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MEXICO-ECONOMY-OIL-DEBT-RATING
Fitch downgrades Pemex debt rating to junk, Moody’s awards negative
outlook
MEXICO CITY, June 7, 2019 (BSS/AFP) – The financial assessment agency Fitch
Ratings downgraded Mexico state oil company Mexican Petroleum (Pemex) from
BBB- to BB+ Thursday, while Moody’s revised its outlook rating from stable to
negative.
BB+ is considered a junk rating because of the struggling company’s
heightened risk of not paying its debt.
In a statement Fitch said, “Fitch Ratings has downgraded Petroleos
Mexicanos’ (PEMEX) Long-Term Foreign and Local Currency Issuer Default
Ratings (IDRs) to ‘BB+’ from ‘BBB-‘. The Rating Outlook is Negative” due to
Pemex’s approximately $80 billion of unpaid debt.
Pemex, which President Andres Manuel Lopez Obrador has set out to save as
it struggles with ongoing losses, is Mexico’s largest public employer.
The BB+ rating is given to non-investment grade and speculative bonds
known as “junk bonds” — they have a high risk of default but offer a high
profitability to compensate.
In a statement Thursday, Pemex called Fitch’s new rating “excessively
severe.”
The company defended its record over the last six months, saying it had
made “strong achievements” not seen in many years, including fighting fuel
theft and stabilizing oil production.
“With the commitment and solidarity of every worker of this great company
and with the dedicated support of the government of the republic, we will
continue dedicating our efforts toward achieving our goals and demonstrating,
with results, we are on the right track,” the statment said.
– Mexico downgraded –
Fitch downgraded Mexico’s sovereign credit rating from BBB+ to BBB
Wednesday, while Moody’s changed its rating for the country from “stable” to
“negative.”
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The changes come amid tensions between Mexico and the United States, its
main trading partner, around the latter’s threats to ramp up tariffs on vital
exports it says is in response to an ongoing migration crisis between the two
countries.
“We changed the (Pemex) outlook to negative consistent with the change in
Mexico’s outlook, given the critical importance of the government’s financial
strength and support to PEMEX’s Baa3 ratings,” Pete Speer, Moody’s senior
vice president, said in a statement.
And Fitch said that Pemex’s negative outlook “reflects the potential for
further deterioration of the company’s stand-alone credit profile.”
“Although PEMEX has implemented some cost cutting measure and received
moderate tax cuts from Mexico, the company continues to severely under invest
in its upstream business, which could lead to further production and reserves
decline,” the statement said.
Pemex announced Wednesday that it had posted profits of $1.46 billion in
April, stemming a stream of losses in the last six months.
The company must increase its assets to reverse a long-term decline in
production, which has fallen from 3.4 million barrels per day in 2004 to an
average of 1.6 million today.
Its $106.5 billion debt makes Pemex among the world’s most-indebted
companies.
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