Pemex plan could boost confidence
Local lender Banorte's chief economist Gabriel Casillas said the Mexican finance ministry's plan to further strengthen ailing state oil company Pemex could rally confidence by injecting billions of dollars from the nation's oil stabilization fund (FEIP) atop the US$5.2bn support announced in February.
"In our opinion, this plan will help to improve investors' confidence," said Casillas in an analysis. "Looking ahead, attention will be on further details on this new measure to strengthen Pemex, as well as on more information about the company's business plan."
The proposal entails using part of FEIP to prepay part of Pemex's debt. FEIP, which historically has been used to pay for the federal government's oil hedge, has resources amounting to 280bn pesos (US$17.4bn), according to Casillas.
The finance ministry estimates that the coffer represents more than enough to recover losses, considering that Pemex only needed 150bn pesos to stabilize revenues after the 2008-2009 financial crisis.
"In this context, if the government used half of the FEIP (around 140bn pesos) to prepay the debt, it would imply a 6.7% reduction in the total debt of Pemex, which amounts to 2.1tn pesos," said Casillas.
"This would cover 73% of the maturities due in 2019, leaving 52bn pesos outstanding," he added.
The economist, nevertheless, stressed that the PEMEX 13 bond was fully paid on its programmed maturity date by an amount of 14.6bn pesos, leaving the outstanding maturities for the year at 37.2bn pesos.
"It is worth highlighting that, in order to use the money from the FEIP, some changes to its operating rules need to be enacted," said Casillas.
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