These are uncertain times in Venezuela, with the reform agenda of the country's new president, Hugo Chavez, fueling international concerns and causing investors to nervously scan their Venezuelan holdings.

Structured finance investors, in particular, have been watching the recent shake-up at Petroleos de Venezuela SA (PDVSA), the state-owned oil company and one of the two largest oil-exporters to the U.S., which was widely seen as a sign of the government's increasing political interference in the management of the oil sector.

"The forced resignation of Mr. Mandini from the presidency of PDVSA and his replacement with Mr. Ciavaldini marks the end of the merit-based, professionally-managed Venezuelan oil industry," said a source. "It also marks a tremendous shift away from a market-oriented strategy to a strategy that is going to increasingly use PDVSA as a little piggy bank for social programs in the country."

One issue of special concern is a possible reform of the country's hydrocarbon laws, which could adversely affect the legal framework governing the oil and gas industry. Potential actions include the renegotiations or abrogation of key contract provisions such as international arbitration and exemptions from OPEC-related production restrictions.

Given the fact that PDVSA has issued almost $3 billion of securitized bonds through PDVSA Finance Ltd., the uncertainties are far from negligible. Though the notes continue to perform without any problems so far, some rating agencies feel that the deals are now vulnerable to governmental actions.

Fitch IBCA, which assigned a double-B-minus credit to the sovereign, has placed all notes issued by single-A-rated PDVSA Finance on rating alert-negative. In tandem, Moody's is reviewing PDVSA Finance, currently rated A3, for possible downgrade. These actions undermine the assumption that, given the importance of PDVSA and its related entities (all of which exceed Venezuela's sovereign ceiling) to the state, the company would be allowed to operate unimpeded in international markets.

In contrast to the views of these two agencies, Duff & Phelps (DCR), which rated PDVSA Finance as a triple-B credit, has seen no need to review its ratings so far.

"We factored the political uncertainty in PDVSA Finance's credit rating, and we feel quite comfortable with the triple-B rating of the project" said Ron Dadina, vice-president at DCR in Chicago. "We don't think that this transactions will be interfered with. At the same time, these deals are linked to the credit quality of the sovereign, which means that if it deteriorates dramatically so might the credit for PDVSA Finance."

Indeed, it is in situations like these that securitization comes into its own. "The bottom line is that PDVSA has to export the oil it produces," explained Dadina. "So regardless of any political and legal changes as long as the exports continue to the U.S. and buyers continue to deposit their payments in the offshore trust, the transaction will proceed undisturbed."

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