Mexico's US$5 billion rescue package to pay down debt at Pemex is a one-of-a-kind transaction that should give the struggling state oil company breathing space to focus on output and costs, Deputy Finance Minister Gabriel Yorio said.
Yorio insisted that the transaction, which also includes a debt refinancing plan, would be the last support the government gives to the world's most indebted oil company this year.
The step, announced earlier on Wednesday, was the latest by President Andres Manuel Lopez Obrador to plot a brighter future for the cash-strapped, debt-laden oil and gas producer after years of declining output.
Saddled with more than US$104 billion of financial debt, Pemex suffered a downgrade to speculative grade, or junk, earlier this year by ratings agency Fitch. Moody's warns it too could strip Mexico's largest company of its investment grade rating.
Yorio said a second such downgrade risked contaminating Mexico's sovereign debt profile, which is rated by Fitch as BBB and that Moody's has on negative outlook.
To stave off a possible Pemex downgrade, the Mexican government has given Pemex several tax breaks and cash support this year, and has budgeted for another US$4.4 billion of similar support in 2020. The government is expected to continue providing extra cash to the company for several more years.
The package including the US$5 billion for prepayment of bonds that mature between 2020 and 2023 was a one-off, however, Yorio said.
A transaction like this is only this time. We don't plan to do it every year, nor are we planning capitalizations like this every year, he said.
This is the last piece of support that we are planning to give to Pemex from the point of view of the 2019 fiscal year.