Moody's cuts Pdvsa, Citgo; rates Citgo loan Ba3

Moody's Investors Service said it downgraded the foreign currency bond rating and global local currency rating of Petroleos de Venezuela SA (Pdvsa) to Caa1 from B2 and B1, respectively, and maintained a negative outlook on the ratings.

The agency also downgraded Citgo Petroleum Corp.'s corporate family rating to B1 from Ba2, its probability of default rating to B1-PD from Ba2-PD and its senior secured ratings on term loans, notes and industrial revenue bonds to B1, LGD3-43% from Ba2, LGD3-41%.

Moody's also assigned a rating of Ba3, LGD3-30% to Citgo's senior secured bank credit facility.

The outlook for Citgo is negative. Citgo is Pdvsa's wholly owned U.S.-based refining subsidiary.

The rating actions follow Moody's Dec. 16 downgrade of the Venezuelan government's foreign currency and local currency bond ratings to Caa1 from B2 and B1, also with a negative outlook. The sovereign rating action reflects concerns over the Venezuela's severe economic stress in the post-Chavez era, reflected in rising economic imbalances.

These imbalances are exacerbated by government policies, which have resulted in high inflation, a huge disconnect between official and parallel market foreign currency exchange rates, a scarcity of many essential goods and services, and deterioration in the country's external accounts and foreign currency reserves, the agency said.

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