Mexico Finance Ministry Gave Pemex $4 Billion Injection

Amy Stillman and Michael O'Boyle
·2 min read
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(Bloomberg) -- Mexico’s state oil giant Petroleos Mexicanos received 70 billion pesos ($4.2 billion) from the Finance Ministry as the company seeks to pay off mounting debts.

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The Finance Ministry gave the company the funds in a capital injection, according to three people with knowledge of the situation who asked not to be identified because the information isn’t public. The Ministry asked Pemex to make spending cuts to capital expenses and operating expenses this year for an equivalent amount to the injection as a condition to receive the funds, said one of the people.

It was the first time that the ministry required spending cuts as a condition to receive funds, the person added.

The funding comes after Pemex Chief Executive Officer Octavio Romero said on Wednesday that the government would refinance the company’s debt since it would be cheaper than if the state oil giant goes to the market itself. President Andres Manuel Lopez Obrador and Deputy Finance Minister Gabriel Yorio also reiterated the government’s support for Pemex on Thursday, without giving specifics.

The Pemex press office and the Finance Ministry didn’t immediately reply to a request for comment after regular office hours. Pemex will report second quarter earnings July 28.

Read More: Pemex Bonds Jump on Pledge Mexico to Support Driller’s Debt

The company’s bonds were among the best performers in emerging-market corporate debt Friday. Bonds due in 2033 jumped 1.1 cent to 92.3 cents on the dollar, the highest since July 17, according to Trace data.

Pemex is the world’s most indebted oil company, with $107.4 billion in financial debt at the end of March. Fitch Ratings Inc. cut the company deeper into junk territory on July 14, while Moody’s Investors Service Inc. put Pemex on a negative outlook for a potential downgrade last week, citing increased credit risks.

It’s not the first time the government has given the oil company direct financial support. In 2021, it gave Pemex a $3.5 billion cash injection, and in 2019 it transferred $5 billion. In total, support under Lopez Obrador has amounted to nearly $49 billion in capitalizations, tax breaks and other assistance.

(Updates with additional detail in second and third paragraphs)

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