Pemex to Get $1.5 Billion From Government to Reduce Record Debt
Nacha Cattan/Adam Williams Bloomberg
April 13, 2016
Finance Ministry to absorb $2.7 billion in pension liabilities
Government to increase ceiling for Pemex tax deductions
Mexico will send 26.5 billion pesos ($1.5 billion) to the nation’s state-owned oil company to pay contractors after debt levels soared to new highs.
The Finance Ministry said in a statement it will also increase the ceiling for Petroleos Mexicanos’s tax deductions, causing the producer’s levies to fall by 50 billion pesos this year. In addition, the ministry will use debt swaps to absorb 47 billion pesos in Pemex pension liabilities this year. The support plan will be dependent on Pemex reducing liabilities by 73.5 billion pesos, according to the statement.
“These measures should only give investors more reasons to go long as clearly the government is going beyond a short-term Band-Aid and instead is working with the company to make it better and more productive,” Rafael Elias, the head of emerging markets strategy at Cantor Fitzgerald, wrote in a note to clients.
The government support comes at a time when Pemex’s finances have reached historic levels of debt amid weak oil prices and 11-straight years of declining crude output. Pemex, which reduced its staff by more than 10,000 employees last year and had its budget cut by $5.6 billion in February, has more than $87 billion in debt and owes more than 100 billion pesos to service providers.