Moody’s assigns Baa1 to Pemex notes

Moody's Investors Service said it assigned a Baa1 senior unsecured rating to Petroleos Mexicanos (Pemex)'s issuances of €2.25 billion (about $2.5 billion) in two tranches: €1.35 billion 3¾% due 2019; and €900 million 5 1/8% due 2023.

Proceeds will be used for general corporate purposes.

The ratings are on review for possible downgrade.

The proposed notes will be issued by Pemex and will be jointly and severally guaranteed by Pemex's subsidiaries, namely Pemex Exploracion y Produccion, Pemex Transformacion Industrial, Pemex Perforacion y Servicios, Pemex Logistica and Pemex Cogeneracion y Servicios.

Pemex Baa1 ratings, as well as its ba3 baseline credit assessment (BCA), are based on the company's weak credit metrics and Moody's view that they will deteriorate further during 2016 as oil prices remain depressed, production continues to drop, taxes remain high, and the company's capex needs are financed with debt.

In addition, the lack of a clear financial policy with regards to target debt leverage also constrains Pemex ratings, the agency said.

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