Pemex, Mexico's state-owned oil monopoly, faces an unusual problem for a major oil company. Although it is one of the world's largest oil producers, it is financially overstretched because it transfers nearly all its profits to the government. This leaves little money for exploration and big-ticket investments. Pemex has, out of necessity, become one of Latin America's most sophisticated frequent issuers on the international capital markets. Last year, the company raised $6.53 billion through 12 international bond sales, second only to the government, which issued $7.38 billion.
In December, Pemex came to the market with a highly unusual transaction. It hired UBS, JP Morgan and Merrill Lynch to sell a bond exchangeable into equity in another company. The deal raised $1.37 billion in Europe and the US for Pemex with a bond that can be converted into its 4.9% stake in Spain's Repsol YPF. This was...
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