Mexican state oil company Petroleos Mexicanos (Pemex) has ended its contract with credit ratings agency Fitch Ratings, which will lead to Fitch withdrawing its BB- rating on the company. Fitch was the first of the big three rating agencies to downgrade Pemex to junk in June 2019. The termination of the contract takes effect on Thursday.
Fitch also identified Pemex as the most vulnerable oil company in Latin America in March last year, given that it is the world’s most indebted national oil company. Pemex’s decision is claimed to be based on not requiring ratings of all three agencies and was made after taking into account quality of service and technical seriousness of the rating analysis, as per Reuters sources. Pemex said that it does not intend on terminating its contracts with Moody’s, S&P or HR Ratings. “It sends the wrong signal to global investors,” Luis Gonzali, co-director at Franklin Templeton said, of the contract cancellation.
In related news, here is an interesting opinion piece on Pemex by renowned Mexican economist Sergio Luna:
Declaring Bankruptcy Could Be The Best Thing to Happen to Pemex
On February 19, Mexico announced a new combo of tax benefits and capital injections to Pemex, Mexico´s National Oil Company, totaling USD 3.5 billion. Among the investors monitoring the largest quasi-sovereign issuer in the world, nobody was surprised. In fact, I am convinced that everyone knows this is not the last time Pemex will get fiscal support.