Mexico’s Pemex plans bond to raise up to $1.5 bln to refinance debt, source says

By Ana Isabel Martinez

MEXICO CITY, Oct 8 (Reuters)Petroleos Mexicanos is seeking to raise between $1 billion and $1.5 billion through a five-year bond to refinance debt, a source with the Mexican state oil firm said on Thursday, the first such operation since it lost its investment grade rating.

“The placement is 100% refinancing, it will not be new debt or raise the balance of Pemex’s debt,” the source said on condition of anonymity.

The source stressed that Pemex PEMX.UL, as the company is known, is complying with instructions from President Andres Manuel Lopez Obrador that the government avoid incurring net debt during his term in office.

The financial institutions involved with the transaction, which was first reported by IFR, are SMBC Nikko, Bank of America, Goldman Sachs, and Mizuho, according to the source.

While Pemex’s budget is almost entirely financed by its own operations, it has received some direct capital injections from the government in an effort to strengthen its balance sheet.

The company is laboring under the weight of some $100 billion in financial debt, more than any other oil firm, plus years of declining crude output.

The source said the latest transaction will not affect the availability of Pemex’s existing lines of revolving credit.

In April, Moody’s became the second major credit rating agency to downgrade Pemex debt to speculative grade, or junk status, dealing a serious blow to Lopez Obrador’s push to boost the company.

(Reporting by Ana Isabel Martinez; Editing by David Alire Garcia and Paul Simao)

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