Petroleos Mexicanos# $2.5 Billion And $1.5 Billion Senior Unsecured Notes Rated #BBB+#

Stocks and Financial Services Press Releases Thursday February 8, 2018 09:33
MEXICO CITY--8 Feb--S&P Global Ratings

MEXICO CITY (S&P Global Ratings) Feb. 7, 2018--S&P Global Ratings assigned its 'BBB+' issue-level ratings to Petroleos Mexicanos' (PEMEX; foreign currency: BBB+/Stable/--; local currency: A-/Stable/--) $2.5 billion 5.35% senior unsecured notes due 2028 and $1.5 billion 6.35% senior unsecured notes due 2048.

The transaction is part of PEMEX's liability management program. The company will use $2.0 billion of the proceeds to repurchase notes maturing in 2019 and 2020, and the remainder to finance its investment program and for working capital. At the same time, the company is performing and exchange offer of the 5.5% notes due 2044 and 5.625% due 2046.

The notes benefit from the guarantees of Pemex Exploración y Producción, Pemex Transformación Industrial, Pemex Perforación y Servicios, Pemex Logística, and Pemex Cogeneración y Servicios, which also currently guarantee all of PEMEX's outstanding notes.

Our foreign currency ratings on the company are the same as the sovereign foreign currency rating on Mexico, based on our assessment of the government's almost certain likelihood of extraordinary support to the company. We also assess PEMEX's stand-alone credit profile as 'bb', reflecting the company's solid position in the global oil market and its average crude production of 1.948 billion barrels per day (bpd) as of Dec. 31, 2017. The ratings also reflect the company's significant free operating cash flow deficit, which has increased the company's debt to EBITDA to above 5.0x during the last year. This ratio indicates the weight of PEMEX's still large unfunded pension obligations and the substantial share of its revenue that the government takes, resulting in weak after-tax metrics.

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