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Pemex’s dollar bonds have fallen by up to 1.6 points after rating agencies sounded warnings over the company’s debt sustainability. In particular, Moody’s lowered its outlook for Pemex’s debt to “negative” from “stable”, whereas Fitch earlier downgraded the company’s ratings from BB- to B+ citing continued weak operational performance. Pemex has accumulated $107bn in debt and has to make roughly $15bn in offshore bond payments in 2023 and 2024 on top of an additional $9bn from other short-dated debt. Moreover, the company has had a history of accidents and explosions at its facilities, which exhibits its weak operational performance. Nevertheless, the Mexican president has pledged to rescue Pemex as part of a broader energy nationalism strategy to “champion state groups” and “reduce reliance on foreign companies and suppliers”. Fitch has also called for the Mexican government to step up support for the company in order to meet the next payments.
Aaron Gifford, an EM sovereign analyst at T Rowe Price which is one of Pemex’s largest bondholders said that the company “is in a vulnerable position given tight liquidity and poor solvency metrics…Higher borrowing costs are also an issue and the lack of immediate government support has come as a disappointment…I still believe the government has the willingness and capacity to support the company.” Saverio Minervini, senior director at Fitch said, “Pemex cannot afford (to wait) for the next government to take action, Pemex needs assistance now…support has been ad hoc and unpredictable”.
Pemex’s 5.35% 2028s have fallen 1.6% since the start of the week to trade at 79.9 cents on the dollar, yielding 11.1%.