MEXICO CITY (Reuters) - Mexican state oil firm Pemex will make all its debt payments, President Andres Manuel Lopez Obrador said on Thursday, promising to shore up its finances after Moody’s and Fitch downgraded its credit rating to one notch above junk.
Lopez Obrador, a veteran leftist who took office in December, said he would present a plan on Friday to strengthen Pemex’s finances. One source of funding will be savings from the government’s fight against fuel theft, he said.
“Pemex will never fail to fulfill an obligation,” Lopez Obrador said at a regular morning news conference, responding to a question on whether his government would refinance or restructure Pemex’s debt. “We will pay all of the obligations punctually.”
The plan to help Pemex’s finances is expected to include a reduction in the taxes the company pays to the government and a capital injection.
Lopez Obrador said the government would not take on additional debt to help Pemex.
“We will not resort to debt,” he said. “We will have no problems resolving our obligations.”
The company said in a presentation viewed by Reuters that it expects to receive a capital infusion of at least $1.25 billion before year’s end. In addition, the government foresees injecting $1.8 billion to monetize labor liabilities and $600 million for “additional fiscal aid 2019-2014.”
The government also hopes to save Pemex $1.6 billion in its fight against fuel theft.
“The direct injection of capital will reduce the financing needs of Pemex and will provide additional liquidity to support the company’s investment program,” according to the presentation.
Obrador’s administration previously spoke of reducing the Pemex tax burden to free up the firm to invest more in exploration and production.
Rating agency Fitch downgraded Pemex’s credit rating in late January, citing the company’s high leverage and tax burden. Pemex holds roughly $103 billion in financial debt, the highest of any state oil firm in Latin America.
Fitch rated Pemex’s long-term Issuer Default Ratings (IDRs) for foreign and local currency at BBB-, the lowest investment-grade rating. Rival rating agency Moody’s also has Pemex at one notch above junk.
Investors worry that if the company loses investment grade status, Mexico’s sovereign debt could also be downgraded.
Reporting by Ana Isabel Martinez and Julia Love; Editing by Bernadette Baum and Peter Cooney
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