Fitch Downgrades Petroperu to 'CCC+'

Fitch Ratings release

Fitch Ratings - New York - 21 May 2024: Fitch Ratings has downgraded Petroleos del Peru - Petroperu S.A.'s (Petroperu) Long-Term Foreign and Local Currency Issuer Default Ratings (IDRs) to 'CCC+' from 'B+'. Fitch has also downgraded the rating of Petroperu's senior unsecured notes to 'CCC+' from 'B+', and revised Petroperu's Standalone Credit Profile (SCP) to 'cc' from 'ccc-'.

The downgrade to a 'CCC+' rating is the result of a revision in the government-related entity (GRE) criteria, which was driven by two key developments: the revision of the SCP from 'ccc-' to 'cc', and the adjustment of the GRE score. Fitch's evaluation indicates that, when assessed on a standalone basis, default of some kind appears probable due to liquidity constraints, which supports its placement in the 'cc' rating category.

Additionally, the "Preservation of Government Policy Role" factor previously rated as 'strong' has been reclassified to 'not applicable,' which has led to a decrease in the GRE score from 25 to 15, moderate expectation of support. Consequently, this change has reduced the uplift derived from the GRE criteria from a previous +5 to a current +3.

This reassessment is underpinned by Petroperu's significant loss of market share, which plummeted from 45% to 25%. This decline underscores the availability of alternative sources for the country to obtain refined products, suggesting a reduced reliance on Petroperu for this purpose.

The full release is available here.