Downgrade of Petro-Peru's credit rating: risks and possible solutions

The S&P Global firm has issued news that has shaken the Peruvian financial sector: the downgrade in the credit rating of Petro-Perú, the state oil company of the country. This event, which has lowered the company's rating from 'B+' to 'B', represents a step closer to a possible default or insolvency for the company. The repercussions of this decision by the rating agency have not been delayed, as it is warned that it could have significant impacts on the social, economic, and reputational aspects for the Peruvian government, as indicated in the report issued on May 28. The risk of Petro-Perú defaulting intensifies if it fails to renegotiate a new waiver with its creditors due to the potential delay in the publication of its audited financial statements for 2023, whose deadline expires on May 31. In this situation, there is a possibility that the rating agencies may continue downgrading the company's rating in the next three months if the necessary waiver to avoid a technical default is not obtained. The Minister of Energy and Mines, Rómulo Mucho, has stated that Petro-Perú is in a situation of technical bankruptcy, referring to the fact that the company faces a debt four times greater than its equity, lacks working capital, and has a low Ebitda. This concerning situation is exacerbated by the malfunction in the flexicoking plant, which has been considered by S&P as a factor contributing to the deterioration in Petro-Perú's liquidity. Experts in the field point out that the situation of the oil company is critical and requires urgent measures to avoid a scenario of further crisis. The proposal to restructure Petro-Perú through a bankruptcy process in Peru and New York has been suggested as a viable alternative to address the company's complex financial situation. In contrast, the possibility of private management has also been mentioned as an option to consider, although the need for a solid plan ensuring the gradual recovery of the company is emphasized. The Board of Petro-Perú is working on presenting an action plan that seeks to offer concrete solutions to overcome the current crisis. The importance of making decisions that provide security and stability to the market is highlighted by specialists, who believe that defining a path to follow is crucial to restore confidence in the company. In this sense, it is expected that measures will be taken to steer Petro-Perú towards sustainable recovery, thus avoiding an unfavorable outcome for the company and the Peruvian economy as a whole.