Petróleos Mexicanos

When Mexico opened its energy market to foreign investment, it had not counted on oil prices tumbling shortly after. But the two events pushed Mexican state-owned oil company Pemex to aggressively rethink its balance sheet — and opened new opportunities to do so. 

In the year under consideration for these awards, Pemex executed a series of capital markets transactions to improve its leverage, taking full advantage of a broadening array of financial tools. The company carried out a liability management exercise for the first time in nearly a decade and made use of sale and leaseback operations, a maneuvre previously off-limits. 

Pemex also expanded its range of investors. It issued in Japanese, Swiss, US and Mexican markets, underscoring its sophisticated approach to capital raising and making it stand out as Corporate Issuer of the Year. 

Juan Pablo Newman, Pemex’s chief financial officer, says addressing leverage was a top priority this year. “Our first question was: How do we diversify our investor base?” he says. 

The breadth and novelty of Pemex’s financial operations put it ahead of other contenders, including Cemex, which has a solid record in the capital markets and issued in dollars and euros last year. Petrobras was another candidate that impressed, winning the Corporate Liability Management of the Year Award for its $6 billion tender and new issue.

Over the course of 2016, Pemex termed out its debt, cutting repayments due in 2018 and 2019 by a third. 

The company raised 600 million Swiss francs in November 2015, in its first issue in that currency in three years. At the start of 2016 Pemex reached out to US and global investors, issuing a $5 billion bond in January after receiving demand of nearly $18 billion. It followed up with a €2.25 billion ($2.48 billion) dual-tranche sale in March. 

“We had access to the euro market, where Pemex is developing an important curve,” says Newman.

At the same time, Pemex turned to local markets, issuing a 5 billion peso ($280 million) bond. In May the company returned to European investors with a 375 million Swiss franc dual-tranche deal, before courting the Japanese market in July. There, it raised 80 billion yen ($763 million), in its first issue since 2008. 

“The Japanese market is very stable with very low interest rates given their financial and economic conditions, and with an investor base that is totally new for our institution,” says Newman. 

Pemex grabbed an opportunity for one more operationas investors prepared to close their books for the holidays in December. The issuer tapped US investors for $5.5 billion in a triple-tranche deal that covers half of its financing needs for this year. Given market uncertainty over US President-elect Donald Trump’s incoming administration, the pre-funding operation was a prudent one. LF

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Winning deals: Pemex/KKR Sale & Leaseback

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