Fitch Ratings said it has downgraded the credit rating of Venezuela’s PDVSA to CC from CCC, a day after the state-owned oil company announced it reached a debt swap deal with investors.
The decision comes as PDVSA grapples with a crippling debt burden, slumping production and low oil prices.
Bondholders agreed to swap $2.8bn in PDVSA bonds for $3.4bn in new securities maturing in 2020, easing investor concerns over a possible debt default. The deal provided some breathing room to the cash-strapped company but it fell short of the $5.3bn in bonds PDVSA had hoped to exchange.
PDVSA had extended the swap deadline three times and reduced the amount of tendered bonds. It also sweetened the terms in the hopes of drawing in more investors. In the days before the final deadline, the company warned it could face difficulty making its debt payments if the swap was unsuccessful.
“Despite the partial success of the exchange offer, PDVSA’s liquidity position is weak and the company could still face difficulties making scheduled payments,” Fitch said in a statement.
Fitch said the swap helped reduce PDVSA’s principal debt payments over the next 12 months to $6.1bn from $7.1bn. But the rating agency described the company’s liquidity position as “uncertain” and “expected to continue to weaken” as the result of upcoming debt payments and low oil prices.
“Although Fitch continues to expect that PDVSA will receive financial aid from the Venezuelan government to make its upcoming principal payments, the company’s claim that it could be difficult to make scheduled payments on its existing debt increases uncertainty about the company’s liquidity,” Fitch said.
Fitch said that PDVSA last reported a liquidity position of $5.8bn at the end of 2015.