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Bond Market News
Ecopetrol Downgraded to HY-Status of Ba1 by Moody’s
May 23, 2024
Ecopetrol was downgraded by a notch, making it a fallen angel from its earlier IG-status of Baa3 to a HY-status of Ba1 by Moody’s. The downgrade reflects the shift in the company’s financial policy which would erode its liquidity due to increase in leverage. Besides increasing leverage, liquidity would also increase due to ongoing dividend distributions and implementation of an ambitious capital investment strategy over the next three years. The downgrade also takes into account the negative free cashflows posted by the company in 2023 and Moody’s expectations that Ecopetrol will continue to post negative free cashflows till 2025. However, Moody’s noted that with a cash position of $3.6bn as of December 2023, the petroleum major’s liquidity position is adequate.
Ecopetrol’s bonds were marginally lower with its 5.375% 2026s at 98.43 cents on the dollar, yielding 6.19%
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