In his attempt to bail out Pemex, President Andres Manuel Lopez Obrador doubled down on his bid as a way to inject another $5 billion into the struggling state oil company, AFP reported on Wednesday, September 11th.
Pemex, Mexico's largest company, is facing massive debt and falling output, but Lopez Obrador is betting heavily on a turnaround to help finance his own ambitious plans to "transform" Mexico with social programs and anti-crime initiatives.
According to the finance ministry, this action is considered to be part of the government's ongoing efforts to strengthen the financial stability of Pemex and enhance its profitability and long-term strategic contribution to the Mexican economy.
Pemex said it would use the money to pay down and restructure its debt in three sets of transactions: it plans to buy back bonds due in 2020 and 2023; refinance its short-term debt by issuing new bonds with terms of seven, 10 and 30 years; and carry out a bond swap aimed at "smoothing (its) due-date profile."
The goal has been to reduce its overall debt, boost liquidity and save on interest payments, it said. Pemex owes more than $100 billion in debt, and is struggling to find the cash it needs to reverse its plunging output. Production has fallen by more than 50% since 2004.
Lopez Obrador, an anti-establishment leftist, is banking on a renaissance at Pemex, which the Mexican government has traditionally relied on heavily for revenue.
The government presented its 2020 budget to Congress on September 8th with an oil output projection of 1.95 million barrels per day for Pemex, an increase of more than 15%. Analysts have called the projection unrealistic, but nonetheless, the government had already announced a separate $5.5 billion bailout package for Pemex in February.
However, that was not enough to stop rating agency Fitch from downgrading the firm's credit to "junk" status in June, according to AFP.