Following its downgrade of Colombia's local and long-term foreign currency ratings, Standard & Poor's recently downgraded its ratings on the securitization deals issued by Empresa Colombiana de Petroleos (Ecopetrol) from BBB-minus to BB-plus.

The oil-backed deals, issued in 1997 and 1999 through Solomon Brothers were for $290 million and $175.6 million respectively. The first offering is scheduled to mature on 2002 and the second one will mature in 2004.

The rating agency explained that the downgrade reflects its opinion that "the structural features of the transaction and the importance of the industry provide only minimal sovereign risk mitigation for wholly government-owned Ecopetrol."

According to S&P, the oil produced from the Cusiana and Cupiagua fields could easily be diverted to another purchaser if the sovereign, in the event of severe financial distress, is looking for ways to increase its foreign exchange earnings.

On May 24, S&P downgraded Colombia's local currency ratings from BBB-plus to BBB and its long-term foreign currency rating from BB-plus to BB.

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