UPDATE 3-Citgo takes $1 bln loan for PDVSA debt; Fitch cuts

(Recasts, Fitch downgrade)

CARACAS/NEW YORK, Dec 19 (Reuters) - Citgo, a U.S. unit of Venezuelan state oil company PDVSA, has negotiated a $1 billion loan to repay debt held by an oil project that Venezuela recently wrested from Exxon Mobil, officials said on Wednesday.

The added burden of the loan on Citgo's books prompted Fitch Ratings on Wednesday to downgrade Citgo's credit rating a notch further into junk bond territory, lowering it to "BB-."

Venezuelan Energy Minister Rafael Ramirez told a newspaper that PDVSA plans to use the proceeds of the loan to buy back $630 million of bonds 156877AB8=156877AB8=RRPS issued for the Cerro Negro project, until recently majority owned by Exxon Mobil (XOM.N). A PDVSA press officer confirmed the story.

Citgo, which owns gas stations and refineries across the United States, confirmed the loan but would not give further details.

Ramirez, who is also president of PDVSA, said the Citgo loan was cheaper than debt at Cerro Negro and Hamaca, another heavy crude oil project in the Orinoco belt.

"We prefer to ask Citgo to take on new debt, at an annual interest rate of 6 percent and reduce the weight of the previous debt, which was taken with 9 percent interest," he said.

PDVSA wants to pay its Cerro Negro debt by Dec. 31 and said on Monday it had paid off all $740 million of debt at Hamaca.

In May, as part of President Hugo Chavez's drive to increase state control over the oil sector, PDVSA took over operations of four multibillion dollar heavy crude projects in the Orinoco basin, including Hamaca and Cerro Negro, which was a joint venture between BP (BP.L), Exxon Mobil and PDVSA.

Exxon Mobil left Cerro Negro after the nationalization, but BP has kept a minority stake in the project.

FITCH'S CITGO CONCERNS

Fitch said the loan underscores Fitch's long-term concerns about the use of Citgo's cash flows and asset base to fund activity by PDVSA.

It also expressed concern about the possibility PDVSA could place additional financial pressure on Citgo if oil prices come down from recent highs.

The new loan will take Citgo's overall debt to around $2.3 billion, said Mark Sadeghian, director of energy at Fitch Ratings in Chicago.

He told Reuters that in the year through Sept. 30, Citgo had provided its PDVSA parent with $1.74 billion in dividends largely funded by sales of non-core assets like pipeline holdings and two U.S-based asphalt refineries, Paulsbro and Savannah.

He said the new $1 billion loan was from a group of banks. Citgo's collateral included its refineries in Lake Charles, Louisiana, and Corpus Christi, Texas, as well as accounts receivable and inventory.

Standard and Poor's Ratings Service and Moody's Investors Service both left their Citgo ratings unchanged in commenting on the loan proposal last week. (Reporting by Janet McGurty, Walker Simon, Fabian Andres Cambero and Frank Jack Daniel; Editing by Leslie Adler)