Fitch Ratings placed both Citgo Petroleum Corporation (Opco) and Citgo Holding Inc. (Holdco) on Rating Watch Negative. This was caused by the impact of recent US sanctions imposed on their parent company, Venezuela’s PDVSA, Fitch noted.
On January 28, 2019, the US authorities announced the imposition of sanctions on PDVSA. The company's assets in the amount of $7 billion were sealed up, and all transactions were banned. At the end of 2018, Citgo had roughly $1 billion in liquidity, but this does not solve the company's financial problems in the face of political uncertainty, analysts say. Earlier it was reported that Citgo was considering filing for bankruptcy to protect its financial operations as it deals with a looming governance crisis in Venezuela.
Experts stated that refinancing risk applies to both Opco's $900 million secured revolver which expires in July of this year, as well as Holdco's $1.875 billion notes which are due later in February 2020. Fitch estimates that PDVSA subsidiaries are subject to operational risks due to US sanctions. The agency intends to revise the rating of these companies by mid-summer 2019. However, experts admit that it could be extended if the company has a credible plan to refinance or find alternative sources of liquidity. Currently, the long-term issuer default ratings for Citgo Petroleum is at 'B', and the rating of Citgo Holding is at 'CCC'.
