Fitch Ratings has upgraded Mexico’s state-owned oil company Petróleos Mexicanos (Pemex) from a rating of BB to BB+, putting the company just one step away from regaining an investment-grade rating.  

The upgrade by one of the top three credit rating agencies came with a stable outlook and followed the successful completion of a US $9.9 billion tender offer in eight series of securities, with financing from the Mexican government. 

“The transaction indicates a stronger connection between Pemex and the state, which resulted in an increase in the company’s Overall Linkage Score (OLS) assessment,” Fitch stated. “Fitch now rates Pemex just one notch below Mexico’s sovereign rating, rather than the two notches below that led to the upgrade.”  

However, Pemex’s “stand-alone” rating, which assesses the financial situation of the oil company without government support, remained at a high-risk rating of CCC.  

“There is an increasing connection between the sovereign and the corporate sector,” Adriana Eraso, director of corporates for Latin America at Fitch Ratings, told the newspaper El Financiero. “Lending to Pemex is becoming more and more like lending to the sovereign; there is a commitment to the market.”  

On Sept. 5, Fitch raised Pemex to the positive rating of BB, after the Mexican government showed a “greater commitment” to helping the company meet its financial obligations through 2027. 

This followed capital injections from the government, including $12 billion in bonds in July and a $4.4-billion investment fund in August. 

Typically, earning a rating upgrade with a positive outlook takes between a year and a year and a half. However, in Pemex’s case, the alteration took just one month, giving Pemex its highest Fitch rating since 2019. 

Pemex is now expected to continue with its new BB+ rating for the foreseeable future. 

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“To further improve the rating, the scenarios are, first, an increase in Mexico’s sovereign rating; the second option is for Pemex to upgrade its stand-alone rating from CCC to BB-, which would take a significant amount of time; or finally, for the Mexican government to guarantee 75% of Pemex’s debt,” explained Eraso.  

Pemex’s grand plan 

In August, Pemex announced the target of achieving fiscal solvency by 2027, as part of its 10-year strategic plan. 

The firm aims to significantly reduce its debt and increase the domestic production of natural gas to help decrease Mexico’s dependence on the United States for the fuel. 

With reports from El Financiero