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S&P drops PDVSA to SD, notes to D
S&P said it lowered its corporate credit rating on PDVSA (Petroleos de Venezuela SA) to SD from CC.
At the same time, the agency downgraded its issue-level ratings on the company's $3 billion 5¼% senior unsecured notes due April 2017 and on its $4.1 billion 8½% senior unsecured notes due November 2017 to D from CC.
The downgrade follows PDVSA's announcement that it will exchange 31.4% of its 3 billion 5¼% senior unsecured notes due April 2017 and 45.3% of its $4.1 billion 8½% senior unsecured notes due November 2017.
As a result, PDVSA will issue new senior secured notes for $3.3 billion at an 8½% interest rate due 2020.
The new notes will be guaranteed by 50.1% of equity shares in PDVSA's indirect subsidiary, Citgo Holding Inc.
S&P said it views the transaction as a distressed exchange because in its view, investors will receive less than what was promised on the original securities, because the timing of payments will be delayed with the extension of the maturity date of the new notes.
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