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Mexico's president says big bank loan shows confidence in Pemex
[MEXICO CITY] An US$8 billion syndicated loan to Mexico's national oil company Pemex is a sign of confidence by more than 20 banks involved in the operation, Mexican President Andres Manuel Lopez Obrador said on Friday, after a recent credit downgrade for the firm.
The deal to renew Pemex credit lines and refinance liabilities was announced on Thursday.
"These actions demonstrate that there is confidence. The banks don't act without information, they don't take a decision like this because they like the government. They know that Pemex is in very good health," Mr Lopez Obrador said in a regular news conference.
He said the terms of the loan reduced interest rates, although he did not specify by how much. He said the financing was available for five years, up from three years under a previous arrangement.
Pemex, saddled with about US$106 billion in debt and facing the prospect of a costly credit rating downgrade, announced in February it was working on the financial operation.
Earlier in June, Fitch cut its rating on Pemex's US$80 billion of bonds from investment grade to speculative grade, or "junk," with a negative outlook. Many investors expect a second downgrade from Moody's Investors Service to formally confirm Pemex as junk credit.
"Everybody is questioning, and betting that the economy will go badly, but when these actions happen it helps a lot because it demonstrates confidence," Mr Lopez Obrador said.
Syndicated loans are a financing vehicle that spreads the lenders' risk between several institutions.
Later on Friday, Pemex said in a statement the financial operation does not amount to new debt for the company, as it allows the refinancing of debt up to US$2.5 billion and the renewal of two revolving credit lines up to a total of US$5.5 billion.
"The interest rate of the operation was closed with Libor +235, which is equivalent, at the close of the operation, to an equivalent fixed rate of 4.15 per cent," the statement said.