MEXICO CITY: Mexico said Wednesday it will inject another $5 billion into struggling state oil company Pemex, as President Andres Manuel Lopez Obrador doubles down on his bid to bail out the firm.
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.
“This action is 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,” the finance ministry said in a statement.
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 is 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 percent since 2004, to around 1.7 million barrels per day.
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 Sunday with an oil output projection of 1.95 million barrels per day for Pemex, an increase of more than 15 percent.
Many analysts have called the projection unrealistic.
The government had already announced a separate $5.5 billion bailout package for Pemex in February.
However, that was not enough to stop ratings agency Fitch from downgrading the firm’s credit to junk status in June.