Fitch Ratings took Citgo Holding Inc., rated one notch above default, off Rating Watch Negative after the Venezuelan state-owned company successfully refinanced a term loan.
The company, which has endured its share of struggles as Venezuela's economy continues to implode, paid off the 2018 loan with $215 million in cash and $375 million in 10.75% notes due in 2020. That was enough for Fitch to remove the negative outlook for both Citgo Petroleum Corp. and Citgo Holding Inc. The holding company keeps its CCC issuer default rating, meaning it remains one step from default, and was given a stable outlook. Citgo Petroleum kept its B issuer default rating and also was given a stable outlook.
"Citgo's ratings are supported by quality refining assets, modest CapEx requirements, Citgo's actions to address near-term refinancing risk, and a robust macro environment for refiners," Fitch said. "The 'CCC' rating at Holdco reflects the fact that Holdco will continue to face significant refinancing risk, and in less than two years could face another challenging refinancing when the 2020 Holdco notes come due in an upsized amount ($1.875 billion)," Fitch said.
Fitch said the impact of U.S. sanctions against Venezuela has had a "material but manageable" impact on Citgo, but U.S. oil and other crude continue to run through its refining system along the Gulf of Mexico.
"Citgo's footprint on the Gulf coast allows favorable access to export markets, which is an important component in maintaining competitive gross margins relative to peers. The overall refining environment remains benign, and Fitch expects 2017 performance will be relatively robust driven by solid refining fundamentals including strong product demand, good crack spreads, and benefits associated with recent U.S. tax reform," the rating agency said.
