Moody’s prunes Pemex

Moody’s Investors Service said its ratings for Petroleos Mexicanos (Pemex) and Pemex Project Funding Master Trust to B3 from B1.

“The downgrade to B3 incorporates Pemex's weakening stand-alone credit quality and reflects Moody's revised assumption of government support to high from very high. The change reflects Moody's assumption of a likely shift in the willingness to support the company's full service of its debt in the next few years in light of Pemex's expanding cash needs and Moody's projections of the government's further deterioration in fiscal conditions in 2024. This deterioration is anticipated to stem from a material increase in the deficit, fueled by social spending, persistently high borrowing costs, and augmented expenditures in flagship projects.

“Moody's foresees that any support from the next administration, although forthcoming in 2024-25, will likely come at a higher cost. The downgrade also incorporates the risk that the company could pursue a transaction such as debt exchanges, repurchases or other transactions that would reduce debt at a substantial discount to par or make other changes that Moody's would consider a distressed exchange, which is a default under Moody's definition,” the agency said in a press release.

The outlook remains negative.

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