(Bloomberg) -- The Peruvian government announced on Tuesday details of a relief package for Petroleos del Peru SA, resolving for now a liquidity crisis at its ailing state-owned oil firm. 

The package is made up of a state-guaranteed $800 million loan, as well as a state-backed $500 million credit line, both with state-owned Banco de la Nacion. Details were published in Peru’s official gazette. The government’s decision process, which took weeks after Petroperu sounded the alarm on its liquidity situation, led Fitch Ratings to cut the company’s rating by three notches deeper into junk.

Read More: Latin America’s Quasi-Sovereign Companies Attract Bond Investors

Petroperu is struggling due to debts incurred in the construction its new Talara refinery, which was significantly delayed and cost more than $6 billion, twice its initial budget. The refinery is now operational and executives say the refinery is the key to turning the company into a profitable enterprise. But the company is now also increasing its debt load. 

Still, the package is short of what Petroperu initially requested, which totaled around $2 billion, and included a cash injection that the government said it simply could not afford. The government has said it will revamp the board of Petroperu soon, although details have not been announced.

©2024 Bloomberg L.P.