The Mexican government is studying the possibility of carrying out systematic bond market “operations” over the next six years to pay off $30 billion to $40 billion of Pemex’s debt maturities, a source with knowledge of the matter told LatinFinance.
“The main objective would be to reduce the cost of debt financing, reducing the differential between what Pemex pays and what the federal government pays,” the source said.
The person declined to elaborate on what type of bond transactions were under consideration.
Mexico’s public debt would not increase as a result of the potential operations, the source said, since Pemex’s liabilities are already included in the national debt tally.
“What we are looking to do is to reallocate and reduce the cost of that debt, transferring it from one balance sheet to another,” the source said.
Deputy Finance Minister Gabriel Yorio held meetings with investors in New York this week during which various options to reduce the cost of the state-owned oil firm’s debt were discussed, the source said.
According to a Bloomberg report published Wednesday, Yorio told investors that Mexico could absorb part of Pemex’s debt, including via buybacks of the company’s bonds funded by sovereign debt issuance.
When asked by LatinFinance via text message on Thursday whether the government is considering absorbing as much as $40 billion of Pemex’s debt, Yorio responded: “We are not analyzing that. It is not correct.”
He did not add further comment.
DEBT BURDEN
The administration of Mexican President Andrés Manuel López Obrador has been taking steps to alleviate the Pemex’s debt burden, which totals around $100 billion, including by making transfers from the national budget to cover maturities.
Additionally, the government granted Pemex a four-month break from paying a royalty profit-sharing tax, known as DUC, in February to provide the company with additional cash to pay its debts.
The DUC strategy has allowed Pemex to avoid “directly accessing the market,” the source said.
Pemex posted a net profit of MXN4.68 billion ($272.7 million) in the first three months of 2024, down by 91.7% from the year-earlier period, while sales fell 3% to MXN405.8 million.
