Mexico’s state-backed oil giant Pemex slides deeper into “junk” territory


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Mexico’s state-backed oil giant Pemex slides deeper into “junk” territory

On Friday, the 3rd of April 2020, the Mexico’s state-backed oil giant, Pemex or Petróleos Mexicanos, created back in the 1938s by nationalization of all private, foreign and domestic oil companies at that time, slid further into the “junk” territory after losing its investment grade status earlier, as the global rating agency Fitch had slashed the rating of its bond by another step to BB with a negative outlook, spurring up fears that its credit profit alongside the Mexican sovereign debt profile would faltered further over the coming days amid a steep decline in oil prices and demands.

As a matter of fact, latest decision of Fitch to slash its credit rating for Mexico’s Pemex further came forth days after the rating agency had red-lined Pemex as the most vulnerable oil giant to a multi-year low oil price among all of its LATAM peers.

Aside from that, as a new rating deeper in to the “junk” territory alongside a negative outlook would impact a nearly $80 billion worth of Pemex bonds held by wide-ranging investors such as wealth funds alongside pension funds and a mass-scale sell-off appears to be likely in a near-term outlook, Fitch said in its Friday’s (April 3rd) statement, “…(the rating) reflects a limited flexibility to navigate the downturn in the oil and gas industry given its elevated tax burden, high leverage, rising per barrel lifting costs and high investment needs to maintain production and replenish reserves. ”