New York-Fitch Ratings, which had a “CCC” Rating Watch Negative on FertiNitro Finance Inc. prior to that company’s nationalization by Venezuela (GM Oct. 18, p. 1), says FertiNitro is now a subsidiary of Pequiven, and that FertiNitro has conveyed to Fitch that Pequiven intends to support its debt obligations. Fitch believes that it is premature to determine whether FertiNitro’s rating will be linked to Pequiven, as details of its support remain unclear. Pequiven’s debt is not rated by Fitch. FertiNitro indicated that there will be a commission to determine how the nationalization process will unfold to support FertiNitro’s obligations. The commission is expected to include representatives from Petroleos de Venezuela (PDVSA, rated “B+” with a Stable Outlook). Based upon Fitch’s experience, it said the government of Venezuela has not prevented payment of debt obligations of strategically important nationalized companies. In these instances, the nationalized companies were initially under the management of PDVSA, and some were divested post-nationalization into other government-owned companies that were not part of PDVSA’s core business. Fitch notes that FertiNitro has consistently honored its debt obligations to date, including its most recent payment due Oct. 1, 2010, just prior to nationalization. FertiNitro’s next loan payment is due April 1, 2011. Fitch said it will closely monitor to see how the change in control will impact the company’s operations and its ability to continue timely payment of its debt. Fitch believes the nationalization has not triggered an immediate debt acceleration. Fitch believes no breach of obligations has occurred for 150 days so long as funds are being deposited in the offshore accounts in accordance with the common security agreement and the borrower is meeting senior debt obligations when due. Fitch seeks to confirm these conclusions with FertiNitro. However, it said after this period, the status of debt obligations is unclear.
Transparency Across the Fertilizer Value-Chain