Bloomberg — Bonds from Mexico’s state oil company Petróleos Mexicanos have tumbled in the wake of warnings it may face more credit downgrades amid repeated accidents that will likely make it harder for the driller to access financing.
Pemex has been among the worst-performing credits across Latin America since Fitch Ratings cut the company deeper into junk territory on July 14 with bonds falling an average of nearly 4.1% and those due in 2032 hovering near lows last seen in October. The notes pared some losses on Wednesday ahead of the Federal Reserve interest-rate decision.
The world’s most-indebted oil major has given traders plenty to worry about as it struggles to grow production and questions loom over how much government support it will receive going forward. Money managers have pushed the yield on some bonds to their widest levels over similar sovereign notes since 2020.
The selloff follows a string of accidents that Fitch says calls into question the driller’s operational capacity and may make it harder for the company to get financing. Moody’s Investors Service, meanwhile, put Pemex on a negative outlook for a potential downgrade last week, citing increased credit risks.
“It feels as if investor concerns are growing with few bottom fishers yet to appear,” said George Ordoñez, a credit strategist at BBVA in New York. Markets have also been concerned by reports that an oil spill is worse than the company has described, he added.
Pemex, which is set to report second-quarter earnings on Friday, has $107.4 billion in debt, making it the most-indebted oil major in the world. Fitch said that the government will have to spend roughly $20 billion more than it receives from the company in 2026 and 2027 to keep Pemex afloat. Those comments added to concerns about about the lack of an explicit commitment from the government, Ordoñez said.
Some investors, like Pacific Investment Management Co., have limited exposure to the company’s bonds on concerns that the country’s next president may provide less support. President Andrés Manuel López Obrador, who has been a strong supporter of Pemex, is set to leave office next year.
--With assistance from Maria Elena Vizcaíno.
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