S&P expects "extraordinary and sufficient" government support for Pemex

The agency Standard & Poor’s (S&P) Global Ratings indicated this Wednesday that it expects an “almost certain” probability that the Government of Mexico “provide extraordinary, timely and sufficient support to the state-owned Petróleos Mexicanos (Pemex) in case of difficulties”.

On Tuesday, the oil company placed $2 billion in a 10-year bond issue in the international market, resources that it will use to refinance part of its heavy credit load.

“We expect an almost certain probability that the government provide timely and sufficient extraordinary support to Pemex in case of difficulties”, the rating agency said in a statement.

The firm said it bases this assumption “on the critical role that Pemex has for the Mexican government, both economically and for the execution of the government’s energy policy”.

As well as the integral link between Pemex and the Government that holds full ownership of the oil company “and that considers the high government participation in all strategic decisions of the company”.

In the report, S&P Global Ratings assigned its global scale senior unsecured issue rating of ‘BBB’ to Pemex bonds for 2,000 million, maturing in 2033issued under a medium-term note program, series C, for 125,000 million.

In addition, he said that the bonds will be jointly and severally guaranteed by Pemex Exploration and Production, Pemex Industrial Transformation and Pemex Logistics, which they currently guarantee all outstanding Pemex notes.

The rating agency indicated that Pemex plans to use the resources of the issuance to refinance existing debt and for general corporate purposes.

“Pemex’s ratings reflect its relationship with its controlling shareholder, the Government of Mexico, and with the incentives, capacity and tools of the latter to support the company”, indicated S&P.

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On Tuesday, the firm Moody’s Investors Service assigned a rating non-guaranteed senior of B1 to the state-owned Petróleos Mexicanos (Pemex) for up to 2,000 million dollars in its new long-term bonds.

He also pointed out that the state company will use the income from the bonds for the debt refinancing and for general corporate purposes.

Just last Friday, the president of Mexico, Andrés Manuel López Obrador, affirmed that his Government will support Petróleos Mexicanos, considered the most indebted oil company in the world, to cover the 10,000 million dollars in bonds that must be paid this year.

The president offered this support questioned by the fact that the state oil company must pay 10,000 million dollars this year that were not contemplated in the budget, of which almost 6,000 million dollars must be covered in the first quarter.

Although López Obrador did not reveal whether the Government will fully or partially cover these amounts, he commented that there is a “full support” of the Ministry of Finance.

Pemex earned an accumulated 9,633 million dollars in the first three quarters of 2022, with a reduction of its total financial debt of 5.2% compared to the end of 2021, reaching 105,035 million dollars.

(With information from EFE, Reuters Y Aristegui News)


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