Mexico Gives $3.5 Billion Lifeline to Pemex to Help Finances

• Petroleos Mexicanos, the world’s most indebted oil company, will get a $3.5Bn cash injection from the government as President Andres Manuel Lopez Obrador orders a new business plan for the struggling company. 
• The state-owned producer will use the funds to pay down obligations and also embark on a series of bond buybacks and new issuance to reduce the cost to service its debt. As part of the initiative, Pemex will also overhaul its five-year business plan, according to a statement released by the company on Monday. 
• Lopez Obrador provided a huge chunk of the federal budget to the country, after more than a decade of declines in output and limited investment in new fields. While the announcement appeared to provide some short-term support for the embattled company, analysts are skeptical that it will be enough to revive operations. 
• “It seems to be a continuation of what they have been doing: a direct transfer from the Mexican government, and trying to change the debt from the short and medium to the longer term,” said Alejandra Leon, Latin America upstream director at IHS Markit. “The critical part is whether there are changes in the operation that generate sufficient resources to deal with the debt, and that’s still unknown.” 
• Still investors seemed to be encouraged, with Pemex’s benchmark bonds due in 2031 rising 1.2 cent to 96.5 cents on the dollar, reducing its yield to 6.4%.

(Source: Bloomberg)