Pemex’s recent return to the cross-border bond market raised more funds than the company’s projected deficit for 2017, allowing it to focus on refinancing debt due next year, CFO Juan Pablo Newman told LatinFinance.
Mexico’s state-owned energy company last week raised $5.5bn with a three-tranche bond in a move that surprised some bankers and investors who expected the company to look to the bond markets in January. The timing paid off, with order books climbing above $30bn.
The transaction capped a flurry of transactions this year for the cash-strapped company, which has used debt swaps, bond buybacks and maturity extensions to help tame its debt load, part of a broader strategy to get its financial house in order.
“Pemex’s finances are stable,” Newman said in a telephone interview. “We’ve been carrying out the necessary transactions to get there. Now we have to keep working to improve our financial situation.”
Newman said the bond sale’s proceeds cover half of the company’s 2017 financing needs. Pemex’s decision to tap the bond market was timed to take advantage of a recent rally in oil prices and momentum from the results of Mexico’s first-ever deepwater auction, which was widely seen as success after attracting major oil companies like ExxonMobil and the China National Offshore Oil Corporation (CNOOC).
“It was the biggest demand Pemex has ever received for an issue. We were slightly surprised,” Newman said.
“The transaction eclipsed the amount of our projected deficit next year,” he added. “Any [transactions] we do from here on out will involving refinancing our debt that comes due next year.”
One debt capital markets source told LatinFinance last week that Pemex could look to issue between $5bn and $10bn next year. The source said Pemex will likely return to the Japanese yen market in 2017 and is monitoring possibilities in the euro market. This year, Pemex issued debt in yen, Swiss francs and British pounds, Newman said.
“We entered the Japanese yen market for the first time, and it’s a financing source that interests us a lot,” Newman said. “We’ll be watching for an opportunity. But without a doubt our three main markets are pesos, dollars and euros.”