Background on Pemex and its Relevance
Petróleos Mexicanos (Pemex), the state-owned petroleum company in Mexico, has been actively working to decrease its financial debt burden following recent government support. Pemex plays a crucial role in Mexico’s economy, as it is responsible for the exploration, production, refining, and marketing of oil and petroleum products in the country.
Pemex’s Bond Prepayment Announcement
On November 3, Pemex announced that it will prepay the upcoming payments for three series of international bonds maturing in 2026. The total amount exceeds $1,900 million (USD) and €467 million (EUR).
- The first prepayment pertains to 4.5% bonds worth $431 million.
- The second pertains to 3.75% bonds worth €467 million.
- The third pertains to 6.875% bonds worth $1,035 million.
This move aims to alleviate part of Pemex’s financial load, which stood at over $99 billion as of June 30, 2021. Additionally, Pemex intends to capitalize on more favorable market conditions.
According to the official notice, the bonds will be liquidated at their nominal value. Pemex will also pay an additional amount, known as the “make-whole amount,” to cover any accrued interest up until their original maturity date.
Deutsche Bank will facilitate these payments, as per Pemex’s statement.
Fitch Ratings Upgrade and its Implications
Just two months after Fitch Ratings raised Pemex’s credit rating, the agency has now upgraded it from “BB” to “BB+” for both long-term local and foreign currency notes. The outlook remains stable.
This improvement comes after Pemex successfully executed a public offering for $9.9 billion across eight bond series, financed by cash from the Mexican government.
Fitch’s upgrade reflects Pemex’s strengthened relationship with the sovereign, resulting in an increased Supervisión, Vinculación y Apoyo (OLS) evaluation for the company. Now, Pemex is rated just one level below Mexico’s sovereign rating instead of two levels, leading to the upgrade.
Pemex’s Strategic Plan and Government Goals
In August, Pemex unveiled its Strategic Plan 2025-2035. The Mexican Secretariat of Finance and Public Credit, through the National Works and Services Bank (Banobras), will establish a $250 billion peso fund for Pemex’s investment projects.
President Claudia Sheinbaum and Secretary of Finance, Edgar Amador Zamora, stated that the government aims for Pemex to finance its operational expenses independently starting in 2027. Furthermore, they intend to reduce Pemex’s debt to $77.3 billion by 2030.
Key Questions and Answers
- What is Pemex? Petróleos Mexicanos (Pemex) is the state-owned petroleum company in Mexico, responsible for oil and petroleum product exploration, production, refining, and marketing.
- Why is Pemex prepaying its bonds? Pemex aims to reduce its financial burden and take advantage of more favorable market conditions.
- What was the recent upgrade from Fitch Ratings? Fitch Ratings upgraded Pemex’s credit rating from “BB” to “BB+” for both long-term local and foreign currency notes, with a stable outlook.
- What are the goals of the Mexican government for Pemex? The Mexican government aims for Pemex to finance its own operational expenses independently by 2027 and reduce debt to $77.3 billion by 2030.
