Fitch Affirms Petrobras Energia's Ratings; Upgrades National Scale to 'AA(arg)'.BUENOS AIRES Buenos Aires (bwā`nəs ī`rēz, âr`ēz, Span. bwā`nōs ī`rās), city and federal district (1991 pop. , Argentina & CHICAGO -- 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 upgraded the National Scale Rating of Petrobras Energia (PE) to 'AA(arg)' from 'AA-(arg)'. In addition, Fitch has affirmed the following ratings of PE: --Foreign currency Issuer Default Rating (FC IDR IDR In currencies, this is the abbreviation for the Indonesian Rupiah. Notes: The currency market, also known as the Foreign Exchange market, is the largest financial market in the world, with a daily average volume of over US $1 trillion. ) at 'B+'; --Local currency Issuer Default Rating (LC IDR) at 'BB-'; --Senior unsecured issue ratings at 'B+/RR3'. The issue rating reflects a recovery expectation in the 'RR3' category, indicating a recovery estimation of 51%-70%. All ratings have a Stable Outlook. PE's ratings are supported by the company's solid credit profile, its significant cash generation outside of Argentina, and its ability to retain a material amount of its export revenues abroad. PE shows balanced oil and gas reserves and an adequate reserve level. The company also benefits from the experience and strong market position of its shareholder, Petrobras Brasileiro (upgraded to 'BB+' by Fitch in June 2006). The international ratings continue to be constrained by the Argentine sovereign environment. The aforementioned factors are tempered by PE's exposure to political interference in the regions where it operates. Currently, a high level of uncertainty exists as to the company's activities in Venezuela, which represent approximately 30% of PE's EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) A metric used to show a company's profitability, but not its cash flow. EBITDA became popular in the 1980s to show the potential profitability of leveraged buyouts, but has become and reserves. Fitch understands that the recent conversion of the existing operating agreements An operating agreement is an agreement among limited liability company ("LLC") members governing the LLC's business, and Member's financial and management rights and duties. No state requires an LLC to have an Operating agreement. into joint ventures controlled by PDVSA PDVSA Petroleos De Venezuela, SA constitutes the major event risk regarding PE's future. Nevertheless, PE's proven access to financing sources and proper cash management, the potential support of its controlling shareholder, and the improvement in credit protection measures in 2005 and the first half of 2006 mitigate a possible reduction in cash flow. PE reported solid credit protection measures that have benefited from the global increase in the price of oil and refined products limited by the effect of export taxes. Through June 2006, the company reported interest coverage of 6.1 times (x), net debt-to-EBITDA of 1.7x, and debt-to-capitalization of 48.1%, consistent with the assigned ratings. PE maintains a leverage position consistent with higher rated entities outside of Argentina. PE is one of the most vertically integrated energy conglomerates in Latin America Latin America, the Spanish-speaking, Portuguese-speaking, and French-speaking countries (except Canada) of North America, South America, Central America, and the West Indies. , with operations encompassing virtually all segments of the energy value chain. Core business activities include oil and gas exploration and production; refining and marketing; petrochemicals; and electricity. PE is controlled by Petrobras Energia Participacoes S.L. (Participacoes), a holding company that is in turn controlled by Brazil's national oil company, Petrobras (Long-term IDR 'BB+' by Fitch). 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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