Monday, June 24, 2024

23 banks agree to refinance US $8 billion in Pemex debt

The federal government has signed a US $8-billion syndicated loan agreement with 23 banks to refinance debt owed by Pemex and renew credit lines for the heavily indebted state oil company.

President López Obrador said on Twitter yesterday that the deal renewed revolving lines of credit with lower interest rates and over a greater period of time in order to strengthen Pemex during the entire six-year term of his government.

The participation of 23 banks in the syndicated loan means that the risk of each individual financial institution is reduced.

Both Mexican and foreign banks signed the agreement including “14 of the 20 biggest [banks] in the world,” López Obrador said.

“It’s the most important operation of its kind in the history of Mexico. In brief, they have confidence in us,” he said.

At a meeting with bank representatives in the National Palace, the president described Pemex as a “fundamental company for the development of our country.”

“It was left in a bad way because it wasn’t properly managed, above all it wasn’t managed honestly,” López Obrador said.

Pemex has liabilities in excess of US $106 billion and Fitch Ratings downgraded the company to junk status earlier this month, reducing its credit rating from investment grade to speculative with a negative outlook.

If Moody’s Investors Service were to follow suit – as many investors believe will happen – there would be a sell-off of up to US $16 billion of Pemex bonds.

The refinancing deal reached yesterday was made possible by a pact agreed to in May by the government and three banks.

HSBC, JPMorgan and Mizuho Securities agreed on May 13 to underwrite a US $8-billion syndicated loan for Pemex that was designed to allow the company to refinance its debt.

Both the president and Pemex CEO Octavio Romero stressed at the time that the deal did not represent new debt for the state oil company.

Romero explained that the agreement refinanced US $2.6 billion in debt and renewed two revolving lines of credit for up to US $5.5 billion.

López Obrador said today that the financing was available over a period of five years, two years longer than under a previous arrangement.

Speaking at his morning press conference, the president reiterated that the new loan deal showed that banks have confidence in the government.

“These actions demonstrate that there is confidence. The banks don’t act without information, they don’t take a decision like this because they like the government. They know that Pemex is in very good health,” López Obrador said.

“Everybody is questioning and betting that the economy will go badly, but when these actions happen it helps a lot because it demonstrates confidence.”

Source: El Financiero (sp) 

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