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: Quote, Profile, Research, Stock Buzz). 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: Quote, Profile, Research, Stock Buzz), Exxon Mobil and PDVSA.