Moody's may downgrade Venezuelan oil projects

Moody's Investors Service said it placed under review for downgrade the Ba3 foreign-currency ratings of the secured long-term debt of four heavy oil upgrading projects in Venezuela: Petrozuata Finance Inc., Sincor, Hamaca Holding LLC and Cerro Negro Finance Ltd.

The rating review reflects concern that government action to increase its role in the projects and raise tax and royalty payments may weaken the debt service coverage and structural protections for debt holders, the agency said.

In addition to sharp increases in the royalty and income taxes levied on the projects, the government appears to be seeking to forcibly increase Petroleos de Venezuela's ownership to a majority stake in each of the projects, following the same pattern that resulted in increased government ownership of various conventional oil concessions owned by foreign investors.

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