NEW YORK (Standard & Poor's) Feb. 22, 2005--Standard & Poor's Ratings Services said today that it expects the government of the Bolivarian Republic of Venezuela to make its missed Oct. 15, 2004, oil-indexed payment obligation on March 3, 2005. Once that payment is made, and assuming there are no other
changes to the government's credit profile, Standard & Poor's will raise its long- and short-term foreign currency sovereign credit ratings on Venezuela to 'B' from 'SD'. (Standard & Poor's lowered its long- and short-term foreign currency sovereign credit ratings on Venezuela to 'SD' from 'B' on Jan. 18,
2005.).
On Feb. 18, 2005, Espiñeira, Sheldon y Asociados (the calculation agent) delivered its calculation report for the determination period ended Aug. 31, 2004, to JPMorgan (the fiscal agent) and the government. According to the calculation agent's report, the reference price for the Oct. 15, 2004, payment date is US$28.4671 per oil obligation, and the strike price for this date is US$28.4539 per oil obligation. Accordingly, the government of Venezuela announced on Feb. 18, 2004, that payment in the amount of US$0.0132 per oil obligation (together with interest thereon from Oct. 15, 2004, to the date of actual payment at a rate equal to LIBOR plus a margin of 13/16% per annum) will be made to the holders of these oil obligations in respect of the Oct.
15, 2004, payment date. These payments are estimated to total US$350 thousand, versus the government's initial estimate of approximately US$35 million prior to the downgrade.
"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 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 will continue to make timely payments on other issues or classes of obligations. In this case,
Standard & Poor's believes that the republic's capacity and willingness to service its debt is comparable to other 'B' rated issuers, and expects no further delay in payments on the oil-indexed payment obligations," he
concluded.