S&P affirms Citgo

Standard & Poor's said it affirmed its ratings on Citgo Petroleum Corp., including the BB corporate credit rating, after the company announced plans to issue $1 billion in additional secured debt.

The outlook is stable.

The new debt will rank pari passu with Citgo's existing $1.15 billion first-lien revolving credit facility and $700 million first-lien term loan, which are rated BBB- with a recovery rating of 1. Citgo will use proceeds from the $1 billion first-lien financing to fund a $1 billion intercompany loan to parent company, Petroleos de Venezuela SA (BB-/stable).

The agency said that although the increase in debt is clearly unfavorable for credit, Citgo's resulting leverage will remain within S&P's range of expectations for the current rating.

The ratings on Citgo reflect its satisfactory business risk profile, its status as one of the largest refiners in the United States, the substantial competitive advantage it gains from its ability to process large volumes of heavy sour crude oils - which trade at sharp discounts to better-quality crude oil - into high-margin products and its economies of scale, S&P said.

The ratings are limited by an aggressive financial risk profile and by the ratings on PDVSA, the agency added.

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