Petroleos Mexicanos’ (PEMEX) has been downgraded to Ba3 from Ba2 with a negative outlook stemming from high business and liquidity risks. The liquidity has come under pressure due to upcoming debt maturities and as the company expands its production capacities. The Baseline Credit Assessment (BCA) has also been lowered to caa3 from caa2 reflecting the deteriorating standalone credit strength of the company. According to the rating agency, the oil company’s liquidity needs and negative free cash flow will rise over the next three years due to high debt maturities and lower operating cash flow due to the planned expansion of its refining business. The expansion has already resulted in operating losses of ~$17bn in 2018-20. Moody’s said that the rating is supported by the government support. They added that the state owned company has successfully reverted production and reserves declines in the last two years. As of March 31, 2021, the state-owned petroleum company had cash in hand of ~$2bn and committed revolving facilities of ~$175mn. However, it has debt maturities of over $10.8bn till the end of 2022. The company has been dependent on state support for its debt repayments and was infused with $3.5bn by the state through reduction in taxes and cash transfers which helped repayment of its $6.5bn debt due in the year. The company has total financial liabilities of $113.2bn as of end-2020. The government has also supported the oil company through other means like granting it control of one of the biggest oil discoveries of the country and by enacting laws favoring it. Fitch had a rating of BB- on the oil giant which it withdrew in March this year. S&P has a rating of BBB on PEMEX after it downgraded it in March last year.