LatinNews Daily - 13 February 2024

*Bonds of Mexico’s state-run oil company Pemex have fallen following a downgrade from international credit ratings agency Moody’s Investors Service on 9 February. Pemex’s bonds due in 2030 fell by as much as 2.9 cents on the US dollar to 84.6 cents, according to Trace data compiled by Bloomberg. This came after Moody’s downgraded Pemex’s baseline credit assessment (BCA) to ca from caa3, indicating high likelihood of a default without backing from the government. At the same time, Moody’s downgraded Pemex’s corporate family rating (CFR), the backed senior unsecured ratings on the company’s existing notes, as well as the backed senior unsecured ratings of Pemex project funding master trust, to B3 from B1. It maintained the negative outlook for both issuers. In a statement, Moody’s said that the BCA downgrade reflects “increasing liquidity requirements due to expanding capital requirements, increasing cost of capital and significant upcoming maturities over the next two to three years”. The downgrade to B3 reflects Moody’s revised assumption of government support to high from very high. Moody’s foresees a likely shift in the willingness of the government to support Pemex’s debt payments in the next few years in light of Pemex’s expanding cash needs and Moody’s projections of the deterioration in the government’s fiscal conditions this year due to an increased deficit fuelled by social spending, borrowing costs, and increased spending on flagship projects. Moody’s adds that although support from the next administration is likely to be “forthcoming” in 2024-25, it will also “likely come at a higher cost”.