Fitch Ratings on Tuesday cut Citgo Petroleum's issuer default rating and its senior secured rating over worries about the glut of global refining capacity.
Fitch lowered the issue default rating to "B plus" from "BB minus" and the senior secured rating to "BB plus" from "BBB minus."
It also assigned a rating of "BB plus" to up to $1.5 billion of senior secured notes, a $700 million secured revolver and a $300 million secured term loan. The ratings outlook was revised to "stable" from "negative."
Because of excess capacity and continued weak demand for energy, refiners have had trouble passing along the higher costs of oil to consumers using gasoline, diesel fuel and heating oil. Some refiners have been shutting operations or scaling back production.
Fitch said Citgo reported a net loss of $201.4 million in 2009 compared with net income of $801.4 million in 2008 and $1.6 billion the year before that. For the first quarter of 2010, Citgo reported a net loss of $127.6 million.
Fitch said Citgo's ratings remained constrained by its linkage to Venezuela's state-owned oil company.
Fitch said Citgo's outlook has improved with improved liquidity and progress in bringing three refineries closer to making ultra low sulfur diesel fuel.
The "BB" ratings are considered speculative and the "B" rating is highly speculative.
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