Mexico launches $5.9bn euro bond and dollar offerings to support Pemex restructuring

The euro bond issue comprised three tranches

WHAT Mexico is again helping to fund Pemex's debt reduction programme, 

WHY Pemex is the world’s most indebted oil company

WHAT NEXT Pemex must balance government oversight with increasing oil and gas production

Mexico accessed international debt markets twice this week, issuing €5bn ($5.88bn) in euro-denominated bonds and launching US dollar-denominated notes to fund state oil company Pemex's debt reduction programme, Bloomberg Línea and Reuters reported.

The government offered dollar bonds maturing in 2031, 2033 and 2035, with initial pricing discussions at 150, 190 and 195 basis points over comparable US Treasury bonds. Bank of America, Citigroup, JPMorgan, Deutsche Bank, Goldman Sachs, Mizuho and SMBC Nikko managed the transaction.

The euro bond issue comprised three tranches: €2.25bn four-year notes, €1.5bn eight-year bonds and €1.25bn 12-year securities, priced Monday. Proceeds will fund general government purposes whilst providing capital contributions to Pemex for partial debt repayment, redemption and buyback of outstanding securities.

The dual offerings support Mexico's $9.9bn Pemex bond buyback programme, part of broader efforts assisting the world's most indebted oil company. Earlier this year, Mexico sold $12bn in pre-capitalised notes (P-Caps) specifically supporting Pemex restructuring.

The transactions reflect Mexican President Claudia Sheinbaum's stated commitment to stabilising Pemex's finances through government-backed debt reduction. The state petroleum giant faces mounting pressure from massive debt burdens whilst oil and gas production levels remain historically low.

Mexico sovereign debt

International investors continue demonstrating an appetite for Mexican sovereign debt despite concerns over the government's extensive Pemex support commitments and their fiscal implications.

This comes as Sheinbaum recently acknowledged that Pemex continues straining public finances due to what she termed "corrupt debt" inherited from previous political administrations, Prensa Latina reported. The state oil company faces concentrated debt maturities in 2025 and 2026 requiring extraordinary government support.

Sheinbaum blamed former presidents Felipe Calderón (2006-2012) and Enrique Peña Nieto (2012-2018) for the "damned corrupt debt" that forces her Treasury to allocate additional resources to prevent a payment crisis, Prensa Latina reported. This has pushed deficit projections from 3.9% of GDP to 4.3% for 2025, and from 3.2%-3.5% to as much as 4.1% in 2026.

The president detailed that Pemex must disburse approximately $11.5bn in 2026 alone, equivalent to three times the cost of the new and vast Felipe Ángeles International Airport near Mexico City, El Periódico de la Energía reported. Finance Secretary Edgar Amador Zamora confirmed 46% of the oil company's debt maturities fall within the current administration’s term, with 26% concentrated in 2025-2026.

Pemex’s debt has surged

Pemex's debt has surged 130% over the past decade, rising from $43bn to $100.5bn, whilst production plummeted. Gasoline and diesel production fell from 718,000 to 324,000 barrels daily between 2012-2018, whilst petrochemicals output halved, according to official data.

"That irresponsible, corrupt debt acquired by Calderón and Peña falls to us to pay. We cannot not pay - these are commitments to banks, funds, etcetera," Sheinbaum said.

The president confirmed government support will continue through 2026 but she expects Pemex to "walk alone" starting in 2027. The Treasury is absorbing part of financing costs to reduce interest payments whilst the company invests in new coking facilities and increases production capacity.

Meanwhile Xinhua reported the 2026 economic package maintains social programmes whilst targeting fiscal consolidation through reduced administrative spending and continued Pemex support.

Additionally, Mexico will inject MXN263.5bn ($14.1bn) for Pemex to service financial debt and cover previous bank credits under the 2026 federal budget proposal, Bloomberg Línea reported.

"This support is conditioned on Pemex improving its financial balance by the same magnitude, ensuring the operation has no impact on public sector deficit, given debt amortisations are recorded as liability reductions rather than budgetary spending," the Finance Ministry stated in the document.

The injection doubles 2025's budgeted MXN136bn ($6.8bn) support. Pemex's total 2026 budget reached MXN517.4bn ($30.43bn), representing 7.7% annual growth.

Oil production is down

Mexico projects 1.8mn barrels daily oil production at $54.9 per barrel, with gas averaging $4 per million British thermal units, 521,000-barrel export platform and 119,000 daily private production barrels.

The explicit government backing addresses Pemex's $98.8bn debt burden and more than $20bn in 2026 maturities. Sheinbaum's administration had first unveiled the ambitious strategic plan in August, coordinated by the Finance and Energy ministries, accompanied by $12bn pre-capitalised notes for debt coverage plus $9.9bn government-funded bond buyback offers.

Results proved immediate: Fitch upgraded Pemex's credit rating whilst analysing additional improvements, followed by Moody's upgrade. The strategic plan includes an investment fund and mixed contracts with private companies for hydrocarbon exploration, targeting Pemex financial self-sufficiency from 2027.

Government ambitions have faced constraints from Pemex‘s four decades of low oil production, declining major assets, smaller discoveries as well as refining delays since July 2022. Pemex has been reporting losses for at least a decade.

Three months ago, in the International Energy Agency in a new report said that Mexico is most likely to become a net oil importer of oil within five years -- because of Pemex debt, declining production and underinvestment.

Venezuela’s PDVSA

According to the Americas Quarterly in late July, the value of Mexico’s crude exports has dropped 43% year-on-year, while 22% of Pemex’ debt is owed to Pemex suppliers while earlier in July some contractors had threatened to stop operations if Pemex let its debts to them grow any higher.

Pemex must reverse production decline, while deeper reforms are needed or it risks the fate of Venezuela’s PDVSA, said the journal. Government oversight must be “rebalanced” with government oversight and operational authority, said the Quarterly.

“Reinforcing Pemex’s independent board representation, establishing debt repayment plans that prioritise operations, and rebuilding trust with suppliers are [also] essential first steps,” said the author, José Ignacio Hernández, who heads research on public debt at Aurora Macro Strategies of New York.  “Similarly, strengthening regulatory agencies and judicial predictability would help shore up investor confidence.”