Exclusive-Mexico's Pemex under pressure to resume financial debt payments

[April 21, 2022]    By Ana Isabel Martinez and Anthony Esposito

MEXICO CITY (Reuters) - Mexico's cash-strapped state oil firm Petroleos Mexicanos (Pemex) is under pressure to resume financial debt repayments despite promises from President Andres Manuel Lopez Obrador that his government would pay them until 2024. On Thursday, Pemex is due to pay some 1 billion euros to redeem a 2015 bond, two sources with knowledge of the matter told Reuters.

"Pemex will make payment of its maturities this month with its own resources, since the finance ministry did not make capital contributions to the company in April (for that)," said one of the sources, who asked to remain anonymous.

Neither the finance ministry nor Pemex responded to requests for comment.

Pemex, one of the world's most-indebted oil companies, has struggled with years of declining crude production and in 2020 lost its coveted investment-grade debt rating.

The source said between May and December Pemex faces outstanding principal and interest payments, mainly related to bonds, worth some $3.8 billion. "The finance ministry notified Pemex about three weeks ago the company had to pay the eurobond, arguing it has more funds due to the increase in ... oil prices," the source added.

Pemex has said it must shoulder peso-denominated financial debt maturities in 2022 worth some $8.4 billion, and another $15.2 billion of debt commitments in other currencies. The ministry has in recent weeks also pressed Pemex to resume amortizations linked mainly to debt issuances, which this year amount to some $7.5 billion, another $7.4 billion in 2023 and $8.8 billion in 2024, the source said.

In 2021, debt amortizations totaled about $6.4 billion.

The second source told Reuters "the additional income from Pemex will be significant, and that allows the company to receive less (government) support", without giving details on how much extra income was expected due to the increase in crude oil prices following Russia's invasion of Ukraine.

Pemex's financial debt closed 2021 at $109.0 billion. Net losses were $10.9 billion last year.

Pemex has begun drawing up a refinancing plan for some $3.5 billion in financial debt, anticipating the funds will not come from the government for now, the first source said.

Mexico in January swapped short-term Pemex bonds for a new 10-year bond as part of a scheme to lower debt and reduce medium-term financial pressure on the firm.

Mexico's government in 2021 made capital contributions to Pemex of 202.569 billion pesos for debt repayments and granted the firm 73.280 billion pesos in tax incentives.

Pemex officials recently said the government will provide it with capital this year in accordance with its maturity profile.

Last month, Lopez Obrador said Mexico will reduce refining output at Pemex while it modernizes its refineries, as the government capitalizes on high oil prices.

Mexico has said it will use extra revenue collected from oil prices to subsidize domestic gasoline and diesel prices, helping to contain inflation.

(Reporting by Ana Isabel Martinez and Anthony Esposito; Editing by Alistair Bell)

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