Fitch Downgrades Petroperu to 'BB+'; Maintains Rating Watch Negative

Fitch Ratings release

Fitch Ratings - New York - 06 Sep 2022: Fitch Ratings has downgraded Petroleos del Peru - Petroperu S.A.'s Long-Term Foreign and Local Currency Issuer Default Ratings (IDR) to 'BB+' from 'BBB-'. Fitch has also downgraded Petroperu's senior unsecured notes to 'BB+' from 'BBB-'. The Rating Watch Negative (RWN) has been maintained.

The downgrade to 'BB+' and revised Standalone Credit Profile (SCP) to ccc- from ccc reflects a weakening in Petroperu's liquidity, persistent high leverage, insufficient government support, and uncertainty pertaining to its ability to maintain its credit lines. Petroperu has publicly disclosed in its unaudited financials a cash position of USD32 million, as of June 30, 2022, which Fitch deems to be inadequate. 

Further, the company disclosed that USD1.2 billion of its USD2.9 billion of uncommitted revolving credit lines are under review with lenders; in June 2022, the government extended a USD750 million intercompany loan, which has a grace period to repay principal and interest through August 2024, to support the company. Fitch views this support as necessary but falls short in providing the liquidity buffer the company needs for working capital and debt service. 

The RWN has been maintained to reflect uncertainty regarding the company's ability to provide audited financials for year-end 2021 by the end of September, and the uncertainty regarding its ability to maintain its USD1.8 billion of revolving credit lines, which Fitch's deems as crucial for the company.

The full release is available here.