Mexico gives struggling Pemex $5 bln to pay debt, refinancing planned
By Miguel Gutierrez and Daina Beth Solomon
MEXICO CITY, Sept 11 (Reuters) - Mexico's government will give state-owned Pemex $5 billion so the world's most indebted oil company can pay off bonds, part of a plan to shore up accounts that also includes refinancing other bonds, the company said on Wednesday.
Pemex, burdened by some $104 billion of debt, has a credit profile rated junk by Fitch and risks a downgrade by Moody's in coming months that would require many institutional investors to sell off billions of dollars of its outstanding paper.
The $5 billion appeared to be in addition to a $4.4 billion contribution to the company, including cash and tax relief, unveiled in the finance ministry's 2020 budget proposal at the weekend.
Pemex said it plans to use the government capital for the prepayment of bonds that mature in 2020 and 2023. It also will issue new bonds in maturities of seven, 10 and 30 years to refinance short-term debt. It did not give a value for the new bond placements.
"Proceeds from this transaction will be used to ensure a reduction in the outstanding balance of Pemex's debt," the company said in a statement.
In June, Pemex CFO Alberto Velazquez told Reuters the company planned to refinance $2.5 billion this year.
In a statement, the finance ministry said the capital contribution will have no impact on net public sector debt or on public sector borrowing requirements, the broadest measure of public sector debt.
Mexican President Andres Manuel Lopez Obrador said this week that he sees a brighter future for Pemex as production stabilizes. Pemex has had 14 straight years of slumping output due to a mixture of ageing fields and a lack of investment.
Finance Minister Arturo Herrera said on Tuesday that the government will “defend the credit rating” of Pemex, assuring the firm has money to invest and to manage its debt profile so it is “more adequate.”
(Reporting by Daina Beth Solomon; Editing by David Gregorio)
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