Mexico has issued $12 billion worth of new debt in a bid to provide support for its troubled oil and gas company, Pemex.
The issue matures in 2030 and is denominated in dollars, Bloomberg reported, citing an unnamed source. It is also larger than initial plans, the report said, with initial plans being for up to $10 billion in debt finance.
The debt instrument that the government is using is called pre-capitalized notes, whose aim is to help strengthen the balance sheet of the company without saddling the government with direct guarantees for financial support, according to reports in the news. Even so, it has been registered as a red flag by at least one credit rater. Fitch wrote last month that Pemex’s financial woes were affecting Mexico’s sovereign rating negatively.
“If Pemex were in a better situation and were not a source of contingent liabilities for sovereign debt, Mexico could have had a rating one level higher than the current one”, Fitch’s head of sovereign ratings for the Americas said, as quoted by Forbes.
Mexico’s energy major is the most indebted company in the world, with a load of some $105 billion, of which some $20 billion in unpaid bills to suppliers. Refining output has stagnated, and issues with crude quality—including high water content—have alienated key buyers. Despite a 2024 cash infusion from the federal government, Pemex’s working capital remains deeply negative.
In this context, the company’s second-quarter financial report offered a rare glimpse of hope as it showed a rare profit, at $3.16 billion, following a loss of $2 billion for the first quarter of the year. The positive result was largely due to favorable exchange rates between the Mexican peso and the greenback. Meanwhile, sales during the quarter fell, and lower oil prices contributed to lower revenues.
By Irina Slav for Oilprice.com
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