Mexico Is Refinancing Pemex Debt After Getting IMF Reserves

Mexico Is Refinancing Pemex Debt After Getting IMF Reserves

16:04 - Mexico has begun a process of refinancing state-owned Petroleos Mexicanos’s debt, after the nation received a transfer of about $12 billion from the International Monetary Fund.

President Andres Manuel Lopez Obrador said Monday that refinancing had begun, and restated that he wants to use newly issued IMF reserves to pay debt, but that he couldn’t provide further details. His spokesman Jesus Ramirez confirmed to Bloomberg News that Pemex’s debt is being refinanced.

The government is considering whether the $12 billion in IMF reserves could be fully or partially used to pay off Pemex’s debt, according to a person with knowledge of the matter who wasn’t authorized to speak publicly about the topic.

AMLO, as the president is known, has prioritized aid to Pemex, seeking to reduce the company’s borrowing costs and free up cash to invest in exploration and production following a decade and a half of output declines. The company currently has $115 billion in debt.

“I can’t say much, but a process of refinancing debt has begun,” the president said at his daily morning press conference. “But let me just say that Pemex is not being left adrift. It’s a company of the nation, of the Mexican people.”

IMF Reserves

Lopez Obrador has been pledging for weeks to repay debt with the IMF’s so-called special drawing rights, or SDRs, which are allocated to member countries based on their share in the Fund. The nation’s central bank says Mexico can only use those funds, which were issued last month as part of efforts to help countries amid the pandemic, if it purchases them from the bank, which received the IMF transfer as international reserves.

“The most expensive debt is Pemex, it’s the way you could reduce financing costs the most,” said Claudia Ceja, a strategist at BBVA in Mexico City. “First we have to see if they can use it for debt payment by law, and then there would probably be some swap, government buyback, or some intermediate operation.”

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