Rating agency Fitch downgraded the credit rating of Mexican state oil company Pemex on Tuesday, sending the peso currency falling in early trading in Asian markets.
Mexico’s deputy finance minister said the downgrade didn’t come as a surprise and that the country’s sovereign rating was not at risk.
“It doesn’t surprise us, but yes, it worries us,” Deputy Finance Minister Arturo Herrera told reporters at an event after Fitch announced the downgrade. “The country’s rating, we feel openly comfortable with as it is.”
Pemex holds $106 billion in financial debt, the highest of any state oil company in Latin America, which ratings agencies Fitch and Moody’s have flagged as a concern for the company’s investment grade rating.
Fitch said the downgrades apply to about $80 billion of notes outstanding and all national scale long-term issuances.
“The ratings are constrained by Pemex’s substantial tax burden, high leverage, significant unfunded pension liabilities, large capital investment requirements, negative equity and exposure to political interference risk,” Fitch said in a statement.
The agency downgraded long-term Issuer Default Ratings (IDRs) for foreign and local currency to BBB- from BBB+. As well, it downgraded national long-term ratings to AA(mex) from AAA(mex), changing their outlook to negative from stable.
The peso, which has firmed since President Andres Manuel Lopez Obrador took office in December, weakened 0.6 pct during early trading in Asian markets following the Fitch announcement.
The leftist has vowed to pump new investment into Pemex and strengthen its role in the country’s oil industry.
Reporting by Daina Beth Solomon and Anthony Esposito; Editing by Shri Navaratnam and Jacqueline Wong