Fitch cuts Venezuela after latest US sanctions
The ratings agency says the sanctions on the oil-exporting sovereign issuer leave it with reduced financing options
Fitch Ratings has downgraded Venezuela to CC from CCC just days
after the Trump administration imposed new financial sanctions
on the country.
The rating agency said a default by Venezuela was now
"probable" and that the sanctions further reduced financing
options for the country and state-owned oil company
Last week, President Donald Trump issued an executive order
prohibiting US institutions from any involvement in new bond
and shares issued by Venezuela’s government and
PDVSA and restricting their access to US bond and equity
Venezuela's liquidity ratio, or central bank reserves and
liquid foreign assets, was estimated at just 33%, relative to
its external debt that has a residual maturity of less than a
year, Fitch said. Gross international reserves have continued
to decline this year, falling approximately $1.2bn to $9.8bn in
the year through August.
While Venezuela has additional FX liquidity in government-run
funds, they are believed to have declined and US sanctions will
further hurt the country’s already weak external
liquidity, Fitch said.
According to S&P Global Ratings, which
Venezuela to CCC- from CCC last month, the government has only
$3bn to $4bn in non-gold reserves.
With $2.8bn in debt payments due this year and $7bn due in
2018, Venezuela is under considerable duress to meet its
obligations. PDVSA also has $4bn in debt payments due
throughout this year.
Last month, PDVSA
a set of investor calls planned to inform and reassure the
buyside about the company's ability to make its bond