S&P downgrades Mexican oil firm PEMEX rating despite financial stimulus

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S&P downgrades Mexican oil firm PEMEX rating despite financial stimulus

On Monday, the 4th of March, 2019, the rating agency, Standard & Poor had smudged the stand-alone credit profile of Mexican oil firm, Petroleos Mexicanos (Pemex), slashing the credit rating to ‘B-‘ from previous ‘BB-‘ and mounting pressures on Mexican government to finance more on the debt-drowned state oil firm.

Besides, the Standard & Poor had downgraded Pemex’s outlook to negative from stable, as it did for the Mexican govt. on last Friday (March 1st), after the market’s closure. However, the rating agency had decided to keep Pemex’s global investment grade rating fixed at ‘BBB+’.

Followed by the Standard & Poor’s move, the Mexican Peso had plunged as well, as the currency was down more than 0.40 percent against the American dollar to 19.30 peso during the post-midday US trading session.

While slashing the credit rating, the S&P also added that the Mexican government’s attempt to clear Pemex’s debts had been insufficient and the company is heavily exposed to political decisions which could eventually jeopardize its financial objectives.

The Pemex would require as little as $20 billion over multiple years to evade further credit deterioration, commented S&P, while the government was planning to inject a lump-sum of $3.9 billion to such an oil company, which had already been ditched underneath a financial debt of nearly $106 billion, according to Pemex’s 2018’s financial statement.

Citing Mexican government’s effort to prevent further credit trimming of Pemex insufficient, S&P said in a statement, “The government’s financial support, in order to restore credit fundamentals, falls well short of the company’s multi-annual capital investment needs."