Petroperu faces a new credit rating downgrade and warns of possible defaults

The state-owned company Petroperú has received another downgrade in its credit rating, this time from Standard & Poor's Global Ratings (S&P), who decided to lower the rating of the oil company to "B" from "B+" as a long-term debt issuer. Additionally, it lowered its standalone credit profile from "CCC+" to "CCC". This news adds to the downgrades made by other credit rating agencies such as Fitch Ratings and Apoyo & Asociados in recent days, highlighting the financial difficulties that Petroperú is currently facing. S&P's decision to downgrade Petroperú's rating is based on the deterioration of the company's financial health due to "unexpected issues", including the shutdown of the flexicoking unit at the Talara Refinery. This situation, which is estimated not to be resolved before June 30, has weakened Petroperú's EBITDA and cash flow, postponing the recovery of these financial indicators until 2025, according to the risk rating agency's report. S&P has also placed Petroperú on "negative credit watch for increased vulnerabilities", reflecting uncertainty about the company's ability to avoid default in the next 12 months without further government support. The agency notes that while the Peruvian government has supported the oil company since 2022, the measures implemented so far have not effectively addressed Petroperú's financial crisis or restored market confidence. In this regard, S&P expresses doubts about the real ability of Petroperú's shareholders, namely the Ministry of Energy and Mines along with the Ministry of Economy, to "rescue" the company. The agency warns that they may downgrade Petroperú's rating in the next three months if the company does not present its audited financial results for 2023, putting it at risk of further financial defaults. Placing Petroperú on "negative credit watch" by S&P underscores the severity of the state oil company's financial situation and the need to take urgent measures to address its vulnerabilities. The lack of visibility on how Petroperú will face the crisis and the effectiveness of its management to resolve it are aspects that concern the credit rating agency and cast doubt on the company's financial sustainability in the near future. Given this downgrade in Petroperú's credit rating and S&P's warnings of potential financial defaults in the short term, it is essential that authorities and the company itself take concrete and effective actions to stabilize its financial situation and regain investors' confidence. Transparency in the presentation of audited financial information and the implementation of measures to improve Petroperú's management and liquidity are key aspects to overcome current challenges and ensure its long-term viability.