Pemex, Mexico’s state-owned oil company, set a number of records with a refinancing operation in the final weeks of 2023, inking Latin America’s largest syndicated transaction and bringing together the broadest group of participating financial institutions to get it done.
The refinancing, which the company announced in mid-December 2023, was for a whopping $8.3 billion and involved an unprecedented 30 financial institutions in the extended syndicate group across the deal’s three refinancing facilities.
The transaction, which wins Loan of the Year, consisted of a $2.2 billion, three-year term loan and a $4.5 billion syndicated revolving credit facility for Pemex, as well as a $1.5 billion syndicated revolving credit facility for a Pemex subsidiary, PMI.
BBVA México, BofA, Bank of China, Citigroup, JPMorgan, Mizuho, Scotiabank and SMBC acting as global coordinators, joint bookrunners, and joint lead arrangers.
The syndicated transaction represented an important milestone for the Mexican oil and gas sector and was the largest transaction in the region in terms of deal size.
“This jumbo operation was meant to improve the company’s cash flow,” says Edgar Amador, undersecretary of finance and public credit. “The finance ministry has been working with Pemex as it moves along a path to its new business model.”
The deal represented a degree of confidence in Pemex’s ability to meet its obligations: the company’s core relationship banks, at least, continued to see Pemex as a top priority for the Mexican government, sufficient to provide financing that extended from the prior administration into the new one.The loan was also the first for Pemex to include ESG-related commitments, establishing a more ambitious sustainability agenda in line with the government’s broader efforts.
The loan came at a critical juncture for the company, with the sovereign including for the second consecutive year additional support for Pemex in its 2025 budget. The budget includes $6.7 billion for Pemex, which will help guarantee debt payments.
President Claudia Sheinbaum’s government, like that of her predecessor, Andrés Manuel López Obrador, is committed to strengthening Pemex. The company, however, needs to find ways to start reducing its debt and increasing production.
Pemex’s debt stood at $97 billion as of the third quarter of 2024. The debt to reserves average is $14 per barrel of oil, which is higher than the other equivalent of state-owned Latin American producers, Brazil’s Petrobras and Colombia’s Ecopetrol, according to analysis from Fitch Ratings.
In a December 2024 report, Fitch cited support for Pemex in the 2025 budget as critical for the company.
“The inclusion of Pemex in Mexico’s annual budget, for the second year in a row is credit positive, signaling increased visibility on timing and magnitude of government support,” Fitch said.
Amador says it is important to focus on the company’s assets and not just its liabilities. He says Pemex in recent years has been investing after decades of neglect, focused on production, reserves, refining capacity and logistics.
“Liability management receives most of the attention, but asset management should also be considered,” he says.
The company’s monthly crude output fell in 2024 compared to previous years this decade. Crude output in November was 1.67 million barrels/day, compared to 1.85 million barrels and 1.79 million barrels, in the same month in 2023 and 2022, respectively.
Borrowers’ Counsel: A&L Goodbody, Cleary Gottlieb
Joint Lead Arrangers: Bank of China; BBVA México; BofA Securities; Citi; JP Morgan; Mizuho; Scotiabank; SMBC
Lenders’ Counsel: Ritch Mueller, Skadden
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