Corporate Issuer of the Year - Pemex

Corporate Issuer of the Year - Pemex

Bonds Capital Markets Corporate & Sovereign Strategy Fixed Income Mexico

Pemex took advantage of favorable market conditions to complete all of its 2018 funding needs last year ahead of Mexico’s upcoming presidential election. The state-owned oil company wrapped up another active year in the capital markets focused on refinancing and diversifying its debt portfolio.

In the year under consideration for these awards, Pemex executed a series of capital markets transactions beginning just weeks after Donald Trump was elected US President, which sent Mexican bond yields tumbling. The energy company took a gamble, raising $5.5 billion from a triple-tranche bond sale that saw order books reach $30 billion. Pemex CFO Juan Pablo Newman described the market reaction as “the highest demand the company has seen.”

Many market intermediaries expressed surprise with Pemex’s decision to issue at the end of 2016 with so much uncertainty surrounding the fate of the North American Free Trade Agreement (NAFTA).

But the issuance came a day after Pemex selected BHP Billiton as a joint venture partner in developing the Trion oil field in the Gulf of Mexico. BHP’s $570 million investment for its 60% stake provided a boost for investor sentiment toward Pemex, which helped buoy the transaction, Newman says.

An agreement by the Organization of Petroleum Exporting Countries to limit production levels, which sent crude prices at the time over $50 a barrel at the time, also provided momentum for the bond sale.

Pemex saw an opportunity to diversify in euros through a €4.25 billion ($4.5 billion) triple-tranche sale in February. The company added $2.5 billion apiece to 6.5% 2027 and 6.75% 2047 bonds in conjunction with a liability management exercise in July, using the proceeds to buy back $1.7 billion of three series of notes maturing in 2018 and 2019.

Pemex has continued to implement internal reforms alongside its push to deleverage and reduce debt. Newman says the market has looked favorably on its efforts, which have resulted in outlook improvements from both S&P Global Ratings and Fitch Ratings.

“Our curve at the moment is much more resilient and reflects our credit profile in a better way,” Newman says.

Going forward, Pemex will continue to look at several currencies to diversify its investor base. But the main priorities continue to be issuances in US dollars and euros. “Our hard currency is denominated in US dollars and most of our suppliers, services contracts, expenses and in investments are in dollars,” Newman says.

Pemex did diversify further in 2017, printing £450 million ($591 million) in 2025 British Bulldogs. Although Pemex has covered its financing needs for 2018, Newman says the company will be monitoring the markets for more opportunities. LF