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PEMEX sold $25 billion in bonds, 5.95% and 6.95% yields

Pemex sells $5 billion of bonds, tapping ravenous yield demand

- Oil company received $25 billion of orders for two tranches
- Offerings tightened pricing to yield 5.95% and 6.95%

By Pablo Rosendo Gonzalez / Bloomberg

Petroleumworld 01 23 2020

It might already be the world's most indebted oil company, but investors want more.

Petroleos Mexicanos received about $25 billion in orders for its sale of $5 billion of debt split evenly between 11- and 40-year notes, according to people familiar with the demand. The two tranches priced at a yield of 5.95% for the shorter duration bonds and 6.95% on the longer ones.

Appetite for the bonds was “insatiable,” even as the debt promised a minimal spread, said Guido Chamorro, who manages $4.5 billion of assets as co-head of emerging-market hard-currency debt at Pictet Asset Management.

Pemex, with about $100 billion in outstanding debt, and its eight banks were initially discussing yields of as much as 6.375% for the 11-year sale and around 7.375% for the 40-year deal. A representative for the state-owned oil company said he had no immediate comment when contacted by telephone.

“Investors are confident the sovereign will always rescue the company,” Chamorro said. “When yields are low, there are two paths to take. Path A: buy longer debt, or path B: buy riskier issuers. Most investors prefer path B. But it does have its danger as Pemex was already the largest corporate issuer worldwide and it will extend the lead today.”

While Fitch Ratings cut Pemex's bond rating to junk in June, S&P Global Ratings analysts said in November that they see no reason for a Pemex downgrade in the near future. The oil company's rating will only move if the sovereign's does, they said.

Pemex has been under pressure from Mexican President Andres Manuel Lopez Obrador to turn around production declines and revamp its refineries to make the country more self-sufficient.

Barclays, Banco Bilbao Vizcaya Argentaria, BNP Paribas, JPMorgan Chase, Morgan Stanley, Mitsubishi UFJ Financial Group, Bank of Nova Scotia and Sumitomo Mitsui Financial Group managed the Pemex bond sale and its concurrent tender offer for debt due between 2021 and 2026.

— With assistance by Amy Stillman


By Pablo Rosendo Gonzalez from Bloomberg. 01 22


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