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Mexico studies bond market deals to pay down Pemex debt

The Mexican government is considering implementing systematic bond market operations over the next six years to pay off $30 billion to $40 billion of Pemex’s debt maturities, as reported by LatinFinance. The main goal of these operations would be to reduce the cost of debt financing for Pemex, bringing it closer to what the federal government pays.

Details about the specific types of bond transactions being contemplated were not disclosed by the source. It was clarified that Mexico’s public debt would not increase due to these potential operations, as Pemex’s liabilities are already accounted for in the national debt.

Deputy Finance Minister Gabriel Yorio recently met with investors in New York to discuss various options for reducing the cost of Pemex’s debt. One option mentioned was Mexico absorbing part of Pemex’s debt through buybacks of the company’s bonds funded by sovereign debt issuance.

In response to questions about potentially absorbing $40 billion of Pemex’s debt, Yorio denied that such analysis was taking place. The Mexican government, under President López Obrador’s administration, has been working to alleviate Pemex’s debt burden, which currently stands at around $100 billion.

In efforts to support Pemex, the government has made transfers from the national budget to cover maturities and granted the company a temporary break from paying a royalty profit-sharing tax earlier this year. These measures have helped Pemex avoid direct market access.

Pemex reported a net profit of MXN4.68 billion in the first quarter of 2024, a significant decrease from the same period last year. Sales also saw a decline. The company’s debt maturities as of March 31, 2024, are detailed in the table below:

– 2024: $6.3 billion
– 2025: $6.8 billion
– 2026: $10.5 billion
– 2027: $7.6 billion
– 2028: $5 billion
– 2029: $3.8 billion
– 2030: $5 billion

(Source: Pemex; Note: data excludes revolving credit lines, short- and long-term liabilities, and accrued interest)

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