currency rating of the Bolivarian Republic of Venezuela and are strongly linked with the sovereign's credit profile. The linkage is based on the company's governance as a state-owned entity, the shareholder's ultimate ability to influence PDVSA's financial flexibility, and utilization of PDVSA's financial resources for quasi-sovereign and fiscal, rather than productive capacity, uses. Currently, the oil minister and the PDVSA president are one and the same, further demonstrating the government's tight control over the strategy and resources of PDVSA. Fitch remains concerned about sovereign credit Sovereign credit is the credit of a sovereign country backed by the financial resources of that state. Sovereign credit is the opposite of sovereign debt. Fiat money is sovereign credit and sovereign bonds are sovereign debts. When money buys bonds, sovereign credit cancels sovereign debt. trends in Venezuela, underscored by recent nationalizations and aggressive stance toward the private sector, as well as by measures to lower oil prices, buoyant government spending Government spending or government expenditure consists of government purchases, which can be financed by seigniorage, taxes, or government borrowing. It is considered to be one of the major components of gross domestic product. and a heterodox het·er·o·dox adj. 1. Not in agreement with accepted beliefs, especially in church doctrine or dogma. 2. Holding unorthodox opinions. macro policy framework. The additional debt incurred by PDVSA raised gross public and public external debt ratios. PDVSA, Venezuela's national oil company, is engaged in the exploration and production of crude oil and natural gas; the refining, marketing and transportation of crude and refined products; and the production of petrochemicals, as well as various other hydrocarbon-related activities in Venezuela and abroad. The Venezuelan government is the company's sole shareholder. Fitch's rating definitions and the terms of use Terms of Use are rules set up by the owner of an intellectual property or service to govern how they may be legally used. In many cases, terms of service are used as a contractual agreement between a company and users of a service they provide. of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures Policies and Procedures are a set of documents that describe an organization's policies for operation and the procedures necessary to fulfill the policies. They are often initiated because of some external requirement, such as environmental compliance or other governmental are also available from the 'Code of Conduct' section of this site. |
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