Fitch comments on delayed Venezuelan oil payments

Fitch Ratings' analyst Morgan C. Harting said "The Venezuelan government's apparent delay in payment on oil-indexed payment obligations and its failure to cure the problem more promptly are evidence of deficiencies in its debt management capacity. The situation also underscores general concerns about willingness to pay."

Fitch said these risks are factored into its B+ rating and stable outlook on the Republic's long-term foreign currency debt and will continue to constrain the ratings.

The establishment of a special account to meet obligations related to the oil-indexed instrument is viewed favorably by Fitch, which said it bolsters the credibility of the government's stated intention to pay once the amount owed is determined. Officials estimate that the final determination will take one to two months.

In Fitch's view, administrative shortcomings that contributed to the payment delay on the oil obligations are not expected to bear directly on the republic's capacity to make payments on bonds because principal and interest payments owed on bonds are more clearly defined and do not depend on assessments by third parties.

The Venezuelan Ministry of Finance said that it would set aside $30 million in a special account with its fiscal agent for late payments plus interest owed in respect of its oil-indexed payment obligations.

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