Judging by the typical indicators, mammoth oil company Petroleos de Venezuela quickly shook off a massive strike that ran from November through January. Production bounced back, collections to the structured finance vehicle have correspondingly edged up, and labor strife has dispersed into impotent pockets of discontent. PDVSA Finance made February and May payments on US$3.3 million in cross-border bonds and, despite severe stress, the vehicle never touched a reserve account.

But under the surface, it is clear that the damage done to the corporate's capacity, management and reputation runs deep; so deep, say some observers, that the company cannot resurrect its old self as an enviably well-run state enterprise. "This is a different company," said Maria Muller, senior credit officer at Moody's Investors Service.

The agency presently rates PDVSA Finance a decidedly unenviable Caa1', in line with the corporate's local currency rating, which, in turn, was collapsed into the sovereign. An improvement of the corporate rating would bump up the vehicle as well, Muller said. Less bearish on the credit, Standard & Poor's upgraded PDVSA Finance to B+' from B-' early this month, citing jumps in exports and output, and resumed invoicing. Fitch Ratings, meanwhile, has the highest opinion of all, having kept it at BB-' following a downgrade in January.

"Fitch's confidence came from offshore liquidity that seemed sufficient to meet even the worst scenario," the agency commented in a report released last week. Indeed, the coverage ratio of receivables never touched the trigger level of 4X, though it appears to have come close in March, plummeting from a historical range of 12X to 19X to about 4.5X.

The diagnosis among rating agencies differs, but they agree that constant meddling from the administration of Hugo Chavez, widespread layoffs and insufficient investment has transformed the once-investment grade credit into a different animal. "I don't think we can anticipate the rating getting back to investment grade in the near future," said Kevin Kime, director at S&P.

One chief feature of the re-incarnated PDVSA is a permanent shroud surrounding the company's books. While production is irrefutably up - validated by the jump in collections - no one appears to trust the "official" figures. Conflicting stats from pro-Chavez factions and anti-Chavez management fed confusion throughout the strike. Since then, the president has purged the company of disloyal workers and tightened the reigns.

Regaining trust will be an uphill battle, but investors have not abandoned the company en masse. Many espouse the belief that the government would never seriously jeopardize the long-term viability of the company, since oil is so critical to the economy and the survival of the regime. "There are some issues there that nobody can control, [but] as far as you can stomach Chavez, it seems like a fairly good story for now," said an asset manager for a U.S. bank.

On top of incentives to sustain production, the structure of the paper tempered anxiety as well, sources said. One banker noted that investors were comfortable with the legal protections afforded by the vehicle. "The structure is among the strongest around," he added. The implications for the celebrated future-flows class in Latin America seem to be mixed. "[It] shows that while the future-flow structure can fall helpless in extreme situations where production stops, this freeze on production and collections cannot persist for long periods when the product is strategically important," Fitch said.

With debt service coverage hitting 15X in May and on the rise, the company is out of the woods for now. Yet its capacity to withstand further crises has been severely crippled. A referendum on the divisive Chavez is looming. The lead up to a ballot and the governments' inevitable attempts to block the vote will only ratchet up simmering political tensions. Thanks to its strategic position, the oil industry is bound to be a lightning rod, yet again.

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