The Mexican government tried to put a happy gloss on its announcement of an $8 billion loan from private-sector banks to its state oil producer Pemex on May 13.
The market even bought it – briefly – with a rally in the company’s bonds (the 10- and 30-year benchmarks both rallied about 15 basis points shortly after president Andrés Manuel López Obrador, frequently abbreviated to Amlo, broke the news).
But the rally faded quickly – and for obvious reasons: the loan confirms the lack of appetite for the credit among international institutional investors.
Pemex had gone to New York in January on a non-deal roadshow to take the temperature of oil and gas investors. The feedback was that investors were not inclined to look past Amlo’s rolling back of important energy reforms that had brought private investment into the sector.
Since the cost of new bonds was going to be prohibitive, the company pursued plan B, which was for HSBC, JPMorgan and Mizuho to stump up the money. They will (try to) syndicate it out to local and international investors.
Pemex, which has a well-deserved reputation for being a poor refinery operator, in our view, would be greatly challenged to meet such an aggressive mandate
-Citibank
The pricing available to Pemex in the bond market was presumably outside the Libor plus 235bp that the banks offered for the five-year, $5.5
