Pemex Extends Mexico’s Europe Foray With Euro Bond Sale

Petroleos Mexicanos, the state-owned oil company, sold 2.25 billion euros ($2.4 billion) of bonds abroad in its first offering in the European currency in 12 months.

Pemex issued 1 billion euros of seven-year debt Tuesday to yield 1.65 percentage points above the mid-swap rate, or 1.98 percent, data compiled by Bloomberg show. The company also sold 1.25 billion euros of 12-year bonds at 2.25 percentage points above the mid-swap rate, or 2.85 percent.

“It’s very cheap financing,” Luis Maizel, who helps manage $5.5 billion of fixed-income securities as co-founder of LM Capital, said by telephone from San Diego.

Pemex’s bond sale came a week after the Mexican government offered its first 100-year notes in euros, locking in lower borrowing costs as the European Central Bank carries out its 1.1 trillion-euro quantitative-easing program. Developing-nation countries and companies raised 20 billion euros in the first three months of this year, the second-busiest quarter for emerging-market sales in a decade.

Barclays Plc, BNP Paribas SA, Deutsche Bank AG and Banco Santander SA arranged the Pemex transaction. The oil company last tapped the European market in April 2014, when it sold 1 billion euros of 12-year bonds to yield 1.75 percentage points above the mid-swap rate.

Pemex’s yield on the new 12-year bond was 1.55 percentage points higher than for 10-year bonds from Spain, which has the same BBB+ credit grade from Fitch Ratings.

“Compared to where peers are in the European market, on a relative basis, the premium is high,” Maizel said.

The pricing probably reflects the past year’s drop in oil prices, Maizel said. In addition, spending cuts by the Mexican government may hinder the country’s economic growth while curbing demand for the nation’s sovereign bonds and Pemex’s securities.

Pemex announced in November it would boost net borrowings by $15 billion this year. So far in 2015, the company has issued some $10 billion in pesos, dollars and euros, according to data compiled by Bloomberg.

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