NEW YORK (Standard & Poor's) Jan. 18, 2005--Standard & Poor's Ratings Services
said today that it lowered its long- and short-term foreign currency sovereign
credit ratings on the Bolivarian Republic of Venezuela to 'SD' from 'B'
following the nonpayment of oil-indexed payment obligations. At the same time,
Standard & Poor's affirmed its 'B' rating on the republic's senior unsecured
foreign currency debt and its 'B' long- and short-term local currency
sovereign credit ratings. The outlook on the local currency ratings is stable.
"Venezuela's oil-indexed payment obligations are financial obligations
ranking pari passu in priority of payment with all of the republic's debt,"
said Standard & Poor's Ratings Services credit analyst Richard Francis. "An
'SD' rating is assigned when Standard & Poor's believes that the obligor has
selectively defaulted on a specific issue or class of obligations but it will
continue to meet its payment obligations on other issues or classes of
obligations in a timely manner. In this case, Standard & Poor's believes that
the republic's capacity and willingness to service its debt other than the oil
indexed payment obligations is comparable to other issuers rated 'B'," he
added.
On Oct. 15, 2004, Venezuela owed an estimated US$35 million on
oil-indexed payment obligations that were originally issued in conjunction
with the government's bank-debt restructuring in 1990. According to the
government, the obligations have been out of the money until the last
reference period; problems with verifying the exact amounts owed and with the
creditor register have resulted in the delay in making the payment.
"Standard & Poor's expects the government to make the payment on the
obligations by next month, at which time Venezuela's long- and short-term
foreign currency sovereign credit ratings will likely be reset to 'B'," Mr.
Francis concluded.