Mexico started a refinancing process of state-owned oil company Petroleos Mexicanos’ (Pemex) debt as it received $12bn from the International Monetary Fund (IMF). The government is considering using the $12bn in IMF reserves either fully or partially to pay off Pemex’s debt. Mexico’s central bank stated that the funds can only be used if these are purchased from the bank, which received the international reserves from the IMF last month as an effort to aid countries amid the pandemic. Mexico’s President Andrés Manuel López Obrador (AMLO) has prioritized supporting Pemex, aiming to reduce its borrowing costs and free up cash to invest in exploration and production. After a decade and a half of declining output, Pemex currently holds $115bn in debt. AMLO said at the daily press conference, “I can’t say much, but a process of refinancing debt has begun, but let me just say that Pemex is not being left adrift. It’s a company of the nation, of the Mexican people”.

“The most expensive debt is Pemex, it’s the way you could reduce financing costs the most…First we have to see if they can use it for debt payment by law, and then there would probably be some swap, government buyback, or some intermediate operation”, said Claudia Ceja, a strategist at BBVA in Mexico City. Alejandra Leon, Latin America upstream director at IHS Markit said, “I don’t believe it’s a game changer, what it does is it allows Pemex to keep operating, to keep surviving…You are just keeping the boat afloat”.

Pemex´s USD bonds were slightly up with its 6.5% 2029s up .76 to 104.281, yielding 5.78%

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