Year: 2022

Winner: Pemex $1BN Exchange & Tender Offer

Mexico’s state-owned oil company, Pemex, is in the midst of a major financial overhaul to
reprofile its debt as it strives to increase oil and gas production.
The company, in conjunction with Mexico’s finance ministry, announced in December 2021 a
liability management operation to ease the company’s tax burden to 40% from 52%, reduce its
debt burden, at slightly more than $100 billion, and lower risk via a capital injection.
Given the size of the company – it is Mexico’s biggest tax payer and employs more than 1.3
million people – the plan was equally big. The entire package, including liability management,
new debt and capital injection amounted to $10.3 billion, according Pemex.
“The liability management operation was structured in a coordinated way with the Finance
Ministry to lower Pemex’s debt, which provided many benefits to the company. The immediate
benefits were lower financing and a better amortization profile,” says Carlos Cortez, Pemex’s
chief financial officer.
As part of the transaction, which wins the award for Quasi-Sovereign Liability Management of
the Year, the Mexican government agreed to a $3.5-billion cash injection to help meet
amortization payments.
The remaining $6.8 billion was a combination of $5.8 billion in an exchange offer and $1
billion in new money. The operation reopened bonds maturing between 2024 and 2030 and
bought back bonds maturing between 2044 and 2060. The new offering came with a coupon
of 6.7%.
The transaction allowed Pemex to reduce nominal debt by $3.2 billion and generate $181
million in annual interest rate savings, according to BofA Securities, joint bookrunners on the
deal alongside Citi, Goldman Sachs and HSBC.
“We were able to change the profile of amortizations, thereby reducing future pressure on
future cash flows,” says Cortez.
Pemex’s amortization payments in 2023 total roughly $10 billion; the company also has
around $6 billion in outstanding bonds due in 2023.
In conjunction with the financial reprofiling, Pemex also announced plans to increase oil and
gas production to achieve energy independence as it prepares for change amid a broader global
transition away from fossil fuels.

Among the goals is to increase crude production to 2 million barrels/day by 2024. Crude
production was 1.76 million barrels/day in the third quarter of 2022, with Pemex hoping to
reach nearly 1.97 million barrels in 2023. Natural gas production was approximately 4 billion
cubic feet/day in the third quarter of 2022, with a goal of increasing this to 4.67 billion cubic
feet in 2023. Mexico imports around 70% of the natural gas it consumes.
The Finance Ministry says the transaction will not only strengthen Pemex’s financial position,
but “prepare the company for the challenges the energy sector will face” in the coming
years. LF

Joint Bookrunners: Citi; BofA; Goldman Sachs; HSBC
Issuer’s Legal Counsel: Cleary Gottlieb
Underwriters’ Legal Counsel: Alta QIL+4 Abogados; Ritch Mueller; Shearman & Sterling

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