Citgo reported lackluster year-over-year earnings for 2Q19, but showed promising trends sequentially, according to four sources familiar with the matter.

The oil refiner booked USD 360m of adjusted EBITDA in 2Q19, down 29% from USD 509m in 2Q18, but up sequentially from USD 95m in 1Q19, the sources said. Year-to-date adjusted EBITDA through 30 June also fell to USD 455m from USD 778m in the first six months of 2018.

The borrower’s Corpus Christi refinery in particular was impacted in the quarter by unfavorable crack spreads and spending on turnaround initiatives, two of the sources said. That specific refinery reported negative USD 42m of EBITDA this quarter, compared to positive USD 37m in 2Q18. Corpus Christi’s refinery was also only at 54% capacity utilization in 2Q19, nearly half of the 94% for the corresponding period last year.

“[Management] spoke about a turnaround that took place at the Corpus Christi plant and of course that takes it down a certain amount of time, but what’s been difficult for the Corpus Christi plant has been difficulty in obtaining heavy crude for it,” one of the sources said.

As of 30 June, liquidity totaled USD 1.181bn through cash on hand and no revolver. The company is 2.85x levered, based on USD 4.7bn of total debt and USD 1.645bn of LTM EBITDA.

The borrower has tapped the market twice in the last six months – to refinance its revolving and accounts receivable facilities in March and to refinance its USD 1.87bn senior secured notes due 2020 in July.

Especially during the syndication in March, several buysiders pointed out that despite Citgo’s attractive US asset base and low pro forma leverage, there are practical and ethical issues around lending to an institution so closely linked to the volatile political and economic situation in Venezuela.

Citgo’s USD 1.37bn 9.25% senior secured notes due 2024 last traded at 104.46 to yield 7.914% on 13 August before the earnings report, according to MarketAxess. The notes are quoted today at 104 to yield 8.04%, according to one of the sources.

The company’s opco USD 650m 6.25% senior secured notes due 2022 traded today at 100.625 to yield 5.591%, down slightly from a trade at 101 to yield 5.211% on 13 August, according to MarketAxess.

The USD 1.2bn Libor+ 500bps (1% floor) TLB due 2024 was last quoted today at 100.313/101, in line with recent levels, according to Markit.

Citgo declined to comment.

2019 Debtwire