Debt and Project

7455 Words30 Pages
Corporate Governance & Restructuring

Petrolera Zuata Petrozuata C.A.

Maastricht University School of Business and Economics Maastricht, 19th September 2012

Driessen, G. (i6060635) Koerselman, W. (i561398) Park, D. (i6051671)

International Business – Finance Corporate Governance and Restructuring Course Code: EBC4052 Tutor: Dr. S. Kleimeier

Case 2: Petrolera Zuata, Petrozuata C.A.

Introduction Petrolera Zuata, hereinafter referred to as Petrozuata, was the first joint venture in a series of strategic associations between PDVSA, Venezuela 's state-owned enterprise entrusted with the task to "efficiently develop and manage the country 's hydrocarbon resources and promote economic development", its subsidiaries and foreign
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1.2. How does the Petrozuata project perform regarding these criteria? Does the project finance structure mitigate some of the risks that the rating agencies consider? If so, how is this mitigation done? The aim for Petrozuata is to get an investment grade rating. This is necessary for the ability to issue project bonds. If Petrozuata would not have an investment grade rating, the bond price would decrease at the same dividend, or the dividend would have to increase, resulting in a situation less favorable for Petrozuata. As mentioned in the previous section, the rating is established based on three elements, these being: the sponsor’s creditworthiness, the projects economics and the sovereign risk of the country, Venezuela. The two main sponsors of the Petrozuata project are Conoco and Maraven. Since these companies are subsidiaries without publicly-traded debt, they have no rating. As a result, we have to look at the credit-ratings of the respective parent companies. Conoco is part of the energy subsidiary of DuPont, which has a 100% stake in Conoco. DuPont was rated by both S&P and Moody’s, AA- and Aa3 respectively, an investment grade rating. Maraven is a subsidiary of PDVSA, which in turn is wholly owned by the Venezuelan government. This means that the rating for
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